SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF EARLIEST EVENT REPORTED: JULY 3, 1995
PEOPLES TELEPHONE COMPANY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 0-16479 13-2626435
(State or other juris- (Commission File (IRS Employer
diction of incorporation) Number) I.D. No.)
2300 N.W. 89TH PLACE, MIAMI, FLORIDA 33172
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 593-9667
<PAGE>
Item 5. Other Events
The Company on July 3, 1995 entered into an agreement
with UBS Capital Corporation to sell 150,000 shares of the
Company's Cumulative Convertible Preferred Stock to UBS Capital
Corporation for a total investment of $15 million. The Cumulative
Preferred Stock will cumulate dividends at an annual rate of 7%
(subject to increase under certain circumstances), which will be
payable in cash or, at the Company's option during the first three
years after issuance, continue to cumulate. The Cumulative Stock
will initially be convertible, at an option of the holders, into
2,857,143 shares of Common Stock of the Company at an exercise
price of $5.25 per share, subject to certain antidultion
adjustments. In addition, the Cumulative Preferred Stock will be
subject to mandatory redemption ten years after issuance and, in
the event of a change in control, to redemption, at the option of
the holders, at its liquidation preference plus accrued and unpaid
dividends. The investment is subject to various conditions,
including the completion of the Company's previously announced
private placement of Senior Notes and is expected to close
simultaneously with such financing.
Item 7. Financial Statements and Exhibits
Exhibit 10 Securities Purchase Agreement between UBS
Capital Corporation, Appian Capital Partners,
L.L.C. and the Company and Exhibits A through F
99 Press release dated and issued July 5, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
Date: July 10, 1995 /s/ Robert D. Rubin
-------------------------------
Robert D. Rubin
President
SECURITIES PURCHASE AGREEMENT
AMONG
PEOPLES TELEPHONE COMPANY, INC.,
UBS CAPITAL CORPORATION
AND
APPIAN CAPITAL PARTNERS, L.L.C.
JULY 3, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
ISSUANCE AND SALE OF THE SECURITIES . . . . . . . . . . . . . . . -1-
1.1 Securities Purchase. . . . . . . . . . . . . . . . . . . . . -1-
1.2 Closing Transactions . . . . . . . . . . . . . . . . . . . . -2-
ARTICLE II
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . -2-
2.1 Conditions to each Purchaser's Obligations . . . . . . . . . -2-
2.2 Conditions to the Company's Obligations. . . . . . . . . . . -6-
ARTICLE III
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
3.1 Affirmative Covenants of the Company . . . . . . . . . . . . -7-
3.2 Negative Covenants of the Company. . . . . . . . . . . . . . -10-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . -14-
4.1 Organization and Corporate Power . . . . . . . . . . . . . . -14-
4.2 Authorization of Transactions. . . . . . . . . . . . . . . . -15-
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . -15-
4.4 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . -16-
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . -16-
4.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . -17-
4.7 Absence of Material Adverse Change . . . . . . . . . . . . . -17-
4.8 Absence of Certain Developments. . . . . . . . . . . . . . . -18-
4.9 Title to Properties. . . . . . . . . . . . . . . . . . . . . -20-
4.10 Environmental and Safety Matters . . . . . . . . . . . . . . -20-
4.11 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . -21-
4.12 Litigation; Proceedings. . . . . . . . . . . . . . . . . . . -22-
4.13 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . -23-
4.14 Governmental Licenses and Permits. . . . . . . . . . . . . . -23-
4.15 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . -25-
4.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . -27-
4.18 Affiliate Transactions . . . . . . . . . . . . . . . . . . . -27-
4.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . -27-
4.20 Governmental Consent, etc. . . . . . . . . . . . . . . . . . -27-
4.21 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . -27-
4.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . -28-
4.23 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . -29-
4.24 INVESTMENT COMPANY . . . . . . . . . . . . . . . . . . . . . -29-
-i-
<PAGE>
4.26 SMALL BUSINESS MATTERS . . . . . . . . . . . . . . . . . . . -30-
4.27 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . -30-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. . . . . . . . . -30-
5.1 Organization and Power . . . . . . . . . . . . . . . . . . . -30-
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . -31-
5.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . -31-
5.4 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . -31-
5.5 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . -31-
ARTICLE VI
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . -32-
ARTICLE VII
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
ARTICLE VIII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . -37-
8.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . -38-
8.3 Indemnification Procedure. . . . . . . . . . . . . . . . . . -39-
8.4 Press Releases and Announcements . . . . . . . . . . . . . . -40-
8.5 Further Transfers. . . . . . . . . . . . . . . . . . . . . . -41-
8.6 Specific Performance . . . . . . . . . . . . . . . . . . . . -41-
8.7 Investigation. . . . . . . . . . . . . . . . . . . . . . . . -41-
8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
8.9 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . -42-
8.10 Transfer of Securities . . . . . . . . . . . . . . . . . . . -43-
8.11 Purchasers' Representations. . . . . . . . . . . . . . . . . -44-
8.12 STANDSTILL . . . . . . . . . . . . . . . . . . . . . . . . . -44-
8.13 CONTINGENT WARRANTS. . . . . . . . . . . . . . . . . . . . . -47-
8.14 REGULATORY COMPLIANCE COOPERATION. . . . . . . . . . . . . . -48-
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
9.1 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . -49-
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
9.3 Binding Agreement; Assignment. . . . . . . . . . . . . . . . -50-
9.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . -51-
9.5 No Strict Construction . . . . . . . . . . . . . . . . . . . -51-
-ii-
<PAGE>
9.6 Headings; Interpretation . . . . . . . . . . . . . . . . . . -51-
9.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . -51-
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . -51-
9.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . -51-
9.10 Parties in Interest. . . . . . . . . . . . . . . . . . . . . -52-
-iii-
<PAGE>
EXHIBITS
Exhibit A - Form of Certificate of Amendment for
Preferred Stock
Exhibit B - Form of Warrant
Exhibit C - Terms of Registration Rights Agreement
Exhibit D - Form of Opinion of Company's Counsel
Exhibit E - Financial Disclosure
Exhibit F - Form of Contingent Warrant
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 4.1 - Subsidiaries/Investments Schedule
Schedule 4.3 - Capitalization Schedule
Schedule 4.4 - Conflicts Schedule
Schedule 4.5 - Financial Statement Schedule
Schedule 4.8 - Developments Schedule
Schedule 4.10 - Environmental Schedule
Schedule 4.11 - Tax Schedule
Schedule 4.12 - Litigation Schedule
Schedule 4.13 - Brokerage Schedule
Schedule 4.14 - Government License/Permit Schedule
Schedule 4.15 - Employees Schedule
Schedule 4.16 - Employee Benefit Plans Schedule
Schedule 4.21 - Customers Schedule
Schedule 4.22 - Disclosure Schedule
Schedule 4.23 - Contracts Schedule
-v-
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made
as of July 3, 1995 by and among Peoples Telephone Company, Inc., a
New York corporation (the "COMPANY"), UBS Capital Corporation, a
New York corporation ("UBS"), and Appian Capital Partners, L.L.C.,
a Delaware limited liability company ("ACP" and together with UBS,
the "PURCHASERS"). Except as otherwise indicated herein,
capitalized terms used herein are defined in Article VII hereof.
Subject to the terms and conditions set forth herein, UBS
desires to purchase from the Company, and the Company desires to
issue to UBS, shares of Series C Cumulative Convertible Preferred
Stock, par value $0.01 per share (the "PREFERRED STOCK"),
convertible at any time after the Closing Date (as defined below)
into shares of the Company's common stock, par value $0.01 per
share (the "COMMON STOCK"), under circumstances as described
herein. In addition, ACP desires to purchase from the Company, and
the Company desires to issue to ACP, one or more warrants (the
"WARRANTS") to purchase at any time after the Closing Date shares
of Common Stock under the circumstances as described herein. The
Preferred Stock, Underlying Common Stock (as defined herein) and
the Warrants are sometimes referred to herein as the "SECURITIES."
In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement,
the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF THE SECURITIES
1.1 SECURITIES PURCHASE. On the terms and subject to
the conditions of this Agreement, at the Closing:
(a) The Company shall authorize the issuance and sale to
UBS of 150,000 shares of Preferred Stock having the rights and
preferences set forth in Exhibit A attached hereto and which will
initially be convertible into an aggregate of 2,857,142.9 shares of
Common Stock. The total purchase price of the Preferred Stock will
be $15,000,000. Each share of Preferred Stock will initially be
convertible into Common Stock at $5.25 per share.
-1-
<PAGE>
(b) The Company shall authorize the issuance and sale to
ACP of the Warrants, having the rights and preferences set forth in
Exhibit B attached hereto, initially exercisable to purchase up to
an aggregate of 275,000 shares of Common Stock. The aggregate
purchase price of the Warrants will be $100,000.
(c) The Company shall authorize the issuance and sale to
UBS of the Contingent Warrants (the "Contingent Warrants"), as
described in Section 8.13 hereof.
1.2 CLOSING TRANSACTIONS.
(a) CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") will take place at
the offices of Kirkland & Ellis, 153 East 53rd Street, New York,
New York at 10:00 a.m., on the date of closing of the Senior Note
Financing (as defined below) (so long as all conditions to the
obligations of the parties to consummate the transactions
contemplated hereby have been satisfied or waived), or at such
other time and location as is mutually agreed upon by the Company
and the Purchasers but in any event not after [AUGUST 15], 1995.
The date and time of the Closing are herein referred to as the
"CLOSING DATE."
(b) TRANSFERS. Subject to the conditions set forth in
this Agreement, at the Closing Date the Company shall issue and
deliver (i) to UBS, stock certificates for 150,000 shares of
Preferred Stock duly registered in the name of UBS or one or more
of its nominee(s) against payment by UBS of $15,000,000 as the
purchase price therefor, (ii) to ACP, the Warrants duly registered
in the name of ACP or one or more of its nominee(s), against
payment by ACP of $100,000 and (iii) to UBS, the Contingent
Warrants duly registered in the name of UBS or one or more of its
nominee(s), against payment by UBS of $1.00 (each of the foregoing
are collectively referred to herein as the "CLOSING TRANSACTIONS").
ARTICLE II
CONDITIONS TO CLOSING
2.1 CONDITIONS TO EACH PURCHASER'S OBLIGATIONS. The
obligation of each of the Purchasers to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of
the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in
Article IV hereof and in any writing delivered pursuant hereto will
-2-
<PAGE>
be true and correct at and as of the Closing Date as though then
made and as though references to the Closing Date were substituted
for references to the date of this Agreement throughout such
representations and warranties;
(b) the Company will have performed and complied with
each of the covenants and agreements required to be performed by it
under this Agreement and the agreements and documents attached
hereto as Exhibits prior to the Closing (except for any breaches
which, individually or collectively with any and all other breaches
by the Company of this Agreement, would not, and could not
reasonably be expected to, have a Material Adverse Effect or be
materially adverse to the interests of the Purchasers);
(c) since March 31, 1995, except as set forth on
Schedule 4.8 and except for the Refinancing (as defined herein),
there will have been no change, circumstance or event which,
individually or collectively with each other such change,
circumstance or event, has had or which could be expected to have
a Material Adverse Effect;
(d) all consents and waivers by third parties that are
required for the consummation of the transactions contemplated
hereby including, without limitation, any consents required
pursuant to any leases or subleases and any consents or waevers
that are required in order that the transactions contemplated
hereby do not constitute a breach of or a default under or a
termination or modification of any agreement or instrument set
forth on Schedule 4.4 or any other material agreement to which the
Company or any of its Subsidiaries is a party or to which any
material property of the Company or any of its Subsidiaries is
subject, will have been obtained on terms reasonably satisfactory
to the Purchasers;
(e) all governmental filings, authorizations and
approvals that are required for the consummation of the
transactions contemplated hereby (including, without limitation,
any FCC filings, authorizations and approvals), if any, will have
been duly made and obtained and all waiting periods will have
expired on terms reasonably satisfactory to the Purchasers other
than those filings, authorizations or approvals the absence of
which would not, individually or in the aggregate, have a Material
Adverse Effect;
(f) the Company shall have duly adopted, executed and
filed with the Secretary of State of New York a Certificate of
Amendment of Rights and Preferences establishing the terms and the
rights and preferences of the Preferred Stock in the form set forth
in Exhibit A hereto (the "CERTIFICATE OF AMENDMENT"), and the
-3-
<PAGE>
Company shall not have adopted or filed any other document
designating terms, rights or preferences of its preferred stock.
The Certificate of Amendment shall be in full force and effect as
of the Closing under the laws of New York and shall not have been
amended or modified;
(g) the Company and the Purchasers shall have entered
into a registration rights agreement with respect to the Preferred
Stock, the Warrants and the Underlying Common Stock (the
"REGISTRATION RIGHTS AGREEMENT") including provisions to the effect
of those set forth on Exhibit C attached hereto, as well as other
provisions reasonably required by the Purchasers, and the
Registration Rights Agreement shall be in form reasonably
satisfactory to the Purchasers and in full force and effect as of
the Closing;
(h) the Company's board of directors (the "BOARD OF
DIRECTORS") shall have taken all such action as is necessary and
sufficient to ensure that, effective as of the Closing, the Board
of Directors shall be comprised of six members, including the Chief
Executive Officer of the Company, the President of the Company, two
directors designated by UBS, and two individuals who are currently
serving as directors of the Company;
(i) the senior note financing (the "SENIOR NOTE
FINANCING") placed by Merrill Lynch & Co. shall have been
consummated on the terms set forth in the form of Indenture
previously delivered to UBS and its counsel, as amended to reflect
the terms set forth in the Preliminary Offering Memorandum dated as
of July 3, 1995 relating to the Senior Note Financing (the
"Preliminary Memorandum") and such other amendments thereto
reasonably acceptable to the Purchasers and the Company shall have
received not less than $75,000,000 of gross proceeds therefrom;
(j) the Company shall be simultaneously consummating the
sale of Securities contemplated hereby to the other Purchaser;
(k) the Purchasers will have received (addressed to each
Purchaser) an opinion, dated the Closing Date, of New York counsel
to the Company, which counsel is experienced in transactions of the
type contemplated hereby and is reasonably satisfactory to the
Purchasers, in the form attached hereto as Exhibit D and otherwise
in form and substance reasonably satisfactory to the Purchasers and
their counsel;
(l) the Second Amended and Restated Warrant Agreement
dated as of February 17, 1994 between the Company and Creditanstalt
American Corporation shall have been amended, in a manner
reasonably satisfactory to the Purchasers, to clarify that there
-4-
<PAGE>
shall be no increase in the amount of Stock issuable, or decrease
in the price payable to the Company, upon exercise of the warrants
issued thereunder upon (i) consummation of the transactions
contemplated hereby or upon issuance of any Stock upon conversion
of the Convertible Preferred Stock or upon exercise of the
Warrants, or (ii) issuance of any Common Stock upon exercise or
conversion of, or in exchange for, any option, right, warrant or
convertible security (other than options, warrants, rights or
convertible securities issued to officers or employees of the
Company or any of its Subsidiaries) if no such increase in such
amount of stock or decrease in price payable to the Company was
required pursuant to the terms thereof upon issuance of any such
option, right, warrant or convertible security;
(m) The Company shall have delivered to each Purchaser
all of the following:
(i) an Officer's Certificate of the Company, dated
the Closing Date, stating that the conditions specified in
Sections 2.1(a)-(j) above, inclusive, have been satisfied;
(ii) certified copies of the resolutions of the Board
of Directors approving the transactions contemplated by this
Agreement;
(iii) certified copies of the certificate of
incorporation (the "CERTIFICATE OF INCORPORATION") and bylaws
(the "BYLAWS") of the Company as in effect as of the Closing
Date;
(iv) copies of all third party and governmental
consents, approvals and filings required in connection with
the consummation of the transactions contemplated herein; and
(v) such other documents or instruments as the
Purchasers may reasonably request to effect the transactions
contemplated hereby;
(n) the Company shall have delivered to UBS the
following:
(i) duly completed and executed SBA (as defined in
Section 8.14) Forms 480, 652 and 1031 (Part A);
(ii) a business plan reasonably satisfactory to UBS
relating to its SBA regulatory requirements, showing the
Company's financial projections;
-5-
<PAGE>
(iii) a written statement from the Company regarding
its intended use of proceeds from the financing under this
Agreement; and
(iv) a list, after giving effect to the transactions
contemplated by this Agreement, of (x) the name of each of the
Company's directors, (y) the name and title of each of the
Company's officers and (z) the name of each of the Company's
stockholders (as set forth in the Section of the Preliminary
Memorandum and any amendment thereto, including the final
memorandum, entitled "Principal Shareholders") setting forth
the number and class of shares held; and
(o) all proceedings to be taken by the Company in
connection with the consummation of the Closing Transactions and
the other transactions contemplated hereby and all certificates,
opinions, instruments and other documents, including customary
representations, warranties, covenants, conditions and remedies for
breach, required to be delivered by the Company to effect the
transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Purchasers.
Any condition to the obligations of the Purchasers
specified in this Section 2.1 may be waived by the Purchasers in
their sole discretion.
2.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The
obligation of the Company to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of
the following conditions on or before the Closing Date:
(a) the representations and warranties set forth in
Article V hereof and in any writing delivered pursuant hereto will
be true and correct at and as of the Closing Date as though then
made and as though the Closing Date were substituted for the date
of this Agreement throughout such representations and warranties;
(b) the Purchasers will have performed and complied in
all material respects with all of the covenants and agreements
required to be performed by them under this Agreement prior to the
Closing;
(c) all consents and waivers by third parties that are
required for the consummation of the transactions contemplated
hereby including, without limitation, any consents required
pursuant to any leases or subleases or that are required in order
that the transactions contemplated hereby do not constitute a
breach of or a default under or a termination or modification of
any material agreement to which the Company or any of its
-6-
<PAGE>
Subsidiaries is a party or to which any material property of the
Company or any of its Subsidiaries is subject, will have been
obtained on terms reasonably satisfactory to the Company; and
(d) all governmental filings, authorizations and
approvals that are required for the consummation of the
transactions contemplated hereby (including, without limitation,
any FCC filings, authorizations and approvals), if any, will have
been duly made and obtained and all waiting periods will have
expired on terms reasonably satisfactory to the Company other than
those filings, authorizations or approvals the absence of which
would not, individually or in the aggregate, have a Material
Adverse Effect.
The conditions specified in this Section 2.2 may be
waived by the Company, in its sole discretion.
ARTICLE III
COVENANTS
3.1 AFFIRMATIVE COVENANTS OF THE COMPANY. From the date
hereof through the Closing and thereafter (unless otherwise
indicated) so long as the number of shares of Underlying Common
Stock in existence equals or exceeds 25% of the number in existence
immediately after the Closing (as adjusted for stock splits, stock
dividends, combinations of shares and similar recapitalizations),
the Company covenants and agrees that it will and will cause each
of its Subsidiaries to:
(a) prior to the Closing, conduct the business and
operations of the Company and its Subsidiaries only in accordance
with applicable laws in the ordinary course of business and in
accordance with the Company's past custom and practice;
(b) prior to the Closing, cooperate with the Purchasers
and use its best efforts to make all registrations, filings and
applications, to give all notices and to obtain all governmental
(including, without limitation, FCC), third party or other
consents, transfers, approvals, orders, qualifications and waivers
necessary or desirable for the consummation of the transactions
contemplated hereby and to cause the other conditions to the
Purchasers' or the Company's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed and delivered);
-7-
<PAGE>
(c) prior to the Closing, promptly inform the Purchasers
(i) if any of the representations and warranties contained in
Article IV was not true and correct when made or would not be true
and correct if restated on any day following the date hereof
through the Closing Date and describing each variance therefrom,
(ii) of each breach of any covenant hereunder by the Company and
(iii) of any other development, circumstance or event which,
individually or in the aggregate with other developments,
circumstances or events, has, or could reasonably be expected to
have a Material Adverse Effect. No disclosure pursuant to this
Section 3.1(c) shall be deemed to amend or supplement this
Agreement or any Schedule hereto or to prevent or cure any breach
of warranty, breach of covenant or misrepresentation;
(d) cause all properties owned by the Company or any of
its Subsidiaries or used or held for use in the conduct of its
business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order
(reasonable wear and tear excepted) and supplied with all necessary
equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all
as in the judgment of the Board of Directors may be necessary so
that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that the foregoing shall not prevent the Company from
discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Board of Directors,
desirable in the conduct of its business or the business of any of
its Subsidiaries and is not disadvantageous in any material respect
to the holders of Preferred Stock or other Underlying Common Stock;
(e) preserve and keep in full force and effect the
corporate existence, rights (charter and statutory), licenses and
franchises of the Company and each of its Subsidiaries; PROVIDED,
HOWEVER, that the Company shall not be required to preserve any
such right, license or franchise if the Board of Directors shall
determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries as
a whole and that the loss thereof is not disadvantageous in any
material respect to the holders of Preferred Stock and other
Underlying Stock; and PROVIDED, FURTHER, that the foregoing shall
not prohibit a sale, transfer or conveyance of a Subsidiary of the
Company or any of its assets which is not otherwise prohibited by
the terms of this Agreement and is in accordance with the Company's
Certificate of Incorporation, as amended by the Certificate of
Amendment;
(f) maintain the books, accounts and records of the
Company and its Subsidiaries in accordance with past custom and
-8-
<PAGE>
practice as used in the preparation of the Financial Statements (as
defined in Section 4.5) except to the extent permitted or required
by GAAP;
(g) keep all of its and its Subsidiaries' properties
which are of an insurable nature insured with insurers, believed by
the Company in good faith to be financially sound and responsible,
against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated
and owning like properties (which may include self-insurance, if
easonable and in comparable form to that maintained by companies
similarly situated);
(h) comply with all material legal requirements and
material contractual obligations applicable to the operations and
business of the Company and its Subsidiaries and pay all applicable
Taxes as they become due and payable;
(i) permit representatives of the Purchasers and their
agents (including their counsel, accountants and consultants) to
have reasonable access during business hours to the Company's
books, records, facilities, key personnel, officers, directors,
customers, independent accountants and legal counsel;
(j) assert and enforce all, and shall not (except with
Super Majority Board Vote) amend or waive any of the Company's
rights under, all agreements between the Company and any of its
directors, executive officers and other Affiliates, and shall
pursue all remedies available to it with diligence and in good
faith in connection with the enforcement of any such rights;
(k) at all times file all reports (including annual
reports, quarterly reports and the information, documentation and
other reports) required to be filed by the Company under the
Exchange Act and Sections 13 and 15 of the rules and regulations
adopted by the SEC thereunder, and the Company shall use its best
efforts to file each of such reports on a timely basis, and take
such further action as any holder or holders of Securities may
reasonably request, all to the extent required to enable such
holders to sell Securities pursuant to Rule 144 adopted by the SEC
under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the
SEC and to enable the Company to register securities with the SEC
on Form S-3 or any similar short-form registration statement;
(l) permit UBS, so long as holders of shares of the
Preferred Stock have the right, voting as a separate class, to
elect one or more directors to the Board of Directors, to designate
one observer to attend each meeting of the Board of Directors and
-9-
<PAGE>
each committee thereof, including each telephonic meeting thereof;
and
(m) if the Company ceases to be a reporting Company
under the Exchange Act or to comply with its reporting obligations
thereunder, make available, upon request, to any holder of the
Securities, so long as the Securities remain outstanding, the
information set forth on Exhibit E attached hereto.
3.2 NEGATIVE COVENANTS OF THE COMPANY. From the
date hereof through the Closing and thereafter (unless otherwise
indicated) so long as the number of shares of Underlying Common
Stock in existence equals or exceeds 25% of the number in existence
immediately after the Closing (as adjusted for stock splits, stock
dividends, combinations of shares and similar recapitalizations),
the Company agrees that it will not, and will cause each of its
Subsidiaries not to:
(a) prior to the Closing, (i) take any action that would
require disclosure pursuant to Section 3.1(c) of this Agreement,
(ii) operate the business of the Company and its Subsidiaries other
than in the ordinary course of business, or (iii) take any action
which, or omit to take any action the omission of which, could
reasonably be expected to have a Material Adverse Effect;
(b) prior to the Closing, enter into any material
contract, lease, agreement or transaction or any renewal,
modification or extension thereof out of the ordinary course of the
business of the Company and its Subsidiaries or restricting in any
material way the conduct of the business of the Company and its
Subsidiaries;
(c) amend the Certificate of Incorporation or Bylaws if
such amendment would adversely affect any rights of the holders of
Preferred Stock or other Underlying Common Stock or subordinate any
rights of holders of Preferred Stock to the rights of any other
holders of Stock of the Company;
(d) except for a sale of Common Stock pursuant to an
underwritten public offering registered pursuant to the Securities
Act, issue or sell or otherwise transfer for consideration (an
"ISSUANCE") Stock of the Company unless, at least 20 days and not
more than 60 days prior to such Issuance, the Company notifies each
holder of Securities in writing of the Issuance (including the
price, the purchaser(s) thereof and the other terms thereof) and
grants to each holder of Securities the right (the "RIGHT") to
subscribe for and purchase such additional shares or other
securities so issued at the same price and on the same terms as
issued in the Issuance such that, after giving effect to the
-10-
<PAGE>
Issuance and exercise of the Right, the Securities owned by such
holder shall represent the same percentage of the outstanding
Common Stock (including, for purposes of this calculation, all
Common Stock and assuming the issuance of Common Stock upon
conversion, exchange or exercise of any security so convertible,
exchangeable or exercisable issued in the Issuance or subject to
the Right) as was owned by such holder prior to the Issuance, or
such lesser amount designated by such holder. The Right may be
exercised by such holder or its nominee at any time by written
notice to the Company received by the Company within 15 days after
receipt of notice by such holder from the Company of the Issuance.
The closing of the purchase and sale pursuant to the exercise of
the Right shall occur at least 5 days after the Company receives
notice of the exercise of the Right and concurrently with the
closing of the Issuance. Notwithstanding the foregoing, the Right
shall not apply to (i) issuances of Common Stock (or securities
convertible into or exchangeable for, or options to purchase,
Common Stock), pro rata to all holders of Common Stock, as a
dividend on, subdivision of, or other distribution in respect of,
the Common Stock, (ii) issuances of Common Stock upon exercise or
conversion of options, warrants and other rights to acquire Common
Stock outstanding on the date hereof as reflected in Schedule 4.3,
in each case issued in accordance with the terms thereof as in
effect on the date hereof or as such terms may thereafter be
adjusted as described in Schedule 4.3, (iii) issuances of Common
Stock upon exercise of stock options granted to employees pursuant
to employee stock option and stock ownership plans approved by the
Board of Directors and (iv) issuances of Common Stock pursuant to
the terms approved by the Board of Directors in connection with the
acquisition of interests in another company or business as
contemplated by paragraph (g) or (j);
(e) without a Super Majority Board Vote, enter into any
transaction or series of transactions with any stockholder,
director, officer, employee or Affiliate which would require
disclosure pursuant to Rule 404 of Regulation S-K under the
Securities Act.
(f) without a Super Majority Board Vote, except as
expressly contemplated by this Agreement, authorize, issue or enter
into any agreement providing for the issuance (contingent or
otherwise) of, (a) any notes or debt securities containing equity
features or issued with capital stock (including, without
limitation, any notes or debt securities convertible into or
exchangeable for capital stock or other equity securities, issued
in connection with the issuance of capital stock or other equity
securities or containing profit participation features) other than
Permitted Equity Kickers, (b) any capital stock or other equity
securities (or any securities convertible into or exchangeable for
-11-
<PAGE>
any capital stock or other equity securities) which are senior to
or on a parity with the Preferred Stock with respect to the payment
of dividends, redemptions or distributions upon liquidation or
otherwise or issue any Stock which votes generally in the election
of the Company's directors, except stock which at no time receives
more than one vote per share of Common Stock which is then issuable
upon conversion thereof or (c) stock appreciation rights or phantom
stock rights other than pursuant to employee benefit plans approved
by the Board of Directors.
(g) without a Super Majority Board Vote, merge or
consolidate with any Person or, except as permitted by subparagraph
(h), (i) or (j) below, permit any Subsidiary to merge or
consolidate with any Person (other than a Wholly-Owned Subsidiary);
(h) without a Super Majority Board Vote, sell, lease or
otherwise dispose of, or permit any Subsidiary to sell, lease or
otherwise dispose of, assets of the Company and its Subsidiaries,
in one transaction or series of related transactions involving
aggregate value (computed on the basis of book value, determined in
accordance with GAAP consistently applied, or fair market value,
determined by the Board of Directors in its reasonable good faith
judgment) or consideration in excess of $5,000,000 in any
transaction or series of related transactions (other than sales of
inventory in the ordinary course of business);
(i) without a Super Majority Board Vote, liquidate,
dissolve or effect a recapitalization or reorganization of the
Company in any form of transaction (including, without limitation,
any reorganization into a limited liability company, a partnership
or any other non-corporate entity which is treated as a partnership
for federal income tax purposes);
(j) without a Super Majority Board Vote, acquire, or
permit any Subsidiary to acquire, any interest in any company or
business (whether by a purchase of assets, purchase of stock,
merger or otherwise), or enter into any joint venture, involving an
aggregate consideration (including, without limitation, the
assumption of liabilities whether direct or indirect and valuing
any Common Stock issued as consideration at the Market Price
thereof determined on the date of issuance thereof) exceeding
$5,000,000 in any one transaction or series of related transactions
or exceeding $5,000,000 in any twelve-month period;
(k) without a Super Majority Board Vote, enter into, or
permit any Subsidiary to enter into, the ownership, active
management or operation of any business other than the domestic pay
telephone business;
-12-
<PAGE>
(l) without a Super Majority Board Vote, hire or elect
any substitute or replacement for the Chief Executive Officer,
President, Chief Financial Officer or Chief Operating Officer of
the Company or change (whether by amendment, waiver or extension of
any existing arrangement or, upon termination of any existing
arrangement, through any future arrangement) the terms of
employment of any of such Persons, including the terms of any
executive employment agreement, any compensation, incentive stock
or option or loan arrangement; or
(m) effect, permit or suffer to occur or take any steps
to cause a Fundamental Change unless, upon the consummation
thereof, the Company shall be required to purchase, and shall have
purchased all shares of the Preferred Stock tendered to the Company
for purchase at a price per share equal to the Liquidation Value
(as defined in the Certificate of Amendment) plus accrued and
unpaid dividends thereon pursuant to an offer to purchase given to
the holders of the Convertible Preferred Stock not less than 15
days prior to the date such Fundamental Change is to be
consummated. For purposes hereof "FUNDAMENTAL CHANGE" means
(i) any sale or transfer of more than 40% of the assets of the
Company and its Subsidiaries on a consolidated basis (measured
either by book value in accordance with GAAP consistently applied
or by fair market value determined in the reasonable good faith
judgment of the Board of Directors) in any transaction or series of
transactions (other than sales in the ordinary course of business
and the sale of the Company's inmate telephone and cellular
telephone businesses) and (ii) any merger or consolidation to which
the Company is a party, except for a merger in which the Company is
the surviving Company, the terms of the Preferred Stock are not
changed and the Preferred Stock is not exchanged for cash,
securities or other property, and after giving effect to such
merger, the holders of the Company's outstanding capital stock
possessing a majority of the voting power (under ordinary
circumstances) to elect a majority of the Board of Directors
immediately prior to the merger shall continue to own the Company's
outstanding capital stock possessing the voting power (under
ordinary circumstances) to elect a majority of the Board of
Directors.
Notwithstanding the foregoing provisions of this
Section 3.2, the Company may (i) negotiate and consummate the sale
of its inmate telephone and cellular telephone rental operations,
(ii) consummate the Senior Note Financing and repay amounts
outstanding under the Company's existing bank credit agreement, and
(iii) enter into and borrow under a new bank credit agreement (the
transactions described in clauses (ii) and (iii) foregoing, the
"REFINANCING").
-13-
<PAGE>
For purposes hereof, a "SUPER MAJORITY BOARD VOTE" means
approval at a meeting of the Board of Directors by a vote of at
least 75% of each of the directors then serving on the Board of
Directors excluding for purposes of subparagraph (e) a director
interested in the subject matter of such approval.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Purchasers to enter into
this Agreement, the Company hereby represents and warrants to each
of the Purchasers that:
4.1 ORGANIZATION AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and is qualified
to do business in every jurisdiction in which the ownership of its
property or conduct of its business requires such qualification
except where the failure to be qualified, individually or in the
aggregate, would not have a Material Adverse Effect. The Company
has full corporate power and authority and has all licenses,
permits and authorizations necessary to own and operate its
properties and to carry on its business as now conducted and
presently proposed to be conducted, except where the failure to
have such licenses, permits and authorizations would not,
individually or collectively, have a Material Adverse Effect. The
copies of the Certificate of Incorporation and Bylaws furnished to
the Purchasers pursuant to Section 2.1(l) reflect all amendments
made thereto at any time prior to the date of this Agreement and
are correct and complete. Except as described on Schedule 4.1, the
minute books containing the records of meetings of the stockholders
and board of directors, the stock certificate books and the stock
record books of the Company are correct and complete. The Company
is not in default under or in violation of any provision of its
certificate of incorporation or bylaws. Schedule 4.1 attached
hereto correctly sets forth the name of each Subsidiary and each
other entity in which the Company or any of its Subsidiaries has an
equity investment, the jurisdiction of its incorporation or
formation and each of the Persons owning any of the outstanding
equity of such Subsidiary and the number of shares or units of such
equity of each Subsidiary owned by each such Person. Except as set
forth on Schedule 4.1, the Company owns no stock or equity interest
in any other entity. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or formation, has full corporate power and
authority necessary to own its properties and to carry on its
-14-
<PAGE>
businesses as now being conducted and as presently proposed to be
conducted and is qualified to do business in every jurisdiction in
which its ownership of property or the conduct of business requires
such qualification except where the failure to be so qualified,
individually or collectively, would not have a Material Adverse
Effect.
4.2 AUTHORIZATION OF TRANSACTIONS. The Company has
full corporate power and authority to execute and deliver this
Agreement, the agreements and documents attached hereto as Exhibits
and the other agreements and documents contemplated hereby. The
Board of Directors has duly approved this Agreement and has duly
authorized the execution and delivery of this Agreement, the
agreements and documents attached hereto as Exhibits and the other
agreements and documents contemplated hereby and the consummation
of the transactions contemplated hereby and thereby. No other
corporate proceedings on the part of the Company are necessary to
approve and authorize the execution and delivery of this Agreement,
the agreements and documents attached hereto as Exhibits and the
other agreements and documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby.
This Agreement, the agreements and documents attached hereto as
Exhibits and the other agreements and documents contemplated hereby
have been duly executed and delivered by the Company and constitute
valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms, except (i) as limited
by the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect of relating to or
affecting the rights and remedies of creditors, and (ii) as limited
by the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or at law.
4.3 CAPITALIZATION. (a) The authorized, issued
and outstanding capital stock of the Company is as set forth on
Schedule 4.3. All of the issued and outstanding shares of capital
stock of the Company have been duly authorized, are validly issued,
fully paid and nonassessable, are not subject to, nor were they
issued in violation of, any preemptive rights. Except as set forth
on Schedule 4.3, there are no outstanding or authorized securities
with profit participating features or profit interests, or options,
warrants, rights or other agreements or commitments to which the
Company is a party or which are binding upon the Company providing
for the issuance, disposition or acquisition of any of its capital
stock or any such securities or interests (collectively
"Options")(other than this Agreement). Except as set forth on
Schedule 4.3, there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the
Company. Except as set forth on Schedule 4.3, there are no voting
-15-
<PAGE>
trusts, proxies or any other agreements or understandings with
respect to the voting of the capital stock of the Company. Except
as set forth on Schedule 4.3, the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any Options.
(b) The authorized, issued and outstanding capital stock
of each Subsidiary is as set forth on Schedule 4.1. All of the
issued and outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable and are not
subject to, nor were they issued in violation of, any preemptive
rights. Except as set forth on Schedule 4.3, there are no Options
to which any Subsidiary is a party or which are binding upon any
Subsidiary providing for the issuance, disposition or acquisition
of any of its capital stock. Except as set forth on Schedule 4.3,
there are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to any of the Subsidiaries.
Except as set forth on Schedule 4.3, there are no voting trusts,
proxies or any other agreements or understandings with respect to
the voting of the capital stock of any of the Subsidiaries. Except
as set forth on Schedule 4.3, no Subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any of its Stock.
4.4 ABSENCE OF CONFLICTS. Except as set forth on
Schedule 4.4, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby do not and will not (a) conflict with or result in a breach
of any of the provisions of, (b) constitute a default under,
(c) result in a violation of, (d) give any third party the right to
terminate or to accelerate any obligation under, (e) result in the
creation of any lien, security interest, charge or encumbrance upon
the Common Stock or (f) require any authorization, consent,
approval, exemption or other action by or notice to any court or
other governmental body, under the provisions of the certificate of
incorporation or bylaws of the Company or any of the Subsidiaries
or any material indenture, mortgage, lease, license, loan agreement
or other agreement or instrument to which the Company or any of the
Subsidiaries is bound or affected, or any law, statute, rule or
regulation or any judgment, order or decree to which the Company or
any of the Subsidiaries is subject except for those with which the
failure to comply, individually or collectively, would not have a
Material Adverse Effect.
4.5 FINANCIAL STATEMENTS. The Company has
furnished the Purchaser with copies of its (a) restated unaudited
consolidated balance sheet as of March 31, 1995 (the "LATEST
BALANCE SHEET") and the related consolidated statements of income
-16-
<PAGE>
and cash flow for the 3-month period ended March 31, 1995 and
(b) audited balance sheets and statements of income and cash flow
for the fiscal years ended December 31, 1993 and 1994. Each of the
foregoing financial statements (including in all cases the notes
thereto, if any) (the "FINANCIAL STATEMENTS") is accurate and
complete in all material respects, is consistent with the Company's
books and records (which, in turn, are accurate and complete in all
material respects), presents fairly the Company's consolidated
financial condition, consolidated results of operations and
consolidated cash flows as of the dates and for the periods
referred to therein, and has been prepared in accordance with GAAP
consistently applied, subject in the case of unaudited financial
statements to changes, which are immaterial in the aggregate,
resulting from normal year-end adjustments and to the absence of
footnote disclosure.
(b) Except as set forth on Schedule 4.5, the restated
audited consolidated financial statements and related schedules and
notes included in the SEC Documents comply in all material respects
with requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder. Except as set
forth on Schedule 4.5, the Financial Statements which are not
audited comply in all material respects with the requirements of
the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder (assuming for such purposes that
such requirements are applicable thereto).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
set forth on Schedule 4.6 and except for obligations or liabilities
with respect to expenses arising from, and indebtedness incurred
in, the Refinancing, neither the Company nor any of the
Subsidiaries have any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not
known, whether due or to become due and regardless of when
asserted) except (a) obligations under contracts and commitments,
(b) liabilities reflected on the Latest Balance Sheet and
(c) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (which liabilities
in the aggregate could not reasonably be expected to have a
Material Adverse Effect).
4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. Except as
set forth on Schedule 4.8 and except for the Refinancing, since
March 31, 1995, or except for obligations or liabilities with
respect to indebtedness incurred in the Refinancing, there has been
no change or event resulting in or which could reasonably be
expected to have a Material Adverse Effect, whether individually or
collectively with any other change or event since such date (it
-17-
<PAGE>
being understood that no representation or warranty is made with
respect to conditions affecting the Company's industry in general).
4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Since March
31, 1995, except as set forth on Schedule 4.8 or as specifically
contemplated by this Agreement neither the Company nor any of the
Subsidiaries has:
(a) issued, sold or transferred any notes, bonds or
other debt securities (except, in the case of the Company, the
issuance of the notes and bank borrowings pursuant to the
Refinancing) or any equity securities, securities convertible,
exchangeable or exercisable into equity securities, or warrants,
options or other rights to acquire equity securities, of the
Company or any of the Subsidiaries;
(b) borrowed any amount or incurred or become
subject to any liabilities, except liabilities incurred in the
ordinary course of business (except, in the case of the Company,
the issuance of the notes and bank borrowings and the incurrence of
expenses pursuant to the Refinancing);
(c) other than the repayment of bank borrowings
pursuant to the Refinancing, discharged or satisfied any lien or
encumbrance or paid any obligation or liability, other than
liabilities paid in the ordinary course of business, or prepaid any
amount of indebtedness for borrowed money;
(d) mortgaged, pledged or subjected to any lien,
charge or any other encumbrance, any portion of its properties or
assets other than in the ordinary course of business or other than
liens pursuant to the bank credit agreement entered into pursuant
to the Refinancing;
(e) sold, leased, assigned or transferred any
portion of its tangible assets or cancelled any debts or claims
owing to or held by it in any such case without fair consideration;
(f) sold, assigned or transferred any Proprietary
Rights or disclosed any proprietary confidential information to any
Person, other than (i) to representatives of the Company acting on
behalf of the Company and subject to obligations to hold such
information confidential, and (ii) to certain prospective lenders,
investors and financial advisors in connection with the
Refinancing, in each case subject to obligations to hold such
information confidential, or granted any license or sublicense of
any rights under or with respect to any Proprietary Rights;
-18-
<PAGE>
(g) suffered any extraordinary losses or waived any
single right of value which has a value in excess of $500,000 or
any rights of value which have an aggregate value of $1,000,000
whether or not in the ordinary course of business or consistent
with past custom and practice;
(h) suffered any theft, taking by power of eminent
domain, damage, destruction or casualty loss in excess of $500,000
to its tangible assets, whether or not covered by insurance or
suffered any substantial destruction of the Company's books and
records;
(i) other than in the ordinary course of business
or as required to effect the Refinancing, entered into, amended or
terminated any material lease, license, contract, agreement or
commitment, or taken any other action or entered into any other
transaction, or changed any material business practice or manner of
dealing with any customer, supplier, subcontractor, insider, sales
representative, or other person or entity with whom the Company or
any of the Subsidiaries engage in any business activity, or entered
into any other transaction;
(j) entered into any employment contract or
collective bargaining agreement, written or oral, or changed in any
other material respect employment terms for, or made or granted any
bonus or any wage, salary or compensation increase to any director
or executive officer or, except in the ordinary course of business,
to any other employee, agent or sales representative, group of
employees or consultant or made or granted any increase in any
employee benefit plan or arrangement, or amended or terminated any
existing employee benefit plan or arrangement or adopted any new
employee benefit plan or arrangement;
(k) incurred intercompany charges or conducted its
cash management customs and practices (including the collection of
receivables, inventory control and payment of payables) other than
in the usual and ordinary course of business in accordance with
past custom and practice;
(l) made any capital expenditures or commitments
therefor that aggregate in excess of $1,000,000;
(m) made any loans or advances to, or guarantees
for the benefit of, any Person;
(n) delayed or postponed (beyond its normal custom
and practice) the payment of accounts payable and other
liabilities;
-19-
<PAGE>
(o) made any charitable contributions or pledges in
excess of $250,000; or
(p) except for the authorization of the Certificate
of Amendment, changed or authorized any change in its certificate
of incorporation or bylaws.
4.9 TITLE TO PROPERTIES. The buildings, machinery,
equipment, vehicles and other tangible assets of the Company and
the Subsidiaries are in good operating condition and repair and are
usable in the ordinary course of business. The Company and the
Subsidiaries own or lease under valid leases all buildings,
machinery, equipment and other tangible assets necessary for the
conduct of their business or used in the conduct of their business.
4.10 ENVIRONMENTAL AND SAFETY MATTERS. Except as
set forth on Schedule 4.10 attached hereto (the "ENVIRONMENTAL
SCHEDULE"):
(a) the Company has complied and is in compliance
with all Environmental and Safety Requirements, except where the
failure so to comply would not, individually or in the aggregate,
result in a Material Adverse Effect;
(b) the Company has obtained and complied with, and
is in compliance with, all permits, licenses and other
authorizations that may be required pursuant to Environmental and Safety
Requirements for the occupation of its facilities and the operation
of its business and such permits, licenses and other authorizations
may be relied upon for continued lawful operation of the business
of the Company on and after the Closing Date without transfer,
reissuance, or other governmental approval or action, except where
the failure so to comply with would not, individually or in the
aggregate, result in a Material Adverse Effect;
(c) the Company has not received any claim,
complaint, citation, report or other written or oral notice
regarding any material liabilities or potential material
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, arising under Environmental and Safety Requirements;
(d) no underground storage tanks or surface
impoundments exist on any property owned by the Company; and
(e) the Company has not, either expressly or by
operation of law, assumed or undertaken any liability or corrective
or remedial obligation of any other person relating to
-20-
<PAGE>
Environmental and Safety Requirements, except liabilities of
businesses assumed in connection with the acquisition thereof.
4.11 TAX MATTERS. Except as set forth on Schedule
4.11 attached hereto:
(a) Each of the Company and its Subsidiaries has
filed all Tax Returns that it was required to file on or before the
date hereof other than those returns which if not filed would not,
individually or in the aggregate, have a Material Adverse Effect.
All such Tax Returns were correct and complete in all material
respects. As of the time of filing, all Taxes owed by any of the
Company and its Subsidiaries (whether or not shown on any Tax
Return), with respect to the taxable periods ending on or before
the Closing Date, have been paid, except where the failure to
withhold, pay or deposit (individually or collectively) would not
have a Material Adverse Effect and except with respect to taxes
which are being contested in good faith and by appropriate
proceedings and with respect to which adequate reserves have been
established on the Company's books. None of the Company and its
Subsidiaries currently is the beneficiary of any extension of time
within which to file any Tax Return. No claim in writing has been
received by the Company from an authority in a jurisdiction where
any of the Company and its Subsidiaries does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of the Company
or any of the Subsidiaries that arose, other than for current taxes
not yet due and payable in connection with any failure (or alleged
failure) to pay any Tax.
(b) Each of the Company and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(c) Except as set forth on Schedule 4.11, neither
the Company nor any director or executive officer of the Company
expects any taxing authority to assess any material additional
Taxes for any period for which Tax Returns have been filed. There
is no dispute or claim concerning any Tax liability of any of the
Company and its Subsidiaries either (i) claimed or raised by any
authority in writing or (ii) as to which any of the directors and
officers (and employees responsible for Tax matters) of the Company
and its Subsidiaries has knowledge based upon personal contact with
any agent of such authority which dispute or claim if resolved
adversely to the Company would result in a Material Adverse Effect.
Schedule 4.11 lists all federal, state, local and foreign income
Tax Returns filed with respect to any of the Company or the
Subsidiaries for taxable periods ended on or after December 31,
-21-
<PAGE>
1991, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of an
Audit. The Company has made available to the Purchasers correct
and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed
to by any of the Company or the Subsidiaries since December 31,
1991.
(d) Except as set forth on Schedule 4.11, neither
the Company nor any of the Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) Neither the Company nor any of the Subsidiaries
has filed a consent under Section 341(f) of the Code concerning
collapsible corporations. None of the Company or any of the
Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code. None of the Company
or any of the Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. None of the Company or any of the
Subsidiaries is a party to any Tax allocation or sharing agreement.
Except as set forth on Schedule 4.11, neither the Company nor any
of the Subsidiaries (i) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group
the common parent of which was the Company) or (ii) has any
Liability for the Taxes of any Person (other than any of the
Company and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee
or successor, by contract or otherwise.
(f) Except as set forth on Schedule 4.11, the
unpaid Taxes of the Company and the Subsidiaries (i) did not, as of
December 31, 1994, exceed in any material amount the reserve for
Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) set forth on the face of the Latest Balance Sheet (rather
than in any notes thereto) and (ii) do not exceed that reserve in
any material amount as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries in filing their Tax Returns.
4.12 LITIGATION; PROCEEDINGS. Except as set forth
in Schedule 4.12 attached hereto (the "LITIGATION SCHEDULE"), to
the Company's knowledge there are no actions, suits, proceedings,
orders or investigations pending or threatened against the Company
-22-
<PAGE>
or the Subsidiaries at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign which, individually or collectively, if determined
adversely to the Company and its Subsidiaries would have a Material
Adverse Effect, and there is no basis for any of the foregoing.
4.13 BROKERAGE. Except for arrangement between the
Company and ACP and except as set forth in Schedule 4.13 attached
hereto, there are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company or the Subsidiaries.
4.14 GOVERNMENTAL LICENSES AND PERMITS.
(a) Except as set forth on Schedule 4.14, the
Company and its Subsidiaries hold all permits, licenses,
certificates of occupancy, franchises, certificates, approvals and
other authorizations of foreign, federal, state and local
governments or other similar rights including all necessary
permits, authorizations and licenses issued to the Company by the
FCC and all state commissions regulating the communications
industry ("REGULATORY AGENCIES") (collectively, the "LICENSES") and
necessary in and for the conduct of their respective businesses,
and such Licenses are in full force and effect except where the
failure to hold such License or for such License to be valid and in
full force and effect, would not have a Material Adverse Effect and
to the Company's knowledge would not adversely effect any contracts
or arrangements of the Company involving 250 or more telephones or
the operation thereof. The Company has paid all taxes with respect
to and filed all statements, reports and information required by
the Regulatory Agencies and duly performed in all respects all of
its obligations under, and is in full compliance with, the
Licenses, the FCC's Rules, the Communications Act of 1934 (the
"COMMUNICATIONS ACT"), all State statutes and regulations, the
Telephone Operator Consumer Services Improvement Act of 1990 and
any other statutes or regulations governing the communications
services operated by the Company (collectively referred to as the
"COMMUNICATIONS STATUTES AND REGULATIONS")except for the failure of
which would not have a Material Adverse Effect and to the Company's
knowledge would not adversely effect any contracts or arrangements
of the Company involving 250 or more telephones or the operation
thereof. Except as set forth in Schedule 4.14, there is not now
pending or to the Company's knowledge threatened any litigation,
proceeding or investigation which reasonably might result in a
termination of any of the Licenses except for litigation,
proceedings or investigations which would not individually or in
-23-
<PAGE>
the aggregate have a Material Adverse Effect and to the Company's
knowledge would not adversely effect any contracts or arrangements
of the Company involving 250 or more telephones or the operation
thereof.
(b) Except as set forth in Schedule 4.14, no event
has occurred (including any notice issued by the Regulatory
Agencies) and no agreement has been entered into by the Company,
which now, or after notice or lapse of time or both, might
reasonably be expected to cause or permit cancellation, revocation
or termination of the Licenses, or would result in any actions,
which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, and there is no pending or to
the Company's knowledge threatened action or matters that would
suggest that any of the Licenses could reasonably be expected not
to be renewed in the ordinary course.
(c) There is not pending any application, petition,
objection or other pleading filed with the Regulatory Agencies, or
any entity with jurisdiction to review administrative orders of the
Regulatory Agencies, which questions the validity of or contests
any of the Licenses except for those that could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) The consummation of the transactions
contemplated by this Agreement will not cause any forfeiture or
impairment of the Licenses except for those that could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.15 EMPLOYEES. Except as set forth on Schedule
4.15, to the best knowledge of the Company, neither Jeffrey Hanft
nor Robert Rubin has any plan to terminate employment with the
Company or any of the Subsidiaries. Except as set forth on
Schedule 4.15, to the best knowledge of the Company, neither the
Company, nor any of the Subsidiaries is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar
agreements, except (a) confidentiality agreements entered into by
the Company with respect to information obtained in connection with
evaluating possible acquisitions or dispositions of businesses, (b)
agreements binding on the Company or any of the Subsidiaries, the
breach of which would not, individually or in the aggregate, have
a Material Adverse Effect and (c) agreements binding on Jeffrey
Hanft or Robert Rubin solely on account of agreements described in
clause (a) foregoing.
-24-
<PAGE>
4.16 EMPLOYEE BENEFIT PLANS. (a) Schedule 4.16
attached hereto (the "EMPLOYEE BENEFIT PLANS SCHEDULE") contains an
accurate and complete list of all Plans, as defined below,
contributed to, maintained or sponsored by the Company and/or any
of its Subsidiaries, to which the Company or any of its
Subsidiaries is obligated to contribute or with respect to which
the Company or any of its Subsidiaries has any liability or
potential liability, whether direct or indirect, including all
Plans contributed to, maintained or sponsored by each member of the
controlled group of companies (within the meaning of Section 414 of
the Code) of which the Company or any of its Subsidiaries is a
member, to the extent the Company or any of its Subsidiaries has
any potential liability with respect to such Plans. For purposes
of this Agreement, the term "Plans" shall mean: (i) employee
benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not
funded and whether or not terminated, (ii) employment agreements,
and (iii) personnel policies or fringe benefit plans, policies,
programs and arrangements, whether or not subject to ERISA, whether
or not funded, and whether or not terminated, including without
limitation, stock bonus, deferred compensation, pension, severance,
bonus, vacation, travel, incentive, and health, disability and
welfare plans.
(b) Except as disclosed on Schedule 4.16, neither the
Company nor any of its Subsidiaries contributes to, has any
obligation to contribute to or otherwise has any liability or
potential liability with respect to (i) any Multiemployer Plan (as
such term is defined in Section 3(37) of ERISA), (ii) any Plan of
the type described in Sections 4063 and 4064 of ERISA or in Section
413(c) of the Code (and regulations promulgated thereunder), (iii)
any Plan that is subject to the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA, or (iv) any plan
which provides health, life insurance, accident or other "welfare-
type" benefits to current or future retirees or current or future
former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Code or applicable state
continuation coverage law.
(c) Except as disclosed on Schedule 4.16, none of the
Plans obligates the Company or any of its Subsidiaries to pay
separation, severance, termination or similar-type benefits solely
as a result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as such term is used
in Section 280G of the Code (and regulations promulgated
thereunder).
(d) Each Plan and all related trusts, insurance
contracts, and funds have been maintained, funded and administered
-25-
<PAGE>
in compliance in all material respects with all applicable laws and
regulations, including but not limited to ERISA and the Code. No
Plan has any material unfunded liabilities. None of the Company,
any Subsidiary, any trustee or administrator of any Plan, or any
other person has engaged in any transaction with respect to any
Plan which could reasonably be expected to subject the Company, any
Subsidiary, or any trustee or administrator of any Plan, or any
party dealing with any Plan, or Purchasers to any material tax or
penalty imposed by ERISA or the Code. Except as disclosed on
Schedule 4.16, no actions, suits, claims, complaints, charges,
proceedings, hearings, investigations, or demands with respect to
the Plans (other than routine claims for benefits) are pending or
threatened, and neither the Company nor of any of its Subsidiaries
has knowledge of any facts which could give rise to or reasonably
be expected to give rise to any actions, suits, claims, complaints,
charges, proceedings, hearings, investigations, or demands. None
of the assets of the Company nor any of its Subsidiaries is the
subject of any lien arising under Section 302(f) of ERISA or
Section 412(n) of the Code, neither the Company nor any of its
Subsidiaries has been required to post any security pursuant to
Section 307 of ERISA or Section 401(a)(29) of the Code, and neither
the Company nor any of its Subsidiaries has knowledge of any facts
which could reasonably be expected to give rise to such lien or
such posting of security.
(e) Each Plan that is intended to be qualified under
Section 401(a) of the Code, and each trust (if any) forming a part
thereof, has received a favorable determination letter from the
Internal Revenue Service as to the qualification under the Code of
such Plan and the tax exempt status of such related trust, and
nothing has occurred since the date of such determination letter
that could adversely affect the qualification of such Plan or the
tax exempt status of such related trust.
(f) No underfunded "defined benefit plan" (as such term
is defined in Section 3(35) of ERISA) has been, during the five
years preceding the Closing, transferred out of the controlled
group of companies (within the meaning of Section 414 of the Code)
of which the Company or any of its Subsidiaries is a member or was
a member during such five-year period.
(g) With respect to each Plan, the Company has made
available Purchasers with true, complete and correct copies, to the
extent applicable, of (i) all documents pursuant to which such Plan
is maintained, funded and administered, (ii) the two most recent
annual reports (Form 5500 series) filed with the Internal Revenue
Service (with attachments), (iii) the two most recent actuarial
reports, (iv) the two most recent financial statements, and (v) all
-26-
<PAGE>
governmental rulings, determinations, and opinions (and pending
requests for governmental rulings, determinations, and opinions).
4.17 INSURANCE. The insurance coverage of the
Company and the Subsidiaries is adequate and is customary for
corporations of similar size engaged in similar lines of business.
4.18 AFFILIATE TRANSACTIONS. Except as disclosed in
any SEC Document, the Company and its Subsidiaries have not entered
into any transaction or series of transactions with any
stockholder, director, officer, employee or Affiliate of the
Company which would require disclosure pursuant to Rule 404 of
Regulation S-K under the Securities Act.
4.19 COMPLIANCE WITH LAWS. The Company, the
Subsidiaries and their officers, directors, agents and employees
have complied with all applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof
(including, without limitation, the Communications Act, the
Securities Act and the Exchange Act) which affect the business,
business practices (including, but not limited to, any of the
Company's and the Subsidiaries' marketing, sales and distribution
of its products and services), the business operations or any
leased properties of any of the Company and the Subsidiaries and to
which the Company and the Subsidiaries may be subject, and no
claims have been filed against any of the Company and its
Subsidiaries alleging a violation of any such laws or regulations
except for those the failure to comply with would not, individually
or in the aggregate, have a Material Adverse Effect.
4.20 GOVERNMENTAL CONSENT, ETC. No permit, consent,
approval or authorization of, or declaration to or filing with, any
governmental or regulatory authority or any other party or person
(including, without limitation, the FCC) is required to be obtained
by the Company in connection with its execution, delivery and
performance of this Agreement or the consummation of any other
transaction contemplated hereby except for those which could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.21 CUSTOMERS. Except as described on Schedule
4.21 hereto (the "MATERIAL CUSTOMER DISPUTE SCHEDULE"), neither the
Company nor any of its Subsidiaries has any reason to believe that
any Person who, collectively with its Affiliates, is party to any
contract or arrangement with the Company or any of its Subsidiaries
relating to the operation of an aggregate of 250 or more telephones
(a "MATERIAL CUSTOMER") has any dispute with the Company or any
of its Subsidiaries with respect to any term or condition of such
arrangement or has indicated that it shall terminate or seek to
amend or revise such arrangement in any material respect.
-27-
<PAGE>
4.22 DISCLOSURE. (a) Neither this Agreement, the
offering memorandum with respect to the Senior Note Offering (in
the form previously delivered to the Purchasers (except to the
extent such form does not contemplate this Agreement and the
transactions contemplated hereby)) nor any of the schedules,
attachments, exhibits, written statements or certificates supplied
to the Purchasers by or on behalf of the Company with respect to
the transactions contemplated hereby contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no
fact which has not been disclosed to the Purchasers in writing and
of which any of the Company's executive officers and directors is
aware or any of the executive officers and directors of any of its
Subsidiaries is aware, and which has had or would reasonably be
anticipated to have a Material Adverse Effect (it being understood
that no representation or warranty is made with respect to
conditions affecting the Company's industry in general). The
Offering Memorandum prepared pursuant to the Senior Note Financing
does not contain an untrue statement of material fact or omit to
state any fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading.
(b) Except as set forth on Schedule 4.22, as of its
filing date, each SEC Document filed, and each SEC Document that
will be filed by the Company prior to the Closing Date, as amended
or supplemented prior to the Closing Date, if applicable, pursuant
to the Securities Act and/or the Exchange Act (i) complied in all
material respects with the applicable requirements of the
Securities Act and/or Exchange Act and (ii) did not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. Each final registration statement filed with the SEC
by the Company pursuant to the Securities Act, as of the date such
statement or amendment became effective (i) complied in all
material respects with the applicable requirements of the
Securities Act and (ii) did not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading (in the case of any prospectus, in light of the
circumstances under which they were made). The Sections in the
Preliminary Memorandum ,as the same may be amended or supplemented,
and in any final offering memorandum, entitled "Risk Factors," "The
Company," "Capitalization," "Selected Financial Information,"
"Management s Discussion and Analysis of Financial Condition and
Results of Operations," "Business," "Management," "Certain
Transactions," "Principal Shareholders," "Description of the Credit
Agreement," "Description of the Notes" and "Consolidated Financial
-28-
<PAGE>
Statements", if included in a prospectus as part of a registration
statement with respect to the exchange offer of notes contemplated
thereby and filed on a Form S-4 with the SEC on the date thereof,
(i) were prepared in material accordance with Regulations S-K and
S-X of the Rules of the SEC, (ii) include all material disclosure
that would be required therein (other than as to matters related to
an exchange offer or the securities to be offered in exchange for
the notes issued pursuant to the Senior Note Financing) by Items
100, 200, 300 and 400 of Regulation S-K and Articles 1, 2, 3, 4, 6,
10, 11 and 12 of Regulation S-X, in each case to the extent such
regulations would be applicable to such a registration statement if
such an exchange offer were contemplated at such time, and (iii)
do not or will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances in which
they were made, not misleading.
4.23 CONTRACTS. Except as set forth on
Schedule 4.23, all of the contracts of the Company or any of its
Subsidiaries that were required to be described in the SEC
Documents or to be filed as exhibits thereto are described in the
SEC Documents or filed as exhibits thereto and are in full force
and effect, other than those which have expired or terminated prior
to January 1, 1995 in accordance with their terms and those which
have been terminated or modified in connection with the
Refinancing. Neither the Company nor any of its Subsidiaries nor,
to the knowledge of the Company, any other party is in breach of or
in default under any such contract except for such breaches and
defaults as in the aggregate have not had, and would not reasonably
be expected to, have a Material Adverse Effect.
4.24 INVESTMENT COMPANY. The Company is not an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
4.25 EXEMPTION FROM REGISTRATION; RESTRICTIONS ON
OFFER AND SALE OF SAME OR SIMILAR SECURITIES. Assuming the
representations and warranties of the Purchasers set forth in
Article V hereof are true and correct in all material respects, the
offer and sale of the Securities made pursuant to this Agreement
will be exempt from the registration requirements of the Securities
Act. Neither the Company nor any Person acting on its behalf has,
in connection with the offering of the Securities, engaged in (A)
any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the
Securities Act), (B) any action involving a public offering within
the meaning of Section 4(2) of the Securities Act, or (C) any
action that would require the registration under the Securities Act
-29-
<PAGE>
of the offering and sale of the Securities pursuant to this
Agreement or that would violate applicable state securities or
"blue sky" laws. The Company has not made and will not prior to
the Closing make, directly or indirectly, any offer or sale of the
Securities or of securities of the same or a similar class as the
Securities if as a result the offer and sale of the Securities
contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Securities Act. As used herein,
the terms "offer" and "sale" have the meanings specified in Section
2(c) of the Securities Act.
4.26 SMALL BUSINESS MATTERS. The Company, together
with its "affiliates" (as that term is defined in Title 13, Code of
Federal Regulations, Section 121.401), is a "small business concern"
within the meaning of the Small Business Investment Act of 1958 and
the regulations thereunder, including Title 13, Code of Federal
Regulations, Section 121.802. The information regarding the Company and
its affiliates set forth in the SBA Form 480, Form 652 and Part A
of Form 1031 delivered at the Closing is accurate and complete.
Neither the Company nor any Subsidiary presently engages in any
activities, nor shall the Company or any Subsidiary use directly or
indirectly the proceeds from the sale of the Preferred Stock
hereunder for any purpose for which a SBIC is prohibited from
providing funds by the Small Business Investment Act of 1958 and
the regulations thereunder (including Title 13, Code of Federal
Regulations, Section 107.804 and Section 107.901).
4.27 CLOSING DATE. All of the representations and
warranties contained in this Article IV and made by or on behalf of
the Company elsewhere in this Agreement and all information
delivered in any schedule, attachment or exhibit hereto or in any
writing delivered to the Purchasers by or on behalf of the Company
are true and correct in all respects on the date of this Agreement
and will be true and correct in all respects on the Closing Date,
unless waived by each of the Purchasers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As a material inducement to the Company to enter into
this Agreement, each Purchaser hereby represents and warrants,
severally and not jointly, to the Company that:
5.1 ORGANIZATION AND POWER. Such Purchaser is a
corporation, limited partnership or limited liability company duly
organized, validly existing and in good standing under the laws of
-30-
<PAGE>
the state of its jurisdiction of incorporation or formation, with
full corporate or partnership (as applicable) power and authority
to enter into this Agreement and perform its obligations hereunder.
5.2 AUTHORIZATION. The execution, delivery and
performance of this Agreement by such Purchaser and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all requisite corporate or partnership
(as applicable) action on the part of such Purchaser, and no other
corporate or partnership (as applicable) proceedings on its part
are necessary to authorize the execution, delivery or performance
of this Agreement. This Agreement constitutes a valid and binding
obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms.
5.3 NO VIOLATION. Such Purchaser is not subject to
or obligated under its certificate of incorporation, its bylaws,
certificate of partnership, certificate of formation, any
applicable law, or rule or regulation of any governmental
authority, or any agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or
decree, which would be breached or violated by its execution,
delivery or performance of this Agreement.
5.4 BROKERAGE. Except for an agreement between the
Company and ACP, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement or agreement made by such Purchaser.
5.5 CLOSING DATE. The representations and
warranties contained in this Article V and made by such Purchaser
elsewhere in this Agreement are true and correct in all respects on
the date of this Agreement and will be true and correct in all
respects on the Closing Date, unless waived by the Company.
ARTICLE VI
TERMINATION
6.1 TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written consent each of the
Purchasers and the Company;
-31-
<PAGE>
(b) by either the Purchasers or the Company if
there has been a material misrepresentation or breach on the part
of the other party or parties in the representations and warranties
set forth in this Agreement if such breach is not cured within 10
days after the Company first becomes aware of such breach, or if
events have occurred which have made it impossible to satisfy a
condition precedent to the terminating party's or parties'
obligations to consummate the transactions contemplated hereby,
unless such terminating party's or parties' willful breach of this
Agreement has caused the condition to be unsatisfied; or
(c) by either of the Purchasers or by the Company
if the Closing has not occurred on or prior to [AUGUST 15], 1995;
and PROVIDED that neither the Purchasers nor the Company may
terminate this Agreement pursuant to this Section 6.1(c) if such
person's willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby at or prior to
such time.
6.2 EFFECT OF TERMINATION. In the event of
termination of this Agreement by either the Purchasers or the
Company as provided above, this Agreement will forthwith become
void and there will be no liability on the part of any party hereto
to any other party hereto or its shareholders or directors or
officers in respect thereof, except for the obligations of the
parties pursuant to Sections 8.7 and 8.8 and except that nothing
herein will relieve any party from liability resulting from any
breach of this Agreement prior to such termination, including,
without limitation, any breach of Section 8.9.
ARTICLE VII
DEFINITIONS
"AFFILIATE" means with respect to any Person, any other
Person (i) directly or indirectly controlling or controlled by or
under direct or indirect control with such specified Person, (ii)
related by blood or marriage to any such specified Person or any
Affiliate of such specified Person, (iii) controlled by any Person
described in clause (ii) foregoing or (iv) in the case of any
limited liability company, each member.
"AFFILIATED GROUP" shall mean an affiliated group as
defined in Section 1504 of the Code (or any analogous combined,
consolidated or unitary group defined under state, local or foreign
Tax law) of which any of the Company or the Subsidiaries is or has
been a member.
-32-
<PAGE>
"ANNUAL REPORTS" means the Company's Annual Reports on
Form 10-K for the years ended December 31, 1993 and 1994 as filed
with the SEC.
"AUDIT" means any audit, assessment of Taxes, or other
examination by any taxing authority, proceedings, or appeal of such
proceedings relating to Taxes.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all
federal, state, local and foreign statutes, regulations, ordinances
and similar provisions having the force or effect of law, all
judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health
and safety, worker health and safety, and pollution or protection
of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or
cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or
radiation.
"ENVIRONMENTAL LIEN" means a lien, either recorded or
unrecorded, in favor of any governmental entity, relating to any
liability of the Company arising under Environmental and Safety
Requirements.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
"FCC" means the Federal Communications Commission.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"MARKET PRICE" of any security means the average of the
closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed or as reported on
the NASDAQ National Market, or, if there has been no sales on any
such exchange or reported on the NASDAQ National Market on any day,
the average of the highest bid and lowest asked prices on all such
exchanges or reported at the end of such day, or, if on any day
such security is not so listed or included in the NASDAQ National
Market, the average of the representative bid and asked prices
-33-
<PAGE>
quoted in the NASDAQ Stock Market as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ Stock
Market, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being
determined and the 20 consecutive business days prior to such day.
If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ National Market, the NASDAQ Stock
Market or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Company and the
holders of a majority of the Preferred Stock. If such parties are
unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Company
and the holders of a majority of the Preferred Stock. The
determination of such appraiser shall be final and binding upon the
parties, and the Company shall pay the fees and expenses of such
appraiser.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse
change in the assets, earnings, financial condition, operating
results, customer, supplier, employee or sales representative
relations or business prospects of the Company and the Subsidiaries
taken as a whole, (ii) material casualty loss, destruction or
damage to the assets or properties of the Company and the
Subsidiaries taken as a whole, whether or not covered by insurance
or (iii) any action or proceeding before any court or government
body wherein an unfavorable judgment, decree, injunction or order
would prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be
rescinded, or might adversely affect the right of the Purchasers to
purchase, own or control the Securities.
"PERMITTED EQUITY KICKERS" means issuance by the Company
of notes or debt securities which do not contain any equity
features and are not issued in connection with the issuance of any
Stock of the Company, except for warrants to purchase Common Stock
(i) with an exercise price per share not less than the Market Price
of the Common Stock , and (ii) the aggregate exercise price of
which does not exceed 10% of the gross cash proceeds received by
the Company from such debt issuance, in each case determined as of
the date of issuance thereof.
"OFFICER'S CERTIFICATE" of any Person means a certificate
signed by the chief executive officer, vice president, secretary or
Chief Financial Officer of such Person stating that (i) the officer
-34-
<PAGE>
signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit such person to
verify the accuracy of the information set forth in such
certificate, and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit
to state any fact necessary to make the certificate not misleading.
"PERSON" means an individual, a partnership (including a
limited partnership), a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PROPRIETARY RIGHTS" means all patents, patent
applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); all trademarks,
service marks, trade dress, trade names and corporate names; all
registered and unregistered statutory and common law copyrights;
all registrations, applications and renewals for any of the
foregoing; all trade secrets, confidential information, ideas,
formulae, compositions, know-how, manufacturing and production
processes and techniques, research and development information,
drawings, specifications, designs, plans, improvements, proposals,
technical and computer data, documentation and software, financial
business and marketing plans, customer and supplier lists and
related information and all other proprietary rights.
"REGULATORY VIOLATION" means, with respect to any SBIC
Holder providing financing under this Agreement, (i) a diversion of
the proceeds of the financing under this Agreement from the
reported use thereof on SBA Form 1031 delivered at Closing, if such
diversion was effected without obtaining the prior written consent
of the SBIC Holders (which may be withheld in their sole
discretion) or (ii) a change in the principal business activity of
the Company and its Subsidiaries to an ineligible business activity
(within the meaning of the SBIC Regulations) if such change occurs
within one year after the date of the initial financing under this
Agreement.
"SBIC" means a Small Business Investment Company licensed
by an SBA under the Small Business Investment Act of 1958, as
amended.
"SBIC REGULATIONS" means the Small Business Investment
Act of 1958 and the regulations issued thereunder as set forth in
13 CFR 107 and 121, as amended.
"SEC" means the United States Securities and Exchange
Commission and any successor to the functions thereof.
-35-
<PAGE>
"SEC DOCUMENTS" means all documents (including any annual
reports) filed by the Company with the SEC (including all exhibits
and schedules thereto and documents incorporated by reference
therein) since December 31, 1991 but shall not include any portion
of any document which is not deemed to be filed under applicable
SEC rules and regulations.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"STOCK" of any Person means any shares, equity or profits
interests, participations or other equivalents (however designated)
of capital stock, whether voting or nonvoting, including any
securities with profit participation features, and any rights,
warrants, options or other securities convertible into or
exercisable or exchangeable for any such shares, equity or profits
interests, participations or other equivalents, or such other
securities, directly or indirectly (or any equivalent ownership
interests, in the case of a Person which is not a corporation).
"SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or
other business entity of which (i) if a corporation, a majority of
the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or
other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership,
association or other business entity if such Person or Persons
shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of
such limited liability company, partnership, association or other
business entity.
"TAX" or "TAXES" shall mean any federal, state, local or
foreign income, estimated, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including without limitation taxes under
Section 59A of the Code), customs duties, capital stock, franchise,
employees' income withholding, social security (or similar),
unemployment, disability, real property, personal property, sales,
-36-
<PAGE>
use, transfer, registration, value added, alternative or add-on
minimum or other tax, of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in
respect of the foregoing.
"TAX RETURNS" shall mean returns, declarations, reports,
claims for refund and information returns or statements relating to
Taxes, including any schedules or attachments thereto.
"TRANSACTION DOCUMENTS" means this Agreement, the
Warrants, the Registration Agreement, each of the other agreements
contemplated hereby, and the Company's Certificate of Incorporation
(as amended by the Certificate of Amendment).
"UNDERLYING COMMON STOCK" means (i) the Common Stock
issued or issuable upon conversion of the Preferred Stock or
exercise of the Warrants, and (ii) any Common Stock issued or
issuable with respect to the securities referred to above by way of
stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other
reorganization. Any Person who holds Preferred Stock or Warrants
shall be deemed to be the holder of the Underlying Common Stock
obtainable upon exercise of such Preferred Stock or Warrants. As
to any particular shares of Underlying Common Stock, such shares
shall cease to be Underlying Common Stock when they have been
(a) effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them or
(b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary of such
Person all of the outstanding capital stock or other ownership
interests of which shall at the time be owned by such Person or one
or more Wholly Owned Subsidiaries of such Person.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 SURVIVAL. Notwithstanding any examination made
for or on behalf of the Purchasers, the knowledge of any of its
officers, directors, stockholders, employees or agents, or the
acceptance of any certificate or opinion, all representations,
warranties, covenants and agreements set forth in this Agreement or
in any writing delivered in connection with this Agreement shall
survive the Closing and, subject to the provisions of the following
-37-
<PAGE>
sentence, shall be fully effective and enforceable, subject to the
limitations set forth in Section 8.3(b) below. Notwithstanding the
foregoing, the representations and warranties set forth in Sections
4.1, 4.2, 4.3 and 4.4 shall survive indefinitely and the
representations and warranties set forth in Sections 4.10, 4.11 and
4.16 shall survive until the termination of their respective
statute of limitations applicable thereto.
8.2 INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless each of the Purchasers, including each
of its affiliates, and the respective partners, directors,
officers, agents and employees thereof (each Purchaser and each
such other Person, an "INDEMNIFIED PARTY") from and against any
losses, claims, damages, judgments, assessments, costs and other
liabilities (collectively "LIABILITIES"), and will reimburse each
Indemnified Party for all fees and expenses (including the
reasonable fees and expenses of counsel) (collectively, "EXPENSES")
as they are incurred in investigating, preparing or defending any
claim, action, proceeding or investigation, whether or not in
connection with pending or threatened litigation or arbitration and
whether or not any Indemnified Party is a party thereto
(collectively, "ACTIONS"), arising out of (i) any breach of any of
the representations or warranties made by the Company in this
Agreement or any of the agreements or certificates, documents or
other writings contemplated hereby or delivered in connection
herewith, (ii) any breach or violation of or failure to fully
perform any covenant, agreement or obligation of the Company in
this Agreement or any of the agreements contemplated hereby, or
(iii) any Action by any third party arising out of or in connection
with the transactions contemplated by this Agreement or any
Indemnified Party's actions or inactions in connection with any
such transactions; provided that the Company will not be
responsible for any Liabilities or Expenses of an Indemnified Party
pursuant to clause (iii) immediately foregoing to the extent that
such Liabilities and Expenses are determined by a judgment of a
court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from such
Indemnified Party's gross negligence or willful misconduct in
connection with the transactions referred to above. If multiple
claims are brought against an Indemnified Party (including in an
arbitration), with respect to at least one of which indemnification
is permitted under applicable law and provided for under this
Agreement, the Company agrees that any award shall be conclusively
deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the award
expressly states that the award, or any portion thereof, is based
solely on a claim as to which indemnification is not available. In
the event the Company becomes liable to an Indemnified Party
pursuant to this Section 8.2, the amount of such liability shall be
-38-
<PAGE>
reduced by the amount of dividends paid in cash to the holders of
Preferred Stock to the extent such dividends are paid pursuant to
Section L2(a) of the Certificate of Amendment.
(b) Each Purchaser agrees to indemnify and hold
harmless the Company from and against any Liabilities, and will
reimburse the Company and its Affiliates for all Expenses as they
are incurred in investigating, preparing, pursuing or defending any
claim, action, proceeding or investigation, to the extent that such
Liabilities and Expenses arise out of the breach by such Purchaser
of any representation or warranty made by such Purchaser; provided
that no Purchaser will be responsible for any Liabilities or
Expenses of the Company that are determined by a judgment of a
court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from the Company's
or any Affiliate's gross negligence or willful misconduct in
connection with the transactions referred to above. The
obligations of the Purchasers pursuant to this Section 8.2(b) are
several and not joint.
8.3 INDEMNIFICATION PROCEDURE.
(a) If an Indemnified Party seeks indemnification
pursuant to Section 8.2, such party shall give prompt written
notice to the Company of the facts and circumstances giving rise to
the claim. Any Indemnified Party asserting a right of
indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any person,
firm, governmental authority or corporation against the Indemnified
Party (a "THIRD PARTY CLAIM") shall notify the Indemnifying Party
(the "INDEMNIFYING PARTY") in writing of the Third Party Claim. As
part of such notice, the Indemnified Party shall furnish the
Indemnifying Party with copies of any pleadings, correspondence or
other documents relating thereto that are in the Indemnified
Party's possession. The Indemnified Party's failure to notify the
Indemnifying Party of any such claim shall not release the
Indemnifying Party, in whole or in part, from its obligations under
Section 8.2 except to the extent that the Indemnified Party's
ability to defend against such claim is actually materially
prejudiced thereby. The Indemnifying Party shall have the right to
elect to assume and control the defense of any such Third party
Claims so long as (i) the counsel employed by the Indemnifying
Party is reasonably satisfactory to the Indemnified Party, (ii)
before undertaking such defense the Indemnifying Party acknowledges
in writing that the Indemnifying Party will be solely responsible
for all Liabilities and Expenses arising from such Third Party
Claim, and (iii) the Indemnified Party is reasonably satisfied that
the Indemnifying Party will have financial resources, or valid
insurance, available to satisfy such Liabilities. If the
-39-
<PAGE>
Indemnifying Party elects to assume and control the defense of the
Third Party Claim, the Indemnified Party shall have the right to
employ counsel separate from counsel employed by such Indemnifying
Party in any such action and to participate in the defense thereof.
The fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless
(i) the employment thereof has been specifically authorized by such
Indemnifying Party in writing, (ii) the Indemnifying Party has
failed to promptly assume the defense and employ counsel or the
Indemnifying Party or its counsel has failed to provide an adequate
defense to such claim in a timely manner or (iii) the Indemnifying
Party is a party to such claim and the Indemnified Party has been
advised by counsel that there are additional or separate defenses,
or there is otherwise a conflict of interest, between the
Indemnified Party and the Indemnifying Party. In any such case the
fees and expenses of the Indemnified Party's counsel shall be paid
by the Indemnifying Party, provided that the Indemnifying Party
shall not in such event be responsible hereunder for the fees and
expenses of more than one firm or separate counsel in connection
with any such action in the same jurisdiction, in addition to any
local counsel. The Indemnifying Party shall not be liable for any
settlement of any claims effected without its written consent
(which shall not be unreasonably withheld). In addition, the
Indemnifying Party will not, without prior written consent of the
Purchasers, settle, compromise or consent to the entry of any
judgment or otherwise seek to terminate any pending or threatened
claims in respect of which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Party is a party
thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Party from
all liabilities arising out of such claim.
(b) No claim for indemnification pursuant to
Section 8.2 or 8.3 with respect to a breach of any of the
representations or warranties included in this Agreement may be
made subsequent to the lapse of the 90-day period commencing upon
delivery to the Purchasers of the final audit report of the
Company's independent certified public accountant accompanying the
financial statements for the year ended December 31, 1995. The
indemnification provisions of this Article VIII are in addition to,
and not in derogation of, any statutory or common law remedy any
party may have for misrepresentation, breach of warranty or breach
of covenant.
8.4 PRESS RELEASES AND ANNOUNCEMENTS. Except to
the extent otherwise agreed by the Purchasers, prior to the Closing
Date, the Company will not disclose the transactions contemplated
hereby, including by making any press release related to this
Agreement or the transactions contemplated herein, or other
-40-
<PAGE>
announcement to the employees, customers or suppliers of the
Company and the Subsidiaries, without the prior written approval of
the Purchasers (which shall not be unreasonably withheld), and the
Company will not disclose the name of any Purchaser participating
therein without the prior written consent of such Purchaser, except
where the Company has been advised by its counsel that such
disclosure is required by law, in which event the Company shall
take all reasonable steps to consult with each of the Purchasers
prior to making such disclosure and to agree with each of the
Purchasers regarding the form and content of such disclosure.
8.5 FURTHER TRANSFERS. The Company (at its own
expense) will execute and deliver such further instruments of
conveyance and transfer and take such additional action as any
Purchaser may reasonably request to effect, consummate, confirm or
evidence the transfer to such Purchaser of the Securities and any
other transactions contemplated hereby. The Company will execute
such documents as may be necessary to assist each of the Purchasers
in preserving or perfecting its rights in the Securities and will
also do such acts as are necessary to perform its representations,
warranties and agreements herein, including by, after the Closing,
making all registrations, filings and applications, giving all
notices and obtaining all governmental (including, without
limitation, FCC), third party or other consents, transfers,
approvals, orders, qualifications and waivers desirable for the
consummation of the transactions contemplated hereby which, for any
reason, had not been made, given or obtained prior to the Closing.
8.6 SPECIFIC PERFORMANCE. The Company acknowledges
that the business of the Company and the Subsidiaries and the
Securities are unique and recognize and affirm that in the event of
a breach of this Agreement by the Company, money damages may be
inadequate and the Purchaser may have no adequate remedy at law.
Accordingly, the Company agrees that the Purchasers shall have the
right, in addition to any other rights and remedies existing in its
favor at law or in equity, to enforce its rights and the Company's
obligations hereunder not only by an action or actions for damages
but also by an action or actions for specific performance,
injunctive and/or other equitable relief (without posting of bond
or other security).
8.7 INVESTIGATION. Prior to the Closing Date, the
Purchasers and their representatives may make or cause to be made
such investigation of the business and properties of the Company
and the Subsidiaries as each deems necessary or advisable and the
Company shall (and cause each of its Subsidiaries to) furnish and
disclose promptly to the Purchasers all information concerning its
business, properties and personnel as the Purchasers or their
-41-
<PAGE>
representatives reasonably request. The Company agrees to permit
each of the Purchasers and its authorized representatives to have
access during business hours to the Company's and each of its
Subsidiaries' books, records, facilities, key personnel, officers,
directors, customers, independent accountants and legal counsel of
the Company and its Subsidiaries.
8.8 EXPENSES. The Company shall pay and hold UBS
and all holders of Underlying Common Stock harmless against
liability for the payment of, and reimburse each such Person for,
(i) all reasonable out-of pocket expenses incurred in connection
with the transactions contemplated by this Agreement, including
those relating to the due diligence review of the Company and
including all reasonable fees and expenses of their special
counsel, all of which shall be payable at the Closing or, if the
Closing does not occur, payable upon demand, (ii) the reasonable
fees and expenses incurred with respect to any amendments or
waivers (whether or not the same become effective) under or in
respect of the Transaction Documents (except that each holder shall
pay its own fees and expenses for any amendment or waiver initially
requested by such holder), and (iii) stamp and other taxes which
may be payable in respect of the execution and delivery of this
Agreement or the issuance, delivery or acquisition of any shares of
any Securities, including upon conversion or exercise but excluding
transfer taxes that may be payable upon transfer of the Securities
by any holder thereof to any third party; provided, however, that
the Company's aggregate liability under clause (i) of this Section
8.8 shall not exceed $300,000.
8.9 EXCLUSIVITY. Until the consummation of the
transactions contemplated hereby or termination of this Agreement
in accordance with Section 6.1, neither the Company, nor any of
its representatives, officers, employees, directors, or agents,
will directly or indirectly (a) submit, solicit, initiate or
encourage any proposal or offer from any person or enter into any
agreement or accept any offer relating to any issuance or sale of
any of its capital stock or of any rights or securities convertible
into or exercisable or exchangeable for any of its capital stock
except for the issuance of capital stock upon exercise or
conversion of warrants, options and other rights to acquire Common
Stock outstanding as reflected on Schedule 4.3 hereto, in each case
in accordance with the terms of such warrants, options and other
rights as previously disclosed to the Purchasers, or (b) furnish
any information with respect to, assist or participate in or
facilitate in any other manner any effort or attempt by any person
to do or seek to do any of the foregoing. The Company represents
and warrants that it is not engaged in any discussions with third-
parties regarding the foregoing and shall notify each of the
-42-
<PAGE>
Purchasers immediately if any person makes any proposal, offer,
inquiry or contact with respect to any of the foregoing.
8.10 TRANSFER OF SECURITIES.
(a) GENERAL PROVISIONS. The Securities are
transferable only pursuant to (i) public offerings registered under
the Securities Act, (ii) Rule 144 or Rule 144A of the Securities
Act (or any similar rule or rules then in force) if such rule is
available or (iii) subject to the conditions specified in Section
8.11 below, any other legally available means of transfer.
(b) OPINION DELIVERY. In connection with the
transfer of any Securities (other than a transfer described in
subsection 8.10(a)(i) or (ii) above and other than a transfer to a
partner or other Affiliate of a Purchaser), the holder thereof
shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an
opinion, in form and substance reasonably satisfactory to the
Company and its counsel, of Kirkland & Ellis or other counsel which
is knowledgeable in securities law matters to the effect that such
transfer of Securities may be effected without registration of such
Securities under the Securities Act. In addition, if the holder of
the Securities delivers to the Company an opinion of Kirkland &
Ellis or such other counsel that, in form and substance reasonably
satisfactory to the Company and its counsel, no subsequent transfer
of such Securities shall require registration under the Securities
Act, the Company shall promptly upon such contemplated transfer
deliver new certificates for such Securities which do not bear the
Securities Act legend set forth in Section 8.11. If the Company is
not required to deliver new certificates for such Securities not
bearing such legend, the holder thereof shall not transfer the same
until the prospective transferee has confirmed to the Company in
writing its agreement to be bound by the conditions contained in
this Section and Section 8.11.
(c) RULE 144A. Upon the request of the Purchaser,
the Company shall promptly supply to the Purchaser or its
prospective transferees all information regarding the Company
required to be delivered in connection with a transfer pursuant to
Rule 144A of the Securities Act.
(d) REMOVAL OF LEGEND. If any Securities are
eligible for sale pursuant to Rule 144(k), the Company shall, upon
the request of the holder of such Securities, remove the legend set
forth in Section 8.11 from the certificates for such Securities.
-43-
<PAGE>
8.11 PURCHASERS' REPRESENTATIONS. Each Purchaser
represents that it is an "Accredited Investor" within the meaning
of the Securities Act. Each Purchaser understands that the
Securities constitute "RESTRICTED SECURITIES" within the meaning of
Rule 144 under the Securities Act. Each Purchaser hereby
represents that it is acquiring the restricted securities purchased
hereunder or acquired pursuant hereto for its own account with the
present intention of holding such securities for purposes of
investment, and that it has no intention of selling such securities
in a public distribution in violation of the federal securities
laws or any applicable state securities Laws; PROVIDED that nothing
contained herein shall prevent such Purchaser and subsequent
holders of restricted securities from transferring such securities
in compliance with the provisions of Section 8.10. Each Purchaser
understands that the restricted securities are being offered and
sold in reliance on exemptions from the registration requirements
of federal and state securities laws and that the Company is
relying upon the truth and accuracy of such Purchaser's
representations, warranties, agreements, acknowledgments and
understandings set forth herein to determine its suitability to
acquire the restricted securities. Each instrument or certificate
for restricted securities shall be imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON JULY __, 1995, AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF JULY __, 1995,
BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS,
AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER
OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
8.12 STANDSTILL.
(a) UBS agrees that, without the prior consent of
the Board of Directors specifically expressed in a resolution
adopted by a majority of the members of the Board of Directors
(excluding members elected by UBS and its Affiliates), during the
Standstill Period (as defined below) it will not, nor will it
permit any of its Affiliates to, directly or indirectly:
(i) acquire, offer to acquire, or agree to acquire,
any Voting Securities (as defined below) or securities
-44-
<PAGE>
convertible into Voting Securities; PROVIDED, HOWEVER, that
nothing contained herein shall prohibit UBS or any of its
Affiliates from acquiring any Voting Securities (A) as result
of a stock split, stock dividend or similar recapitalization
by the Company, (B) upon conversion or exercise of or exchange
for any other Voting Securities, or (C) so long as UBS and
its Affiliates beneficially own (within the meaning of Rule
13d-3 of the Exchange Act), in the aggregate, no more than 25%
of the Voting Securities outstanding immediately following
such acquisition of Voting Securities; PROVIDED FURTHER, that
the foregoing prohibition will not apply to the acquisition by
any Affiliate of UBS of any Voting Securities, directly or
indirectly, and for purposes of clause (C) above UBS and its
Affiliates will not be deemed to hold Voting Securities if and
to the extent such Voting Securities are acquired or held (x)
for the benefit of one or more third parties in one or more
customer or fiduciary accounts (or in the case of an employee
benefit plan or pension fund which is subject to the
provisions of ERISA, have been allocated to plan
participants), or (y) in the ordinary course of business and
not as a means of circumventing the foregoing, by or in a
capacity as (1) a broker or dealer registered under Section 15
of the Exchange Act, (2) a bank, as defined in Section 3(a)(6)
of the Exchange Act, (3) an investment company registered
under Section 8 of the Investment Company Act of 1940 (4) an
investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, or (5) an employee benefit
plan or a pension fund which is subject to the provisions of
ERISA, or an endowment fund;
(ii) make or solicit any other person to make an
offer or proposal to the Board of Directors or the
shareholders to acquire the Company or substantially all of
the assets or the Common Stock of the Company or any of its
Subsidiaries; or
(iii) initiate or conduct, directly or indirectly,
any "solicitation" of "proxies" (as such terms are used in the
rules of the SEC) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any Voting
Securities.
Notwithstanding the foregoing, if any breach of this Section 8.12
caused by an acquisition of a non-material amount of Voting
Securities shall have been cured by disposition of Voting
Securities within 30 days after UBS becomes aware of such breach,
then no breach of this Section 8.12 shall be deemed to have
occurred;
-45-
<PAGE>
(b) As used herein, the term "Standstill Period"
shall mean the period from the date that the Closing occurs until
the earliest to occur of:
(i) the date that is the tenth anniversary of the
Closing Date;
(ii) the date on which UBS and its affiliates cease
to beneficially own (within the meaning of Rule 13d-3 of the
Exchange Act), in the aggregate, at least 5% of the
outstanding Voting Securities;
(iii) a Change of Control (as defined in the
Certificate of Amendment);
(iv) the sale of substantially all of the Common
Stock of the Company or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole, through a
purchase agreement, merger or other business combination;
(v) a tender offer is made to all holders of the
Common Stock as to which the Board of Directors has not
publicly announced its opposition within 10 business days (or
the then required period under the federal securities laws)
after the commencement of such tender offer or with respect to
which the Board of Directors has announced its approval;
(vi) a Bankruptcy Event; or
(vii) default in the payment of principal or interest
when due (whether at maturity, upon acceleration or otherwise)
after the expiration of any grace periods applicable thereto
with respect to indebtedness of the Company or any of its
Subsidiaries for money borrowed having an aggregate
outstanding principal amount in excess of $2,500,000 or more
(unless at the time thereof the Company shall have
unrestricted cash, cash equivalents or commitments under
existing debt instruments available to make such payment).
For purposes of this Section 8.12, "VOTING SECURITIES"
means Common Stock, the Preferred Stock, the Warrants, and any
other securities of the Company entitled to vote in the election of
directors of the Company. In determining the number of outstanding
Voting Securities, neither Voting Securities nor securities
convertible into Voting Securities held in the treasury of the
Company shall be deemed to be outstanding, and outstanding shares
of Preferred Stock, Warrants and other Voting Securities which are
convertible into or exercisable or exchangeable for Common Stock
will be counted as the number of shares of Common Stock obtainable
-46-
<PAGE>
upon conversion or exercise thereof or in exchange therefor.
Whenever the phrase "securities convertible into Voting Securities"
is used herein, such phrase shall mean securities convertible into,
exchangeable for, or which represent a right to acquire, Voting
Securities; and "BANKRUPTCY EVENT" means any of the following
events: the Company or any of its Subsidiaries shall commence a
voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or hereafter in effect, or
any successor thereto (the "BANKRUPTCY CODE"); an involuntary case
is commenced against the Company or any of its Subsidiaries and is
not dismissed within 60 days after commencement of the case; a
custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or any substantial part of the property of the
Company of any of its Subsidiaries; the Company or any of its
Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
rehabilitation, dissolution, insolvency or liquidation or similar
law of any jurisdiction, whether now or hereafter in effect,
relating to the Company or such Subsidiary, or there is commenced
against the Company or such Subsidiary, or there is commenced
against the Company or any of its Subsidiaries any such proceeding
which remains undismissed for a period of 60 days; the Company or
any of its Subsidiaries is adjudicated insolvent or bankrupt; any
order of relief or other order approving any such case or
proceeding is entered; the Company or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or
unstayed for a period of 60 days; the Company or any of its
Subsidiaries makes a general assignment for the benefit of
creditors; the Company or any of its Subsidiaries shall fail to
pay, or shall state in writing that it is unable to pay, or shall
be unable to pay, its debts, generally as they become due; the
Company or any of its Subsidiaries shall call a general meeting of
its creditors with a view to arranging a composition or adjustment
of its debts; or any corporate action is taken by the Company or
any of its Subsidiaries for the purpose of effecting any of the
foregoing.
8.13 CONTINGENT WARRANTS.
(a) At the Closing, the Company shall issue to UBS
Contingent Warrants substantially in the form of Exhibit F hereto
for the consideration set forth in Section 1.1 hereof. The
Contingent Warrants shall provide that upon any Optional Redemption
of shares of Preferred Stock pursuant to the terms of the
Certificate of Incorporation, as amended by the Certificate of
Amendment, the holder of the Contingent Warrants shall have the
right to acquire initially the same number of shares of Common
Stock into which such holder's shares of Preferred Stock being
-47-
<PAGE>
redeemed (the "REDEEMED SHARES") are convertible as of the
Redemption Date thereof. The initial exercise price for each share
of Common Stock under the Contingent Warrants shall be equal to the
Conversion Price of the Redeemed Shares as of the Redemption Date
thereof, and the Contingent Warrants shall be exercisable at any
time after the Redemption Date of the Redeemed Shares and shall
expire (unless previously exercised) on the Scheduled Redemption
Date of the Redeemed Shares corresponding to the shares of Common
Stock covered by the Contingent Warrants; but in no event shall the
Contingent Warrants be exercisable after the sixth anniversary of
the redemption of all of the shares of Preferred Stock.
(b) The terms "Conversion Price," "Optional
Redemption," "Redemption Date" and "Scheduled Redemption Date" have the
meanings set forth in the Certificate of Amendment.
8.14 REGULATORY COMPLIANCE COOPERATION.
(a) Within 75 days after the Closing and at the end
of each month thereafter until all of the proceeds of the financing
under this Agreement have been used by the Company and its
Subsidiaries, the Company shall deliver to each holder of Preferred
Stock or Underlying Common Stock which is an SBIC (an "SBIC
HOLDER"), a written statement certified by the Company's president
or chief financial officer describing in reasonable detail the use
of the proceeds of the financing under this Agreement by the
Company and its Subsidiaries. In addition to any other rights
granted hereunder, the Company shall grant each SBIC Holder and the
United States Small Business Administration (the "SBA") access to
the Company's records to the extent necessary and solely for the
purpose of verifying the use of such proceeds.
(b) Upon the occurrence of a Regulatory Violation
or in the event that any SBIC Holder determines in its reasonable
good faith judgment that a Regulatory Violation has occurred, in
addition to any other rights and remedies to which it may be
entitled as a holder of Preferred Stock or Underlying Stock
(whether under this Agreement, the Certificate of Amendment or
otherwise), each SBIC Holder shall have the right to demand the
immediate repurchase of all of the outstanding shares of Preferred
Stock and Underlying Common Stock owned by such SBIC Holder at a
price per share equal to the purchase price paid for such stock
hereunder, plus, if applicable, all accrued or declared and unpaid
dividends thereon, by delivering written notice of such demand to
the Company. The Company shall pay the purchase price for such
stock by a cashier's or certified check or by wire transfer of
immediately available funds to each SBIC Holder demanding
repurchase within 30 days after the Company's receipt of the demand
notice, and upon such payment, each such SBIC Holder shall deliver
-48-
<PAGE>
the certificates evidencing the Preferred Stock and Underlying
Common Stock to be repurchased duly endorsed for transfer or
accompanied by duly executed forms of assignment.
(c) Promptly after the end of each calendar year
(but in any event prior to February 28 of each year), the Company
shall deliver to the SBIC Holder a written assessment of the
economic impact of the SBIC Holder's investment in the Company,
specifying the full-time equivalent jobs created or retained in
connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes
and other economic benefits resulting from the investment
(including, but not limited to, technology development or
commercialization, minority business development, urban or rural
business development and expansion of exports).
ARTICLE IX
MISCELLANEOUS
9.1 AMENDMENT AND WAIVER. This Agreement may be
amended and any provision of this Agreement may be waived, provided
that, subject to the last sentence of Section 2.1 and the last
sentence of Section 2.2, any such amendment or waiver will be
binding upon a party only if such amendment or waiver is set forth
in a writing executed by each of the Company and holders of two-
thirds of the Underlying Common Stock and which would not
disproportionately and adversely affect the holders of a majority
of the Warrants without the consent of the holders of the majority
of the Warrants. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights
or obligations of any party under or by reason of this Agreement.
9.2 NOTICES. All notices, demands and other
communications given or delivered under this Agreement will be in
writing and will be deemed to have been given when personally
delivered, three days after being mailed by first class mail,
return receipt requested, or delivered by express courier service
or telecopied (subject to receipt of written confirmation).
Notices, demands and communications to the Company and the
Purchasers will, unless another address is specified in writing, be
sent to the address indicated below:
-49-
<PAGE>
NOTICES TO THE COMPANY:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, Florida 33172
Attention: Robert D. Rubin
Telecopy: (305) 477-9890
WITH A COPY TO:
Steel Hector & Davis
200 S. Biscayne Boulevard
Suite 4000
Miami, Florida 33131-2398
Attention: Richard J. Lampen, Esq.
Telecopy: (305) 577-7001
NOTICES TO THE PURCHASERS:
Appian Capital Partners, L.L.C.
c/o Archon Capital Partners, L.P.
11111 Santa Monica Boulevard
Suite 1100
Los Angeles, California 90025
Attention: Ronald N. Beck
Telecopy: (310) 914-0470
UBS Capital Corporation
299 Park Avenue
New York, New York 10171
Attention: Justin S. Maccarone
Telecopy: (212) 821-6333
WITH A COPY TO:
Kirkland & Ellis
200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
Attention: John A. Weissenbach, Esq.
Telecopy: (312) 861-2200
9.3 BINDING AGREEMENT; ASSIGNMENT.
(a) This Agreement and all of the provisions hereof
will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations
-50-
<PAGE>
hereunder may be assigned by the Company without the prior written
consent of each of the Purchasers.
(b) Each Purchaser may (at any time prior to the
Closing), at its sole discretion, assign, in whole or in part, its
rights and obligations pursuant to this Agreement to one or more of
its respective Affiliates.
9.4 SEVERABILITY. Whenever possible, each
provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating
the remainder of such provisions or the remaining provisions of
this Agreement.
9.5 NO STRICT CONSTRUCTION. The language used in
this Agreement will be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any person.
9.6 HEADINGS; INTERPRETATION. The headings used in
this Agreement are for convenience of reference only and do not
constitute a part of this Agreement and will not be deemed to
limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced
and construed as if no caption had been used in this Agreement.
Whenever the term "including" is used in this Agreement (whether or
not that term is followed by the phrase "but not limited to" or
"without limitation" or words of similar effect) in connection with
a listing of one or more items or matters, that listing will be
interpreted to be illustrative only and will not be interpreted as
a limitation on, or an exclusive listing of, such items or matters.
9.7 ENTIRE AGREEMENT. This Agreement and the
documents referred to herein contain the entire agreement between
the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
9.8 COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which taken together will constitute one and
the same instrument.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE EXHIBITS
AND SCHEDULES HERETO SHALL BE GOVERNED BY THE INTERNAL LAW OF THE
-51-
<PAGE>
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK
OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
9.10 PARTIES IN INTEREST. Nothing in this Agreement,
express or implied, is intended to confer on any person other
than the parties and their respective successors and assigns any
rights or remedies under or by virtue of this Agreement.
* * * * *
-52-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
PEOPLES TELEPHONE COMPANY, INC.
By: _____________________________________
Name:
Title:
UBS CAPITAL CORPORATION
By: _____________________________________
Name:
Title:
By: _____________________________________
Name:
Title:
APPIAN CAPITAL PARTNERS, L.L.C
By: _____________________________________
Name:
Title:
-53-
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
PEOPLES TELEPHONE COMPANY, INC.
UNDER SECTION 805 OF
THE BUSINESS CORPORATION LAW
1. The name of the corporation is Peoples Telephone Company,
Inc. (formed under the name of Shirts Unlimited Franchise, Inc.)
(the "CORPORATION").
2. The Corporation originally filed its Certificate of
Incorporation with the New York Department of State on September 5,
1968.
3. Pursuant to the authority granted to the Board of
Directors of the Corporation by Section II, Article Fourth, of its
Certificate of Incorporation, the Corporation hereby amends its
Certificate of Incorporation by the addition of a provision stating
the number, designation, relative rights, preferences and
limitations of a series of the Corporation's Preferred Stock as
fixed by the Board of Directors of the Corporation, as follows
(except as otherwise indicated herein, capitalized terms used
herein are defined in Section M herein):
SECTION A. DESIGNATION AND AMOUNT; PAR VALUE. The shares of
such series shall be designated as "Series C Cumulative Convertible
Preferred Stock" (the "CONVERTIBLE PREFERRED STOCK") and the number
of authorized shares constituting Convertible Preferred Stock shall
be 160,000. The par value of each share of such series shall be
$.01.
SECTION B. DIVIDENDS.
1. GENERAL OBLIGATION. When and as declared by the
Corporation's Board of Directors and to the extent permitted under
the New York Business Corporation Law (the "NYBCL"), the
Corporation will pay preferential dividends to the holders of the
Convertible Preferred Stock as provided in this Section B. Except
as otherwise provided herein, dividends on each share of
<PAGE>
Convertible Preferred Stock (a "SHARE") will accrue on a daily
basis at a rate of 7% per annum of the Liquidation Value thereof
(plus all accumulated and unpaid dividends thereon) from and
including the Date of Issuance (as defined below) of such Share to
and including the date on which the Liquidation Value (plus all
accrued and unpaid dividends thereon) of such Share is paid in full
or the date on which such share is converted into shares of
Conversion Stock. Such dividends will accrue whether or not they
have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues any
Share will be deemed to be its "DATE OF ISSUANCE" regardless of the
number of times a transfer of such Share is made on the stock
records maintained by or for the Corporation and regardless of the
number of certificates which may be issued to evidence such Share.
The dividends on each Share shall be payable on each Dividend
Reference Date during the first three years following the Date of
Issuance, at the Corporation's election either in cash or
accumulating. Commencing on June 30, 1998 and on each Dividend
Reference Date thereafter, all accrued and unpaid dividends shall
be paid in cash unless and to the extent the Corporation is
prohibited from paying such dividends in cash under the Indenture
or the Credit Agreement and, except to the extent paid in cash,
such dividends will accumulate on each such Dividend Reference
Date. Notwithstanding the foregoing, all dividends otherwise
accruing pursuant to this Section B1 will cease to accrue as of a
Dividend Termination Date, so long as the Corporation has paid in
cash all dividends which have accrued and are unpaid through such
Dividend Termination Date. Further, notwithstanding termination of
the dividend pursuant to the immediately preceding sentence, the
dividend rate is subject to increase (or, if the dividend has
previously terminated, is subject to resume accruing) pursuant to
Section L2(a) (except on account of any Event of Noncompliance
which is described in Section L1(c)(i) which occurs after dividends
pursuant to this Section have otherwise ceased to accrue on account
of the immediately preceding sentence).
2. DIVIDEND REFERENCE DATES. The accrued dividends
will be payable on June 30 and December 31 of each year commencing
on December 31, 1995 (the "DIVIDEND REFERENCE DATES") to the
holders of record of the Convertible Preferred Stock at the close
of business on the immediately preceding June 15 and December 15.
To the extent that all accrued dividends are not paid on the
Dividend Reference Dates, all dividends which have accrued on each
Share outstanding during the six-month period (or other period in
the case of the initial Dividend Reference Date) ending upon each
such Dividend Reference Date will be accumulated and shall remain
accumulated dividends with respect to such Share until paid.
-2-
<PAGE>
3. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except
as otherwise provided herein, if at any time the Corporation elects
to pay dividends in cash and pays less than the total amount of
dividends then accrued with respect to the Convertible Preferred
Stock, such payment will be distributed ratably among the holders
of the Convertible Preferred Stock based upon the aggregate accrued
but unpaid dividends on the Shares of Convertible Preferred Stock
held by each such holder, and any amounts of such dividends
remaining thereafter shall be accumulated and shall remain
accumulated dividends with respect to such Share until paid.
SECTION C. LIQUIDATION. Upon any liquidation, dissolution or
winding up of the Corporation, the holders of the Convertible
Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any of the Junior Securities,
an amount in cash equal to the aggregate Liquidation Value (plus
all accrued and unpaid dividends thereon) of all such Convertible
Preferred Stock outstanding, and the holders of Convertible
Preferred Stock will not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the
holders of the Convertible Preferred Stock are insufficient to
permit payment to such holders of the aggregate amount which they
are entitled to be paid, then the entire assets to be distributed
shall be distributed ratably among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends)
of the Convertible Preferred Stock held by each such holder. Prior
to the time of any liquidation, dissolution or winding up of the
Corporation, the Corporation shall declare for payment all accrued
and unpaid dividends with respect to the Convertible Preferred
Stock. The Corporation will mail written notice of such
liquidation, dissolution or winding up, not less than 10 days prior
to the payment date stated therein, to each record holder of
Convertible Preferred Stock. Neither the consolidation or merger
of the Corporation into or with any other corporation or
corporations, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section C.
SECTION D. REDEMPTIONS.
1. SCHEDULED REDEMPTION. On [ ], 2005 (the "SCHEDULED
REDEMPTION DATE"), the Corporation will redeem all issued and
outstanding Shares of Convertible Preferred Stock, at a price per
Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon).
2. OPTIONAL REDEMPTIONS. The Corporation may at any
time and from time to time after the Date of Issuance redeem all or
-3-
<PAGE>
any portion of the Shares of Convertible Preferred Stock then
outstanding. Upon any such redemption, the Corporation shall pay
a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
3. REDEMPTION PRICE. For each Share which is to be
redeemed, the Corporation will be obligated on the Redemption Date
to pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such
Share) an amount in immediately available funds equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). If the Corporation's funds which are legally available
for redemption of Shares on any Redemption Date are insufficient to
redeem the total number of Shares to be redeemed on such date,
those funds which are legally available will be used to redeem the
maximum possible number of Shares ratably among the holders of the
Shares to be redeemed based upon the aggregate Liquidation Value of
such Shares (plus all accrued and unpaid dividends thereon) held by
each such holder. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of Shares,
such funds will immediately be used to redeem the balance of the
Shares which the Corporation has become obligated to redeem on any
Redemption Date but which it has not redeemed.
4. NOTICE OF REDEMPTION. Except as otherwise provided
herein, the Corporation will mail written notice of each redemption
of Convertible Preferred Stock to each record holder not more than
60 nor less than 30 days prior to the date on which such redemption
is to be made. In case fewer than the total number of Shares
represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Shares will be issued to the
holder thereof without cost to such holder within 3 business days
after surrender of the certificate representing the redeemed
Shares.
5. DETERMINATION OF THE NUMBER OF EACH HOLDER'S SHARES
TO BE REDEEMED. Except as otherwise provided herein, the number of
Shares of Convertible Preferred Stock to be redeemed from each
holder thereof in redemptions hereunder will be the number of
Shares determined by multiplying the total number of Shares to be
redeemed times a fraction, the numerator of which will be the total
number of Shares then held by such holder and the denominator of
which will be the total number of Shares of Convertible Preferred
Stock then outstanding.
6. DIVIDENDS AFTER REDEMPTION DATE. No Share is
entitled to any dividends accruing after the date on which the
Liquidation Value (plus all accrued and unpaid dividends thereon)
of such Share is paid in full. On such date all rights of the
-4-
<PAGE>
holder of such Share will cease, and such Share will not be deemed
to be outstanding.
7. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares
which are redeemed or otherwise acquired by the Corporation will be
cancelled and will not be reissued, sold or transferred.
8. SPECIAL REDEMPTIONS.
If a Change of Control (as defined below) has occurred or
the Corporation obtains knowledge that a Change of Control is
proposed to occur, the Corporation shall give prompt written notice
of such Change of Control describing in reasonable detail the
material terms and date of consummation thereof to each holder of
Convertible Preferred Stock, but in any event such notice shall not
be given later than 5 days after the occurrence of such Change of
Control, and the Corporation shall give each holder of Convertible
Preferred Stock prompt written notice of any material change in the
terms or timing of such transaction. Any holder of Convertible
Preferred Stock may require the Corporation to redeem all or any
portion of the Convertible Preferred Stock owned by such holder at
a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon) by giving written notice to
the Corporation of such election prior to 21 days after receipt of
the first such notice from the Corporation which confirms that a
Change of Control has occurred (the "EXPIRATION DATE"); PROVIDED
that in no event shall the Corporation be obligated to redeem
Shares unless (a) all amounts then due and payable under the Credit
Agreement (whether at maturity, by acceleration or otherwise) have
been paid in full and (b)(i) a Change of Control Offer (as defined
in the Indenture, as in effect on the Date of Issuance) has been
made to the holders of the notes outstanding under the Indenture
(if and to the extent that any such Change of Control Offer is
required to be made pursuant to the Indenture as in effect at the
time of the applicable Change of Control) and all such notes which
have been validly tendered in accordance therewith have been
purchased in accordance with the terms of the Indenture applicable
thereto as in effect on the Date of Issuance (if and to the extent
required pursuant to the Indenture as in effect at the time of the
applicable Change of Control), and (ii) the Corporation shall not,
since the date of such Change of Control Offer, have defaulted in
the payment when due of any amount of principal, interest or
premium owing with respect to any notes outstanding pursuant to the
Indenture (except any such default which shall have been cured or
waived). The Corporation shall give prompt written notice (a
"SECOND NOTICE") of each such election to all other holders of
Convertible Preferred Stock within 5 days after the receipt
thereof, and each such holder shall have until the later of (i) the
Expiration Date or (ii) 10 days after receipt of the latest Second
-5-
<PAGE>
Notice to request redemption hereunder (by giving written notice to
the Corporation) of all or any portion of the Convertible Preferred
Stock owned by such holder.
Subject to the proviso of the second sentence of the
preceding paragraph, upon receipt of such election(s), the
Corporation shall be obligated to redeem the aggregate number of
Shares specified therein on the later of (i) 90 days following
occurrence of the Change of Control or (ii) 5 days after the
Corporation's receipt of such election(s).
For purposes hereof, "CHANGE OF CONTROL" has the meaning
given such term in the Indenture as in effect on the Date of
Issuance, without amendment or modification thereof and whether or
not any notes issued pursuant to the Indenture are outstanding.
Redemptions made pursuant to this Section D8 shall not
relieve the Corporation of its obligation pursuant to Section D1
above to redeem any Convertible Preferred Stock outstanding on the
Scheduled Redemption Date.
SECTION E. PRIORITY OF CONVERTIBLE PREFERRED STOCK ON
DIVIDENDS AND REDEMPTIONS. So long as any Convertible Preferred
Stock remains outstanding, without the prior written consent of the
holders of a majority of the outstanding shares of Convertible
Preferred Stock, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation
directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities (other than dividends
payable solely in the securities in respect of which such dividends
are paid).
SECTION F. ELECTION OF DIRECTORS.
1. So long as at least 50,000 shares of
Convertible Preferred Stock are outstanding and held of record by
Qualified Convertible Preferred Holders (as defined below), then
the holders of a majority of the Convertible Preferred Stock,
voting separately as a single class in the election of directors of
the Corporation, to the exclusion of all other classes of the
Corporation's capital stock and with each Share of Convertible
Preferred Stock entitled to one vote, shall be entitled to elect
two (2) directors to serve on the Corporation's Board of Directors
until his successor is duly elected by holders of a majority of
the Convertible Preferred Stock or he is removed from office by
holders of a majority of the Convertible Preferred Stock; and so
long as Qualified Convertible Preferred Holders hold of record an
aggregate of less than 50,000 but at least 25,000 shares of
-6-
<PAGE>
Convertible Preferred Stock, then the holders of a majority of the
Convertible Preferred Stock, voting separately as a single class in
the election of directors of the Corporation, to the exclusion of
all other classes of the Corporation's capital stock and with each
Share of Convertible Preferred Stock entitled to one vote, shall be
entitled to elect one (1) director to serve on the Corporation's
Board of Directors until his successor is duly elected by holders
of a majority of the Convertible Preferred Stock or he is removed
from office by holders of a majority of the Convertible Preferred
Stock. If the holders of a majority of the Convertible Preferred
Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as
the holders of a majority of the Convertible Preferred Stock elect
a director to fill such position and shall not be filled by
resolution or vote of the Corporation's Board of Directors or the
Corporation's other stockholders.
2. So long as the holders of a majority of the
Convertible Preferred Stock have the right to elect at least one
director pursuant to Section F1, the Corporation's Board of
Directors will be comprised of no more than six (6) directors, who
shall include the Corporation's Chief Executive Officer and
President. Each director elected by the holders of the Convertible
Preferred Stock will be paid fees not less than the fees paid to
any other member of the Corporation's Board of Directors (excluding
fees payable for services rendered in their capacity other than as
directors) and will be reimbursed for all reasonable expenses
relating to attending each meeting of the Corporation's Board of
Directors. For purposes of this Section F, "QUALIFIED CONVERTIBLE
PREFERRED HOLDERS" means and includes, collectively, UBS, any
successor to all or substantially all of the business or assets
thereof and each Affiliate of the foregoing.
SECTION G. OTHER VOTING RIGHTS. The holders of the
Convertible Preferred Stock shall be entitled to notice of all
stockholders' meetings in accordance with the Corporation's bylaws,
and except in the election of directors and as otherwise provided
herein, the holders of the Convertible Preferred Stock shall be
entitled to vote on all matters submitted to the stockholders for
a vote together with the holders of the Common Stock voting
together as a single class with each share of Common Stock entitled
to one vote per share and each Share of Convertible Preferred Stock
entitled to one vote for each share of Common Stock issuable upon
conversion of the Convertible Preferred Stock as of the record date
for such vote or, if no record date is specified, as of the date of
such vote.
-7-
<PAGE>
SECTION H. CONVERSION.
1. CONVERSION PROCEDURE.
(a) At any time and from time to time, any holder
of Convertible Preferred Stock may convert all or any portion of
the Convertible Preferred Stock (including any fraction of a Share)
held by such holder into a number of shares of Conversion Stock
computed by multiplying the number of Shares to be converted by
$100.00 and dividing the result by the Conversion Price then in
effect.
(b) Except as otherwise provided herein, each
conversion of Convertible Preferred Stock shall be deemed to have
been effected as of the close of business on the date on which the
certificate or certificates representing the Convertible Preferred
Stock to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such
conversion has been effected, the rights of the holder of the
Shares converted as a holder of Convertible Preferred Stock shall
cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to
be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock
represented thereby.
(c) The conversion rights of any Share subject to
redemption hereunder shall terminate on the Redemption Date for
such Share unless the Corporation has failed to pay to the holder
thereof the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon).
(d) Notwithstanding any other provision hereof, if
a conversion of Convertible Preferred Stock is to be made in
connection with a Change of Control or other transaction affecting
the Corporation, the conversion of any Shares of Convertible
Preferred Stock may, at the election of the holder thereof, be
conditioned upon the consummation of such transaction, in which
case such conversion shall not be deemed to be effective until such
transaction has been consummated.
(e) As soon as possible after a conversion has been
effected (but in any event within 5 business days in the case of
subparagraph (i) below), the Corporation shall deliver to the
converting holder:
(i) a certificate or certificates representing
the number of shares of Conversion Stock issuable by reason of
-8-
<PAGE>
such conversion in such name or names and such denomination or
denominations as the converting holder has specified;
(ii) payment of cash in an amount equal to
all accrued dividends with respect to each Share converted which
have not been paid prior thereto provided that the Corporation will
not be obligated to pay such amount to the extent it is prohibited
from doing so by the NYBCL or by the terms of the Indenture or the
Credit Agreement; provided further that any dividend not paid shall
continue to accumulate, and dividends shall continue to accrue with
respect thereto, and such amount shall be paid in cash as and when,
and to the extent, the Corporation is not prohibited from doing so
by the NYBCL or by the terms of the Indenture and the Credit
Agreement, and in any event all such accrued dividends shall be
paid in cash not later than the tenth anniversary of the Date of
Issuance, to the extent not previously paid in cash, subject to the
last two sentences of Section D2 above; and
(iii) a certificate representing any Shares of
Convertible Preferred Stock which were represented by the
certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
(f) If for any reason the Corporation is unable to
pay any portion of the accrued and unpaid dividends on Convertible
Preferred Stock being converted, the unpaid portion of such
dividends may, at the election of the converting holder made by
giving written notice thereof to the Corporation at any time
thereafter, be converted into an additional number of shares of
Conversion Stock determined by dividing (i) the amount of the
unpaid portion of such dividends, by (ii) 95% of the Market Price
of one share of the Conversion Stock as of the date of such notice.
(g) The issuance of certificates for shares of
Conversion Stock upon conversion of Convertible Preferred Stock
shall be made without charge to the holders of such Convertible
Preferred Stock for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion
and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Convertible Preferred Stock, the
Corporation shall take all such actions as are necessary in order
to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable,
free and clear of all taxes, liens, charges and encumbrances with
respect to the issuance thereof.
(h) The Corporation shall not close its books
against the transfer of Convertible Preferred Stock or of
Conversion Stock issued or issuable upon conversion of Convertible
-9-
<PAGE>
Preferred Stock in any manner which interferes with the timely
conversion of Convertible Preferred Stock. The Corporation shall
assist and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to
or in connection with any conversion of Shares hereunder
(including, without limitation, making any filings required to be
made by the Corporation).
(i) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Conversion Stock, solely for the purpose of issuance upon the
conversion of the Convertible Preferred Stock, such number of
shares of Conversion Stock as are issuable upon the conversion of
all outstanding Convertible Preferred Stock. All shares of
Conversion Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of
any domestic securities exchange or the NASDAQ National Market upon
which shares of Conversion Stock may be listed (except for official
notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance). The Corporation shall not
take any action which would cause the number of authorized but
unissued shares of Conversion Stock to be less than the number of
such shares required to be reserved hereunder for issuance upon
conversion of the Convertible Preferred Stock.
(j) If any fractional interest in a share of
Conversion Stock would, except for the provisions of this
subparagraph, be delivered upon any conversion of the Convertible
Preferred Stock, at the request of the holder thereof, the
Corporation, in lieu of delivering the fractional share therefor,
shall pay an amount to the holder thereof equal to the Market Price
of such fractional interest as of the date of conversion.
2. CONVERSION PRICE.
(a) The initial "CONVERSION PRICE" shall be $5.25
per share. In order to prevent dilution of the conversion rights
granted under this Section H, the Conversion Price shall be subject
to adjustment from time to time pursuant to this Section H2.
(b) If and whenever on or after the original Date
of Issuance of the Convertible Preferred Stock the Corporation
issues or sells, or in accordance with Section H3 is deemed to have
issued or sold, any shares of its Common Stock for a consideration
per share less than the Conversion Price in effect immediately
-10-
<PAGE>
prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be
reduced to the Conversion Price determined by dividing (i) the sum
of (1) the product derived by multiplying the Conversion Price in
effect immediately prior to such issue or sale by the number of
shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or
sale.
(c) Notwithstanding the foregoing, there shall be
no adjustment in the Conversion Price as a result of any issue or
sale (or deemed issue or sale) of (i) shares of Common Stock upon
exercise of the Warrants in accordance with the terms thereof as in
effect at the Date of Issuance, (ii) shares of Common Stock
pursuant to stock options, warrants and other rights to acquire
Common Stock described in Schedule 4.3 to the Securities Purchase
Agreement (as such number of shares is proportionately adjusted for
subsequent stock splits, combinations of shares and stock dividends
affecting the Common Stock), in each case pursuant to the terms
thereof as in effect on the date of the Securities Purchase
Agreement or as such terms may thereafter be adjusted as described
in Schedule 4.3, (iii) shares of Common Stock upon exercise of
stock options granted to employees and directors of the Corporation
and its Subsidiaries pursuant to the terms of stock option plans
and stock ownership plans approved by the Corporation's Board of
Directors, and (iv) shares of Common Stock as consideration for the
acquisition of any interest in any business or company from a
Person other than an Affiliate (A) which acquisition is not
prohibited pursuant to the Securities Purchase Agreement, and (B)
so long as the Market Price of the Conversion Stock as of the
closing of such acquisition exceeds $4.50 per share (as such price
is proportionately adjusted for subsequent stock splits, combinations
of shares and stock dividends affecting the Conversion Stock)
and so long as the Market Price of the Conversion Stock has not at
any time from the Date of Issuance through such closing time been
equal to or greater than $5.25 per share (as so adjusted).
3. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Conversion Price under
Section H2, the following shall be applicable:
(a) ISSUANCE OF RIGHTS OR OPTIONS. If the
Corporation in any manner grants or sells any Options and the price
per share for which Common Stock is issuable upon the exercise of
such Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the
Conversion Price in effect immediately prior to the time of the
-11-
<PAGE>
granting or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the granting or sale of such
Options for such price per share. For purposes of this paragraph,
the "price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise
of all such Options, plus in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon
the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or
when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
(b) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the
Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes
of this paragraph, the "price per share for which Common Stock is
issuable" shall be determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities.
No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be
-12-
<PAGE>
made pursuant to other provisions of this Section H, no further
adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(c) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of
such change shall be immediately adjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section H3, if the terms of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of the Convertible Preferred Stock are changed in the
manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder
to be increased.
(d) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued. For purposes
of this Section H3, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of the Convertible Preferred Stock shall not cause the
conversion Price hereunder to be adjusted unless, and only to the
extent that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the Date
of Issuance of the Convertible Preferred Stock.
(e) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the
Corporation therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of
-13-
<PAGE>
the consideration other than cash received by the Corporation shall
be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Corporation shall be the Market Price
thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving
entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net
assets and business of the non-surviving entity as is attributable
to such Common Stock, Option or Convertible Security, as the case
may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Corporation and the
holders of a majority of the outstanding Convertible Preferred
Stock. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration
shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding
Convertible Preferred Stock. The determination of such appraiser
shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Corporation.
(f) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issue or sale of other securities of
the Corporation, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by the
parties thereto, the Option shall be deemed to have been issued for
a consideration of $.01.
(g) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(h) RECORD DATE. If the Corporation takes a record
of the holders of Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
4. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Corporation at any time subdivides (by any stock split, stock
-14-
<PAGE>
dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the
Corporation at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.
5. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of
the Corporation's assets or other transaction, in each case which
is effected in such a manner that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange
for Common Stock, is referred to herein as an "ORGANIC CHANGE".
Prior to the consummation of any Organic Change, the Corporation
shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the Convertible
Preferred Stock then outstanding) to insure that each of the
holders of Convertible Preferred Stock shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the
case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's
Convertible Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such
Organic Change if such holder had converted its Convertible
Preferred Stock immediately prior to such Organic Change. In each
such case, the Corporation shall also make appropriate provisions
(in form and substance satisfactory to the holders of a majority of
the Convertible Preferred Stock then outstanding) to insure that
the provisions of this Section H and Section I hereof shall
thereafter be applicable to the Convertible Preferred Stock
(including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than
the Corporation an immediate adjustment of the Conversion Price to
the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable
and receivable upon conversion of Convertible Preferred Stock, if
the value so reflected is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Corporation) resulting from consolidation
or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the
-15-
<PAGE>
holders of a majority of the Convertible Preferred Stock then
outstanding), the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section H but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Corporation's Board of
Directors shall make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of Convertible
Preferred Stock; provided that no adjustment shall be made in
connection with any stock appreciation rights or phantom stock
rights granted to employees pursuant to employee benefit plans
approved by the Corporation's Board of Directors; and provided
further that no such adjustment shall increase the Conversion Price
as otherwise determined pursuant to this Section H or decrease the
number of shares of Conversion Stock issuable upon conversion of
each Share of Convertible Preferred Stock.
7. NOTICES.
(a) Promptly after any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all
holders of Convertible Preferred Stock, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Corporation shall give written notice to
all holders of Convertible Preferred Stock at least 20 days prior
to the date on which the Corporation closes its books or takes a
record (a) with respect to any dividend or distribution upon Common
Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(c) The Corporation shall also give written notice
to the holders of Convertible Preferred Stock at least 20 days
prior to the date on which any Organic Change shall take place.
SECTION I. PURCHASE RIGHTS. If at any time the
Corporation grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then each holder of
Convertible Preferred Stock shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase
Rights which such holder could have acquired if such holder had
held the number of shares of Conversion Stock acquirable upon
-16-
<PAGE>
conversion of such holder's Convertible Preferred Stock immediately
before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or if no such record is taken, the
date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
SECTION J. REGISTRATION OF TRANSFER. The Corporation
will keep at its principal office a register for the registration
of Convertible Preferred Stock. Upon the surrender of any
certificate representing Convertible Preferred Stock at such place,
the Corporation will, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a
new certificate or certificates in exchange therefor representing
in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of Shares as
is requested by the holder of the surrendered certificate and will
be substantially identical in form to the surrendered certificate,
and dividends will accrue on the Convertible Preferred Stock
represented by such new certificate from the date to which
dividends have been fully paid on such Convertible Preferred Stock
represented by the surrendered certificate.
SECTION K. REPLACEMENT. Upon receipt of evidence
reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing Shares of any class of Convertible Preferred Stock, and
in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a Purchaser or other institutional investor its
own agreement will be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Corporation will
(at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of Shares of
such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends will accrue on the Convertible
Preferred Stock represented by such new certificate from the date
to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
SECTION L. EVENTS OF NONCOMPLIANCE.
1. DEFINITIONS. An Event of Noncompliance shall have
occurred if:
(a) the Corporation fails on any Dividend Reference
Date on or after the third anniversary of the Date of Issuance to
-17-
<PAGE>
pay in cash the full amount of dividends then accrued on the
Convertible Preferred Stock, whether or not legally permissible,
except to the extent prohibited by the Indenture or Credit
Agreement;
(b) the Corporation fails to make any redemption
payment with respect to the Convertible Preferred Stock which it is
required to make hereunder, whether or not such payment is legally
permissible or is prohibited by any agreement to which the
Corporation is subject;
(c) the Corporation (i) breaches any material
representation or warranty, or (ii) otherwise breaches or fails to
perform or observe any material covenant or agreement set forth
herein or in the Definitive Agreements, which breach or failure
continues for 30 days after the Corporation first becomes aware
thereof;
(d) the Corporation fails to pay when due any
amount owing under the Indenture or Credit Agreement, and such
failure continues after any grace period applicable thereunder;
(e) any event described in any of paragraphs (h),
(i) or (j) of Section 5.01 of the Indenture, as in effect on the
Date of Issuance, shall have occurred and be continuing with
respect to the Corporation;
(f) any event described in paragraph (g) of Section
5.01 of the Indenture, as in effect on the Date of Issuance, shall
have occurred and be continuing;
(g) a judgment in excess of $2,500,000 is rendered
against the Corporation or any Subsidiary and, within 60 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of
any such stay, such judgment is not discharged; provided that the
Event of Noncompliance will be continuing only to the extent such
amounts remain unpaid; or
(h) the Corporation or any Subsidiary becomes in
default of any obligation or agreement evidencing or relating to
indebtedness and the result of such default is that an amount
exceeding $2,500,000 has become due prior to its stated maturity;
provided that the Event of Noncompliance will be continuing only to
the extent such amounts remain unpaid.
-18-
<PAGE>
2. CONSEQUENCES OF EVENTS OF NONCOMPLIANCE.
(a) If an Event of Noncompliance has occurred, the
dividend rate on the Convertible Preferred Stock shall increase
immediately by an increment of 50 basis points (1/2 percentage
point). Thereafter, until such time as no Event of Noncompliance
exists, the dividend rate shall increase automatically at the end
of each succeeding 90-day period by an additional increment of 50
basis points (1/2 percentage point) up to a maximum of 400 basis
points (4 percentage points). Any increase of the dividend rate
resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of
Noncompliance exists, subject to subsequent increases pursuant to
this paragraph.
(b) If an Event of Noncompliance of the type
described in Section L1(e) has occurred, all of the Convertible
Preferred Stock then outstanding shall be subject to immediate
redemption by the Corporation (without any action on the part of
the holders of the Convertible Preferred Stock) at a price per
Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon). The Corporation shall immediately
redeem all Convertible Preferred Stock upon the occurrence of such
Event of Noncompliance, and subject, however, to the prior payment
in full of all amounts due and payable under the Credit Agreement
and the Indenture.
(c) If any Event of Noncompliance exists, each
holder of the Convertible Preferred Stock shall also have any other
rights which such holder is entitled to under any contract with the
Corporation or agreement and any other rights which such holder may
have pursuant to applicable law; provided that any payment with
respect to any claim arising from such rights shall be subordinated
to the prior payment in full of all amounts then owing and due
under the Credit Agreement and the Indenture.
SECTION M. DEFINITIONS. Unless defined below or
elsewhere herein, each capitalized term used herein shall have the
meaning given such term in the Securities Purchase Agreement.
"ACP" means Appian Capital Partners, L.L.C., a Delaware
limited liability company.
"COMMON STOCK" means, all shares of the Corporation's
Common Stock, par value $.01 per share, as adjusted for any stock
split, stock dividend, share combination, share exchange,
recapitalization, merger, consolidation or other reorganization.
-19-
<PAGE>
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections H3(a) and H3(b) hereof.
"CONVERSION STOCK" means shares of the Common Stock;
provided that if there is a change such that the securities
issuable upon conversion of the Convertible Preferred Stock are
issued by an entity other than the Corporation or there is a change
in the type or class of securities so issuable, then the term
"Conversion Stock" shall mean one share of the security issuable
upon conversion of the Convertible Preferred Stock if such security
is issuable in shares, or shall mean the smallest unit in which
such security is issuable if such security is not issuable in
shares.
"CONVERTIBLE SECURITIES" means any stock or securities
directly or indirectly convertible into or exchangeable for Common
Stock.
"CREDIT AGREEMENT" means the Fourth Amended and Restated
Loan and Security Agreement dated as of July ___, 1995, by and
among the Corporation, as borrower, the lenders party thereto from
time to time, and Creditanstalt-Bankverein, as agent for the
lenders, as amended, supplemented or otherwise modified from time
to time or any agreement evidencing a refinancing of such
indebtedness, including any agreement extending the maturity of,
refinancing or restructuring indebtedness thereunder.
"DEFINITIVE AGREEMENTS" means the Securities Purchase
Agreement, the Warrants and the Registration Rights Agreement, in
each case as amended from time to time in accordance with its
respective terms.
"DIVIDEND TERMINATION DATE" means any date following a
period of 45 consecutive trading days (a "TRADING PERIOD") during
which the average of the closing prices for the Common Stock on the
NASDAQ market exceeded: (x) in the case of any Trading Period of
which the first 23 or more days occur during the fourth year after
the closing, 200% of the conversion price for the Convertible
Preferred Stock in effect as of the end of such Trading Period (the
"First Target"), provided that such closing price for the Common
Stock on each of the final 15 trading days of such Trading Period
shall equal or exceed 90% of the First Target; (y) in the case of
any Trading Period of which the last 23 or more trading days occur
during the fifth year after the closing, 175% of the conversion
price for the Convertible Preferred Stock in effect as of the end
of such Trading Period (the "Second Target"), provided that such
closing price for the Common Stock on each of the final 15 trading
-20-
<PAGE>
days of such Trading Period shall equal or exceed 90% of the Second
Target; and (z) in the case of any Trading Period of which the last
23 or more trading days occur during the sixth or any subsequent
year after the closing, 150% of the conversion price for the
Convertible Preferred Stock in effect as of the end of such Trading
Period (the "Third Target"), provided that such closing price for
the Common Stock on each of the final 15 trading days of such
Trading Period shall equal or exceed 90% of the Third Target.
"INDENTURE" means the Indenture governing $100,000,000 in
aggregate principal amount of any series of the Corporation's __%
Senior Notes due 2002, dated as of July __, 1995 between the
Corporation and First Union National Bank of North Carolina, as
trustee, as amended, supplemented or otherwise modified from time
to time or any agreement evidencing a refinancing of such
indebtedness, including any agreement extending the maturity of,
refinancing or restructuring indebtedness thereunder.
"JUNIOR SECURITIES" means any of the Corporation's Stock,
except for the Convertible Preferred Stock.
"LIQUIDATION VALUE" of any Share as of any particular
date will be equal to $100.00.
"MARKET PRICE" of any security means the average of the
closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed or as reported on
the NASDAQ National Market, or, if there has been no sales on any
such exchange or reported on the NASDAQ National Market on any day,
the average of the highest bid and lowest asked prices on all such
exchanges or reported at the end of such day, or, if on any day
such security is not so listed or included in the NASDAQ National
Market, the average of the representative bid and asked prices
quoted in the NASDAQ Stock Market as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ Stock
Market, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being
determined and the 20 consecutive business days prior to such day.
If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ National Market, the NASDAQ Stock
Market or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and
the holders of a majority of the Convertible Preferred Stock. If
such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly
-21-
<PAGE>
selected by the Corporation and the holders of a majority of the
Convertible Preferred Stock. The determination of such appraiser
shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
"OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities
other than rights, warrants or options referred to clauses (i),
(ii) or (iii) of Section H2(c) above.
"PERSON" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock corporation, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or
political subdivision thereof.
"PURCHASER" means UBS.
"REDEMPTION DATE" as to any Share means the date
specified in the notice of any redemption at the Corporation's
option or the applicable date specified herein in the case of any
other redemption; provided, that no such date will be a Redemption
Date unless the applicable Liquidation Value (plus all accrued and
unpaid dividends thereon) is actually paid in cash, and if not so
paid, the Redemption Date will be the date on which such
Liquidation Value (plus all accrued and unpaid dividends thereon)
is fully paid in cash.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement as defined in the Securities Purchase Agreement,
as such Registration Rights Agreement may be amended from time to
time in accordance with its terms.
"SECURITIES PURCHASE AGREEMENT" means the Securities
Purchase Agreement, dated as of July 3, 1995 among the Corporation,
UBS and ACP, as amended from time to time in accordance with its
terms.
"STOCK" of any Person means any shares, equity or profits
interests, participations or other equivalents (however designated)
of capital stock, whether voting or nonvoting, including any
securities with profit participation features, and any rights,
warrants, options or other securities convertible into or
exercisable or exchangeable for any such shares, equity or profits
interests, participations or other equivalents, or such other
securities, directly or indirectly (or any equivalent ownership
interests, in the case of a Person which is not a corporation).
-22-
<PAGE>
"SUBSIDIARY" means any corporation of which the shares of
outstanding capital stock possessing the voting power (under
ordinary circumstances) in electing the board of directors are, at
the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
"UBS" means UBS Capital Corporation, a New York
corporation.
"WARRANTS" means the Warrants issued pursuant to the
Securities Purchase Agreement, as they may be amended from time to
time in accordance with their terms.
SECTION N. AMENDMENT AND WAIVER. No amendment,
modification or waiver will be binding or effective with respect to
any of the provisions of this amendment to the Corporation's
Certificate of Incorporation stating the number, designation,
relative rights, preferences and limitations of the Convertible
Preferred Stock, without the prior written consent of the holders
of at least 80% of the Shares of Convertible Preferred Stock then
outstanding.
SECTION O. NOTICES. Except as otherwise expressly
provided herein, all notices referred to herein will be in writing
and will be delivered by registered or certified mail, return
receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).
-23-
<PAGE>
IN WITNESS WHEREOF, the undersigned President
and Assistant Secretary of the Corporation have executed this
Certificate as of this ____ day of July ___, 1995.
PEOPLES TELEPHONE COMPANY, INC.
By:________________________
Name:
Title:
By:________________________
Name:
Title:
NOTARIZED:
<PAGE>
EXHIBIT B
THIS WARRANT WAS ORIGINALLY ISSUED ON JULY __,
1995 AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT,
THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT. THIS WARRANT IS
ALSO SUBJECT TO A SECURITIES PURCHASE
AGREEMENT DATED AS OF JULY __, 1995 BETWEEN
PEOPLES TELEPHONE COMPANY, INC. (THE
"COMPANY") AND THE PARTIES NAMED THEREIN,
INCLUDING THE ORIGINAL HOLDER HEREOF. A COPY
OF THE SECURITIES AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER
HEREOF UPON REQUEST.
STOCK PURCHASE WARRANT
Date of Issuance: July ___, 1995 Certificate No. W-_
FOR VALUE RECEIVED, PEOPLES TELEPHONE COMPANY, INC., a
New York corporation (the "Company"), hereby grants to APPIAN
CAPITAL PARTNERS, L.L.C., a Delaware limited liability company
("ACP") or its transferees and assigns the right to purchase from
the Company at any time after the Date of Issuance (as defined
below) a total of 275,000 Warrant Shares (as defined herein) at a
price per share of $5.25 (the "INITIAL EXERCISE PRICE"). This
Warrant is issued pursuant to the terms of the Securities Purchase
Agreement, dated as of July 3, 1995 (the "SECURITIES PURCHASE
AGREEMENT"), among the Company, ACP and UBS Capital Corporation, a
New York corporation. Certain capitalized terms used herein are
defined in Section 8 hereof. The amount and kind of securities
obtainable pursuant to the rights granted hereunder and the
purchase price for such securities are subject to adjustment
pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
SECTION 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The purchase rights represented by
this Warrant may be exercised, in whole or in part, at any time and
from time to time after the Date of Issuance to and including 5:00
p.m., New York time, on July __, 2005 or, if such day is not a
business day, on the next following business day (the "EXERCISE
PERIOD").
<PAGE>
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been
exercised when all of the following items have been delivered to the
Company (the "EXERCISE TIME"):
(a) a completed Exercise Agreement, as
described in Section 1C below, executed by the Person
exercising all or part of the purchase rights represented by
this Warrant (the "PURCHASER");
(b) this Warrant;
(c) if the Purchaser is not the Registered
Holder, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to
the Purchaser; and
(d) either (1) a check payable to the Company
in an amount equal to the product of the Exercise Price (as
defined below) multiplied by the number of Warrant Shares
being purchased upon such exercise (the "AGGREGATE EXERCISE
PRICE"), (2) the surrender to the Company of shares of Common
Stock, shares of Preferred Stock or debt securities of the
Company having a value equal to the Aggregate Exercise Price
of the Warrant Shares being purchased upon such exercise
(provided that for purposes of this subparagraph, the value of
any note or other debt security or any preferred stock shall
be deemed to be equal to the aggregate outstanding principal
amount or liquidation value thereof plus all accrued and
unpaid interest thereon or accrued or declared and unpaid
dividends thereon), or (3) a written notice to the Company
that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance
a number of Warrant Shares issuable upon such exercise of the
Warrant which when multiplied by the Fair Market Value of one
Warrant Share is equal to the Aggregate Exercise Price (and
such withheld shares shall no longer be issuable under this
Warrant).
(ii) Certificates for Warrant Shares purchased upon
exercise of this Warrant shall be delivered by the Company to the
Purchaser within five days after the date of the Exercise Time
together with any cash payable in lieu of a fraction of a share
pursuant to Section 13 hereof. Unless this Warrant has expired or
all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new warrant, substantially identical
hereto, representing the rights formerly represented by this
-2-
<PAGE>
Warrant which have not expired or been exercised and shall, within
such five-day period, deliver such new warrant to the Person
designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise
of this Warrant shall be deemed to have been issued to the
Purchaser at the Exercise Time, and the Purchaser shall be deemed
for all purposes to have become the Registered Holder of such
Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares
upon exercise of this Warrant shall be made without charge to the
Registered Holder or the Purchaser for any issuance tax in respect
thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of Warrant Shares (other
than transfer taxes payable because the holder of the Warrant
Shares is other than the Registered Holder).
(v) The Company shall not close its books against
the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company
shall from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that
the Company fails to comply with its obligations set forth in the
foregoing sentence, the Purchaser may (but shall not be obligated
to) purchase Warrant Shares hereunder at par value, and the Company
shall be obligated to reimburse the Purchaser for the aggregate
amount of consideration paid in connection with such exercise in
excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with the
Registered Holder or any Purchaser required to make any
governmental filings or obtain any governmental approvals prior to
or in connection with any exercise of this Warrant (including,
without limitation, making any filings required to be made by the
Company).
(vii) Notwithstanding any other provision hereof,
if an exercise of any portion of this Warrant is to be made in
connection with a Change of Control (as defined in the Amended
Certificate of Incorporation) or other transaction affecting the
Company, such exercise may at the election of the Registered Holder
be conditioned upon the consummation of such transaction, in which
case such exercise shall not be deemed to be effective until
immediately prior to the consummation of such transaction.
-3-
<PAGE>
(viii) The Company shall at all times reserve and
keep available out of its authorized but unissued Common Stock
solely for the purpose of issuance upon the exercise of this
Warrant, the maximum number of Warrant Shares issuable upon the
exercise of this Warrant. All Warrant Shares which are so issuable
shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all
such actions as may be necessary to ensure that all such Warrant
Shares may be so issued without violation by the Company of any
applicable law or governmental regulation or any requirements of
any domestic securities exchange or the NASDAQ National Market upon
which shares of Common Stock or other securities constituting
Warrant Shares may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon
each such issuance). The Company shall not take any action which
would cause the number of authorized but unissued Warrant Shares to
be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant.
(ix) If the Warrant Shares issuable by reason of
exercise of this Warrant are at the time of exercise of this
Warrant convertible into or exchangeable for any other stock or
securities of the Company, the Company shall, at the Purchaser's
option and upon surrender of this Warrant by such Purchaser as
provided above together with any notice, statement or payment
required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such
Purchaser) a certificate or certificates representing the stock or
securities into which the Warrant Shares issuable by reason of such
conversion are convertible or exchangeable, registered in such name
or names and in such denomination or denominations as such
Purchaser has specified.
(x) The Company shall not, and shall not permit its
subsidiaries to, directly or indirectly, by any action (including,
without limitation, reincorporation in a jurisdiction other than
New York, amending its certificate of incorporation or through any
Organic Change (as defined below), issuance or sale of securities
or any other voluntary action) avoid or seek to avoid the
observance or performance of any of terms of this Warrant or impair
or diminish its value (except for any action which ratably affects
all Warrant Shares and shares of Common Stock), but shall at all
times in good faith assist in the carrying out of all such terms of
this Warrant. Without limiting the generality of the foregoing,
the Company shall (a) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its
-4-
<PAGE>
obligations under this Warrant and (b) not undertake any reverse
stock split, combination, reorganization or other reclassification
of its capital stock which would have the effect of causing a
material portion of the purchase rights represented hereby to
become exercisable for less than one share of Common Stock.
1C. EXERCISE AGREEMENT. Upon any exercise of this
Warrant, the Purchaser shall deliver to the Company an Exercise
Agreement in substantially the form set forth in EXHIBIT I hereto,
except that if the Warrant Shares are not to be issued in the name
of the Registered Holder, the Exercise Agreement shall also state
the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be
issued does not include all of the Warrant Shares purchasable
hereunder, it shall also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to
be issued.
SECTION 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF
SHARES. In order to prevent dilution of the rights granted under
this Warrant, the Initial Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2 (as so
adjusted, the "EXERCISE PRICE"), and the number of Warrant Shares
obtainable upon exercise of this Warrant shall be subject to
adjustment from time to time, each as provided in this Section 2.
2A. If and whenever on or after the Date of Issuance the
Company issues or sells, or in accordance with Section 2C is deemed
to have issued or sold, any shares of Common Stock for a
consideration per share less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then
immediately upon such issue or sale or deemed issue or sale the
Exercise Price shall be reduced to the Exercise Price determined by
dividing (i) the sum of (1) the product derived by multiplying the
Exercise Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any,
received by the Company upon such issue or sale, by (ii) the number
of shares of Common Stock Deemed Outstanding immediately after such
issue or sale.
2B. Notwithstanding the foregoing, there shall be no
adjustment in the Exercise Price as a result of any issue or sale
(or deemed issue or sale) of (i) shares of Common Stock upon
conversion of the Preferred Stock in accordance with the terms
thereof as in effect as of the Date of Issuance, (ii) shares of
Common Stock pursuant to exercise of stock options, warrants and
other rights to acquire Common Stock described in Schedule 4.3 to
-5-
<PAGE>
the Securities Purchase Agreement (as such number of shares is
proportionately adjusted for subsequent stock splits, combinations
of shares and stock dividends affecting the Common Stock), in each
case pursuant to the terms thereof as in effect on the date of the
Securities Purchase Agreement or as such terms may thereafter be
adjusted as described in Schedule 4.3 thereto, (iii) shares of
Common Stock upon exercise of stock options granted to employees
and directors of the Company and its Subsidiaries pursuant to the
terms of stock option plans and stock ownership plans approved by
the Company's Board of Directors, and (iv) shares of Common Stock
as consideration for the acquisition of any interest in any
business or company from a Person other than an Affiliate (A) which
acquisition is not prohibited pursuant to the Securities Purchase
Agreement, and (B) so long as the Fair Market Value of one Warrant
Share as of the closing of such acquisition exceeds $4.50 per share
(as such price is proportionately adjusted for subsequent stock
splits, combinations of shares and stock dividends affecting the
Warrant Shares) and so long as the Fair Market Value of one Warrant
Share has not at any time from the Date of Issuance through such
time been equal to greater than $5.25 per share (as so adjusted).
2C . EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Exercise Price under Section
2B, the following shall be applicable:
(1) ISSUANCE OF RIGHTS OR OPTIONS. If the Company
in any manner grants or sells any Options and the price per share
for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the
Exercise Price in effect immediately prior to the time of the
granting or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting or sale of such Options
for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such
Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
-6-
<PAGE>
issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the Exercise
Price shall be made when Convertible Securities are actually issued
upon the exercise of such Options or when Common Stock is actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities
and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than the Exercise Price in
effect immediately prior to the time of such issue or sale, then
the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (i) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities. No further adjustment of the
Exercise Price shall be made when Common Stock is actually issued
upon the conversion or exchange of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Exercise
Price had been or are to be made pursuant to other provisions of
this Section 2, no further adjustment of the Exercise Price shall
be made by reason of such issue or sale.
(3) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of
such change shall be immediately adjusted to the Exercise Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 2C, if the terms of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of this Warrant are changed in the manner described in the
-7-
<PAGE>
immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued
as of the date of such change; provided that no such change shall
at any time cause the Exercise Price hereunder to be increased.
(4) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Exercise Price then in effect hereunder shall be adjusted
immediately to the Exercise Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued. For purposes
of this Section 2C, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Date of
Issuance shall not cause the Exercise Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms
of such Option or Convertible Security caused it to be deemed to
have been issued after the Date of Issuance.
(5) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the
Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Fair Market
Value thereof as of the date of receipt. If any Common Stock,
Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving Company, the amount of consideration
therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Option or Convertible Security,
as the case may be. The fair value of any consideration other than
cash and securities shall be determined jointly by the Company and
the holders of a majority of the outstanding Warrants. If such
parties are unable to reach agreement within a reasonable period of
time, the fair value of such consideration shall be determined by
an independent appraiser experienced in valuing such type of
consideration jointly selected by the Company and the holders of a
majority of the outstanding Warrants. The determination of such
-8-
<PAGE>
appraiser shall be final and binding upon the parties, and the fees
and expenses of such appraiser shall be borne by the Company.
(6) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by the
parties thereto, the Option shall be deemed to have been issued for
a consideration of $.01.
(7) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(8) RECORD DATE. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
2D. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time
combines (by reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
2E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction in
each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "ORGANIC
CHANGE". Prior to the consummation of any Organic Change, the
Company shall make appropriate provision (in form and substance
-9-
<PAGE>
satisfactory to the Registered Holders of a majority of the
Warrants) to ensure that each Registered Holder of Warrant(s) shall
thereafter have the right to acquire and receive upon exercise
thereof, in lieu of or addition to (as the case may be) the Warrant
Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrant(s), such shares of
stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had exercised
its Warrants immediately prior to such Organic Change. In each
such case, the Company shall also make appropriate provision (in
form and substance satisfactory to the Registered Holders of a
majority of the Warrants then outstanding) to insure that the
provisions of this Section 2 and Section 5 hereof shall thereafter
be applicable to the Warrants (including, in the case of any such
Organic Change in which the successor entity or purchasing entity
is other than the Company, an immediate adjustment of the Exercise
Price to the value for the Common Stock reflected by the terms of
such Organic Change and a corresponding immediate adjustment in the
number of Warrant Shares acquirable and receivable upon exercise of
the Warrants, if the value so reflected is less than the Fair
Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such
Organic Change unless, prior to the consummation thereof, the
successor entity (if other than the Company) resulting from such
Organic Change assumes by written instrument (in form and substance
reasonably satisfactory to the Registered Holders of a majority of
the Warrants then outstanding) the obligation to deliver to each
Registered Holder of Warrant(s) such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such
Registered Holder may be entitled to acquire.
2F. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company's Board of
Directors shall make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares obtainable upon exercise of
this Warrant so as to protect the rights of the Registered Holder
of this Warrant; provided that no adjustment shall be made for
stock appreciation rights and phantom stock rights granted to
employees pursuant to employee benefit plans approved by the
Company's Board of Directors; and provided further that no such
adjustment shall increase the Exercise Price as otherwise
determined pursuant to this Section 2 or decrease the number of
Warrant Shares issuable upon conversion of any Warrant.
-10-
<PAGE>
2G. NOTICES.
(i) Promptly after any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Registered
Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least 20 days prior to the date on which any
Organic Change shall take place.
(iii) The Company shall also give written notice to the
Registered Holder at least 20 days prior to the date on which any
Organic Change, dissolution or liquidation shall take place.
SECTION 3. LIQUIDATING DIVIDENDS. If the Company
declares or pays a dividend upon the Common Stock payable otherwise
than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently
applied) except for a stock dividend payable in shares of
Common Stock (a "LIQUIDATING DIVIDEND"), then the Company shall pay
to the Registered Holder of this Warrant at the time of payment
thereof the Liquidating Dividend which would have been paid to such
Registered Holder on the Warrant Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken
for such Liquidating Dividend, or, if no record is taken, the date
as of which the record holders of Common Stock entitled to such
dividends are to be determined.
SECTION 4. PURCHASE RIGHTS. If at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then each holder of Warrants shall be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of Warrant Shares acquirable upon
conversion of such holder's Warrants immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
SECTION 5. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY.
This Warrant shall not entitle the Registered Holder hereof
to any voting rights or other rights as a stockholder of the
Company. No provision hereof, in the absence of affirmative action
by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered
-11-
<PAGE>
Holder shall give rise to any liability of such Registered Holder
for the Exercise Price of Warrant Shares acquirable by exercise
hereof or as a stockholder of the Company.
SECTION 6. TRANSFERABILITY. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant
and all rights hereunder are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this
Warrant with a properly executed Assignment (in the form of EXHIBIT
II hereto) at the principal office of the Company.
SECTION 7. WARRANT EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Warrant is exchangeable, upon the surrender
hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the
aggregate the purchase rights hereunder, and each of such new
Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender.
At the request of the Registered Holder (pursuant to a transfer of
Warrants or otherwise), this Warrant may be exchanged for one or
more Warrants to purchase Common Stock. The date the Company
initially issues Warrants pursuant to the Securities Purchase
Agreement shall be deemed to be the "DATE OF ISSUANCE" regardless
of the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall
be issued. All Warrants representing portions of the rights
hereunder are referred to herein as the "WARRANTS."
SECTION 8. DEFINITIONS. The following terms have the
meanings set forth below:
"AFFILIATE" means with respect to any Person, any other
Person directly or indirectly controlling or controlled by or is
under direct or indirect control with such specified Person.
"AMENDED CERTIFICATE OF INCORPORATION" means the
Company's Amended Certificate of Incorporation filed with the
Secretary of the State of New York on July __, 1995.
"COMMON STOCK" means the Company's Common Stock, $.01 par
value per share, or any securities into which such Common Stock is
hereafter converted or exchanged.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 2C(1) and 2C(2) hereof.
"CONVERTIBLE SECURITIES" means any stock or securities
directly or indirectly convertible into or exchangeable for Common
Stock, other than any such securities referred to in Section 2B
above.
-12-
<PAGE>
"FAIR MARKET VALUE" of any security means the average of
the closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed or as
reported on the NASDAQ National Market, or, if there has been no
sales on any such exchange or reported on the NASDAQ National
Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day,
or, if on any day such security is not so listed or included in the
NASDAQ National Market, the average of the representative bid and
asked prices quoted in the NASDAQ Stock Market as of 4:00 P.M., New
York time, or, if on any day such security is not quoted in the
NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of 21 days consisting of the day as of which "Fair Market
Value" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ National Market,
the NASDAQ Stock Market or the over-the-counter market, the "Fair
Market Value" shall be the fair value thereof determined jointly by
the Company and the Registered Holders of a majority of the
Warrants. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by
an independent appraiser experienced in valuing securities jointly
selected by the Company and the Registered Holders of a majority of
the Warrants. The determination of such appraiser shall be final
and binding upon the parties, and the Company shall pay the fees
and expenses of such appraiser.
"OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities
other than rights, warrants or options referred to in Section 2B
above.
"PERSON" means an individual, a partnership (including a
limited partnership), a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED STOCK" means the Cumulative Convertible
Preferred Stock issued pursuant to the Securities Purchase
Agreement.
"REGISTERED HOLDER" means the holder of this Warrant as
reflected in the records of the Company maintained pursuant to
Section 13.
"WARRANT SHARES" means shares of the Company's Common
Stock issuable upon exercise of the Warrant; PROVIDED, that if the
securities issuable upon exercise of the Warrants are issued by an
entity other than the Company or there is a change in the class of
-13-
<PAGE>
securities so issuable, then the term "Warrant Shares" shall mean
shares of the security issuable upon exercise of the Warrants if
such security is issuable in shares, or shall mean the equivalent
units in which such security is issuable if such security is not
issuable in shares.
SECTION 9. REPLACEMENT. Upon receipt of evidence
reasonably satisfactory to the Company (an affidavit of the
Registered Holder shall be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to
the Company (provided that if the Registered Holder is a financial
institution or other institutional investor its own agreement shall
be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense)
execute and deliver in lieu of such certificate a new certificate
of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate.
SECTION 10. NOTICES. Except as otherwise expressly
provided herein, all notices referred to herein shall be in writing
and shall be delivered by registered or certified mail, return
receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Company, at its principal executive
offices and (ii) to a Registered Holder, at such Registered
Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. AMENDMENT AND WAIVER. No amendment,
modification or waiver will be binding or effective with respect to
any provision of this Warrant without the prior written consent of
the Registered Holders of the Warrants then outstanding.
SECTION 12. WARRANT REGISTER. The Company shall
maintain at its principal executive offices a register for the
registration of transfer of Warrants. Upon the surrender of any
certificate representing Warrants at such place, the Company will,
at the request of the record holder of such certificate, execute
and deliver (at the Company's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the
number of Warrant Shares represented by the surrendered
certificate. Each such new certificate will be registered in such
name and will represent such number of Warrant Shares as is
requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate.
SECTION 13. FRACTIONS OF SHARES. If any fractional
interest in a Warrant Share would, except for the provisions of
this subparagraph, be delivered upon any exercise of the Warrant,
at the request of the Registered Holder the Company, in lieu of
delivering the fractional share therefor, shall pay an amount to
-14-
<PAGE>
the Registered Holder thereof equal to the Fair Market Value of
such fractional interest as of the date of exercise.
SECTION 14. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a
part of this Warrant. THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
* * * * *
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed and attested by its duly authorized officers under its
corporate seal and to be dated as of the date hereof.
PEOPLES TELEPHONE COMPANY, INC.
By: _________________________
Name:
Title:
Attest:
____________________________
Assistant Secretary
-16-
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in
the attached Warrant (Certificate No. W-____), hereby agrees to
subscribe for the purchase of ______ Warrant Shares covered by such
Warrant and makes payment herewith in full therefor at the price
per share provided by such Warrant.
Signature ____________________
Address ______________________
-17-
<PAGE>
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns and transfers all of the rights of the undersigned
under the attached Warrant (Certificate No. W-_____) with respect
to the number of the Warrant Shares covered thereby set forth
below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature _______________________
_______________________
Witness _______________________
<PAGE>
EXHIBIT C
DRAFT: 6/29/95
Each capitalized term used and not otherwise defined
herein shall have the meaning given such term in the Securities
Purchase Agreement to which this Exhibit is attached.
The Registration Rights Agreement to be entered into by
the Company and the Purchasers at the Closing shall include
provisions to the effect as follows, as well as other provisions
reasonably required by the Purchasers, and shall be in form
reasonably satisfactory to the Purchasers:
1. At the request, at any time and from time to time, of the
holders of a majority of the Registrable Securities (as defined
below), the Company will register under the Securities Act on Form
S-1, or any similar long-form registration (a "LONG-FORM
REGISTRATION"), or on Form S-2 or S-3 or any similar short-form
registration (a "SHORT-FORM REGISTRATION"), if available to the
Company, all or any portion of the Registrable Securities held by
any holder thereof which such holder requests to be so registered.
The Company will pay all Registration Expenses with respect to up
to two Long-Form Registrations (it being understood that a
registration will not count as the second and final long-form
registration unless the holders are able to sell at least 90% of
the shares they propose to sell in such offering), and up to one
Short-Form Registration per year; provided that, if a Short-Form
Registration is available to the Company, the Company will use such
a form, and the holders of Registrable Securities may elect to
treat such registration as a Long-Form Registration for purposes of
expense reimbursement in accordance with this sentence. The
holders of a majority of the Registrable Securities may select the
underwriter(s) for the offering, subject to the approval of the
Company which will not be withheld unreasonably. No securities
will be included in a registration described in this paragraph
without the prior written consent of holders of a majority of the
Registrable Securities to be included therein, except that shares
of Common Stock may be included as required pursuant to Existing
Registration Rights so long as the number of such securities so
included, when combined with the number of Registrable Securities
proposed to be included therein, does not exceed the number which,
in the reasonable judgment of the managing underwriter thereof, can
be sold at the price and on the terms substantially as proposed.
For purposes hereof, "EXISTING REGISTRATION RIGHTS" means rights
held by stockholders of the Company to cause the Company to
register shares of Common Stock held by such holders at the Closing
and rights held by other Persons to cause the Company to register
<PAGE>
shares of Common Stock issuable to such Persons under options,
warrants or other rights held by such Persons at the Closing, as
such rights are set forth in the agreements described in the
Schedules to the Securities Purchase Agreement and in effect at the
Closing. The Company may postpone for no more than 120 days in
each 360-day period, the filing or the effectiveness of a
registration statement for such a registration if the Board of
Directors, acting in good faith, determines that such registration
might reasonably be expected to have a material and adverse effect
on any proposal or plan to engage in any acquisition or disposal of
stock or assets or any merger, consolidation, tender offer or
similar transaction; provided, that in such event, the holders of
Registrable Securities requesting such registration will be
entitled to withdraw such request and, if such request is
withdrawn, such registration will not count as one of the permitted
registrations. In connection with underwritten offerings of
Registrable Securities, the Company will agree not to effect a
public sale or distribution of any of its equity securities during
the period beginning seven days before and extending 120 days (or
such lesser number of days as reasonably requested by the managing
underwriter of such underwritten offering of Registrable
Securities) after the effective date of any such registration
requested by holders of Registrable Securities.
2. In the event that after the date of the Agreement
the Company registers under the Securities Act any of its equity
securities (other than on registration statements on Form S-8 or
Form S-4 or successor forms thereto which may be used solely for
registering stock issued to employees or in business combinations)
for the account of the Company, the holders of Registrable
Securities will be permitted to include all or any portion thereof
in such registration, and the Company will pay all Registration
Expenses with respect thereto. In the event that the number of
securities proposed to be included in such registration exceeds the
number which, in the reasonable judgment of the managing
underwriter thereof, can be sold on the terms substantially as
proposed, the Company shall cause to included therein (a) first,
the securities proposed to be sold for the account of the Company,
(b) second, the Registrable Securities and other securities
required to be included therein pursuant to Existing Registration
Rights, pro rata among the holders thereof according to the number
of Registrable Securities and such other securities held, and (c)
third, all other securities.
3. In the event that after the date of the Agreement
the Company registers under the Securities Act any of its equity
securities, other than Registrable Securities, which securities are
to be sold for the account of one or more of the Company's
2
<PAGE>
stockholders, the holders of Registrable Securities will be
permitted to include all or any portion thereof in such
registration, and the Company will pay all Registration Expenses
with respect thereto. In the event that the number of securities
proposed to be included in such registration exceeds the number
which, in the reasonable judgment of the managing underwriter
thereof, can be sold on the terms substantially as proposed, and
such registration is in accordance with a demand made pursuant to
Existing Registration Rights, the securities proposed to be sold in
accordance with such Existing Registration Rights will be included
first, the Registrable Securities will be included second, and all
other securities will be included third.
4. Registration procedures will be as set forth in
Annex A hereto.
5. Indemnification in connection with each registration
will be as set forth in Annex B hereto.
6. Certain Definitions.
"REGISTRABLE SECURITIES" means (i) any shares of Common
Stock issued or issuable upon conversion or exercise of any
Preferred Stock or Warrants or acquired after the date hereof by a
Purchaser or any of its Affiliates holding Registrable Securities
and (ii) any shares of capital stock of the Company issued or
issuable with respect to the securities referred to in clause (i)
by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when they
have been (x) distributed to the public pursuant to a offering
registered under the Securities Act or sold to the public through
a broker, dealer or market maker in compliance with Rule 144 under
the Securities Act (or any similar rule then in force), unless such
securities are held at such time by a holder of other Registrable
Securities, or (y) repurchased by the Company or any Subsidiary.
For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right
to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities
or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has
actually been effected.
"REGISTRATION EXPENSES" means all expenses incident to
the Company's performance of or compliance with the Registration
Rights Agreement, including without limitation all registration and
3
<PAGE>
filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and of one
counsel for the holders of Registrable Securities and all
independent certified public accountants, underwriters (excluding
discounts and commissions) and other Persons retained by the
Company.
4
<PAGE>
Annex A to Exhibit C
REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be
registered pursuant to the Registration Rights Agreement, the
Company will use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
(a) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company
will furnish to the counsel selected by the holders of a majority
of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six
months (or until all Registrable Securities registered thereunder
have been sold in accordance therewith, if sooner) and comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities
such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and
such other documents as such seller may reasonably request in order
to facilitate the disposition of the Registrable Securities owned
by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller reasonably requests and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subsection,
1
<PAGE>
(ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process (i.e., service of
process which is not limited solely to securities law violations in
any such jurisdiction);
(e) notify each seller of such Registrable Securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company will promptly
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(f) cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by
the Company are then listed and, if not so listed, to be listed on
the Nasdaq National Market (the "NASDAQ MARKET") and, if listed on
the Nasdaq Market, use its best efforts to secure designation of
all such Registrable Securities covered by such registration
statement as a Nasdaq "National Market System security" within the
meaning of Rule 11Aa2-1 of the SEC or, failing that, to secure
Nasdaq Market authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register as such with respect to such
Registrable Securities with the National Association of Securities
Dealers, Inc;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order
to facilitate the disposition of such Registrable Securities;
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any
disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
2
<PAGE>
officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to
its security holders, as soon as reasonably practicable, an earning
statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter
after the effective date of the registration statement, which
earning statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 promulgated thereunder;
(k) permit any holder of Registrable Securities which
holder, in its sole and exclusive judgment, might be deemed to be
an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable
statement and to require the insertion therein of material,
furnished to the Company in writing, which in the reasonable
judgment of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company
will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities
as may be necessary to enable the sellers thereof to consummate
the disposition of such Registrable Securities; and
(n) in the case of any underwritten offering, obtain a
"cold comfort" letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as the managing
underwriter of such underwritten offering may reasonably request.
If any such registration or comparable statement refers to any
holder by name or otherwise as the holder of any securities of the
Company and if, in its sole and exclusive judgment, such holder is
or might be deemed to be a controlling person of the Company, such
holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to such holder and
3
<PAGE>
presented to the Company in writing, to the effect that the holding
by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the
Company's securities covered thereby and that such holding does not
imply that such holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such
reference to such holder by name or otherwise is not required by
the Securities Act or any similar Federal statute then in force,
the deletion of the reference to such holder; provided that with
respect to this clause (ii) such holder shall furnish to the
Company an opinion of counsel to such effect, which opinion of
counsel shall be reasonably satisfactory to the Company.
4
<PAGE>
Annex B to Exhibit C
INDEMNIFICATION.
(a) The Company will indemnify, to the extent permitted
by law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses arising out of or based upon any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall
reimburse such holder, director, officer or controlling person for
any legal or other expenses reasonably incurred by such holder,
director, officer or controlling person in connection with the
investigation or defense of such loss, claim, damage, liability or
expense, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments
or supplements thereto after the Company has furnished such holder
with a sufficient number of copies of the same. In connection with
an underwritten offering, the Company will indemnify such
underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating, each
such holder will furnish to the Company in writing such information
and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and,
to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only
to the extent that such untrue statement or omission is contained
in any information or affidavit so furnished in writing by such
holder; provided, that the obligation to indemnify will be
individual to each holder and will be limited to the net amount of
1
<PAGE>
proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder
will (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification and
(ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party, but only so long
as, prior to assuming such defense (A) the indemnifying party
acknowledges in writing to the indemnified Person that (1) it is
not aware of any basis to believe that the indemnifying party is
not responsible for all liabilities and expenses arising from such
claim, and (2) upon becoming aware of any basis for a belief that
the indemnifying party will not be solely responsible for all such
liabilities and expenses, it will promptly notify such indemnified
party in writing thereof and offer to resign from such defense, and
(B) the indemnified person is reasonably satisfied that the
indemnifying party will have financial resources, or valid
insurance, available to satisfy such liabilities and expenses. The
indemnifying party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but
such consent will not be unreasonably withheld, it being understood
in any event that the withholding of such consent shall be deemed
to be unreasonable unless the indemnifying party acknowledges in
writing that it is responsible for all liabilities and expenses
arising from such settlement). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will
not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party
and will survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the
Company's indemnification is unavailable for any reason.
<PAGE>
EXHIBIT D
FORM OF OPINION OF COMPANY'S COUNSEL
Each capitalized term used herein has the meaning given
such term in the Agreement to which this Exhibit D is attached.
(i) Each of the Company and its Subsidiaries is duly
incorporated and is validly existing under the laws of its respective
jurisdiction of incorporation, with full corporate power and
authority to own, lease and operate its assets and properties and
conduct its business in the manner presently owned and conducted.
(ii) Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation in good standing
under the laws of all other jurisdictions where the ownership or
leasing of its respective properties or the conduct of its
respective business requires such qualification, except where the
failure to be so qualified and in good standing could not
reasonably be expected to have a Material Adverse Effect.
(iii) The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Agreement, the Registration Rights Agreement and the other
agreements contemplated by the Agreement to which the Company is a
party, and, to the knowledge of such counsel, the Company and each
of its Subsidiaries have obtained all consents, approvals, orders,
certificates, licenses, permits, franchises and authorizations of
and from, and has made all declarations and filings with all
governmental and regulatory authorities, all self-regulatory
organizations and all courts and other tribunals necessary to own,
lease, license and use their respective properties and assets and
to conduct their respective business in the manner presently owned
and operated, except to the extent that the failure to so obtain
or file, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(iv) Each of the Agreement, the Registration Rights
Agreement and the other agreements contemplated by the Agreement to
which the Company is a party (assuming due authorization and
execution of each by each party hereto) constitutes a valid and
binding agreement of the Company, enforceable against the Company
in accordance with its terms except (a) as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors
rights generally, (b) as the enforceability thereof may be subject
to the application of general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law)
and (c) with respect to the Registration Rights Agreement, that
<PAGE>
such counsel expresses no opinion regarding the enforceability of
the indemnification provisions contained in Section ___ thereof.
(v) The Certificate of Amendment containing the terms of
the Preferred Stock set forth in Exhibit A to the Agreement has
been duly adopted by the Company's board of directors, has been
duly filed with the Secretary of State of New York, has become
effective under the laws of New York and constitutes a valid and
binding obligation of the Company, enforceable against the Company
in accordance with its terms.
(vi) The certificates representing the Preferred Stock
purchased at the Closing have been duly authorized, executed and
delivered by the Company, such Preferred Stock has been validly
issued and is outstanding, fully paid and nonassessable, and there
are no statutory, or to the knowledge of such counsel, contractual,
preemptive rights of stockholders or rights of first refusal with
respect to the issuance of such Preferred Stock.
(vii) The Warrants purchased at the Closing have been duly
authorized, executed and delivered by the Company, have been
validly issued and are outstanding, fully paid and nonassessable,
and there are no statutory or, to the knowledge of such counsel,
contractual, preemptive rights of stockholders or rights of first
refusal with respect to the issuance of such Warrants.
(viii) The Common Stock issuable upon conversion of the
Preferred Stock or upon exercise of the Warrants has been duly
authorized and reserved for issuance by the Company, there are no
statutory or, to the knowledge of such counsel, contractual,
preemptive rights of stockholders or rights of first refusal with
respect to the issuance of such Common Stock, and the Common Stock
to be issued upon conversion of such Preferred Stock or upon
exercise of the Warrants shall upon such issuance be validly
issued, fully paid and nonassessable.
(ix) The execution, delivery and performance by the
Company of the Agreement, the Registration Rights Agreement and the
other agreements contemplated by the Agreement, the issuance, sale
and delivery of the Preferred Stock and the Warrants and the
issuance of Common Stock upon conversion of the Preferred Stock and
upon exercise of the Warrants, the consummation by the Company of
the transactions contemplated thereby and the compliance by the
Company with the terms of the foregoing do not, and, at the Closing
Date, will not, conflict with or constitute or result in a breach
or violation by the Company or any of the Subsidiaries of any of
the terms or provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) by the Company or any of the Subsidiaries or give rise to
any right to accelerate the maturity or require the prepayment of
2
<PAGE>
any indebtedness under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries under, (A) any material
agreements which the Company has filed pursuant to Item 601 of
Regulation S-K of the SEC, (B) the Company's Certificate of
Incorporation, the Certificate of Amendment, the Company's bylaws
or the charter or bylaws of any of its Subsidiaries (the
"Organizational Documents") or (C) any law, rule or regulation of
the United States or the State of Florida or New York applicable to
the Company or any of its Subsidiaries or any order, decree or
judgment known to such counsel to be applicable to the Company or
any of its Subsidiaries, of any court or governmental or regulatory
agency or body or arbitrator.
(x) Assuming that the representations and warranties of
the Purchasers contained in Section 8.11 of the Agreement are true,
correct and complete, it is not necessary in connection with the
offer, sale and delivery of the Preferred Stock and the Warrants to
the Purchasers, in accordance with the Agreement, to register the
Preferred Stock and the Warrants under the Securities Act.
(xi) To the knowledge of such counsel, Schedule A
attached hereto correctly sets forth the number of shares of each
class of the Company's and each Subsidiary's authorized capital
stock and the number of outstanding shares of each such class as of
the Closing; all of the outstanding capital stock of the Company
and each of its Subsidiaries has been duly authorized and validly
issued, is fully paid and nonassessable and was not issued in
violation of any preemptive or similar rights (whether provided
contractually or pursuant to any Organizational Document), and the
outstanding shares of the capital stock owned by the Company or its
Subsidiaries are owned beneficially and of record by the Company
free and clear of all liens, encumbrances, equities and claims of
restrictions on transferability or voting except for liens in favor
of the lenders under the Credit Agreement.
(xii) To the knowledge of such counsel, except as
described in Schedule 4.3 to the Agreement, (A) there is no
outstanding Stock of the Company or any of its Subsidiaries, except
for the Preferred Stock and the Warrants, (B) there are no
agreements providing for the issuance (contingent or otherwise) of,
or any commitments or claims of any character relating to, any
Stock except for or as contemplated by the Agreement or (C) there
are no obligations (contingent or otherwise) of the Company or any
of its Subsidiaries to repurchase, exchange or otherwise acquire or
retire any Stock, except pursuant to the Agreement and the
Certificate of Amendment.
(xiii) To the knowledge of such counsel, except as set
forth on the Schedule 4.12 to the Agreement, no legal, regulatory
3
<PAGE>
or governmental proceedings are pending to which the Company or any
of the Subsidiaries is a party or to which the assets of the
Company or any of the Subsidiaries is subject which, individually
or in the aggregate, could reasonably be expected to have a
Material Adverse Effect and no such material proceedings have been
threatened against the Company or any of the Subsidiaries with
respect to any of its respective assets or properties.
(xiv) To the knowledge of such counsel, except as set
forth in Schedule ___ and except for the Registration Rights
Agreement dated as of ______, 1995 between the Company and Merrill
Lynch & Co., no holder of any security of the Company has any right
to require registration of shares of Common Stock or any other
security of the Company.
4
<PAGE>
EXHIBIT E
FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
deliver to each Purchaser (so long as such Purchaser holds any
Preferred Stock or any Underlying Common Stock) and to each holder
of at least __% of the outstanding Preferred Stock and each holder
of at least __% of the Underlying Common Stock:
i. as soon as available but in any event within
30 days after the end of each monthly accounting
period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash
flows of the Company and its Subsidiaries for such
monthly period and for the period from the
beginning of the fiscal year to the end of such
month, and unaudited consolidating and consolidated
balance sheets of the Company and its Subsidiaries
as of the end of such monthly period, setting forth
in each case comparisons to the Company's annual
budget and to the corresponding period in the
preceding fiscal year, and all such statements
shall be prepared in accordance with generally
accepted accounting principles, consistently
applied [, SUBJECT TO THE ABSENCE OF FOOTNOTE
DISCLOSURES AND TO NORMAL YEAR-END ADJUSTMENTS FOR
RECURRING ACCRUALS FOR ________ AND ________,] and
shall be certified by the Company's Chief Financial
Officer;
ii. accompanying the financial statements referred
to in subparagraph (i) an Officer's Certificate
stating that there is no Event of Noncompliance (as
defined in the Certificate of Amendment) in
existence and that neither the Company nor any of
its Subsidiaries is in default under any of its
other material agreements or, if any Event of
Noncompliance or any such default exists,
specifying the nature and period of existence
thereof and what actions the Company and its
Subsidiaries have taken and propose to take with
respect thereto;
1
<PAGE>
iii. within 90 days after the end of each fiscal
year, consolidating and consolidated statements of
income and cash flows of the Company and its
Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of
the Company and its Subsidiaries as of the end of
such fiscal year, setting forth in each case
comparisons to the Company's annual budget and to
the preceding fiscal year, all prepared in
accordance with generally accepted accounting
principles, consistently applied, and accompanied
by (a) with respect to the consolidated portions of
such statements, an opinion of an independent
accounting firm of recognized national standing
acceptable to the holders of a majority of the
outstanding Preferred Stock and the holders of a
majority of the Underlying Common Stock, (b) a
certificate from such accounting firm, addressed to
the Board of Directors, stating that in the course
of its examination nothing came to its attention
that caused it to believe that there was an Event
of Noncompliance in existence or that there was any
other default by the Company or any Subsidiary in
the fulfillment of or compliance with any of the
terms, covenants, provisions or conditions of any
other material agreement to which the Company or
any Subsidiary is a party or, if such accountants
have reason to believe any Event of Noncompliance
or other default by the Company or any Subsidiary
exists, a certificate specifying the nature and
period of existence thereof, and (c) a copy of such
firm's annual management letter to the Board of
Directors;
iv. promptly upon receipt thereof, any additional
reports, management letters or other detailed
information concerning significant aspects of the
Company's operations or financial affairs given to
the Company by its independent accountants (and not
otherwise contained in other materials provided
hereunder);
2
<PAGE>
v. at least 30 days but not more than 90 days
prior to the beginning of each fiscal year, an
annual budget prepared on a monthly basis for the
Company and its Subsidiaries for such fiscal year
(displaying anticipated statements of income and
cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets
prepared by the Company and any revisions of such
annual or other budgets, and within 30 days after
any monthly period in which there is a material
adverse deviation from the annual budget, an
Officer's Certificate explaining the deviation and
what actions the Company has taken and proposes to
take with respect thereto;
vi. promptly (but in any event within 5 business
days) after the discovery or receipt of notice of
any Event of Noncompliance, any default under any
material agreement to which it or any of its
Subsidiaries is a party, any condition or event
which is reasonably likely to result in any
material liability under any federal, state or
local statute or regulation relating to public
health and safety, worker health and safety or
pollution or protection of the environment] or any
other material adverse change, event or circumstance
affecting the Company or any Subsidiary (including,
without limitation, the filing of any material
litigation against the Company or any Subsidiary or
the existence of any dispute with any Person which
involves a reasonable likelihood of such litigation
being commenced), an Officer's Certificate specifying
the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken
and propose to take with respect thereto;
vii. within 10 days after transmission thereof,
copies of all financial statements, proxy
statements, reports and any other general written
communications which the Company sends to its
stockholders and copies of all registration
statements and all regular, special or periodic
3
<PAGE>
reports which it files, or any of its officers or
directors file with respect to the Company, with
the SEC or with any securities exchange on which
any of its securities are then listed, and copies
of all press releases and other statements made
available generally by the Company to the public
concerning material developments in the Company's
and its Subsidiaries' businesses; and
viii. with reasonable promptness, such other
information and financial data concerning the Company
and its Subsidiaries as any Person entitled to
receive information may reasonably request.
Each of the financial statements referred to in subparagraph (i)
and (iii) shall be true and correct in all material respects as of
the dates and for the periods stated therein, subject in the case
of the unaudited financial statements to changes resulting from
normal year-end adjustments for recurring accruals for ________ and
________ (none of which would, alone or in the aggregate, be
materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole).
<PAGE>
EXHIBIT F
THIS WARRANT WAS ORIGINALLY ISSUED ON JULY __,
1995 AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT,
THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT. THIS WARRANT IS
ALSO SUBJECT TO A SECURITIES PURCHASE
AGREEMENT DATED AS OF JULY __, 1995 BETWEEN
PEOPLES TELEPHONE COMPANY, INC. (THE
"COMPANY") AND THE PARTIES NAMED THEREIN,
INCLUDING THE ORIGINAL HOLDER HEREOF. A COPY
OF THE SECURITIES AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER
HEREOF UPON REQUEST.
CONTINGENT STOCK PURCHASE WARRANT
Date of Issuance: July __, 1995 Certificate No. W-_
This Warrant is being issued simultaneously with the
issuance of 150,000 shares of the Company's Series C Cumulative
Convertible Preferred Stock (the "CONVERTIBLE PREFERRED STOCK"),
represented by stock certificate no. _____ (the "SUBJECT SHARES"),
to UBS CAPITAL CORPORATION, a New York Corporation ("UBS") pursuant
to the Securities Purchase Agreement dated as of July 3, 1995 (the
"SECURITIES PURCHASE AGREEMENT"), between PEOPLES TELEPHONE
COMPANY, INC. a New York Corporation (the "COMPANY"), and certain
investors.
For value received, the Company hereby grants to UBS or
its registered assigns (the "REGISTERED HOLDER") the right to
purchase from the Company after an Optional Redemption of any
Subject Shares a number of shares of the Company's Common Stock
equal to the aggregate number of shares of Common Stock into which
the Redeemed Shares were convertible as of the respective
Redemption Dates thereof at a price per share equal to $5.25 (the
"INITIAL EXERCISE PRICE") (such price as adjusted and readjusted
from time to time in accordance with Section 2 hereof).
Certain capitalized terms used herein are defined in
Section 8 hereof. The amount and kind of securities obtainable
pursuant to the rights granted hereunder and the purchase price for
such securities are subject to adjustment pursuant to the
provisions contained in this Warrant.
<PAGE>
This Warrant is subject to the following provisions:
SECTION 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The purchase rights represented by
this Warrant may be exercised, in whole or in part, at any time and
from time to time after the Redemption Date of the Redeemed Shares
to which such rights relate, to and including the Scheduled
Redemption Date of the Redeemed Shares to which such purchase
rights relate, but no later than six years after the Optional
Redemption of all outstanding shares of Convertible Preferred Stock
(the "EXERCISE PERIOD").
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised
when all of the following items have been delivered to the
Company (the "EXERCISE TIME"):
(a) a completed Exercise Agreement, as
described in Section 1C below, executed by the Person
exercising all or part of the purchase rights represented by
this Warrant (the "PURCHASER");
(b) this Warrant;
(c) if the Purchaser is not the Registered
Holder, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to
the Purchaser; and
(d) either (1) a check payable to the Company
in an amount equal to the product of the Exercise Price
multiplied by the number of Warrant Shares being purchased
upon such exercise (the "AGGREGATE EXERCISE PRICE"), (2) the
surrender to the Company of shares of Common Stock, shares of
Convertible Preferred Stock or debt securities of the Company
having a value equal to the Aggregate Exercise Price of the
Warrant Shares being purchased upon such exercise (provided
that for purposes of this subparagraph, the value of any note
or other debt security or any preferred stock shall be deemed
to be equal to the aggregate outstanding principal amount or
liquidation value thereof plus all accrued and unpaid interest
thereon or accrued or declared and unpaid dividends thereon),
or (3) a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing
the Company to withhold from issuance a number of Warrant
Shares issuable upon such exercise of the Warrant which when
-2-
<PAGE>
multiplied by the Fair Market Value of one Warrant Share is
equal to the Aggregate Exercise Price (and such withheld
shares shall no longer be issuable under this Warrant).
(ii) Certificates for Warrant Shares purchased upon
exercise of this Warrant shall be delivered by the Company to the
Purchaser within five days after the date of the Exercise Time
together with any cash payable in lieu of a fraction of a share
pursuant to Section 13 hereof. Unless this Warrant has expired or
all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new warrant, substantially identical
hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within
such five-day period, deliver such new warrant to the Person
designated for delivery in the Exercise Agreement.
(iii) The Warrant Shares issuable upon the exercise
of this Warrant shall be deemed to have been issued to the
Purchaser at the Exercise Time, and the Purchaser shall be deemed
for all purposes to have become the Registered Holder of such
Warrant Shares at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares
upon exercise of this Warrant shall be made without charge to the
Registered Holder or the Purchaser for any issuance tax in respect
thereof or other cost incurred by the Company in connection with
such exercise and the related issuance of Warrant Shares (other
than transfer taxes payable because the holder of the Warrant
Shares is other than the Registered Holder).
(v) The Company shall not close its books against
the transfer of this Warrant or of any Warrant Shares issued or
issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company
shall from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to
or less than the Exercise Price then in effect. In the event that
the Company fails to comply with its obligations set forth in the
foregoing sentence, the Purchaser may (but shall not be obligated
to) purchase Warrant Shares hereunder at par value, and the Company
shall be obligated to reimburse the Purchaser for the aggregate
amount of consideration paid in connection with such exercise in
excess of the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with the
Registered Holder or any Purchaser required to make any
governmental filings or obtain any governmental approvals prior to
-3-
<PAGE>
or in connection with any exercise of this Warrant (including,
without limitation, making any filings required to be made by the
Company).
(vii) Notwithstanding any other provision hereof,
if an exercise of any portion of this Warrant is to be made in
connection with a Change of Control (as defined in the Amended
Certificate of Incorporation) or other transaction affecting the
Company, such exercise may at the election of the Registered Holder
be conditioned upon the consummation of such transaction, in which
case such exercise shall not be deemed to be effective until
immediately prior to the consummation of such transaction.
(viii) The Company shall at all times reserve and
keep available out of its authorized but unissued Common Stock
solely for the purpose of issuance upon the exercise of this
Warrant, the maximum number of Warrant Shares issuable upon the
exercise of this Warrant. All Warrant Shares which are so issuable
shall, when issued and upon the payment of the applicable Exercise
Price, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all
such actions as may be necessary to ensure that all such Warrant
Shares may be so issued without violation by the Company of any
applicable law or governmental regulation or any requirements of
any domestic securities exchange or the NASDAQ National Market upon
which shares of Common Stock or other securities constituting
Warrant Shares may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon
each such issuance). The Company shall not take any action which
would cause the number of authorized but unissued Warrant Shares to
be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrant.
(ix) If the Warrant Shares issuable by reason of
exercise of this Warrant are at the time of exercise of this
Warrant convertible into or exchangeable for any other stock or
securities of the Company, the Company shall, at the Purchaser's
option and upon surrender of this Warrant by such Purchaser as
provided above together with any notice, statement or payment
required to effect such conversion or exchange of Warrant Shares,
deliver to such Purchaser (or as otherwise specified by such
Purchaser) a certificate or certificates representing the stock or
securities into which the Warrant Shares issuable by reason of such
conversion are convertible or exchangeable, registered in such name
or names and in such denomination or denominations as such
Purchaser has specified.
-4-
<PAGE>
(x) The Company shall not, and shall not permit its
subsidiaries to, directly or indirectly, by any action (including,
without limitation, reincorporation in a jurisdiction other than
New York, amending its certificate of incorporation or through any
Organic Change (as defined below), issuance or sale of securities
or any other voluntary action) avoid or seek to avoid the
observance or performance of any of terms of this Warrant or impair
or diminish its value (except for any action which ratably affects
all Warrant Shares and shares of Common Stock), but shall at all
times in good faith assist in the carrying out of all such terms of
this Warrant. Without limiting the generality of the foregoing,
the Company shall (a) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its
obligations under this Warrant and (b) not undertake any reverse
stock split, combination, reorganization or other reclassification
of its capital stock which would have the effect of causing a
material portion of the purchase rights represented hereby to
become exercisable for less than one share of Common Stock.
1C. EXERCISE AGREEMENT. Upon any exercise of this
Warrant, the Purchaser shall deliver to the Company an Exercise
Agreement in substantially the form set forth in EXHIBIT I hereto,
except that if the Warrant Shares are not to be issued in the name
of the Registered Holder, the Exercise Agreement shall also state
the name of the Person to whom the certificates for the Warrant
Shares are to be issued, and if the number of Warrant Shares to be
issued does not include all of the Warrant Shares purchasable
hereunder, it shall also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to
be issued.
SECTION 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF
SHARES. In order to prevent dilution of the rights granted under
this Warrant, the Initial Exercise Price shall be subject to
adjustment from time to time as provided in this Section 2 (as so
adjusted, the "EXERCISE PRICE"), and the number of Warrant Shares
obtainable upon exercise of this Warrant shall be subject to
adjustment from time to time, each as provided in this Section 2.
2A. If and whenever on or after the Date of Issuance the
Company issues or sells, or in accordance with Section 2C is deemed
to have issued or sold, any shares of Common Stock for a
consideration per share less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then
immediately upon such issue or sale or deemed issue or sale the
Exercise Price shall be reduced to the Exercise Price determined by
dividing (i) the sum of (1) the product derived by multiplying the
-5-
<PAGE>
Exercise Price in effect immediately prior to such issue or sale by
the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any,
received by the Company upon such issue or sale, by (ii) the number
of shares of Common Stock Deemed Outstanding immediately after such
issue or sale.
2B. Notwithstanding the foregoing, there shall be no
adjustment in the Exercise Price as a result of any issue or sale
(or deemed issue or sale) of (i) shares of Common Stock upon
conversion of the Preferred Stock in accordance with the terms
thereof as in effect as of the Date of Issuance, (ii) shares of
Common Stock pursuant to exercise of stock options, warrants and
other rights to acquire Common Stock described in Schedule 4.3 to
the Securities Purchase Agreement (as such number of shares is
proportionately adjusted for subsequent stock splits, combinations
of shares and stock dividends affecting the Common Stock), in each
case pursuant to the terms thereof as in effect on the date of the
Securities Purchase Agreement or as such terms may thereafter be
adjusted as described in Schedule 4.3 thereto, (iii) shares of
Common Stock upon exercise of stock options granted to employees
and directors of the Company and its Subsidiaries pursuant to the
terms of stock option plans and stock ownership plans approved by
the Company's Board of Directors, and (iv) shares of Common Stock
as consideration for the acquisition of any interest in any
business or company from a Person other than an Affiliate (A) which
acquisition is not prohibited pursuant to the Securities Purchase
Agreement, and (B) so long as the Fair Market Value of one Warrant
Share as of the closing of such acquisition exceeds $4.50 per share
(as such price is proportionately adjusted for subsequent stock
splits, combinations of shares and stock dividends affecting the
Warrant Shares) and so long as the Fair Market Value of one Warrant
Share has not at any time from the Date of Issuance through such
time been equal to greater than $5.25 per share (as so adjusted).
2C. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Exercise Price under Section
2B, the following shall be applicable:
(1) ISSUANCE OF RIGHTS OR OPTIONS. If the Company
in any manner grants or sells any Options and the price per share
for which Common Stock is issuable upon the exercise of such
Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the
Exercise Price in effect immediately prior to the time of the
granting or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
-6-
<PAGE>
Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold
by the Company at the time of the granting or sale of such Options
for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting or sale
of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such
Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the Exercise
Price shall be made when Convertible Securities are actually issued
upon the exercise of such Options or when Common Stock is actually
issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(2) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities
and the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than the Exercise Price in
effect immediately prior to the time of such issue or sale, then
the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable"
shall be determined by dividing (i) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities. No further adjustment of the
Exercise Price shall be made when Common Stock is actually issued
upon the conversion or exchange of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Exercise
Price had been or are to be made pursuant to other provisions of
this Section 2, no further adjustment of the Exercise Price shall
be made by reason of such issue or sale.
-7-
<PAGE>
(3) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of
such change shall be immediately adjusted to the Exercise Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 2C, if the terms of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of this Warrant are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued
as of the date of such change; provided that no such change shall
at any time cause the Exercise Price hereunder to be increased.
(4) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Exercise Price then in effect hereunder shall be adjusted
immediately to the Exercise Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued. For purposes
of this Section 2C, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Date of
Issuance shall not cause the Exercise Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms
of such Option or Convertible Security caused it to be deemed to
have been issued after the Date of Issuance.
(5) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the
Company therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Fair Market
Value thereof as of the date of receipt. If any Common Stock,
-8-
<PAGE>
Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving Company, the amount of consideration
therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Option or Convertible Security,
as the case may be. The fair value of any consideration other than
cash and securities shall be determined jointly by the Company and
the holders of a majority of the outstanding Warrants. If such
parties are unable to reach agreement within a reasonable period of
time, the fair value of such consideration shall be determined by
an independent appraiser experienced in valuing such type of
consideration jointly selected by the Company and the holders of a
majority of the outstanding Warrants. The determination of such
appraiser shall be final and binding upon the parties, and the fees
and expenses of such appraiser shall be borne by the Company.
(6) INTEGRATED TRANSACTIONS. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by the
parties thereto, the Option shall be deemed to have been issued for
a consideration of $.01.
(7) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(8) RECORD DATE. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
2D. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time
combines (by reverse stock split or otherwise) one or more classes
-9-
<PAGE>
of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased.
2E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction in
each case which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic
Change". Prior to the consummation of any Organic Change, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of a majority of the
Warrants) to ensure that each Registered Holder of Warrant(s) shall
thereafter have the right to acquire and receive upon exercise
thereof, in lieu of or addition to (as the case may be) the Warrant
Shares immediately theretofore acquirable and receivable upon
exercise of such Registered Holder's Warrant(s), such shares of
stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had exercised
its Warrants immediately prior to such Organic Change. In each
such case, the Company shall also make appropriate provision (in
form and substance satisfactory to the Registered Holders of a
majority of the Warrants then outstanding) to insure that the
provisions of this Section 2 and Section 5 hereof shall thereafter
be applicable to the Warrants (including, in the case of any such
Organic Change in which the successor entity or purchasing entity
is other than the Company, an immediate adjustment of the Exercise
Price to the value for the Common Stock reflected by the terms of
such Organic Change and a corresponding immediate adjustment in the
number of Warrant Shares acquirable and receivable upon exercise of
the Warrants, if the value so reflected is less than the Fair
Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such
Organic Change unless, prior to the consummation thereof, the
successor entity (if other than the Company) resulting from such
Organic Change assumes by written instrument (in form and substance
reasonably satisfactory to the Registered Holders of a majority of
the Warrants then outstanding) the obligation to deliver to each
Registered Holder of Warrant(s) such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such
Registered Holder may be entitled to acquire.
2F. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions (including, without limitation, the
-10-
<PAGE>
granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Company's Board of
Directors shall make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares obtainable upon exercise of
this Warrant so as to protect the rights of the Registered Holder
of this Warrant; provided that no adjustment shall be made for
stock appreciation rights and phantom stock rights granted to
employees pursuant to employee benefit plans approved by the
Company's Board of Directors; and provided further that no such
adjustment shall increase the Exercise Price as otherwise
determined pursuant to this Section 2 or decrease the number of
Warrant Shares issuable upon conversion of any Warrant.
2G. NOTICES.
(i) Promptly after any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Registered
Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least 20 days prior to the date on which any
Organic Change shall take place.
(iii) The Company shall also give written notice to the
Registered Holder at least 20 days prior to the date on which any
Organic Change, dissolution or liquidation shall take place.
SECTION 3. LIQUIDATING DIVIDENDS. If the Company
declares or pays a dividend upon the Common Stock payable otherwise
than in cash out of earnings or earned surplus (determined in accordance
with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a
"LIQUIDATING DIVIDEND"), then the Company shall pay to the
Registered Holder of this Warrant at the time of payment
thereof the Liquidating Dividend which would have been paid to such
Registered Holder on the Warrant Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken
for such Liquidating Dividend, or, if no record is taken, the date
as of which the record holders of Common Stock entitled to such
dividends are to be determined.
SECTION 4. PURCHASE RIGHTS. If at any time the
Company grants, issues or sells any Options, Convertible Securities
or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then each holder of Warrants shall be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if
-11-
<PAGE>
such holder had held the number of Warrant Shares acquirable upon
conversion of such holder's Warrants immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
SECTION 5. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY.
This Warrant shall not entitle the Registered Holder hereof
to any voting rights or other rights as a stockholder of the
Company. No provision hereof, in the absence of affirmative action
by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered
Holder shall give rise to any liability of such Registered Holder
for the Exercise Price of Warrant Shares acquirable by exercise
hereof or as a stockholder of the Company.
SECTION 6. TRANSFERABILITY. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant
and all rights hereunder are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this
Warrant with a properly executed Assignment (in the form of EXHIBIT
II hereto) at the principal office of the Company.
SECTION 7. WARRANT EXCHANGEABLE FOR DIFFERENT
DENOMINATIONS. This Warrant is exchangeable, upon the surrender
hereof by the Registered Holder at the principal office of the
Company, for new Warrants of like tenor representing in the
aggregate the purchase rights hereunder, and each of such new
Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender.
At the request of the Registered Holder (pursuant to a transfer of
Warrants or otherwise), this Warrant may be exchanged for one or
more Warrants to purchase Common Stock. The date the Company
initially issues Warrants pursuant to the Securities Purchase
Agreement shall be deemed to be the "DATE OF ISSUANCE" regardless
of the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall
be issued. All Warrants representing portions of the rights
hereunder are referred to herein as the "WARRANTS."
SECTION 8. DEFINITIONS. The following terms have the
meanings set forth below:
"AFFILIATE" means with respect to any Person, any other
Person directly or indirectly controlling or controlled by or is
under direct or indirect control with such specified Person.
"AMENDED CERTIFICATE OF INCORPORATION" means the
Company's Amended Certificate of Incorporation filed with the
Secretary of the State of New York on July __, 1995.
-12-
<PAGE>
"COMMON STOCK" means the Company's Common Stock, $.01 par
value per share, or any securities into which such Common Stock is
hereafter converted or exchanged.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given
time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 2C(1) and 2C(2) hereof.
"CONVERTIBLE SECURITIES" means any stock or securities
directly or indirectly convertible into or exchangeable for Common
Stock, other than any such securities referred to in Section 2B
above.
"FAIR MARKET VALUE" of any security means the average of
the closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed or as
reported on the NASDAQ National Market, or, if there has been no
sales on any such exchange or reported on the NASDAQ National
Market on any day, the average of the highest bid and lowest asked
prices on all such exchanges or reported at the end of such day,
or, if on any day such security is not so listed or included in the
NASDAQ National Market, the average of the representative bid and
asked prices quoted in the NASDAQ Stock Market as of 4:00 P.M., New
York time, or, if on any day such security is not quoted in the
NASDAQ Stock Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of 21 days consisting of the day as of which "Fair Market
Value" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ National Market,
the NASDAQ Stock Market or the over-the-counter market, the "Fair
Market Value" shall be the fair value thereof determined jointly by
the Company and the Registered Holders of a majority of the
Warrants. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by
an independent appraiser experienced in valuing securities jointly
selected by the Company and the Registered Holders of a majority of
the Warrants. The determination of such appraiser shall be final
and binding upon the parties, and the Company shall pay the fees
and expenses of such appraiser.
"OPTIONAL REDEMPTION" means a redemption of all or any
portion of the Subject Shares pursuant to Section D2 of the Amended
Certificate of Incorporation.
"OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities
other than rights, warrants or options referred to in Section 2B
above.
-13-
<PAGE>
"PERSON" means an individual, a partnership (including a
limited partnership), a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED STOCK" means the Cumulative Convertible
Preferred Stock issued pursuant to the Securities Purchase
Agreement.
"REDEEMED SHARES" means the aggregate number of Subject
Shares redeemed by the Company pursuant to any Optional Redemption.
"REDEMPTION DATE" and "SCHEDULED REDEMPTION DATE" shall
have the meanings set forth in the terms of the Convertible
Preferred Stock in the Amended Certificate of Incorporation.
"REGISTERED HOLDER" means the holder of this Warrant as
reflected in the records of the Company maintained pursuant to
Section 13.
"WARRANT SHARES" means shares of the Company's Common
Stock issuable upon exercise of the Warrant; PROVIDED, that if the
securities issuable upon exercise of the Warrants are issued by an
entity other than the Company or there is a change in the class of
securities so issuable, then the term "Warrant Shares" shall mean
shares of the security issuable upon exercise of the Warrants if
such security is issuable in shares, or shall mean the equivalent
units in which such security is issuable if such security is not
issuable in shares.
SECTION 9. REPLACEMENT. Upon receipt of evidence
reasonably satisfactory to the Company (an affidavit of the
Registered Holder shall be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to
the Company (provided that if the Registered Holder is a financial
institution or other institutional investor its own agreement shall
be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense)
execute and deliver in lieu of such certificate a new certificate
of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate.
SECTION 10. NOTICES. Except as otherwise expressly
provided herein, all notices referred to herein shall be in writing
and shall be delivered by registered or certified mail, return
receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Company, at its principal executive
offices and (ii) to a Registered Holder, at such Registered
-14-
<PAGE>
Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. AMENDMENT AND WAIVER. No amendment,
modification or waiver will be binding or effective with respect to
any provision of this Warrant without the prior written consent of
the Registered Holders of the Warrants then outstanding.
SECTION 12. WARRANT REGISTER. The Company shall
maintain at its principal executive offices a register for the
registration of transfer of Warrants. Upon the surrender of any
certificate representing Warrants at such place, the Company will,
at the request of the record holder of such certificate, execute
and deliver (at the Company's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the
number of Warrant Shares represented by the surrendered
certificate. Each such new certificate will be registered in such
name and will represent such number of Warrant Shares as is
requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate.
SECTION 13. FRACTIONS OF SHARES. If any fractional
interest in a Warrant Share would, except for the provisions of
this subparagraph, be delivered upon any exercise of the Warrant,
at the request of the Registered Holder the Company, in lieu of
delivering the fractional share therefor, shall pay an amount to
the Registered Holder thereof equal to the Fair Market Value of
such fractional interest as of the date of exercise.
SECTION 14. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a
part of this Warrant. THE CONSTRUCTION, VALIDITY AND INTERPRETATION
OF THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
* * * * *
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
to be signed and attested by its duly authorized officers under its
corporate seal and to be dated as of the date hereof.
PEOPLES TELEPHONE COMPANY, INC.
By: _________________________
Name:
Title:
Attest:
____________________________
Assistant Secretary
-16-
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in
the attached Warrant (Certificate No. W-____), hereby agrees to
subscribe for the purchase of ______ Warrant Shares covered by such
Warrant and makes payment herewith in full therefor at the price
per share provided by such Warrant.
Signature ____________________
Address ______________________
-17-
<PAGE>
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns and transfers all of the rights of the undersigned
under the attached Warrant (Certificate No. W-_____) with respect
to the number of the Warrant Shares covered thereby set forth
below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature _______________________
_______________________
Witness _______________________
-18-
PRESS RELEASE
PEOPLES TELEPHONE COMPANY, INC.
2300 N.W. 89TH PLACE
MIAMI, FLORIDA 33172
(305) 593-9667
FOR IMMEDIATE RELEASE
Contact: Robert D. Rubin, President, or
Bonnie Biumi, Chief Financial Officer
(305) 593-9667, ext. 131 or 232
Alexandra Magnuson
Edelman Financial
(212) 704-8172
PEOPLES TELEPHONE COMPANY, INC. ANNOUNCES
PROPOSED PREFERRED EQUITY INVESTMENT BY
UBS CAPITAL CORP.
MIAMI, FL, July 5, 1995 -- PEOPLES TELEPHONE COMPANY, INC. (NASDAQ:PTEL)
announced today that it has entered into an agreement with UBS Capital
Corporation to sell 150,000 shares of the Company's Cumulative Convertible
Preferred Stock for a total investment of $15 million. The Cumulative
Preferred Stock will cumulate dividends at an annual rate of 7% (subject
to increase under certain circumstances), which will be payable in
cash or, at the Company's option during the first three years after issuance,
continue to cumulate. The Cumulative Stock will initially be convertible,
at the option of the holders, into 2,857,143 shares of Common Stock of the
Company at an exercise price of $5.25 per share, subject to certain
antidilution adjustments. In addition, the Cumulative Preferred Stock
will be subject to mandatory redemption ten years after issuance and, in the
event of a change in control, to redemption, at the option of the holders,
at its liquidation preference plus accrued and unpaid dividends. The
investment is subject to various conditions, including the completion of the
Company's previously announced private placement of Senior Notes and is
expected to close simultaneously with such financing.
Pursuant to the terms of the Cumulative Preferred Stock, subject to
certain minimum share ownership requirements, the initial holders of the
Cumulative Preferred Stock shall be entitled to elect an aggregate of two
members of the six member Board of Directors of the Company.
- more -
<PAGE>
-2-
In connection with the transaction, the Company has agreed to certain
affirmative and negative covenants with respect to conduct of the business,
among other matters. In particular, absent approval of 75% of the members of
the Board of Directors of the Company, the Company will be restricted from
entering into a number of transactions outside of the ordinary course of
business (including certain acquisitions and dispositions of assets).
Mr. Jeffrey Hanft, Chairman and Chief Executive Officer of the Company,
said: "The Company welcomes this infusion of equity by UBS Capital and the
benefit of their expertise and participation on the Board of Directors."
UBS Capital Corporation is a wholly-owned merchant banking subsidiary
of UBS Securities which is a wholly-owned subsidiary of Union Bank of
Switzerland.
Peoples Telephone Company, the nation's largest independent provider of
public pay telephone services, owns and operates in excess of 40,000 public
pay telephones in 41 states.
-30-
