__________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 31, 1995
Date of Report (Date of earliest event reported)
SA TELECOMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-18048 75-2258519
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1912 Avenue K, Suite 100
Plano, Texas 75074
(Address of Principal Executive Offices) (Zip Code)
(214) 516-0662
(Registrant's Telephone Number, Including Area Code)
SA HOLDINGS, INC.
(Former Name or Former Address, if Changed Since Last Report)
__________________________________________________________________
<PAGE>
ITEM 2. Acquisition or Disposition of Assets.
On July 31, 1995, SA Holdings, Inc., a Delaware corporation
("STEL") consummated the acquisition of 100% of the outstanding
capital stock (the "USC Stock") of U.S. Communications, Inc., a
Texas corporation ("USC"), pursuant to the terms of that amended
Stock Purchase Agreement (the "Stock Purchase Agreement") by and
among STEL, USC, Howard Maddera, Bill L. Johnson, Marianne Reed and
NTS Communications, Inc., the shareholders of USC (collectively,
the "Shareholders"). USC is an interexchange long distance carrier
headquartered in Levelland, Texas.
The aggregate purchase price paid by STEL for the USC Stock
(the "Purchase Price") was $9.6 million paid (i) $4.1 million in
cash, (ii) $2.75 million in notes bearing 8% interest per annum
(the "Purchase Notes"), (iii) $1.5 million in a separate group of
notes also bearing interest at 8% per annum (the "Offset Notes")
and (iv) 125,000 shares of the Series B Cumulative Convertible
Preferred Stock of STEL (the "Series B Preferred Stock"). Certain
of the Shareholders were also issued a warrant, granting the
holders thereof, the right to acquire up to an aggregate of
1,050,000 shares of the Registrant's Common Stock for an exercise
price of $1.25 per share. A form of the Note, Preferred Stock &
Warrant Purchase Agreement dated July 31, 1995 between the
Registrant and the purchasers thereof is attached as an exhibit
hereto and incorporated herein by reference. The Shareholders also
received an aggregate of $2.4 million in nonsolicitation and
noncompetition fees in connection with the terms of the Stock
Purchase Agreement. The terms of the Stock Purchase Agreement were
determined by arms length negotiations between the parties.
In order to satisfy claims by STEL of any breach or
nonperformance of representation, warranty, covenant or other
obligation of the Shareholders contained in the Stock Purchase
Agreement, the parties placed $300,000 of the cash portion of the
Purchase Price in escrow with American State Bank. Additionally,
STEL has the right to offset the amounts payable under the Offset
Notes for any event which it is entitled to indemnification under
the Stock Purchase Agreement.
In order to fund the cash portion of the Purchase Price, STEL
borrowed an aggregate of $7.0 million from Norwest Bank Minnesota,
N.A. ("Norwest") pursuant to that Term Credit Agreement dated July
31, 1995 between Norwest and the Registrant. Additionally, the
Registrant privately placed 166,667 shares of its Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock") with Jesup & Lamont Securities Corporation ("Jesup &
Lamont") for $1.5 million, pursuant to that Share Purchase
Agreement, dated July 31, 1995 between the Registrant and Jesup &
Lamont (the "Share Purchase Agreement"). In connection with the
placement of the Series A Preferred Stock, Jesup & Lamont was also
granted a warrant to purchase up to 500,000 shares of the
Registrant's Common Stock for an exercise price of $1.125 per
share, pursuant to that Warrant Purchase Agreement dated July 31,
1995 between the Registrant and Jesup & Lamont (the "Warrant
Purchase Agreement"). The Share Purchase Agreement and the Warrant
Purchase Agreement are each attached as exhibits hereto and are
incorporated individually herein by reference.
<PAGE>
The preferences and relative, participating, optional and
other rights of the Series A Preferred Stock and the Series B
Preferred Stock and the qualifications, limitations and
restrictions appertaining thereto are set forth in the respective
Certificate of Designations, Preferences and Rights attached as
exhibits hereto and incorporated herein by reference.
Prior to the consummation of the transactions contemplated by
the Stock Purchase Agreement, no material relationship existed
between STEL, any officer, director or affiliate of STEL or any
associate of any such officer or director and USC or the
Shareholders. Pursuant to the terms of an Employment Agreement
dated July 31, 1995, Bill L. Johnson has been retained by USC to
act as Vice President for an initial term expiring July 31, 1997.
ITEM 5. Other Events.
On July 24, 1995, the Shareholders of STEL approved an
amendment to the Certificate of Incorporation of STEL changing the
name thereof to SA Telecommunications, Inc. The Certificate of
Amendment to the Certificate of Incorporation affecting this change
was filed with the Secretary of State of the State of Delaware on
August 3, 1995.
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide the financial statements
of the business acquired and described in Item 2 above at this
time. The Registrant intends to prepare the required
financial statements and file same under cover of Form 8-K/A
as soon as practicable, but no later than October 13, 1995.
(b) Pro-Forma Financial Information.
It is impracticable to provide the pro-forma financial
information required pursuant to Article 11 of Regulation S-X
with respect to the transactions described in Item 2 above at
this time. The Registrant intends to prepare the required
pro-forma financial statements and file same under cover of
Form 8-K/A as soon as practicable, but not later than October
13, 1995.
<PAGE>
(c) Exhibits.
Exhibit No. Document Description
2.1* Stock Purchase Agreement, dated
as of June 30, 1995, between SA
Holdings, Inc., U.S.
Communications, Inc. and the
Shareholders thereof (the
"Stock Purchase Agreement")
2.2* Supplemental Agreement to the
Stock Purchase Agreement, dated
July 31, 1995
4.1* Certificate of Designations,
Preferences and Rights of
Series A Cumulative Convertible
Preferred Stock
4.2** Share Purchase Agreement, dated
July 31, 1995, between SA
Holdings, Inc. and Jesup &
Lamont Securities Corporation
4.3* Form of Series A Preferred
Stock Certificate
4.4* Warrant Purchase Agreement,
dated July 31, 1995, between SA
Holdings, Inc. and Jesup &
Lamont Securities Corporation
4.5* Common Stock Purchase Warrant
Certificate issued to Jesup &
Lamont Securities Corporation
4.6* Certificate of Designations,
Preferences and Rights of
Series B Cumulative Convertible
Preferred Stock
4.7* Form of Purchase Note, issued
by SA Holdings, Inc. and
schedule of differences thereto
pursuant to General Instruction
2 to Item 601
4.8* Form of Offset Note, issued by
SA Holdings, Inc. and schedule
of differences thereto pursuant
to General Instruction 2 to
Item 601
4.9** Form of Note, Preferred Stock &
Warrant Purchase Agreement,
dated as of July 31, 1995
between SA Holdings, Inc. and
the purchasers thereof
4.10* Form of Series B Preferred
Stock Certificate
4.11* Form of Common Stock Purchase
Warrant Certificate issued to
purchasers thereof
4.12** Term Credit Agreement dated
July 31, 1995 between SA
Holdings, Inc. and Norwest
Bank-Minnesota, N.A. and
related Security Agreement and
Promissory Note
20.1* SA Holdings, Inc. press release
dated August 1, 1995
23.1** Consent of Auditors
_______________
* Filed herewith
** To be filed by amendment
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
SA TELECOMMUNICATIONS, INC.
Date: August 14, 1995 By:
J. David Darnell
Vice President-Finance and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION
2.1* Stock Purchase Agreement, dated
June 30, 1995, between SA Holdings,
Inc., U.S. Communications, Inc. and
the Shareholders thereof (the
"Stock Purchase Agreement")
2.2* Supplemental Agreement to the Stock
Purchase Agreement, dated July 31,
1995
4.1* Certificate of Designations, Preferences
and Rights of Series A Cumulative
Convertible Preferred Stock
4.2** Share Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and
Jesup & Lamont Securities Corporation
4.3* Form of Series A Preferred Stock Certificate
4.4* Warrant Purchase Agreement, dated July 31,
1995, between SA Holdings, Inc. and
Jesup & Lamont Securities Corporation
4.5* Common Stock Purchase Warrant Certificate
issued to Jesup & Lamont Securities
Corporation
4.6* Certificate of Designations, Preferences
and Rights of Series B Cumulative
Convertible Preferred Stock
4.7* Form of Purchase Note, issued by SA
Holdings, Inc. and schedule of differences
thereto pursuant to General Instruction 2
to Item 601
4.8* Form of Offset Note, issued by SA Holdings,
Inc. and schedule of differences thereto
pursuant to General Instruction 2 to Item 601
4.9** Form of Note, Preferred Stock & Warrant
Purchase Agreement, dated as of July 31,
1995 between SA Holdings, Inc. and the
purchasers thereof
4.10* Form of Series B Preferred Stock Certificate
4.11* Form of Common Stock Purchase Warrant
Certificate issued to purchasers thereof
4.12** Term Credit Agreement dated July 31, 1995
between SA Holdings, Inc. and Norwest Bank
Minnesota, N.A. and related Security
Agreement and Promissory Note
20.1* SA Holdings, Inc. press release dated
August 1, 1995
23.1** Consent of Auditors
_______________
* Filed herewith
** To be filed by amendment
BY AND AMONG
SA HOLDINGS, INC.,
U. S. COMMUNICATIONS, INC.
BILL L. JOHNSON,
HOWARD MADDERA,
MARIANNE REED AND
NTS COMMUNICATIONS, INC.,
Dated as of June 30, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. GENERAL . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . 1
Section 1.2 Previous Agreement . . . . . . . . . . . . 4
Section 1.3 Agreement to Sell. . . . . . . . . . . . . 4
Section 1.4 Purchase Price . . . . . . . . . . . . . . 4
Section 1.5 Closing Deliveries . . . . . . . . . . . . 4
Section 1.6 Escrow . . . . . . . . . . . . . . . . . . 5
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS . . . . . . . . . . . . . . 6
Section 2.1 Organization; Qualification. . . . . . . . 7
Section 2.2 Authority Relative to this Agreement . . . 7
Section 2.3 Capitalization . . . . . . . . . . . . . . 7
Section 2.4 Subsidiaries . . . . . . . . . . . . . . . 7
Section 2.5 Governmental Consents and Approvals. . . . 8
Section 2.6 No Violations. . . . . . . . . . . . . . . 8
Section 2.7 Financial Statements, Etc. . . . . . . . . 9
Section 2.8 Title to and Condition of Assets and
Property . . . . . . . . . . . . . . . . . 10
Section 2.9 Litigation . . . . . . . . . . . . . . . . 11
Section 2.10 Absence of Changes . . . . . . . . . . . . 11
Section 2.11 Undisclosed Liabilities; Commitments . . . 12
Section 2.12 Environmental Matters. . . . . . . . . . . 12
Section 2.13 Pension Matters. . . . . . . . . . . . . . 13
Section 2.14 Labor Matters. . . . . . . . . . . . . . . 14
Section 2.15 Taxes. . . . . . . . . . . . . . . . . . . 15
Section 2.16 Inventory. . . . . . . . . . . . . . . . . 16
Section 2.17 Proprietary Rights . . . . . . . . . . . . 16
Section 2.18 Surety Obligations . . . . . . . . . . . . 16
Section 2.19 No Brokers . . . . . . . . . . . . . . . . 16
Section 2.20 Records. . . . . . . . . . . . . . . . . . 17
Section 2.21 Compliance With Law; Conduct . . . . . . . 17
Section 2.22 Regulatory Compliance. . . . . . . . . . . 17
Section 2.23 Investment Company Act; Etc. . . . . . . . 17
Section 2.24 Public Utility Holding Company Act . . . . 17
Section 2.25 Insurance. . . . . . . . . . . . . . . . . 17
Section 2.26 Instruments in Full Force and Effect;
Possession under Leases. . . . . . . . . . 18
Section 2.27 Receivables. . . . . . . . . . . . . . . . 18
Section 2.28 Accounts Payable . . . . . . . . . . . . . 18
Section 2.29 Items Reflected in the USC Disclosure
Schedule . . . . . . . . . . . . . . . . . 18
Section 2.30 Bank Accounts; Powers of Attorney. . . . . 19
Section 2.31 Product and Service Warranties . . . . . . 19
Section 2.32 Transactions with Affiliates . . . . . . . 19
Section 2.33 Corrupt Practices. . . . . . . . . . . . . 20
Section 2.34 Absence of Bad Debt or Uncollectible
Accounts . . . . . . . . . . . . . . . . . 20
Section 2.35 Investments in Competitors . . . . . . . . 20
Section 2.36 No Default . . . . . . . . . . . . . . . . 20
Section 2.37 Copies of Documents; Accuracy of
Information Furnished. . . . . . . . . . . 20
Section 2.38 Title to Shares. . . . . . . . . . . . . . 21
Section 2.39 Shareholder Authority Relative to this
Agreement. . . . . . . . . . . . . . . . . 21
Section 2.40 Certain Transactions or Arrangements . . . 21
Section 2.41 Disclosure . . . . . . . . . . . . . . . . 22
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SAH . . . . . 22
Section 3.1 Organization; Qualification. . . . . . . . 22
Section 3.2 Authority Relative to this Agreement . . . 23
ARTICLE 4. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 23
Section 4.1 Conduct of Business of USC and its
Subsidiaries . . . . . . . . . . . . . . . 23
Section 4.2 Forbearances by USC and its
Subsidiaries . . . . . . . . . . . . . . . 23
Section 4.3 No Solicitation. . . . . . . . . . . . . . 24
Section 4.4 Investigation of Business and
Properties . . . . . . . . . . . . . . . . 25
Section 4.5 Confidentiality. . . . . . . . . . . . . . 25
Section 4.6 Investigation of Financial Statements. . . 26
Section 4.7 Agreement to Consummate. . . . . . . . . . 26
Section 4.8 Agreement Regarding Brokers. . . . . . . . 26
Section 4.9 Notice . . . . . . . . . . . . . . . . . . 26
Section 4.10 Public Announcements . . . . . . . . . . . 26
Section 4.11 Delivery of USC Disclosure Schedules . . . 26
Section 4.12 NTS Logo and Service Mark. . . . . . . . . 27
ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING . . . . . . . . 27
Section 5.1 General Conditions . . . . . . . . . . . . 27
Section 5.2 Conditions to Closing in Favor of USC. . . 27
Section 5.3 Conditions to Closing in Favor of SAH. . . 28
ARTICLE 6. CLOSING DATE AND TERMINATION OF AGREEMENT . . . 31
Section 6.1 Closing Date . . . . . . . . . . . . . . . 31
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER . . . . . . . 32
Section 7.1 Termination. . . . . . . . . . . . . . . . 32
Section 7.2 Effect of Termination. . . . . . . . . . . 32
Section 7.3 Amendment. . . . . . . . . . . . . . . . . 32
Section 7.4 Extension; Waiver. . . . . . . . . . . . . 32
ARTICLE 8. INDEMNIFICATION . . . . . . . . . . . . . . . . 33
Section 8.1 Indemnity. . . . . . . . . . . . . . . . . 33
Section 8.2 Indemnification if Negligence of
Indemnitee . . . . . . . . . . . . . . . . 34
Section 8.3 No Third Party Beneficiaries . . . . . . . 34
Section 8.4 Remedies of SAH. . . . . . . . . . . . . . 34
ARTICLE 9. GENERAL PROVISIONS AND OTHER AGREEMENTS . . . . 35
Section 9.1 Notices. . . . . . . . . . . . . . . . . . 35
Section 9.2 Fees and Expenses. . . . . . . . . . . . . 36
Section 9.3 Interpretation . . . . . . . . . . . . . . 36
Section 9.4 Counterparts . . . . . . . . . . . . . . . 36
Section 9.5 Miscellaneous. . . . . . . . . . . . . . . 37
Section 9.6 Survival . . . . . . . . . . . . . . . . . 37
Section 9.7 Inducement of Clients. . . . . . . . . . . 37
Section 9.8 Independent Obligations of Shareholders. . 37
LIST OF EXHIBITS
Exhibit 5.1(d)(1) Form of Employment Agreement
Exhibit 5.1(d)(2) Form of Nonsolicitation Agreement -
Johnson
Exhibit 5.1(d)(3) Form of Nonsolicitation Agreement -
Maddera
Exhibit 5.1(d)(4) Form of Nonsolicitation Agreement - Reed
Exhibit 5.1(d)(5) Form of Nonsolicitation Agreement - NTS
Exhibit 5.3(b) Opinion of Counsel for USC and
Shareholders
Exhibit 5.3(p) NTS Side Letter Agreement
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made as of June
30, 1995, by and between SA HOLDINGS, INC., a Delaware corporation
("SAH" or "Purchaser"), U. S. COMMUNICATIONS, INC., a Texas
corporation ("USC"), and BILL L. JOHNSON, HOWARD MADDERA, MARIANNE
REED, and NTS COMMUNICATIONS, INC. ("NTS"), the holders of an
aggregate of 100% of the outstanding shares of capital stock of USC
(individually a "Shareholder" and collectively the "Shareholders").
RECITALS OF THE PARTIES:
WHEREAS, pursuant to that Stock Purchase Agreement dated as of
October 6, 1994 by and between the parties hereto, as subsequently
amended (the "Previous Agreement"), the Shareholders contracted to
sell and SAH contracted to buy, all of the outstanding shares of
capital stock of USC; and
WHEREAS, the parties hereto desire to terminate the Previous
Agreement and restate their agreement, in its entirety, relating to
the sale and purchase of USC; and
WHEREAS, SAH continues to desire to purchase all of the
outstanding shares of capital stock of USC in accordance with the
terms hereof; and
WHEREAS, the Shareholders continue to desire to sell all of
such shares of capital stock to SAH in accordance with the terms
hereof.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the representations and warranties, conditions and
promises herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
AGREEMENTS:
ARTICLE 1. GENERAL
Section 1.1 Definitions. Unless otherwise stated in this
Agreement, the following terms shall have the following meanings
(the following definitions to be equally applicable to both the
singular and plural forms of any of the terms herein defined):
"Affiliate": Any Person that, directly or indirectly,
controls, or is controlled by or under common control with, another
Person. For the purposes of this definition, "control" (including
the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the power to direct or cause the
direction of the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities
or by contract or otherwise.
"Arbitration": A proceeding brought pursuant to Section
1.5(c) hereof which, in accordance with the rules in effect of the
American Arbitration Association, settles disputes concerning the
Escrow Funds.
"Business": Means the business of USC and its Subsidiaries as
conducted in the normal course prior to the date hereof.
"Code": The Internal Revenue Code of 1986, as amended.
"Common Stock": The common stock, par value $10.00 per share
of USC.
"Customer Data": All of USC's customer lists, lists of
potential customers, sales records and other customer data
(including credit data) relating to the Business of USC.
"Debt": All obligations for borrowed money.
"Employment Agreement": The Employment Agreement in the form
of Exhibit 5.1(d)(1) hereto.
"ERISA": Employee Retirement Income Security Act of 1974, as
amended.
"Governmental Body": Any court or any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, authority or instrumentality, domestic or foreign.
"Lien": All mortgages, deeds of trust, claims, liens,
security interests, pledges, conditional sale contracts, claims,
rights of first refusal, options, charges, liabilities,
obligations, agreements, privileges, liberties, easements,
rights-of-way, powers of attorney, limitations, reservations,
restrictions and other encumbrances of any kind.
"Material Adverse Effect": Any (a) change, development or
effect (individually or in the aggregate) in the general affairs,
management, business, goodwill, results of operations, condition
(financial or otherwise), assets, liabilities or prospects (whether
or not the result thereof would be covered by insurance) that would
be material and adverse to USC and its Subsidiaries (or such other
parties as the context requires), or (b) fact or development that
would (individually or in the aggregate), after giving effect to
the Transactions, impair USC's or its Subsidiaries' (or such other
parties, as the context requires) ability or obligations to perform
on a timely basis any material obligations it has under this
Agreement.
"Nonsolicitation Agreements": The Nonsolicitation Agreements
each in the form of Exhibits 5.1(d)(2), 5.1(d)(3), 5.1(d)(4) and
5.1(d)(5) hereto, to be executed by each of the Shareholders at the
Closing.
"NTS Side Letter Agreement": The Side Letter Agreement by and
among NTS, USC and Purchaser, dated June 30, 1995 and attached
hereto as Exhibit 5.3(p) hereto.
"Operative Documents": This Agreement, the Employment
Agreement, the Nonsolicitation Agreements and all other agreements,
instruments, documents, and certificates executed and delivered by
or on behalf of USC, the Shareholders or Purchaser at or before the
Closing pursuant to this Agreement.
"Order": Any order, writ, injunction, decree, judgment, award
or determination of any Governmental Body.
"Permits": All permits, authorizations, certificates,
approvals, registrations, variances, exemptions, rights-of-way,
franchises, privileges, immunities, grants, ordinances, licenses
and other rights of every kind and character (a) under any (1)
federal, state, local or foreign statute, ordinance or regulation,
(2) Order or (3) contract with any Governmental Body or (b) granted
by any Governmental Body.
"Permitted Encumbrances": (a) Liens for Taxes and assessments
not yet due and payable; (b) such Liens, minor imperfections of
title and easements on real property, which do not in any material
respect detract from the value of such real property and do not
interfere with the present use of the property and (c) all matters
of public record filed (1) in the County Clerk's office of that
county in Texas where USC has its principal place of business or
(2) with the Secretary of State of the State of Texas which, in any
event, do not materially interfere with the use or disposition of
the property.
"Person": An individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization or
Governmental Body.
"Previous Agreement": As defined in the preambles hereto.
"Products": All products manufactured, produced, licensed,
marketed or distributed by USC and its Subsidiaries.
"Real Property": The real property owned by USC or any of its
Subsidiaries.
"USC Schedules", "USC Disclosure Schedule" or "Schedules":
The schedules to this Agreement delivered by the Shareholders
and/or USC to Purchaser pursuant to Section 4.11 hereof which are
approved by Purchaser (with reservation of all rights with respect
thereto) and incorporated by reference to the Section of this
Agreement to which each such schedule relates.
"Sellers": USC and the Shareholders, collectively.
"Stock": As defined in Section 1.3 hereof.
"Subsidiary" or "Subsidiaries" with respect to any corporation
shall mean any other corporation of which at least a majority of
the securities having by their terms ordinary voting power to elect
a majority of the Board of Directors of such other corporation is
at the time directly or indirectly owned or controlled by such
first corporation, or by such first corporation and one or more of
its Subsidiaries.
"Supplier Data": All of USC's and its Subsidiaries' supplier
lists and publications of potential suppliers, transmission
carriers, switched service providers and other supplier data
relating to the purchase of raw materials, utilities and other
supplies used in connection with the Business.
"Taxes": Any federal, state, local or foreign income, sales,
excise, real or personal property or other taxes, assessments,
fees, levies, imposts, duties, deductions or other charges of any
nature whatsoever (including, without limitation, interest and
penalties) imposed by any law, rule or regulation.
"Tax Obligations": Any Taxes which are attributable or
relating to the assets or the Business of USC and its Subsidiaries
for any periods ending on or before the Closing Date or which may
be applicable because of the transactions contemplated hereby.
"TBCA": The Texas Business Corporation Act.
"Transaction or "Transactions": The acquisition of stock,
performance of covenants, and transactions contemplated hereby in
each case as contemplated by this Agreement.
"U.S.": The United States of America.
Section 1.2 Previous Agreement. The parties hereto
expressly acknowledge, confirm and agree that the Previous
Agreement has been cancelled and terminated and is without any
further force or effect whatsoever.
Section 1.3 Agreement to Sell. Subject to the terms and
conditions of the Operative Documents, at the Closing, the
Shareholders shall sell, transfer and deliver to Purchaser, and
Purchaser shall purchase, all of the outstanding capital stock
("Stock") of USC.
Section 1.4 Purchase Price. The aggregate purchase price
for all of the Stock (the "Purchase Price") shall equal $9,600,000
exclusive of the aggregate consideration to be separately received
pursuant to the terms of the Nonsolicitation Agreements (the
"Nonsolicitation Fee"). The total proceeds to be delivered by SAH
to the Shareholders at the Closing (subject to the escrow
provisions below), consisting of the Purchase Price and the
Nonsolicitation Fee, will in no event exceed $12,000,000.
Section 1.5 Closing Deliveries. Without limiting the
deliveries at the Closing set forth in Article 6 hereof, at the
Closing:
(a) each of the Shareholders shall deliver to Purchaser
(i) certificates representing the Stock, endorsed for transfer
to Purchaser, which shall transfer to Purchaser good title to
the Stock, free and clear of all Liens; and (ii) such other
documents, including officer's certificates, opinions of
counsel and other agreements as may be required by this
Agreement or reasonably requested by Purchaser; and
(b) Purchaser shall deliver to each of the Shareholders
a check equal to the sum of (a) the Per Share Purchase Price
(proportionately reduced for the Escrow Funds [as hereinafter
defined]) for each share of Stock delivered by such
Shareholder and (b) the applicable Nonsolicitation Fee set
forth in such Shareholder's respective Nonsolicitation
Agreement. For purposes hereof, the Per Share Purchase Price
shall mean the quotient obtained by dividing the Purchase
Price (proportionately reduced for the Escrow Funds) by the
number of shares of outstanding Stock.
(c) Purchaser shall deposit the Escrow Funds with the
Escrow Agent pursuant to the terms of Section 1.6 hereof.
Section 1.6 Escrow.
(a) At the Closing, Purchaser shall have deposited with
an independent escrow agent of Purchaser's choosing (the
"Escrow Agent") $1,800,000 (the "Escrow Funds") to satisfy any
claims made by Purchaser in respect of any breach or
nonperformance by any of the Shareholders of any
representation, warranty, covenant or other obligation of any
Shareholder under this Agreement. Six months from the Closing
Date, the Escrow Funds, to the extent such funds have not
otherwise been distributed as provided herein, shall be
reduced to equal $1,200,000 and, on such date, the Escrow
Agent shall distribute to the Shareholders the following
percentages ("Shareholder Percentages") of any such funds over
$1,200,000 which have not been utilized to satisfy a claim as
provided herein:
Shareholder Percent (%)
Bill L. Johnson 33.33
Howard Maddera 33.33
Marianne Reed 16.67
NTS Communications, Inc. 16.67
(b) At any time on or before the first anniversary of
the Closing Date, SAH may give the Escrow Agent written notice
of a claim (a "Notice of Claim") that any one or more of the
Shareholders has breached or nonperformed any one or more of
the representations, warranties, covenants or other
obligations contained in this Agreement and the dollar amount
of the Escrow Funds claimed as a result of SAH's damages
thereof (the "Claimed Amount"). The Escrow Agent shall send
a copy of any Notice of Claim to each of the Shareholders.
Within fifteen (15) days after a Notice of Claim is given by
the Escrow Agent to the Shareholders, the Shareholders (acting
collectively) shall have the right to file with the Escrow
Agent written notice that they intend to contest SAH's claim.
If, within such fifteen (15) day period, the Escrow Agent does
not receive such notice from the Shareholders or receives
notice from the Shareholders that such claim is uncontested,
the Escrow Agent shall deliver to SAH the Claimed Amount. If,
however, within such fifteen (15) day period, the Escrow Agent
shall receive notice from the Shareholders of their intention
to contest SAH's Notice of Claim and the underlying claim with
respect to the Escrow Funds (hereinafter termed a "Contested
Claim"), then the Escrow Agent shall promptly give SAH a copy
of such notice and continue to hold the Claimed Amount until
the earlier of:
(i) receipt of written notice from the Shareholders
consenting to the release of the Claimed Amount to
SAH; or
(ii) receipt of a written final decision of a majority
of the arbitrators directing disposition of the
Claimed Amount after Arbitration; or
(iii) receipt of a certified copy of a final judgment,
unappealed or unappealable, of a court of competent
jurisdiction, or of the agreement of the
Shareholders and SAH, that (A) SAH or (B) the
Shareholders are entitled to all or part of the
Claimed Amount.
Thereupon, the Escrow Agent shall deliver to the proper party the
Claimed Amount in accordance with clause (i), (ii) or (iii) above.
(c) One day after the first anniversary of the Closing
Date, the Escrow Agent shall, to the extent such funds have
not otherwise been distributed as provided herein, distribute
the Escrow Funds to the Shareholders in their respective
Shareholder Percentages.
(d) Any Contested Claim shall be settled by Arbitration
in Dallas, Texas before three arbitrators in accordance with
the rules then in effect of the American Arbitration
Association. The Shareholders (acting collectively) and SAH
shall each, within twenty one (21) days from the date of a
Notice of Claim, designate one arbitrator and such designated
arbitrators shall mutually agree on, and shall designate, a
third arbitrator; provided, however, that, failing such
agreement within thirty (30) days after their appointment, the
third arbitrator shall be named by the American Arbitration
Association. SAH and the Shareholders shall pay the fees and
expenses of their respectively designated arbitrators and
shall bear equally the fees and expenses of the third
arbitrator. The written final decision of the majority of the
arbitrators shall be furnished to SAH, the Shareholders and
the Escrow Agent in writing and shall constitute a conclusive
determination of the Contested Claim in question, binding upon
SAH, the Shareholders and the Escrow Agent and shall not be
contested by any of them.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders, jointly and severally, hereby
represent and warrant to SAH that the following are true and
correct as of the date of this Agreement and will be true and
correct (without limitation) through the Closing and as of that
date, regardless of what investigations, if any, SAH shall have
made prior hereto or prior to the Closing:
Section 2.1 Organization; Qualification. USC is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. USC has full corporate power
and authority to own and lease all of the properties and assets it
now owns and leases and to carry on its business as now being
conducted. USC is duly qualified as a foreign corporation and is
in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except
where the failure so to qualify would not have a Material Adverse
Effect on USC or any Subsidiary. USC has heretofore delivered to
SAH complete and correct copies of its Certificate of Incorporation
and Bylaws and those of its Subsidiaries, as such are currently in
effect. The USC Disclosure Schedule sets forth a true and correct
list of each jurisdiction in which USC is qualified to do business.
Section 2.2 Authority Relative to this Agreement. USC has
full corporate power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by USC and the Shareholders of
this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by the
Board of Directors of USC and no other corporate proceedings on the
part of USC are necessary with respect thereto. This Agreement has
been duly and validly executed and delivered by USC and the
Shareholders, and constitutes a legal, valid and binding obligation
of USC and the Shareholders, enforceable against each of them in
accordance with its terms.
Section 2.3 Capitalization. The authorized capital stock
of USC consists of 100,000 shares of USC Common Stock, of which, as
of the date hereof, 8,250 shares of USC Common Stock are validly
issued and outstanding, fully paid and nonassessable. There are
1500 shares of USC Common Stock held in the treasury of USC. There
are no other options, warrants or other commitments to issue or
sell any shares of capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any
right to acquire from USC, any shares of its capital stock. No
shares of USC's capital stock, including, but not limited to the
USC Common Stock, have been issued in violation of any preemptive
rights or applicable federal or state securities laws. Except as
listed on the USC Disclosure Schedule, there are no restrictions,
including but not limited to self-imposed restrictions, on the
retained earnings of USC or any Subsidiary or on the ability of USC
or any Subsidiary to declare and pay dividends. There are no
outstanding obligations of USC to repurchase, redeem or otherwise
acquire any capital stock or other securities of USC. There are no
stock appreciation rights, equity appreciation plans, stock
valuation plans or similar agreements or arrangements pursuant to
which any Person shall have the right to receive any money or
property with respect to the equity securities, capital structure
or shareholders equity, or any increase in the value of any of
them, of USC.
Section 2.4 Subsidiaries. Each of USC's Subsidiaries is
a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation with full
corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in
each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such
qualification necessary. Set forth in the USC Disclosure Schedule
is a complete list of each of USC's Subsidiaries, the state of its
incorporation, and a list of each jurisdiction in which each such
Subsidiary is qualified to do business. USC has heretofore
delivered to SAH complete and correct copies of the Articles of
Incorporation and Bylaws, as currently in effect, of each of its
Subsidiaries. None of USC's Subsidiaries have any options,
warrants or other commitments to issue or sell any shares of
capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to acquire from
any of USC's Subsidiaries, any shares of its capital stock, and no
such securities or obligations are outstanding. No shares of
capital stock of any of USC's Subsidiaries have been issued in
violation of any preemptive rights or applicable federal or state
securities laws. USC owns, directly or indirectly, all of the
outstanding capital stock of each of its Subsidiaries, free and
clear of all Liens and all such capital stock is duly authorized,
validly issued and outstanding, fully paid and nonassessable, and
neither USC nor any of its Subsidiaries owns or holds any
securities of, or any interest in, any other Person or is subject
to any joint venture, partnership or other arrangement that is
created as a partnership for federal income tax purposes. There
are no voting trusts or other agreements by and between or among
USC, any Subsidiary or any or all of their respective stockholders,
whether or not USC or a Subsidiary is a party thereto, imposing any
restrictions upon the transfer or voting of or otherwise pertaining
to the securities of USC (including, but not limited to the USC
Common Stock) or any Subsidiary or the ownership thereof. Any and
all such restrictions set forth in the USC Disclosure Schedule
shall be duly complied with or expressly waived as of the Closing
Date.
Section 2.5 Governmental Consents and Approvals. The
execution, delivery and performance by USC and each of the
Shareholders of this Agreement and the consummation of the
transactions contemplated hereby by each of the Shareholders
requires no consent, approval, order or authorization of, action by
or in respect of, or registration or filing with, any Governmental
Body court, agency, or authority, other than (a) filings required
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended ("HSR Act"), (b) any applicable filings with and
consents and/or approvals of the Federal Communications Commission
("FCC"), (c) any applicable filings with and consents and/or
approvals of state security commissions under state securities laws
or of Public Utility Commissions under state public utility
statutes and similar laws and (d) such other consents, approvals,
permits, authorizations, notifications or filings, the failure of
which to obtain or make would not have a Material Adverse Effect on
USC or any of its Subsidiaries or materially adversely affect the
ability of USC or the Shareholders to perform each of their
obligations set forth herein or to consummate the transactions
contemplated hereby.
Section 2.6 No Violations. The execution, delivery and
performance of this Agreement by USC and each of the Shareholders,
the consummation by USC and each of the Shareholders of the
transactions contemplated hereby or compliance by USC and each of
the Shareholders with any of the provisions hereof does not and
will not (a) conflict with or result in any breach or violation of
any provision of the Certificate of Incorporation or Bylaws of USC
or any of its Subsidiaries, (b) result in a default, or give rise
to any right of termination, cancellation or acceleration or loss
of any material benefit (with or without the giving of notice or
lapse of time or both), or require the consent, approval, waiver or
other action by any person under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, trust
(constructive or otherwise), agreement, lease (of real or personal
property) or other instrument or obligation to which any
Shareholder, USC or any of its Subsidiaries is a party or by which
any Shareholder, USC or any of its Subsidiaries may be bound, (c)
result in the creation or imposition of any claim, lien, pledge,
security interest, obligation, restriction or other encumbrance on
any of the property of any Shareholder, USC or any of its
Subsidiaries, or (d) violate any judgment, order, writ, injunction,
decree, statute, rule or regulation applicable to any Shareholder,
USC or any of its Subsidiaries.
Section 2.7 Financial Statements, Etc.
(a) The following audited and unaudited financial
statements of USC have been delivered to SAH:
(i) the consolidated audited balance sheets of USC
and its Subsidiaries as of December 31, 1994, 1993 and
1992 (the "Audited Balance Sheet") and the consolidated
audited statements of operations, of stockholder's equity
and of cash flows for each of the one (1) year periods
ended December 31, 1994, December 31, 1993 and December
31, 1992 (together with related notes and schedules),
which financial statements contain a report of Duff &
Anderson, CPA's, independent auditors, reporting thereon
(such balance sheets, the related statements of
operations, of stockholder's equity and of cash flows,
and the related notes and schedules being hereinafter
together referred to as the "Audited Financial
Statements"); and
(ii) the consolidated unaudited balance sheet of USC
and its Subsidiaries as of April 30, 1995 (the "Interim
Balance Sheet") and the related unaudited statements of
operations, of stockholder's equity and of cash flows for
the four month period then ended (such balance sheets,
the related statements of operations, of stockholder's
equity and of cash flows, being hereinafter together
referred to as the "Interim Financial Statements").
(b) The Audited Financial Statements and the Interim
Financial Statements (collectively, the "Financial Statements"
or "USC Financial Statements"), including the related notes
and schedules, have been prepared from the books and records
of USC and its Subsidiaries which accurately reflect the
transactions of USC and its Subsidiaries. The Financial
Statements are true, complete and correct in all material
respects, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP")
and present fairly the financial position of USC and its
Subsidiaries as of the dates of such statements. The Interim
Financial Statements are not presented in accordance with GAAP
but otherwise accurately reflect the financial condition of
USC and the Subsidiaries and are true and correct in all
material respects.
(c) The trade accounts and other receivables of USC and
its Subsidiaries which are classified as current assets on the
Audited Balance Sheet and the Interim Balance Sheet
(collectively, the "Balance Sheets") are bona fide
receivables, were acquired in the ordinary course of business,
are true and correct, and, subject to the write-off for
doubtful accounts, are good and collectible.
(d) The inventories of USC and its Subsidiaries
reflected on the Balance Sheets are true and correct and are
salable in the ordinary course of business, and the value of
obsolete materials and materials of below standard quality has
been written down or reserved against consistent with USC's
past practice and industry standards. There have been no
write-ups of inventories or other assets.
(e) USC and its Subsidiaries have no liabilities
(contingent or otherwise) other than:
(i) those set forth or reserved against in the
Interim Balance Sheet, and
(ii) those incurred since the date of the Interim
Balance Sheet in the ordinary course of business and
consistent with past practices.
(f) USC and its Subsidiaries have no debt other than
disclosed in the Financial Statements and USC Schedules.
There are no receivables of USC owed by Affiliates of Seller
which are not disclosed in the Financial Statements and
schedules thereto.
(g) USC's and its Subsidiaries' books of account have
been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions,
and the revenues, expenses, assets and liabilities of USC and
its Subsidiaries have been properly recorded in such books.
(h) The Working Capital of USC and its Subsidiaries
(determined as set forth in Section 5.3(j) hereof), at the
Closing, shall not be less than $0. USC and its Subsidiaries
have each adequately funded all accrued employee benefit costs
and such funding is reflected in the balance sheets included
in the USC Financial Statements.
(i) USC and its Subsidiaries have each adequately
funded all accrued employee benefit costs and such funding is
reflected in the balance sheets included in the USC Financial
Statements.
Section 2.8 Title to and Condition of Assets and Property.
USC or its Subsidiaries have good and marketable title to any and
all assets reflected in the USC Financial Statements currently
owned and used in the operation of their respective businesses, and
such assets are free and clear of all Liens, except as set forth in
the USC Schedule. The ownership of all such assets as among USC
and its Subsidiaries is as set forth in the USC Disclosure
Schedule. The USC Disclosure Schedule further sets forth a true
and complete description of all real and personal property
currently leased or otherwise occupied or used but not owned by USC
or a Subsidiary, true, correct and complete copies of which leases
and other agreements, including all amendments and modifications
thereto will be delivered at or before the time the Schedules are
required to be delivered pursuant to Section 4.11 hereto. Each of
the leases is a valid and binding obligation of the parties thereto
and neither USC, nor any of its Subsidiaries nor the lessor
thereunder is in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under
any such lease. USC and its Subsidiaries enjoy peaceful and
undisturbed possession of their respective interests under all such
leases. Except as set forth in the USC Disclosure Schedule,
neither USC nor any Subsidiary owns any real property or any
interest therein. All personal property not set forth in the USC
Disclosure Schedule and reflected on the USC Financial Statements
is owned by USC or such Subsidiary and, except as set forth in the
USC Disclosure Schedule, all property owned or leased by USC and
each of its Subsidiaries and reflected on the USC Financial
Statements or located on the premises of USC or a Subsidiary is in
good operating condition and repair, ordinary wear and tear
excepted, is suitable for the use to which the same is customarily
put, is free from defects other than minor defects that do not
interfere with or detract from the use or value thereof and is
merchantable and not obsolete and is of a quality and quantity
presently usable in the ordinary course of the operation of the
Business of USC and its Subsidiaries and is all of the assets
currently used or needed in said Business. The buildings,
structures, improvements, assets and operations of USC and each of
its Subsidiaries conform with all applicable restrictive covenants,
deeds, leases, and restrictions and all applicable federal, state
and local laws, ordinances, rules and regulations, including, but
not limited to, those relating to zoning and working conditions.
Section 2.9 Litigation. Except as disclosed in the USC
Disclosure Schedule, there is no action, order, claim, suit,
proceeding, litigation, investigation, inquiry, review or notice
("Proceeding") pending or threatened against, relating to or
affecting USC, any of its Subsidiaries or any of their respective
properties or assets or any officer or director of USC or its
Subsidiaries relating to USC or its Subsidiaries, at law or in
equity, before any Governmental Body nor is there any basis for
asserting the foregoing. Neither USC nor any of its Subsidiaries
nor any of their respective properties or assets is specifically by
name, subject to any currently existing order, judgment, writ,
decree or injunction. Except as disclosed in the USC Disclosure
Schedule, USC is not subject to any currently existing Proceeding
by any Governmental, Body. There is no basis for the assertion of
any Proceeding by any Governmental Body or any person or entity
regarding any violation of federal or state securities laws.
Section 2.10 Absence of Changes. Since December 31, 1994,
the Business of USC and its Subsidiaries has been operated in the
ordinary course consistent with past practice and there has not
been (a) any material adverse change in the Business, operations,
properties, condition (financial or otherwise), prospects, assets
or liabilities of USC and its Subsidiaries (contingent or
otherwise, whether due or to become due, known or unknown); (b) any
dividend declared or paid or distribution made on the capital stock
of USC or any of its Subsidiaries, or any capital stock thereof
redeemed or repurchased; (c) any incurrence of long-term debt by
USC or any of its Subsidiaries; (d) any salary, bonus or
compensation increases to any officers, employees or agents of any
of USC or its Subsidiaries; (e) any pending or threatened
litigation or disputes affecting USC or any of its Subsidiaries;
(f) any transaction or contract, or amended or terminated any
transaction or contract by USC or any of its Subsidiaries, except
normal transactions or contracts consistent in nature and scope
with prior practices and entered into in the ordinary course of
business consistent with past practices, (g) any mortgage, sale,
transfer, distribution or other disposition of any material assets
by USC or any of its Subsidiaries, except in the ordinary course of
business consistent with past practices, (h) any damage,
destruction or loss by USC or any of its Subsidiaries to or of any
of their respective assets except in the ordinary course of
business and except to the extent that any asset damaged, destroyed
or lost has been repaired or replaced, (i) except in the ordinary
course of business and consistent with past practice, any capital
expenditures for additions to property, plant or equipment, (j) any
grant or credit to any customer or distributor on terms materially
more favorable than the terms on which credit has been extended to
such customer or distributor in the past nor changed the terms of
any credit previously extended, or (k) any other change in the
nature of, or the manner of conducting, the Business of USC and its
Subsidiaries, other than changes that neither have had, nor
reasonably may be expected to have, a Material Adverse Effect on
the Business of USC or any of its Subsidiaries.
Section 2.11 Undisclosed Liabilities; Commitments. Except
as disclosed in the USC Disclosure Schedule, neither USC nor any of
its Subsidiaries has, to the best knowledge of the Shareholders
after substantial inquiry, any debts, guaranties, liabilities or
obligations, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, and there is no basis for the
assertion against USC or any of its Subsidiaries of any such debt,
guaranty, liability or obligation, that were not accrued or
reserved against in the USC Financial Statements. USC and its
Subsidiaries have in all material respects performed all contracts,
agreements and commitments to which any of them is a party, and
there is not under any such contracts, agreements or commitments
any existing default or event of default or event which with notice
or lapse of time or both would constitute a default.
Section 2.12 Environmental Matters. USC and each of its
Subsidiaries have duly complied with, and their Business,
operations, assets, equipment, leaseholds and other facilities are
in compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated thereunder, governing (a) air
emissions, (b) discharges to surface water or ground water, (c)
solid or liquid waste disposal, (d) the use, storage, generation,
handling, transport, discharge, release, or disposal of toxic or
hazardous substances or wastes, or (e) other environmental, health
or safety matters, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42
U.S.C. Section 601 et seq., as amended, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., as amended, the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et
seq., as amended, the Clean Air Act, 42 U.S.C. Section 7401 et
seq., as amended, the Occupational Safety and Health Act of 1970,
as amended ("OSHA"), the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, and other
environmental conservation or protection laws. There is no
Proceeding pending or threatened against USC or any Subsidiary
relating to the environment nor is there a basis for the assertion
against USC or any of its Subsidiaries of any Proceeding. Neither
USC nor any of its Subsidiaries has received notice of, or knows
of, any past, present or future events, conditions, facts,
circumstances, activities, practices, incidents, actions or plans
that may interfere with or prevent compliance or continued
compliance or that might constitute a violation of any federal,
state or local environmental, health or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder,
which relate to the use, ownership or occupancy of the property or
the operation of the business of USC or any of its Subsidiaries.
Section 2.13 Pension Matters. During the past five years,
neither USC nor any of its Subsidiaries has maintained or
contributed to any defined benefit pension plans (as defined in
Section 3(2) of ERISA or any multiemployer plans (as defined in
Section 3(37)(A) of ERISA). Each employee benefit plan (as defined
in Section 3(3) of ERISA) (each, an "Employee Benefit Plan" or
"Plan") maintained for employees of USC or its Subsidiaries or to
which USC or its Subsidiaries have contributed and any related
trust agreement, annuity contract or any other funding or
implementing instrument complies currently and has complied in the
past, as to form, operation and administration, with the provisions
of ERISA, as amended, and all other applicable laws, rules and
regulations and with the Code where required in order to be tax-
qualified under Section 401(a) or 403(a) and 501(a) of the Code,
and no event has occurred that may give rise to disqualification of
any such Plan under said Sections. All necessary governmental
approvals for the Employee Benefit Plans have been obtained. Each
Employee Benefit Plan that is subject thereto meets and has met at
all times the minimum funding standards of Section 302 of ERISA,
Section 412 of the Code and any other applicable law, and no
accumulated funding deficiency, whether or not waived, exists with
respect to any such Plan. Each Employee Benefit Plan that is an
employee pension benefit plan (as defined in Section 3(2)(A) of
ERISA) has been duly authorized by the Board of Directors of USC
and a favorable determination as to the qualification under the
Code of each such employee pension benefit plan has been made by
the Internal Revenue Service. USC has delivered, or will deliver
prior to the Closing, to Purchaser the following documents as in
effect on the date hereof: (A) true, correct and complete copies of
each Plan, including all amendments thereto, which is an employee
pension benefit or welfare benefit plan (within the meaning of
Sections 3(1) or 3(2) of ERISA), and in the case of any unwritten
Plans, descriptions thereof, (B) with respect to any Plans or Plan
amendments described in the foregoing clause (A), (i) the most
recent determination letter issued by the Internal Revenue Service
after September 1, 1974, if any, (ii) all trust agreements or other
funding agreements, including insurance contracts, and (iii) the
most recent actuarial valuations, annual reports, summary plan
descriptions, employee handbooks or other descriptive materials
supplied and employee or retiree summaries of material
modifications and summary annual reports, if any. With respect to
any Plan, no prohibited transaction (within the meaning of Section
406 of ERISA and/or Section 4975 of the Code) exists which could
subject USC or any Subsidiary to any material liability or civil
penalty assessed pursuant to Section 502(i) of ERISA or a material
Tax imposed by Section 4975 of the Code. Neither USC, its
Subsidiaries nor any of their respective Affiliates, nor any
administrator or fiduciary of any Plan (or agent of any
administrator or fiduciary of any Plan (or agent of any of the
foregoing) has engaged in any transaction or acted or failed to act
in a manner which is likely to subject USC or any of its
Subsidiaries to any liability for a breach of fiduciary or other
duty under ERISA or any other applicable law. The transactions
contemplated by the this Agreement will not be, or cause any,
prohibited action or transaction.
There are no pending claims, investigations or causes of
action ("Claims") and, to the best of each Seller's knowledge, no
such Claims are planned or threatened, against any Employee Benefit
Plan or fiduciary of any such plan by any participant, beneficiary
or governmental agency with respect to the qualification or
administration of any such Employee Benefit Plan. No Seller nor
any Subsidiary of USC has made, nor will any of them or any of
USC's (or any of its Subsidiaries') employees or representatives
make prior to the Closing Date, any representation to or agreement
with, any of Seller's (or any of its Subsidiaries') employees
(whether written or oral) with respect to (i) the provisions of any
employee benefits other than those provided under any Employee
Benefit Plan disclosed to Purchaser or (ii) the continuation of any
benefits beyond the Closing Date under any Employee Benefit Plan.
All filings required by ERISA and the Code as to each Plan have
been timely filed and all notices and disclosures to participants
required by ERISA or the Code have been timely provided. Each Plan
to which ERISA Sections 601 through 609 and Section 4980B of the
Code apply has been administered in material compliance with such
Sections. USC and its Subsidiaries have made or shall make full
and timely payment of all amounts which are required under the
terms of the Plans to be paid as a contribution to each such Plan
with respect to the period from the end of the last plan year
ending before the date of this Agreement to the Closing Date.
Neither USC nor its Subsidiaries have any unfunded obligations with
respect to any Plan. All contributions made to or accrued with
respect to all Employee Benefit Plans are deductible under Section
404 or 162 of the Code. No amounts, nor any assets or any Employee
Benefit Plan are subject to Tax as unrelated business taxable
income under Section 511, 512, or 419A of the Code. No facts exist
which could result in a material increase in premium costs of Plans
for which benefits are insured or a material increase in benefit
costs of Plans which provide self insured benefits. No Plan
provides (or has any obligation or commitment to provide) health,
medical, disability, life or other similar benefits with respect to
any current or former employees (or beneficiary thereof) of USC or
its Subsidiaries beyond their retirement or other termination of
service (other than coverage mandated by Title I, Subtitle B, Part
6 of ERISA, which coverage is fully paid by the former employee or
his dependents). There are no agreements which will provide
payments to any officer, employee, shareholder, or highly
compensated individual of USC or its Subsidiaries which will be
"parachute payments" under Section 280G of the Code that are
nondeductible to Seller or subject to tax under Section 4999 of the
Code. All group health plans of USC and its Subsidiaries and each
of their Affiliates have been operated in compliance with the group
health plan continuation coverage requirements of Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code.
Section 2.14 Labor Matters. Except as set forth on the
USC
Disclosure Schedule, neither USC nor any of its Subsidiaries has
any obligations, contingent or otherwise, under any employment or
consulting agreement, or collective bargaining agreement or other
contract with a labor union or other labor or employee group.
There are no efforts presently being made or threatened by or on
behalf of any labor union with respect to the employees of USC or
any of its Subsidiaries. USC and each of its Subsidiaries are in
compliance with all federal, state or other applicable laws,
domestic or foreign, regarding employment and employment practices,
terms and conditions of employment and wages and hours, and have
not and are not engaged in any unfair labor practice. No unfair
labor practice complaint against USC or any of its Subsidiaries is
pending or threatened before the National Labor Relations Board.
There is no labor strike, dispute, slowdown or stoppage pending or
threatened against or involving USC or any Subsidiary. No
representation question exists respecting the employees of USC or
any Subsidiary. No employment-related grievance or internal or
informal complaint or liability with respect to the termination of
any employee, consultant or agent exists. No arbitration
proceeding arising out of or under any collective bargaining
agreement is pending and no claim therefor has been asserted. No
collective bargaining agreement is currently being negotiated by
USC or any of its Subsidiaries, and neither USC nor any Subsidiary
has experienced any material labor difficulty. There has not been
and there will not be any adverse change in relations with
employees of USC or any of its Subsidiaries as a result of any
announcement or consummation of the transactions contemplated by
this Agreement. No employee of USC or any of its Subsidiaries is
in violation of any term of any employment contract, or any other
contract or agreement with or any restrictive covenant or any other
common law obligation to a former employer relating to the right of
any such employee to be employed by USC or any of its Subsidiaries
because of the nature of the business conducted or to be conducted
by USC and its Subsidiaries or to the use of trade secrets or
proprietary information of others, and the employment of USC's and
its Subsidiaries' employees does not subject USC or its
Subsidiaries to liability in connection with such covenants or
agreements. There is neither pending nor threatened Proceedings
with respect to any contract, agreement, covenant or obligation
referred to above nor is there any basis for asserting the
foregoing.
Section 2.15 Taxes. All Taxes, assessments and other
governmental charges that are due and payable by USC or its
Subsidiaries, other than those presently payable without penalty or
interest, have been timely paid, and USC and its Subsidiaries have
timely filed (and, through the Closing Date, will timely file) all
federal, state and other tax returns required by law to be filed by
them. All such tax reports or returns are true, complete and
correct in all respects with regard to USC and its Subsidiaries for
the periods covered thereby. USC and its Subsidiaries are not
delinquent in the payment of any Tax, assessment or governmental
charge, there is no tax deficiency asserted against USC or any of
its Subsidiaries, and there is no unpaid assessment, proposal for
additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of USC or any of its Subsidiaries or any violation of
any federal, state, local or foreign tax law that could be asserted
by any taxing authority. There are no tax liens upon any
properties or assets of USC or any of its Subsidiaries. No
Internal Revenue Service, state or local, audit, investigation or
Proceeding of USC or any of its Subsidiaries is pending or
threatened, and the results of any completed audits are properly
reflected in the USC Financial Statements. Neither USC nor its
Subsidiaries have granted any extension to any taxing authority of
the limitation period during which any tax liability may be
asserted. Neither USC nor its Subsidiaries have committed any
material violation of any federal, state, local or foreign tax
laws. All monies required for the payment of Taxes not yet due and
payable with respect to the operations of USC and its Subsidiaries
through and including the Closing Date have been approved, reserved
against and entered upon the books and USC Financial Statements.
All monies required to be withheld by USC and its Subsidiaries from
employees or collected from customers for income taxes, social
security and unemployment insurance taxes and sales, excise and use
taxes, and the portion of any such taxes to be paid by USC and its
Subsidiaries to governmental agencies or set aside in accounts for
such purpose have been approved, reserved against and entered upon
the books and USC Financial Statements.
Section 2.16 Inventory. No item included in the
inventories, materials or supplies of USC or its Subsidiaries is
pledged as collateral or held on consignment from others. All such
inventory items are standard quality goods saleable in the ordinary
course of business.
Section 2.17 Proprietary Rights. USC owns or validly
licenses the right to use all technology, proprietary information,
know-how, ideas (patented or unpatented), data, licenses, customer
lists, processes, formulas, trade secrets, telephone numbers,
computer software, computer programs, designs, inventions,
trademarks, trademark registrations and applications therefor,
registered and common law copyrights, and registered copyright
applications, trade names (whether or not registered or
registrable), service marks, service mark registrations and
applications therefor (collectively, the "Proprietary Rights")
necessary to conduct the Business of USC or its Subsidiaries as the
Business is presently being conducted. The USC Disclosure Schedule
sets forth a complete and correct list (including, where
applicable, registration numbers and dates of filing, renewal and
termination) of all Proprietary Rights. No consent or approval of
any third party will be required for the use of the Proprietary
Rights by USC or its Subsidiaries after the consummation of the
transactions contemplated hereby and the transactions hereunder
will not result in any breach of any agreement relating to any
Proprietary Rights. No claim or opposition has been asserted by
any person or entity to the ownership of or USC's right to use any
of the Proprietary Rights or challenging or questioning the
validity or effect of any license or agreement relating thereto,
and there is no valid basis for any such claim or assertion. USC
has ownership of, or valid licenses to use all of, the Proprietary
Rights. Each of the Proprietary Rights is valid and subsisting,
has not been cancelled, abandoned or otherwise terminated and, if
applicable, has been duly asserted, registered and filed. The
Proprietary Rights owned by USC and its Subsidiaries are owned free
and clear of all Liens. USC has taken all reasonable steps to
establish and preserve its ownership of all Proprietary Rights.
USC's use of the Proprietary Rights will not, and the conduct of
the Business as presently conducted does not, infringe on or
violate the rights of any other Person. No Proceedings have been
instituted, are pending or are threatened that challenge or oppose
the rights of USC with respect to any of the Proprietary Rights.
USC has not received any notice or inquiry from any Person of any
alleged infringement by USC. USC has not given and is not bound by
any agreement of indemnification in connection with any Proprietary
Rights or product or service sold or performed by USC. No Seller
is aware of any infringement by others of USC's Proprietary Rights.
Set forth in the USC Disclosure Schedule is a list of all
confidentiality agreements entered into by USC or any of its
Subsidiaries relating to the Proprietary Rights and all such
contracts are in full force and effect.
Section 2.18 Surety Obligations. Neither USC nor any of
its
Subsidiaries is obligated as surety or indemnitor under any surety,
performance, completion or similar bond or other contract issued
and have not entered into any agreement to assure payment,
performance or completion of performance of any undertaking or
obligation of any Person.
Section 2.19 No Brokers. No Seller has employed any
broker, agent or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
Section 2.20 Records. The respective minute books, books of
account, stock record books and other records of USC and each of
its Subsidiaries, all of which have been or will be made available
to Purchaser, contain accurate and complete records of all
corporate actions of the respective stockholders and Boards of
Directors (and committees thereof) during the periods of time in
which such minute books were maintained.
Section 2.21 Compliance With Law; Conduct. Neither USC nor
any of its Subsidiaries has violated or failed to comply with any
statute, law, ordinance, regulation, rule or order of any foreign,
federal, state or local government or any other Governmental Body
or any judgment, order, writ, injunction or decree of any court,
applicable to its Business or operation, except where such
violations or failure to comply would not have a Material Adverse
Effect on USC or any of its Subsidiaries. USC and its
Subsidiaries' respective Businesses are in conformity with all
federal, state and local energy, public utility, health, and OSHA
requirements and all other federal, state and local governmental
and regulatory requirements. USC and its Subsidiaries have all
permits, licenses, authorizations, consents, approvals and
franchises from governmental agencies required to conduct their
respective Businesses as then and are now contemplated to be
conducted.
Section 2.22 Regulatory Compliance. USC and its
Subsidiaries comply in all material respects with all state and
federal rules and regulations applicable to the Business,
including, but not limited to, those regulations governing the
provision of operator assisted telecommunications services,
including, but not limited to, the requirements set forth under 47
C.F.R. Section 64.703 - 64.707, and the terms and conditions within
each order granting jurisdictional authority and all related
tariffs.
Section 2.23 Investment Company Act; Etc. To the best
knowledge of the Shareholders, neither USC nor any of its
Subsidiaries is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers Act of 1940, as amended.
Section 2.24 Public Utility Holding Company Act. Neither
USC nor any of its Subsidiaries is a "public utility," a "holding
company," an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or a "public
utility" within the meaning of the Federal Power Act, as amended.
Section 2.25 Insurance. Contained in the USC Disclosure
Schedule is a complete and accurate description of all insurance
maintained by USC with respect to the assets, properties and
business of USC and its Subsidiaries. All of the insurable
properties of USC and its Subsidiaries are insured for their
benefit under valid and enforceable policies, issued by insurers
rated B+ or better. The insurance maintained by USC and its
Subsidiaries is in amounts and of a nature as is customarily
maintained by persons conducting operations similar to those of
USC.
Section 2.26 Instruments in Full Force and Effect;
Possession under Leases. The USC Schedule contains a complete and
accurate list of all material contracts, agreements,
understandings, commitments and obligations, whether written or
oral (including, without limitation, licenses, royalties, operating
and capital leases, assignments and similar agreements) of USC and
its Subsidiaries (the "Material Contracts"). The Material
Contracts are valid, binding and in full force and effect against
USC and its Subsidiaries and have not been amended or supplemented
in any manner or respect except as disclosed on the USC Disclosure
Schedule. Except as set forth in the USC Disclosure Schedule,
there are no defaults by USC or any of its Subsidiaries thereunder
and USC and the Shareholders know of no defaults thereunder by any
other party thereto, and no event has occurred that with the lapse
of time or action or inaction by any party thereto would result in
a violation thereof or a default thereunder.
Section 2.27 Receivables. The USC Disclosure Schedule
contains a complete and accurate list of all USC and its
Subsidiaries' receivables (including aged accounts receivables,
loan receivables and advances) as of June 30, 1995, showing the
name of each account debtor and the amount due from each by invoice
number and date. All of such accounts receivables and all account
receivables since the date thereof have arisen in the ordinary
course of business for products delivered or services rendered.
Neither USC nor any of its Subsidiaries is aware of any event or
condition with respect to a specific customer that causes it to
believe that any such receivable will not be collected in full in
due course without resort to litigation and will not be subject to
counterclaim or setoff. The write-offs for doubtful accounts
reflected on the various USC Financial Statements were or will be,
as the case may be, determined in accordance with GAAP and past
practice consistently applied and adequately provide for all
uncollectible receivables.
Section 2.28 Accounts Payable. The USC Disclosure Schedule
contains a complete and accurate list of all USC and its
Subsidiaries' aged accounts payable at June 30, 1995, showing the
name of each account creditor and the amount due to each by invoice
number and date.
Section 2.29 Items Reflected in the USC Disclosure Schedule.
The USC Disclosure Schedule contains a complete and accurate list
or brief description of (a) all current or pending contracts,
commitments and leases (of real or personal property), written or
otherwise, between USC or any of its Subsidiaries and any party
that involve, in the aggregate, the payment or receipt by USC or
any of its Subsidiaries of more than $10,000, which cannot be
cancelled without penalty upon thirty (30) days' notice, or which
otherwise are material to USC or any of its Subsidiaries; (b) all
of the Proprietary Rights; (c) all employee benefit programs
(including but not limited to medical, profit-sharing or pension
plans), employee bonus and incentive compensation arrangements and
accrued and unused vacation time as of June 30, 1995, of USC and
each of its Subsidiaries and through the Closing Date; (d) any
compensation, noncompetition, severance, consulting, or
confidentiality agreements between USC or any of USC's (or any of
its Subsidiaries') employees, consultants or agents for the last
two fiscal years and at present; (e) the number and job category of
all current employees of USC and each of its Subsidiaries,
including with respect to key employees, their names, date of
employment, current compensation (including sales commissions) and
date and amount of last increase in compensation; (f) all capital
assets of USC and its Subsidiaries with a book value greater than
$200, setting forth any Liens or restrictions thereon; (g) federal
and state income tax returns for the last three fiscal years; (h)
a list of all leases, contracts or agreements for which consents of
any private persons or public authorities would be required (citing
the section(s) thereof requiring such consents) for the
consummation of the transactions contemplated hereby, or for the
preventing of any termination of any material right, privilege,
license or agreement of, or any loss or disadvantage to, USC or any
of its Subsidiaries or SAH upon consummation of the transactions
contemplated hereby; (i) all governmental licenses and permits
relating to any of USC's and its Subsidiaries' operations; (j) any
arrangements or agreements of USC or any of its Subsidiaries with
their respective competitors; and (k) the ten largest customers of
USC and each of its Subsidiaries and the ten largest suppliers to
USC and its Subsidiaries for the fiscal year ended December 31,
1994, and for the period from January 1, 1995, to June 30, 1995.
Neither USC nor any of its Subsidiaries has received notice, or has
knowledge or reason to believe, that any customer listed in the USC
Disclosure Schedule is seeking or presently intends to seek to
terminate or diminish its relationship with USC or any of its
Subsidiaries or that any such customer will not renew or continue
its existing agreement with USC or any of its Subsidiaries on the
expiration date thereof (or otherwise) on terms at least as
favorable to USC or its Subsidiaries as those currently in effect.
Section 2.30 Bank Accounts; Powers of Attorney. The USC
Disclosure Schedule completely and accurately lists the name of
each bank, brokerage firm or other financial institution in which
USC or any of its Subsidiaries has an account or possesses a safe
deposit box and sets forth the amount and nature of all cash and
cash equivalents contained therein at June 30, 1995. The USC
Disclosure Schedule also completely and accurately lists the names
of all Persons authorized to draw thereon, or to have access
thereto or to authorize transactions therein, and the names of all
parties, if any, holding powers of attorney from USC or one of its
Subsidiaries with respect thereto or with respect to any other
matter, and the account number of any such account. Neither USC
nor its Subsidiaries maintain any securities or commodity trading
account or other brokerage account.
Section 2.31 Product and Service Warranties. There is no
claim against or liability of USC or any Subsidiary on account of
product or service warranties or with respect to the manufacture,
sale or lease of Products or performance of services, and there is
no basis for any such claim on account of Products heretofore
manufactured, sold or leased or services performed.
Section 2.32 Transactions with Affiliates. Except as set
forth in the USC Disclosure Schedule, neither USC nor any of its
Subsidiaries has engaged in any loans, leases, contracts or other
transactions with any director, officer or key employee of USC or
any of its Subsidiaries, or any member of any such individual's
immediate family or any other Affiliate of USC or any of its
Subsidiaries. As of the Closing Date, all advances or loans made
by USC or any of its Subsidiaries to any stockholder, officer,
director, employee, Affiliate or agent of USC or any of its
Subsidiaries will have been repaid in full, with accrued interest
to the date of repayment.
Section 2.33 Corrupt Practices. Since the inception of USC
and each of its Subsidiaries, there have been no violations of the
Foreign Corrupt Practices Act or any similar state or federal
statute relating to bribery or similar offenses by USC or any of
its Subsidiaries or any of their agents. Neither USC, its
Subsidiaries, nor any officer, director, employee or agent of USC
or any Subsidiary (or any Person acting on behalf of any of the
foregoing) has since the date of USC's incorporation, given or
agreed to give any gift or similar benefit of more than nominal
value to any customer, supplier, governmental employee or official,
or any other Person who is or may be in a position to help or
hinder USC or any of its Subsidiaries or assist USC or any of its
Subsidiaries in connection with any actual or proposed transaction,
which gift or similar benefit, if not given in the past, would have
a Material Adverse Effect, or which would subject USC or any of its
Subsidiaries to penalty in any private or governmental litigation
or Proceeding.
Section 2.34 Absence of Bad Debt or Uncollectible Accounts.
At June 30, 1995, and at the date of each subsequent balance sheet
included in the USC Financial Statements, USC had no bad debt or
uncollectible account which has not been revealed and written off
in the Financial Statements.
Section 2.35 Investments in Competitors. Except as set
forth in the USC Disclosure Schedule, none of the executive
officers or directors of USC or any of its Subsidiaries owns
directly or indirectly any interest or has any investment in any
Person that is a competitor or potential competitor of, or which
otherwise directly or indirectly does business with, USC or any of
its Subsidiaries.
Section 2.36 No Default. Neither USC nor any of its
Subsidiaries is in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under
(a) its respective Certificate of Incorporation or Bylaws; (b) any
mortgage, loan, agreement, contract, arrangement, lease, lease
purchase, indenture or other evidences of indebtedness for borrowed
money or other instrument to which USC or any of its Subsidiaries
is a party or by which USC or any of its Subsidiaries or any of the
assets of USC or its Subsidiaries is bound; or (c) any judgment,
order, writ, injunction, or decree, of any court, arbitrator,
Governmental Body.
Section 2.37 Copies of Documents; Accuracy of Information
Furnished. USC or the Shareholders have delivered or made
available to SAH complete and accurate copies of all documents
listed on the USC Disclosure Schedule and all other information
requested for deciding whether to consummate the transactions
hereby. All of the exhibits and schedules provided by USC or the
Shareholders are true, correct and complete in all material
respects and no written representation, warranty or statement made
by USC or the Shareholders in or pursuant to this Agreement
contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact to make such
representation, warranty or statement not misleading to SAH who are
seeking complete and accurate information with respect to USC and
its Subsidiaries.
Section 2.38 Title to Shares. The Shareholders are the
lawful owners of the number of shares of USC Common Stock set forth
below:
Shareholder Number of Shares
Bill L. Johnson 2750
Howard Maddera 2750
Marianne Reed 1375
NTS Communications, Inc. 1375
The Shareholders are the sole holders and owners (beneficially and
of record) of 100% (8250 Shares) of the USC Common Stock, which
constitutes 100% of USC's outstanding shares of capital stock.
Each of the Shareholders holds good, valid and indefeasible title
to such shares. The Shareholders each possess full authority and
legal right to sell, transfer and assign the entire legal and
beneficial ownership of the shares of Stock issued to each of
them, free and clear of all Liens, rights of first refusal, voting
trust, voting agreements, buy/sell agreements, preemptive rights,
proxies or other interests of any nature of any Person.
Section 2.39 Shareholder Authority Relative to this
Agreement. This Agreement has been duly and validly executed and
delivered by each of the Shareholders and constitutes the legal,
valid and binding obligation of each of the Shareholders,
enforceable against each of them in accordance with its terms,
except as enforcement hereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, moratorium or other similar laws
affecting enforcement of creditors' rights generally. The
execution, delivery and performance by the Shareholders or USC of
this Agreement and the consummation of the transactions
contemplated hereby will not violate any provision of any law to
which any of the Shareholders or USC is subject nor result in a
breach or violation by any of the Shareholders or USC of any of the
terms or provisions of, or constitute a default by any of the
Shareholders or USC under any note, bond, mortgage, indenture,
license, trust (constructive or other), agreement, lease, or other
instrument or obligation to which any of the Shareholders or USC is
a party or by which any of the Shareholders or USC is bound. None
of the Shareholders, nor USC, is a party to, or subject to, or
bound by, any currently existing order, judgment, injunction, writ
or decree of any court or governmental authority, or any
arbitration award that would restrict performance by any of the
Shareholders or USC of this Agreement or such other documents or
instruments to be executed or delivered by any of the Shareholders
or USC in conjunction herewith.
Section 2.40 Certain Transactions or Arrangements. Except
for agreements and transactions entered into in connection with
this Agreement and except as set forth in the USC Disclosure
Schedule, no Shareholder is directly or indirectly, a party to any
transaction with USC or any of its Subsidiaries, including without
limitation: (a) any contract, agreement, understanding or
commitment or other arrangement providing for the furnishing of
services by, rental of real or personal property from or otherwise
requiring payments to any Shareholder or any affiliate of any
Shareholder; (b) any contract, agreement, understanding, commitment
or other arrangement relating to the employment of any Shareholder
by USC or any Subsidiary, or any bonus, deferred compensation,
pension, profit sharing, stock option, employee stock purchase,
retirement or other employee benefit plan; or (c) any loans or
advances to or from USC or any of its Subsidiaries.
Section 2.41 Disclosure.
(a) No representation or warranty of Shareholders or USC
contained in this Agreement or statement in the USC Schedule
contains any untrue statement. No representation or warranty
of USC contained in this Agreement or statement in the USC
Schedule attached hereto omits to state a material fact
necessary in order to make the statements herein or therein,
in light of the circumstances under which they were made, not
misleading.
(b) There is no fact known to Shareholders or USC which
has specific application to Seller and which could have a
Material Adverse Effect but which has not been set forth in
this Agreement or the USC Schedule hereto.
(c) The disclosures in the USC Schedule attached hereto
shall relate only to the representations and warranties in the
Section of this Agreement to which they expressly relate and
to no other representation or warranty in this Agreement.
(d) In the event of any inconsistency between the
statements in the body of this Agreement and those in the USC
Schedule attached hereto (other than an exception expressly
set forth as such in the USC Schedule in relation to a
specifically identified representation or warranty), those in
this Agreement shall control.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SAH
Except as set forth in the disclosure schedule delivered to
USC and the Shareholders by SAH contemporaneously with the
execution hereof (the "SAH Disclosure Schedule"), SAH hereby
represents and warrants to USC and each of the Shareholders as
follows, regardless of what investigations, if any, USC or the
Shareholders shall have made prior hereto:
Section 3.1 Organization; Qualification. SAH is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. SAH has full corporate
power and authority to own and lease all of the properties and
assets it now owns and leases and to carry on its business as now
being conducted. SAH is duly qualified as a foreign corporation
and is in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification necessary,
except where the failure so to qualify would not have a Material
Adverse Effect on SAH.
Section 3.2 Authority Relative to this Agreement. SAH has
full corporate power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by SAH of this Agreement, and
the consummation of the transactions contemplated hereby, have been
duly and validly authorized by the Board of Directors of SAH and no
other corporate proceedings on the part of SAH are necessary with
respect thereto. This Agreement has been duly and validly executed
and delivered by SAH and constitutes a legal, valid and binding
obligation of SAH, enforceable against it in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, moratorium or other similar laws
affecting enforcement of creditors' rights generally. As of the
date hereof, to SAH's knowledge and except as contemplated by this
Agreement, SAH is not prohibited by any governmental agency or
agreement from acquiring USC.
ARTICLE 4. ADDITIONAL AGREEMENTS
Section 4.1 Conduct of Business of USC and its
Subsidiaries. Each of the Shareholders and USC jointly and
severally covenant that after the date hereof and prior to the
Closing Date, USC and its Subsidiaries shall conduct their
operations according to their normal course of business to preserve
intact their business organization, keep available the services of
their officers and employees, maintain satisfactory relationships
with licensors, suppliers, dealers, customers and all others having
business relationships with them and continue to service and
maintain all of their respective assets in a manner consistent with
past practice.
Section 4.2 Forbearances by USC and its Subsidiaries. Each
of the Shareholders and USC jointly and severally covenant and
agree that except as contemplated by this Agreement, neither USC
nor any of its Subsidiaries shall, after the date hereof and prior
to the Closing Date, without the prior written consent of SAH:
(a) issue additional capital stock or any additional
securities or obligations convertible into or
exchangeable for, or giving any person any right to
acquire, capital stock;
(b) acquire any shares of its capital stock;
(c) declare or pay any dividend;
(d) issue stock options or any stock appreciation rights or
enter into any contract or agreement providing for
compensation or payments to any Person with respect or by
reference to the capital stock, capital structure or
stockholders' equity account of USC or its Subsidiaries
or pay any amounts with respect to any of them;
(e) sell any assets not in the ordinary course of business;
(f) issue or incur additional debt for borrowed money other
than pursuant to existing credit agreements;
(g) mortgage, pledge or otherwise encumber any of its
properties or assets;
(h) make any investment in third parties or assets of a
capital nature either by purchasing stock, securities or
assets, contributing to capital, transferring property or
otherwise making any investment;
(i) make any commitments for capital expenditures or other
commitment or transaction other than in the ordinary
course of business without the prior written consent of
SAH;
(j) increase in any manner the compensation of or pay any
bonuses or special awards to any of its directors or
officers;
(k) amend its Charter, Certificate of Incorporation or Bylaws
except as may be necessary to facilitate the consummation
of the transactions contemplated by this Agreement; or
(l) enter into any employment, consulting, brokerage or
commission agreement or arrangement other than in the
ordinary course of business consistent with past
practice;
(m) take any action, or fail to take any action, the result
of ;which can reasonably be expected to be a termination
of or material default under any Material Contract;
(n) materially amend, modify or terminate, or agree to amend,
modify or terminate any Material Contract;
(o) fail to maintain the confidential treatment or otherwise
fail to preserve any of its Proprietary Rights;
(p) enter into any agreement to do any of the things
described in clauses (a) through (o) above.
Section 4.3 No Solicitation. Each of the Shareholders and
USC, jointly and severally, covenant and agree that USC, its
respective Subsidiaries, officers and directors and Shareholders
will not, nor permit any of their respective agents or
representatives (including, without limitation, investment bankers,
attorneys and accountants) or any of the officers, employees,
agents or representatives of any of the Subsidiaries to, directly
or indirectly (a) solicit, initiate or encourage submission of
proposals or offers by, or (b) furnish any information with respect
to or otherwise cooperate in any way with, or participate in any
discussions or negotiations with, any Person with respect to any
proposal regarding the acquisition or purchase of all or a material
portion of the assets of, or any equity interest in USC or any
Subsidiaries or any business combination with USC or any
Subsidiary. USC and the Shareholders shall promptly notify SAH if
any such proposal or offer, or any inquiry or contract with any
Person with respect thereto, is made and shall, in any such notice,
indicate in reasonable detail the identity of the offeror and the
terms and conditions of any such proposal. In the event the
Transaction does not close, neither party will solicit the
customers of the other for a period of two (2) years from the date
of this Agreement.
Section 4.4 Investigation of Business and Properties. SAH
may make or cause to be made such investigation of the Business and
properties of USC and its Subsidiaries and of their financial and
legal condition as appropriate or advisable to familiarize itself
therewith. USC agrees to furnish SAH and its employees, offices,
agents, investment bankers, potential investors, accountants,
counsel and other representatives with all financial, operating and
other data and information concerning SAH and each of its
Subsidiaries and commitments of USC and each of its Subsidiaries as
SAH shall from time to time reasonably request and will afford SAH
and its employees, officers, accountants, attorneys, agents,
investment bankers, potential investors and other authorized
representatives access to USC's and of its Subsidiaries' offices to
review such documents and their books and records and will be given
opportunity to ask questions of, and receive answers from,
representatives of USC and each of its Subsidiaries with respect to
such matters. No investigations by the Purchaser or its employees,
representatives or agents shall reduce or otherwise affect the
obligation or liability of the Sellers with respect to any
representations, warranties, covenants or agreements made herein or
in an Exhibit, Schedule or other certificate, instrument, agreement
or document (including the USC Schedule), executed or delivered in
connection with this Agreement.
Section 4.5 Confidentiality. Each party agrees with
respect to all technical, commercial and other information that is
furnished or disclosed by the other parties, including, but not
limited to, information regarding such party's (and its
Subsidiaries' and Affiliates') organization, personnel, business
activities, customers, subscribers, policies, assets, finances,
costs, sales, revenues, technology, rights, obligations,
liabilities and strategies (the "Information"), that, unless and
until the transactions contemplated hereby shall have been
consummated, (a) such Information is confidential and/or
proprietary to the furnishing/disclosing party and entitled to and
shall receive treatment as such by the receiving party; (b) the
receiving party will hold in confidence and not disclose or use
(except in respect of the transactions contemplated hereby) any
such Information, treating such Information with the same degree of
care and confidentiality as it accords its own confidential and
proprietary information; provided, however, that the receiving
party shall not have any restrictive obligation with respect to any
Information that (i) is contained in a printed publication
available to the general public, (ii) is or becomes publicly known
through no wrongful act or omission of the receiving party, or
(iii) is known by the receiving party without any proprietary
restrictions by the furnishing/disclosing party at the time of
receipt of such Information; and (c) all such Information furnished
to a party by another, unless otherwise specified in writing, shall
remain the property of the furnishing/disclosing party and, in the
event this Agreement is terminated, shall be returned to it,
together with any and all copies made thereof, upon request for
such return by it (except for documents submitted to a governmental
agency with the consent of the furnishing/disclosing party or upon
subpoena and that cannot be retrieved with reasonable effort), and
each party shall confirm in writing to the others compliance with
any such request. Each party hereto acknowledges that the remedy
at law for any breach by a party of its obligations under this
section is inadequate and that the other parties shall be entitled
to equitable remedies, including injunctive relief, in the event of
breach by any other party.
Section 4.6 Investigation of Financial Statements. USC
agrees to give, and agrees to cause its independent certified
public accountants to give, such assistance to the independent
certified public accountants of SAH, and to employees or
representatives of SAH as it may reasonably request in connection
with their review of the USC Financial Statements. Such review
shall specifically include, without limitation, the right to
examine any notes and work papers related thereto.
Section 4.7 Agreement to Consummate. Subject to the terms
and conditions herein provided, each of the parties hereto agrees
to use reasonable efforts to do all things necessary, proper or
advisable under applicable laws and regulations to consummate and
make effective, as soon as reasonably practicable, the transactions
contemplated by this Agreement, including, but not limited to, the
obtaining of all consents, authorizations, orders and approvals of
any Governmental Body required in connection therewith and
initiating or defending any legal action that is necessary or
appropriate to permit the transactions contemplated hereby to be
consummated. At any time after the Closing Date, if any further
action is necessary, proper or advisable to carry out the purposes
of this Agreement, then, as soon as is reasonably practicable, each
party to this Agreement shall take, or cause its proper officers to
take, such action. No party to this Agreement shall take or cause
to be taken any action that would cause the representations or
warranties expressed herein to be untrue or incorrect on the
Closing Date.
Section 4.8 Agreement Regarding Brokers. Each party agrees
that he, she or it will pay or dispute, and hold the other parties
harmless from, any claims of brokers or others for finder's or
brokerage fees asserted as a result of representations by such
party to such brokers or others, regardless of whether the
existence of such brokers or others are disclosed herein.
Section 4.9 Notice. USC and the Shareholders shall
promptly give notice to SAH upon becoming aware of the occurrence
or failure to occur, or the impending or threatened occurrence or
failure to occur, of any event that would cause or constitute, any
of their representations or warranties being or becoming untrue.
SAH will promptly give notice to USC and the Shareholders upon
becoming aware of the occurrence or failure to occur, of any event
that would cause or constitute, any of their representations or
warranties being or becoming untrue.
Section 4.10 Public Announcements. Neither USC nor the
Shareholders shall issue any press release or make any public
statement with respect to this Agreement or the transactions
contemplated hereby. SAH may disclose this transaction at any
time.
Section 4.11 Delivery of USC Disclosure Schedules. USC and the
Shareholders shall deliver to SAH the USC Disclosure Schedules and
all other documents, schedules, financial statements and appraisals
required hereunder no later than July 21, 1995. SAH may notify the
Shareholders at any time within 45 days after delivery of any
matter disclosed by such USC Disclosure Schedules or other
documents, schedules, financial statements and appraisals which
does not meet the satisfaction of SAH, whereupon SAH may terminate
this Agreement without further force or effect.
Section 4.12 NTS Logo and Service Mark. Nothing in this
Agreement shall be construed to transfer any statutory or common
law interest whatsoever in the NTS Communications service mark or
logo as the same are registered with the United States Patent and
Trademark Office under registration numbers 1,293,303; 1,296,928
and 1,798,210 (the "NTS Rights") to SAH or any other party.
ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING
Section 5.1 General Conditions. Consummation of the
Transactions shall be subject to the fulfillment at the Closing
Date of each of the following conditions:
(a) No Injunction. No court having jurisdiction shall
have issued, to the knowledge of SAH, USC or any Shareholder,
an injunction preventing the consummation of the Transaction
that shall not have been stayed or dissolved at the Closing
Date.
(b) HSR Act. The waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 shall have expired
or been terminated and no action shall have been instituted by
either the United States Department of Justice or the Federal
Trade Commission to prevent the consummation of the
transactions contemplated by this Agreement or to modify or
amend such transactions in any material manner or, if any such
action shall have been instituted, it shall have been
withdrawn or a final judgment shall have been entered against
such Department or Commission, as the case may be.
(c) Proceedings. All proceedings taken or to be taken
in connection with the transactions contemplated hereby, and
all documents incident thereto shall be reasonably
satisfactory in form and substance to the parties and their
counsel, and the parties and their counsel shall have received
all such counterpart originals or certified or other copies of
such documents as the parties or their counsel may reasonably
request.
(d) Employment and Nonsolicitation Agreements. The
appropriate parties shall have executed the Employment
Agreement and the Nonsolicitation Agreements.
Section 5.2 Conditions to Closing in Favor of USC.
Consummation of the Transactions shall be subject to the
fulfillment, to the satisfaction of USC, or written waiver, at or
before the Closing Date, of each of the following conditions:
(a) Representations and Warranties of SAH. The
representations, warranties and statements of SAH contained in
this Agreement, the exhibits hereto and the SAH Disclosure
Schedule, shall be complete and accurate as of the date of
this Agreement and shall also be complete and accurate at and
as of the Closing Date, except for changes contemplated by
this Agreement, as if made on the Closing Date; and SAH shall
have performed or complied with all agreements and covenants
required by this Agreement to be performed or complied with by
them at or prior to the Closing Date.
(b) SAH Officer's Certificates. SAH shall have
delivered to the Shareholders a certificate, dated the Closing
Date, of the President of SAH to the effect that (a) he is
familiar with the provisions of this Agreement and (b) the
conditions specified in Section 5.1 and in paragraph (a) of
this Section 5.2 have been satisfied in all material respects.
(c) Governmental Consents, Authorizations, Etc. All
material consents, authorizations, orders or approvals of, and
filings or registrations with, and any permits, licenses or
other authorizations required by, any applicable Governmental
Body that are required for, or in connection with, the
execution and delivery of this Agreement by USC and the
consummation by USC of the transactions contemplated hereby
shall have been obtained or made.
Section 5.3 Conditions to Closing in Favor of SAH.
Consummation of the Transactions shall be subject to the
fulfillment, to the satisfaction of SAH, or its written waiver, at
or before the Closing Date of the following conditions:
(a) Copies of Resolutions of USC. USC shall have
furnished SAH with copies of resolutions duly adopted by the
Board of Directors and Shareholders approving the execution
and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, certified as of the Closing
Date by the Secretary or an Assistant Secretary of USC.
(b) Opinion of Counsel for USC and the Shareholders.
USC and the Shareholders shall have furnished SAH with an
opinion dated the Closing Date of John Vickers III, Esq.,
counsel for USC and Shareholders, in form attached hereto as
Exhibit 5.3(b).
(c) Representations and Warranties of USC and
Shareholders. The representations, warranties and statements
of USC and Shareholders contained in this Agreement, the
exhibits hereto and the USC Disclosure Schedule shall be
complete and accurate as of the date of this Agreement and
shall also be complete and accurate at and as of the Closing
Date, except for changes contemplated by this Agreement, as if
made at and as of the Closing Date; and USC and each of the
Shareholders shall have performed or complied with all
agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing
Date.
(d) USC Officers' and Shareholders' Certificate. USC
and each of the Shareholders shall have delivered to SAH a
certificate, dated the Closing Date (and, with respect to USC
and NTS, signed by the President and Secretary of each such
entity) to the effect that (a) they are familiar with the
provisions of this Agreement and (b) the conditions specified
in Section 5.1 and in paragraph (c) of this Section 5.3 have
been satisfied.
(e) Governmental Consents, Authorizations, Etc. All
material consents, authorizations, orders or approvals of, and
filings or registrations with, and any permits, licenses or
other authorizations required by, any applicable Governmental
Body that are required for or in connection with, the
execution and delivery of this Agreement by SAH and the
consummation by SAH of the transactions contemplated hereby
shall have been obtained or made.
(f) Legislation. No law or legally binding regulation
shall have been enacted that does or would prohibit, restrict
or delay consummation of the Transactions or any of the
conditions to the consummation of the Transactions or that
does or would have a Material Adverse Effect on USC or any of
its Subsidiaries.
(g) Financing The proceeds of the Financing necessary to
consummate the Transactions contemplated by this Agreement, on
terms satisfactory to SAH shall have been obtained by SAH.
For purposes hereof, the term "Financing" shall mean the
obtaining of funds through borrowings, private placements, or
other means, for the purpose of consummating the Transactions
contemplated by this Agreement.
(h) Litigation. There shall be no effective injunction,
writ or preliminary restraining order or any other order of
any nature issued by a court or governmental agency of
competent jurisdiction restraining or prohibiting consummation
or altering the terms of any of the transactions provided for
herein, or actions seeking damages based upon the foregoing
which SAH reasonably deems material.
(i) No Adverse Change. There shall have occurred no
adverse change (whether or not covered by insurance) in the
assets or financial condition of USC or its Subsidiaries since
June 30, 1995.
(j) Financial Ratios of USC. At Closing, the Working
Capital of USC will be greater than $0. For purposes hereof,
Working Capital means (i) current assets (herein being defined
as cash and cash equivalents, accounts receivable (net of
allowance for bad debt), inventory, prepaid expenses and
deferred income taxes) less (ii) current liabilities (herein
being defined as accounts payable, accrued expenses, taxes and
all other current liabilities according to GAAP.
(k) Purchaser's Investigation. The investigations by
Purchaser and its representatives in connection with the
proposed Transactions shall not have caused Purchaser, or its
representatives to become aware of any facts or circumstances
(even if such facts or circumstances were previously disclosed
to the Purchaser in the USC Disclosure Schedule or elsewhere
in the Operative Documents) which relate to the business,
operations, assets, properties, liabilities, financial
conditions, results of operation or affairs of USC or its
Subsidiaries that, in the sole judgment of Purchaser make it
inadvisable for Purchaser to proceed with the Transactions
contemplated by this Agreement.
(l) Debt. At Closing, USC and its Subsidiaries shall
have no debt or indebtedness of any kind or nature except as
disclosed in the Financial Statements.
(m) Appraisals. USC shall have obtained appraisals of
the fair market value of all of the personal and real property
of USC and any of its Subsidiaries which had an initial cost
in excess of $10,000 and such appraisal shall be delivered to
and found to be reasonably satisfactory by SAH. All of the
costs of such appraisals shall be borne by the Shareholders
and not USC or any of its Subsidiaries.
(n) Audited Financial Statements. The Shareholders and
USC shall cause USC's auditors to deliver to SAH revised
Financial Statements which have been audited without
qualification and do not show any deviation or departure from
GAAP and specifically, without limitation, shall properly
reflect federal income tax liabilities in accordance with GAAP
and such revised Financial Statements for the years ended (and
as of) December 31, 1992, December 31, 1993 and December 31,
1994. All of the costs associated with the audit shall be
borne by the Shareholders and not USC or any of its
Subsidiaries. Such revised Financial Statements shall be
found to be satisfactory to SAH in its sole and absolute
discretion.
(o) Employee Terminations. At or prior to the Closing,
USC shall have caused those employees listed by SAH on
Schedule 5.3(o) hereto to be terminated by USC. All of such
employees shall have been employees "at will" under Texas law
and shall, in connection with such termination, receive no
more than standard severance benefits in connection with such
termination. The USC Disclosure Schedule provides a list of
the severance benefits (if any) provided to each such
employee.
(p) Delivery of Documents. USC and the Shareholders
shall have timely delivered the USC Disclosure Schedules, the
NTS Side Letter Agreement in the form of Exhibit 5.3(p) hereto
and all other documents, schedules, financial statements and
appraisals required hereunder to SAH.
(q) Approvals. The Transactions shall have been
approved and adopted by a majority of the full Board of
Directors of the Corporation and by the requisite vote of the
shareholders of SAH.
(r) Other Matters. USC and Shareholders shall have
delivered to SAH, in form and substance reasonably
satisfactory to counsel for SAH, such certificates and other
evidence as SAH may reasonably request as to the satisfaction
of the conditions contained in this Section 5.3.
ARTICLE 6. CLOSING DATE AND TERMINATION OF AGREEMENT
Section 6.1 Closing Date.
(a) Subject to the right of the Purchaser and Sellers to
terminate this Agreement pursuant to Article 7 hereof, the
closing for the consummation of the transactions contemplated
by this Agreement (the "Closing") shall, unless another date
or place is agreed to in writing by USC and SAH, take place at
the offices of Arter, Hadden, Johnson & Bromberg at 10:00 a.m.
on such date as the parties may agree upon in writing (the
"Closing Date").
(b) At the Closing, USC and the Shareholders, as
applicable, shall deliver, or cause to be delivered to the
Purchaser, the following:
(1) the original stock certificates representing
the Stock, together with stock powers duly endorsed in
blank;
(2) the opinion of counsel for USC and the
Shareholders referred to in Section 5.3(b);
(3) the certificate referred to in Section 5.3(d),
dated as of the Closing Date;
(4) resignations of the directors and officers of
USC and Subsidiaries;
(5) the Employment Agreements;
(6) the Nonsolicitation Agreements;
(7) certified copies of the resolutions of the
Board of Directors, authorizing the execution, delivery
and performance of this Agreement; and
(8) the corporate minute books, stock transfer
ledgers, blank certificate books and corporate seals of
USC and its Subsidiaries.
(c) At the Closing, Purchaser shall cause to be
delivered to Shareholders the following:
(1) the certificate referred to in Section 5.2(b)
dated as of the Closing Date;
(2) certified copies of the resolutions of the
Board of Directors of Purchaser, authorizing the
execution, delivery and performance of this Agreement.
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by mutual consent of the Shareholders and the Boards
of Directors of SAH and USC;
(b) by Shareholders if any representation or warranty of
SAH or by SAH if any representation or warranty of USC or any
Shareholder contained herein shall have been incorrect or
breached in any material respect, as to which notice shall
have been given to such party, and shall not have been cured
or otherwise resolved to the reasonable satisfaction of the
other party on or before the Closing Date, or by either
Shareholders or SAH if any condition to the consummation of
the transactions contemplated hereunder that must be fulfilled
to its satisfaction has (in the good faith judgment of all of
the Shareholders or a majority of the Board of Directors of
SAH) become impractical to be fulfilled;
(c) by either SAH or Shareholders if any permanent
injunction or other order of a court or other competent
authority preventing the consummation of the Transactions
shall have become final and non-appealable; or
(d) by SAH or Shareholders if the Closing has not
occurred by July 31, 1995; provided, however, that such date
may be extended by written agreement between the parties and
provided, further, that no party shall be permitted to
terminate hereunder if such party is in violation of this
Agreement.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement as provided herein, this Agreement
shall become wholly void and have no further force and effect
except as hereinafter provided; and there shall be no liability on
the part of Shareholders, USC, SAH (or their respective officers of
directors) except to comply with the confidentiality provisions of
Section 4.5 hereof, to pay the fees and expenses as apportioned in
Section 9.2 and except as otherwise provided herein. Nothing
contained herein shall relieve any party from liability for its
breach of this Agreement.
Section 7.3 Amendment. This Agreement and the exhibits and
schedules hereto may be amended by the parties hereto at any time
prior to the Closing Date; provided, however, that any amendment
must be by an instrument or instruments in writing signed and
delivered on behalf of each of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the
Closing Date, any party hereto that is entitled to the benefits
hereof (with respect to any such corporate party by action taken by
its Board of Directors or a duly authorized officer), may (a)
extend the time for the performance of any of the obligations or
other acts of any of the other parties hereto, (b) in whole or in
part, waive any inaccuracy in the representations and warranties of
any of the other parties hereto contained herein or in any exhibit
or schedule hereto or in any document delivered pursuant hereto,
and (c) in whole or in part, waive compliance with any of the
agreements of any of the other parties hereto or conditions
contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid as set forth in an
instrument in writing signed and delivered on behalf of such party.
ARTICLE 8. INDEMNIFICATION
Section 8.1 Indemnity.
(a) Shareholders jointly and severally agree to
indemnify and hold Purchaser, its officers, directors, agents,
attorneys and accountants ("Purchaser Indemnitees") harmless
from any and all damages, losses which shall include any
diminution in value, liabilities (joint or several), payments,
obligations, penalties, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or
expenses (including without limitation, fees, disbursements
and expenses of attorneys, accountants and other professional
advisors and of expert witnesses and costs of investigation
and preparation) of any kind or nature whatsoever
(collectively "Damages"), directly or indirectly resulting
from, relating to or arising out of:
(i) any breach or nonperformance (partial or total)
of or inaccuracy in any representation or warranty or
covenant or agreement of any of Shareholders or USC
contained in any Operative Document;
(ii) any breach or nonperformance, partial or total,
by Sellers of any covenant or agreement of any of
Shareholders or USC (or any Affiliate thereof) contained
in any Operative Document;
(iii) all claims based on any Plans of
whatsoever nature (including all liabilities to any
Person under ERISA and all liabilities to any
Governmental Body) or for salary or other compensation
and benefits attributable to service or to or employment
by Seller prior to the Closing;
(iv) any losses or costs of defending against any
claims which may be made against Purchaser by any Person
claiming violations of any local, state, or federal laws
relating to the employment relationship, including, but
not limited to, wages, hours, concerted activity,
nondiscrimination, occupational health and safety and the
payment and withholding of Taxes, where such claims arise
out of circumstances occurring prior to the Closing Date.
USC shall have the right to control any defense of any
Claim for which SAH may seek indemnification except for
those defenses raised in response to any claim made by
any Person which is a party to this Agreement or an
Affiliate thereof.
(b) Subject to Section 8.1(c) hereof, SAH shall
indemnify and hold the Shareholders and their representatives,
officers, directors, agents, attorneys and accountants
("Seller Indemnitees") harmless from, any and all Damages
resulting from or arising out of any breach or nonperformance
(partial or total) of any representation or warranty, covenant
or agreement of SAH contained in this Agreement or any other
Operative Document.
(c) Each Shareholder shall retain liability, and shall
indemnify SAH, for the payment of any Tax liabilities of USC
with respect to its assets and the conduct of its Business
during all periods ending as of or prior to the Closing.
(d) Each of the Shareholders acknowledges that in
connection with this transaction SAH will be required to file
a public report of Form 8-K reporting the transaction and, in
connection therewith, will be required to supply certain
financial data concerning USC and each of its Subsidiaries.
Each of the Shareholders agrees that he, she or it will be
solely responsible for any and all costs concerning the
preparation of such financial data and the related report on
Form 8-K as the financial data relates to USC. The
Shareholders shall be jointly and severally liable for such
costs, but amongst themselves, such liability shall be
apportioned as set forth in Section 1.5(b) hereof. Each of
the Shareholders agree to reimburse SAH for the costs of such
audit/"agreed to procedures" and related reports within thirty
(30) days of receipt of notice therefor as those costs relate
to the USC financial information. In the event such amounts
are not promptly remitted to Purchaser, Purchaser shall be
entitled to directly deduct such amounts from the Escrow
Funds.
Section 8.2 Indemnification if Negligence of Indemnitee.
The indemnification provided in this Article 8 shall be applicable
whether or not negligence of the applicable Purchaser Indemnitee or
Seller Indemnitee is alleged or proven.
Section 8.3 No Third Party Beneficiaries. The foregoing
indemnification is given solely for the purpose of protecting the
parties to this Agreement and the Purchaser Indemnitees and the
Seller Indemnitees and shall not be deemed extended to, or
interpreted in a manner to confer any benefit, right or cause of
action upon, any other Person.
Section 8.4 Remedies of SAH. In any proceeding by SAH to
assert or prosecute any claims under, or to otherwise enforce, this
Agreement, the Shareholders covenant and agree that they shall not
assert as a defense or bar to recovery by SAH, and hereby waive any
right to so assert such defense or bar such recovery, that (a)
prior to Closing, USC shall have had knowledge of the circumstances
giving rise to the claim being pursued by it; (b) prior to Closing,
USC engaged in conduct or took action that caused or brought about
the circumstances giving rise to its claim, or otherwise
contributed thereto; (c) USC is estopped from asserting or
recovering upon its claim by reason of having joined in the
representations, warranties and covenants made by the parties in
this Agreement; or (d) the Shareholders have a right of
contribution from USC to the extent that there is any recovery
against them.
ARTICLE 9. GENERAL PROVISIONS AND OTHER AGREEMENTS
Section 9.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if and when
delivered personally or transmitted by telex, telecopy or telegram,
mailed by registered or certified mail (return receipt requested)
or sent by a recognized next business day courier to the following
persons at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) If to SAH:
1912 Avenue K, Suite 100
Plano, Texas 75074-5959
Attention: Jack W. Matz, Jr.
Telecopy: (214) 881-0656
with a copy to:
Arter, Hadden, Johnson & Bromberg
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attention: Stanley R. Huller, Esq.
Telecopy: (214) 741-7139
(b) If to USC:
1107 Austin
Leveland, Texas 79336
Attention: Howard Maddera
Telecopy: (806) 894-4793
with a copy to:
John Vickers, III
555 Bear Lane, Suite 900
Corpus Christi, Texas 78405
(c) If to the Shareholders:
William L. Johnson
4613 86th Street
Lubbock, Texas 79424
Telecopy: (806) 894-4793
with copies to:
Marianne Reed
1626 Cactus Drive
Leveland, Texas 79336
Telecopy: (806) 894-4793
NTS Communications, Inc.
1220 Broadway
Lubbock, Texas 79401
Attention: Barbara Andrews
Telecopy: (806) 762-4350
Section 9.2 Fees and Expenses. The Shareholders shall pay
all fees, costs and expenses (including without limitation, those
of accountants, appraisers and attorneys) of USC and their own
fees, costs and expenses (including without limitation, those of
accountants and attorneys) incurred in connection with or related
to the preparation, negotiation, execution, delivery, satisfaction,
compliance and consummation of this Agreement and the transactions
contemplated hereby and the closing conditions hereunder. SAH
shall pay its own such fees, costs and expenses (including without
limitation, those of accountants and attorneys).
Section 9.3 Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Terms such as
"herein," "hereof," "hereinafter" refer to this Agreement as a
whole and not to the particular sentence or paragraph where they
appear, unless the context otherwise requires. Terms used in the
plural include the singular, and vice versa, unless the context
otherwise requires.
Section 9.4 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 9.5 Miscellaneous. This Agreement (a) constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof; (b) is not
intended to and shall not confer upon any other person any rights
or remedies hereunder or otherwise with respect to the subject
matter hereof, except for rights that may expressly arise as a
consequence of the Transaction; (c) shall not be assigned by
operation of law or otherwise; (d) has been drafted by all of the
parties to this Agreement and should not be construed against any
of the parties hereto; and (e) shall be governed in all respects,
including validity, interpretation and effect by the substantive
laws of the State of Texas without regard to conflict of law
provisions.
Section 9.6 Survival. No investigation by the parties
hereto made heretofore or hereafter shall affect the
representations and warranties of the parties that are contained
herein, and each such representation and warranty shall survive
such investigation and the consummation of the transaction
contemplated by this Agreement for a period of two (2) years.
Section 9.7 Inducement of Clients. Each of the
Shareholders agrees that for a period of five (5) years after the
Closing Date that such Shareholder shall not, directly or
indirectly, solicit or interfere with the clients, employees and
business relationships of USC or its Subsidiaries. For the purpose
of the foregoing sentence the term "clients" shall mean any
individual, proprietorship, partnership, corporation, association
or other entity that is presently (or within the last three years
has been) solicited or served by USC or its Subsidiaries. Without
in any manner limiting the scope of the foregoing provisions, if
any Shareholder engages in any of the following acts, such
Shareholder shall be construed to have violated this covenant and
agreement:
(a) Induces or attempts to induce any client or
prospective client to withdraw, curtail, divert or cancel its
business or any agreements with SAH, USC or its Subsidiaries;
(b) Induces or attempts to induce any employee of USC or
its Subsidiaries to terminate his or her employment therewith;
(c) Induces or attempts to induce any independent
contractor providing services on behalf of SAH, USC or its
Subsidiaries to terminate his, her or its business
relationship therewith;
(d) Develops any material or rights (whether
contractual, property or otherwise) utilizing the confidential
information of SAH, USC or its Subsidiaries; or
(e) Disrupts in any manner whatsoever any of SAH's,
USC's or its Subsidiaries existing business relationships.
Section 9.8 Independent Obligations of Shareholders. Each
of the Shareholders acknowledges and agrees that his, her or its
execution hereof constitutes their respective agreement to be bound
irrespective of any other Shareholder's execution hereof. In no
event shall SAH be bound by the terms hereof unless Shareholders
owning in excess of 80% of the outstanding shares of Stock agree to
be bound by the terms hereof. In no event shall any Shareholder
who fails to execute this Agreement be entitled to any payment
hereunder or under any document or transaction contemplated hereby.
The parties acknowledge that the fair value of any shares
transferred hereunder may be substantially less in the event such
transfer was consummated without the benefit of the terms and
conditions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or have caused this Agreement to be executed by their
duly authorized officers.
SA HOLDINGS, INC.
By: ________________________________
Name: Jack W. Matz, Jr.
Title: Chairman & CEO
U. S. COMMUNICATIONS, INC.
By: ________________________________
Name: Bill Johnson
Title: President
SHAREHOLDERS:
________________________________________
BILL L. JOHNSON
________________________________________
HOWARD MADDERA
________________________________________
MARIANNE REED
NTS COMMUNICATIONS, INC.
By: ______________________________
Name: Barbara Andrews
Title: President
SPOUSAL CONSENTS
The undersigned, each in their individual capacity as the
spouse of the Shareholder listed opposite their respective name, do
hereby execute this Agreement below for the purposes of (i)
indicating his or her understanding of, and binding him or her to
perform in accordance with the provisions of this Agreement, (ii)
binding his or her community property interest, if any, in the
Stock now ow hereafter owned by his or her spouse and (iii)
acknowledging that if the Stock owned by his or her spouse is
community property, it is the special community property of such
spouse, subject to the exclusive control and dominion of said
spouse.
Spouse Shareholder Date
Shellie Johnson Bill L. Johnson
Fern Maddera Howard Maddera
Marianne Reed
<PAGE>
STOCK PURCHASE AGREEMENT
Exhibit 5.1(d)(1) to Stock Purchase Agreement
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of ___________, 1995 (the "Effective Date"), by
and between WILLIAM JOHNSON, an individual ("Employee"), and U.S.
COMMUNICATIONS, INC. ("Employer").
RECITALS:
WHEREAS, Employer desires to employ Employee upon the terms
set forth in this Agreement; and
WHEREAS, Employee desires to be employed by Employer upon the
terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, Employer and Employee agree as follows:
AGREEMENTS:
1. EMPLOYMENT.
Subject to the terms and conditions stated in this Agreement,
Employer hereby employs Employee and Employee hereby accepts such
employment.
2. DUTIES OF EMPLOYEE.
(a) During the Term of Employment (hereinafter defined),
Employee shall devote all of his working time and attention to the
performance of the executive, management, consulting, product
design, marketing, customer development, or other duties related to
the business of Employer that the Board of Directors of the
Employer may from time to time specify and which are consistent
with the position of a senior executive of such Employer.
(b) Employee acknowledges and agrees that the
performance of his duties may entail significant travel and other
promotional activities on behalf of Employer.
(c) Employee acknowledges and agrees that the conduct of
the business of Employer shall, at all times, be within the
exclusive control of the Board of Directors of such Employer.
3. BASE SALARY.
As compensation for Employee's services rendered hereunder,
Employers shall pay Employee a minimum aggregate annual base
salary equal to $180,000 for the first year of service and $150,000
for the second and, if extended, succeeding years of service. Such
salary shall be paid in accordance with customary payroll practices
of Employer from time to time in effect but no less frequently than
in equal monthly payments.
4. OTHER BENEFITS.
During the Term of Employment:
(a) Vacations. Employee shall be entitled to two (2)
weeks vacation each year during the term hereof (all of which
vacation must be utilized in the respective calendar year in which
it accrues).
(b) Standard Company Benefits. Employee will be
entitled to all benefits, if any, ordinarily accorded to, and will
participate in all employee plans ordinarily participated in by
full-time employees of Employer, to the extent Employee is eligible
under the terms of such plans, including without limitation all
health, medical, dental, retirement, life and disability insurance
plans established by Employer, in accordance with the terms of such
plans. Employee shall be entitled to participate in any pension and
retirement plans, stock option or ownership plans, and other fringe
benefit plans as are or may be made available from time to time to
executive or other salaried employees of Employer to the extent
eligible under the terms of such plans.
5. TERM OF EMPLOYMENT.
Unless sooner terminated in accordance with this Agreement,
the Term of Employment (herein so called) shall become effective as
of the Effective Date and shall continue through any and all times
through and including the date which is _____ (___) years after the
Effective Date of this Agreement provided, however, that the
Employer shall have the option but not the obligation to extend the
Term of Employment for an additional one (1) year by providing
Employee written notice of its intention to do so at least ninety
(90) days prior to the expiration of such initial two (2) year
period, whereupon the terms and conditions of this Agreement
governing the second year of service shall similarly govern the
third year of service.
6. TERMINATION BY EMPLOYER.
(a) With Notice. The Term of Employment may be
terminated by Employer at any time, with or without cause, by
written notice to Employee.
(b) Automatic. This Agreement shall automatically
terminate upon the death of Employee.
(c) Effect. Upon termination of the Term of Employment
for any reason, whether by Employee or an Employer and whether with
or without cause, all continuing rights and obligations hereunder
shall cease except for (i) the rights and obligations arising under
Paragraph 4 of this Agreement to the extent the agreements
governing any such benefits and plans so require, (ii) the rights
and obligations under this Subparagraph 6(c), and (iii) the rights
and obligations under Paragraphs 7, 8, and 9 hereof. The covenants
set forth in Paragraphs 7, 8, and 9 shall be construed as
agreements independent of any other provision of this Agreement.
The existence of any claim or cause of action against Employer,
whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of said covenants.
Employee expressly authorizes Employer to deduct from any
compensation payable to Employee on the expiration or termination
of this Agreement, the value of any monetary advances or loans
received by Employee from any Employer, the value of any personal
expenses of Employee borne by Employer which are outstanding, and
the value of any property or materials belonging to any Employer
which are not returned to such Employer upon expiration or
termination.
7. CONFIDENTIALITY COVENANTS.
During the Term of Employment (except with respect to
disclosures occurring during the normal course of Employee
performing his services in accordance herewith) and continuing in
perpetuity, Employee shall:
(a) preserve as confidential all knowledge and
information pertaining to the business, affairs, directors,
officers, shareholders, employees, and other personnel of Employer
and all affiliates of the Employer obtained by Employee from any
source whatsoever and which is not a matter of public knowledge,
unless disclosure is otherwise required by applicable law, and
(b) not, except on behalf of Employer during the Term of
Employment, use Employer's records, documents, contracts, writings,
data or other information, whether or not same is in written or
other recorded form, unless they are a matter of public knowledge.
Without limiting the generality of the foregoing, the
prohibitions contained above shall be operative, whether inside or
outside the United States, with respect to any information or
knowledge that any Employer now or hereafter may deem to be
confidential, including, without limitation, the following
information with respect to Employer: (i) directors, officers,
shareholders, employees, and other personnel; (ii) operations or
planning with respect to the business of Employer, including
customer lists, lists of suppliers, and information pertaining to
potential customers or suppliers; (iii) bids or progress under, or
negotiations pursuant to, government or other contracts, or with
respect to facilities and equipment, including contents of any
manual, practice or procedure, or operating revenue, expense,
private or public debt or equity financing or banking, accounting,
or financial matters; (iv) advertising or promotional plans or
programs; (v) matters contained in applications to or matters or
proceedings pending under the jurisdiction of any regulatory agency
or court, including those that are only threatened; (vi) any
system, procedure, or administrative operation; (vii) plans for the
extension of the present business or commencement of a new
business; (viii) any trademarks or licenses owned or utilized by
Employer or work in progress with respect to such items and (ix)
plans with respect to business combinations or reorganizations.
8. NONCOMPETITION COVENANT.
During the Term of Employment and continuing during the
Restricted Period, Employee hereby agrees that he shall not Engage
in a Competing Business. For the purposes of this Agreement, the
term "Restricted Period" shall mean, in the event of the
termination of the Term of Employment for any reason, any and all
times through and including the date which is five (5) years
following the Effective Date of this Agreement. The term "Engage"
shall mean the Employee, directly or indirectly, being a principal,
owner, officer, director, employee, shareholder (other than a
holder of fewer than 5% of the outstanding shares of a
publicly-traded company), consultant, partner, joint venturer,
agent, or equity owner or having any other capacity whatsoever in
any business enterprise (regardless of whether it is a corporation,
partnership, sole proprietorship or business association). The term
"Competing Business" shall mean any business enterprise which is
engaged in the Business of Employer in any area of the world in
which Employer or any of its affiliates are then conducting or
planning to conduct business. The term "Business of Employer" shall
mean the type of business engaged in or proposed to be engaged in
by Employer at the time of Employee's termination.
9. INDUCEMENT OF CLIENTS.
During the Term of Employment and continuing during the
Restricted Period, Employee hereby agrees that he shall not,
directly or indirectly, solicit or interfere, for the benefit of
any Competing Business or in any manner materially detrimental to
Employer, with the Clients, employees and business relationships of
Employer. For purposes of the foregoing sentence, the term
"Clients" shall mean any individual, proprietorship, partnership,
corporation, association, or other entity that is solicited or
served by Employer or its affiliates during the Term of Employment
and within three (3) years prior to the commencement thereof.
Without in any manner limiting the scope of the foregoing
provisions, if the Employee engages in any of the following acts he
shall be considered to have violated this covenant:
(a) induces or attempts to induce any Client or
prospective Client to withdraw, curtail, divert, or cancel its
business or any agreements with Employer or its affiliates;
(b) induces or attempts to induce any employee of
Employer or its affiliates to terminate his or her employment
therewith;
(c) induces or attempts to induce any independent
contractor providing services on behalf of Employer or its
affiliates to terminate his or her business relationship therewith;
(d) develops any materials utilizing the confidential
information of an Employer or its affiliates, except for the
benefit of Employer or its affiliates; or
(e) disrupts in any manner whatsoever any of Employer's
or its affiliate's existing business relationships.
10. REMEDIES.
Without limiting any other rights of Employer, in the event of
breach or threatened breach by Employee of any provision in
Paragraphs 7, 8, or 9 hereof, Employer shall be entitled to (i)
relief by temporary restraining order, temporary injunction,
permanent injunction or otherwise, as issued by a court of law or
equity, (ii) recovery of all attorneys' fees and costs incurred by
Employer in obtaining such relief, and (iii) any other legal and
quitable relief to which it may be entitled, including any and all
monetary damages which any Employer may incur as a result of said
breach or threatened breach or violation. Employer may pursue any
remedy available to it, including declaratory relief, concurrently
r consecutively in any order as to any breach, violation, or
threatened breach or violation, and the pursuit of one such remedy
at any time will not be deemed an election of remedies or waiver of
the right to pursue any other remedy. Employer has the right to
pursue partial enforcement and/or to seek declaratory relief
regarding the enforceable scope of this Agreement without penalty
nd without waiving Employer's right to pursue any other available
remedy subsequent to or concurrently with declaratory relief. The
provisions of this Paragraph 10 shall not in any manner limit the
rights and remedies available to Employer for any breach of the
terms of this Agreement.
11. NO BREACH.
Employee represents and warrants that the execution and
delivery of this Agreement and his performance and consummation of
the transactions contemplated under those documents, do not, and
will not, conflict, breach, or constitute a default under any other
agreement, instrument, covenant or restriction that Employee is a
party to or otherwise bound by.
12. NOTICES.
Any notice or request herein required or permitted to be given
to either party hereunder shall be given in writing and shall be
personally delivered or sent to such party by prepaid mail at the
address of such party set forth below or at such other address as
such party may designate by written communication to the other
party to this Agreement:
If to Employer: U. S. Communications, Inc.
1107 Austin
Leveland, Texas 79336
Attention: President
With copies to:
SA Holdings Inc.
1912 Avenue K, Ste. 100
Plano, Texas 75074-5959
Attn: Jack W. Matz, Jr.
and
Arter, Hadden, Johnson & Bromberg
1717 Main Street, Suite 4100
Dallas, Texas 75201-4605
Attention: Mark S. Solomon, Esq.
If to Employee: William Johnson
1107 Austin
Leveland, Texas 79336
Each notice given in accordance with this paragraph shall be deemed
to have been given, if personally delivered, on the date personally
delivered or, if mailed, on the fifth day following the day on
which it is deposited in the United States mail, certified or
registered mail, return receipt requested, with postage prepaid.
13. HEADINGS.
The headings of the paragraphs of this Agreement have been
inserted for convenience of reference only and shall in no way
restrict or modify any of the terms or provisions hereof.
14. SEVERABILITY.
If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a
part of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each
such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
15. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof.
16. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of each of the parties hereto and their respective successors,
heirs, assigns, and legal representatives, but Employee may not
assign this Agreement nor any rights or obligations hereunder
without the prior consent in writing of the Employers. This
Agreement may be assigned by any Employer to any party who acquires
substantially all of the assets of such Employer or who merges or
consolidates with such Employer; provided that such party agrees to
assume and be liable for all of the obligations of such Employer
hereunder.
17. ATTORNEYS' FEES.
If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which he or it may
be entitled.
18. WAIVERS.
One or more waivers of any covenant, term, or provision of
this Agreement by either party hereto shall not be construed as a
waiver of the breach of any other covenant, term, or provision or
of any subsequent breach of the same or any other covenant, term,
or provision. The consent or approval of either party hereto with
respect to the act of the other party hereto shall not be deemed to
waive or render unnecessary consent to or approval of any
subsequent similar act. No custom or practice of the parties shall
constitute a waiver of either party's rights to insist upon strict
compliance with the terms hereof.
19. GOVERNING LAW.
This Agreement shall be governed in all respects, including
validity, interpretation and effect by the laws of the State of
Texas.
EXECUTED to be effective as of the date first above written.
EMPLOYEE:
___________________________________
William Johnson
EMPLOYER:
U.S. COMMUNICATIONS, INC.
By:________________________________
Title:_____________________________
<PAGE>
EXHIBIT 5.1(d)(2) TO STOCK PURCHASE AGREEMENT
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (this "Agreement") is made and
entered into as of _______________, 1995 (the "Effective Date"), by
and between BILL L. JOHNSON, ("Shareholder"), and SA HOLDINGS,
INC., a Delaware corporation ("SAH").
R E C I T A L S:
WHEREAS, Shareholder is the holder of certain shares of the
outstanding capital stock of U.S. Communications, Inc., a Delaware
corporation (together, with its Subsidiaries and affiliates,
"USC"); and
WHEREAS, in accordance with the terms of that certain Stock
Purchase Agreement dated as of June 30, 1995 by and between SAH,
USC, the Shareholder and the holders of the remaining capital stock
of USC (the "Stock Purchase Agreement"), the Shareholder, in order
to preserve the value and good will of USC and as a material
inducement for the closing of the Stock Purchase Agreement, has
agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
AGREEMENTS:
ARTICLE I - INDUCEMENT OF CLIENTS
1.1 Nonsolicitation. During the Restricted Period (as
hereinafter defined), the Shareholder hereby agrees that he, she or
it shall not, directly or indirectly, solicit or interfere, for the
benefit of any Competing Business or in any manner detrimental to
SAH or USC, with the Clients, employees and business relationships
of SAH or USC. For purposes of this Agreement, the term "Competing
Business" shall mean any business enterprise which is engaged in
the Business of USC or the business of SAH in any area of the world
in which SAH or USC is then conducting or planning to conduct
business and the term "Clients" shall mean any individual,
proprietorship, partnership, corporation, association, or other
entity that is currently solicited or served by SAH or USC or has
been solicited or served by SAH or USC during the three (3) year
period immediately preceding the Effective Date. Without in any
manner limiting the scope of the foregoing provisions, if the
Shareholder engages in any of the following acts, he, she or it
shall be considered to have violated this covenant:
(a) induces or attempts to induce any Client or
prospective Client to withdraw, curtail, divert or cancel its
business or any agreements with SAH, USC or its Subsidiaries;
(b) induces or attempts to induce any employee of SAH,
USC or its Subsidiaries to terminate his or her employment
therewith;
(c) induces or attempts to induce any independent
contractor providing services on behalf of SAH, USC or its
Subsidiaries to terminate his or her business relationship
therewith;
(d) develops any materials or rights (whether
contractual, property or otherwise) utilizing the confidential
information of SAH, USC or its Subsidiaries, except for the benefit
of SAH or USC; or
(e) disrupts in any manner whatsoever any of SAH's,
USC's or its Subsidiaries existing business relationships.
ARTICLE II - CONFIDENTIALITY
2.1 Confidentiality and Non-Disclosure. The Shareholder
acknowledges and agrees that he, she or it has had and may in the
future have access to certain trade secrets and confidential
information of a proprietary nature to USC. The Shareholder
acknowledges and agrees that all trade secrets and confidential
information are valuable and unique assets of USC or its Clients,
the confidentiality of which is essential to USC's ability to
differentiate its products and services, to compete and to fulfill
its contractual obligations. The Shareholder also acknowledges and
agrees that USC or its Clients will retain a proprietary interest
in such information that will persist beyond termination of his or
her affiliation with USC. The Shareholder agrees that he, she or
it:
(a) will not intentionally disclose such information to
other parties; and
(b) will take reasonable precautions to protect against
the inadvertent disclosure of such information or the theft or
misappropriation of such information by others; and
(c) will make no use of such information except as
requested by SAH.
All documentation relating to the trade secrets and confidential
information of USC or its Clients shall remain the exclusive
property of USC or its Clients and such information shall not be
removed from the premises of USC or its Clients without USC's prior
written consent.
ARTICLE III - NONSOLICITATION FEE
Upon the Closing of the Stock Purchase Agreement, the
Shareholder shall be entitled to a Nonsolicitation Fee as partial
consideration for his, her or its performance under this Agreement
equal to $799,920 payable by check as provided by the appropriate
provisions of the Stock Purchase Agreement.
ARTICLE IV - SHAREHOLDER REPRESENTATION
4.1 No Breach. Shareholder represents and warrants that the
execution and delivery of this Agreement and his, her or its
performance and consummation of the transactions contemplated under
this Agreement, does not and will not, conflict, breach, or
constitute a default under any other agreement, instrument,
covenant or restriction that Shareholder is a party to or otherwise
bound by.
ARTICLE V - ENFORCEMENT OF COVENANTS
5.1 Relief. In the event of breach or threatened breach by
Shareholder of any provision of this Agreement, SAH shall be
entitled to (i) relief by temporary restraining order, temporary
injunction, permanent injunction or otherwise, as issued by a court
of law or equity, (ii) recovery of all attorneys' fees and costs
incurred by SAH in obtaining such relief, and (iii) any other legal
and equitable relief to which it may be entitled, including, but
not limited to, any and all monetary damages which SAH may incur as
a result of said breach or threatened breach or violation. SAH may
pursue any remedy available to it, including declaratory relief,
concurrently or consecutively in any order as to any breach,
violation, or threatened breach or violation, and the pursuit of
one such remedy at any time will not be deemed an election of
remedies or waiver of the right to pursue any other remedy. SAH
has the right to pursue partial enforcement and/or to seek
declaratory relief regarding the enforceable scope of this
Agreement without penalty and without waiving SAH's right to pursue
any other available remedy subject to or concurrently with
declaratory relief. The covenants contained in this Agreement are
independent, and the existence of any claim or cause of action of
the Shareholder against SAH, whether predicated on this Agreement,
the Stock Purchase Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by SAH.
5.2 Extension of Restricted Period for Injunctive Relief. If
the Shareholder violates the restrictive covenants of Article 1
above and SAH brings legal action for injunctive or other relief
under Section 5.1 above, SAH shall not be deprived of the benefit
of the full period of the Restricted Period as a result of the time
involved in obtaining the relief.
ARTICLE VI - TERM
6.1 Term. This Agreement shall commence as of the Effective
Date and shall terminate on the fifth anniversary of the Effective
Date (such time period being referred to as the "Restricted
Period").
ARTICLE VII - MISCELLANEOUS
7.1 Definitions. Terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Stock Purchase
Agreement.
7.2 Illegal, Invalid or Unenforceable Provisions. If any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the
term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of
this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added
automatically, as a part of this Agreement, a provision as similar
in terms to such illegal, invalid, or unenforceable provision as
may be possible and be legal, valid and enforceable. Moreover, if
any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be excessively broad as to time
duration, geographical scope, activity, or subject, it shall be
construed, by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
7.3 Disputes. In the event any party hereto seeks any
judicial determination of any of its rights or obligations
contained herein, the prevailing party or parties in such judicial
determination, whether plaintiff or defendant, shall be entitled to
recover damages, reasonable attorneys' fees, court costs and other
reasonable expenses resulting from such judicial determination on
the basis thereof.
7.4 Notices. In the event a notice or other document is
required to be sent hereunder, such notice or other document shall
be personally delivered or sent by registered or certified mail,
return receipt requested, to the party entitled to receive such
notice or other document at the address reflected in the Stock
Purchase Agreement.
7.5 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject
matter contained herein. This Agreement may be amended from time
to time by an instrument in writing signed by all those who are
parties to this Agreement at the time of such amendment.
7.6 Successors and Assigns. The terms, provisions and
agreements herein contained shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. SAH may assign this
Agreement to any Person without the consent of the Shareholder.
7.7 Waiver of Breach. The waiver by a party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
7.8 Governing Law. THE LAWS OF THE STATE OF TEXAS SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION
OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day
and year first above written.
SHAREHOLDER:
___________________________________
BILL L. JOHNSON
SA HOLDINGS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT 5.1(d)(3) TO STOCK PURCHASE AGREEMENT
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (this "Agreement") is made and
entered into as of _______________, 1995 (the "Effective Date"), by
and between HOWARD MADDERA, ("Shareholder"), and SA HOLDINGS, INC.,
a Delaware corporation ("SAH").
R E C I T A L S:
WHEREAS, Shareholder is the holder of certain shares of the
outstanding capital stock of U.S. Communications, Inc., a Delaware
corporation (together, with its Subsidiaries and affiliates,
"USC"); and
WHEREAS, in accordance with the terms of that certain Stock
Purchase Agreement dated as of June 30, 1995 by and between SAH,
USC, the Shareholder and the holders of the remaining capital stock
of USC (the "Stock Purchase Agreement"), the Shareholder, in order
to preserve the value and good will of USC and as a material
inducement for the closing of the Stock Purchase Agreement, has
agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
AGREEMENTS:
ARTICLE I - INDUCEMENT OF CLIENTS
1.1 Nonsolicitation. During the Restricted Period (as
hereinafter defined), the Shareholder hereby agrees that he, she or
it shall not, directly or indirectly, solicit or interfere, for the
benefit of any Competing Business or in any manner detrimental to
SAH or USC, with the Clients, employees and business relationships
of SAH or USC. For purposes of this Agreement, the term "Competing
Business" shall mean any business enterprise which is engaged in
the Business of USC or the business of SAH in any area of the world
in which SAH or USC is then conducting or planning to conduct
business and the term "Clients" shall mean any individual,
proprietorship, partnership, corporation, association, or other
entity that is currently solicited or served by SAH or USC or has
been solicited or served by SAH or USC during the three (3) year
period immediately preceding the Effective Date. Without in any
manner limiting the scope of the foregoing provisions, if the
Shareholder engages in any of the following acts, he, she or it
shall be considered to have violated this covenant:
(a) induces or attempts to induce any Client or
prospective Client to withdraw, curtail, divert or cancel its
business or any agreements with SAH, USC or its Subsidiaries;
(b) induces or attempts to induce any employee of SAH,
USC or its Subsidiaries to terminate his or her employment
therewith;
(c) induces or attempts to induce any independent
contractor providing services on behalf of SAH, USC or its
Subsidiaries to terminate his or her business relationship
therewith;
(d) develops any materials or rights (whether
contractual, property or otherwise) utilizing the confidential
information of SAH, USC or its Subsidiaries, except for the benefit
of SAH or USC; or
(e) disrupts in any manner whatsoever any of SAH's,
USC's or its Subsidiaries existing business relationships.
ARTICLE II - CONFIDENTIALITY
2.1 Confidentiality and Non-Disclosure. The Shareholder
acknowledges and agrees that he, she or it has had and may in the
future have access to certain trade secrets and confidential
information of a proprietary nature to USC. The Shareholder
acknowledges and agrees that all trade secrets and confidential
information are valuable and unique assets of USC or its Clients,
the confidentiality of which is essential to USC's ability to
differentiate its products and services, to compete and to fulfill
its contractual obligations. The Shareholder also acknowledges and
agrees that USC or its Clients will retain a proprietary interest
in such information that will persist beyond termination of his or
her affiliation with USC. The Shareholder agrees that he, she or
it:
(a) will not intentionally disclose such information to
other parties; and
(b) will take reasonable precautions to protect against
the inadvertent disclosure of such information or the theft or
misappropriation of such information by others; and
(c) will make no use of such information except as
requested by SAH.
All documentation relating to the trade secrets and confidential
information of USC or its Clients shall remain the exclusive
property of USC or its Clients and such information shall not be
removed from the premises of USC or its Clients without USC's prior
written consent.
ARTICLE III - NONSOLICITATION FEE
Upon the Closing of the Stock Purchase Agreement, the
Shareholder shall be entitled to a Nonsolicitation Fee as partial
consideration for his, her or its performance under this Agreement
equal to $799,920 payable by check as provided by the appropriate
provisions of the Stock Purchase Agreement.
ARTICLE IV - SHAREHOLDER REPRESENTATION
4.1 No Breach. Shareholder represents and warrants that the
execution and delivery of this Agreement and his, her or its
performance and consummation of the transactions contemplated under
this Agreement, does not and will not, conflict, breach, or
constitute a default under any other agreement, instrument,
covenant or restriction that Shareholder is a party to or otherwise
bound by.
ARTICLE V - ENFORCEMENT OF COVENANTS
5.1 Relief. In the event of breach or threatened breach by
Shareholder of any provision of this Agreement, SAH shall be
entitled to (i) relief by temporary restraining order, temporary
injunction, permanent injunction or otherwise, as issued by a court
of law or equity, (ii) recovery of all attorneys' fees and costs
incurred by SAH in obtaining such relief, and (iii) any other legal
and equitable relief to which it may be entitled, including, but
not limited to, any and all monetary damages which SAH may incur as
a result of said breach or threatened breach or violation. SAH may
pursue any remedy available to it, including declaratory relief,
concurrently or consecutively in any order as to any breach,
violation, or threatened breach or violation, and the pursuit of
one such remedy at any time will not be deemed an election of
remedies or waiver of the right to pursue any other remedy. SAH
has the right to pursue partial enforcement and/or to seek
declaratory relief regarding the enforceable scope of this
Agreement without penalty and without waiving SAH's right to pursue
any other available remedy subject to or concurrently with
declaratory relief. The covenants contained in this Agreement are
independent, and the existence of any claim or cause of action of
the Shareholder against SAH, whether predicated on this Agreement,
the Stock Purchase Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by SAH.
5.2 Extension of Restricted Period for Injunctive Relief. If
the Shareholder violates the restrictive covenants of Article 1
above and SAH brings legal action for injunctive or other relief
under Section 5.1 above, SAH shall not be deprived of the benefit
of the full period of the Restricted Period as a result of the time
involved in obtaining the relief.
ARTICLE VI - TERM
6.1 Term. This Agreement shall commence as of the Effective
Date and shall terminate on the fifth anniversary of the Effective
Date (such time period being referred to as the "Restricted
Period").
ARTICLE VII - MISCELLANEOUS
7.1 Definitions. Terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Stock Purchase
Agreement.
7.2 Illegal, Invalid or Unenforceable Provisions. If any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the
term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of
this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added
automatically, as a part of this Agreement, a provision as similar
in terms to such illegal, invalid, or unenforceable provision as
may be possible and be legal, valid and enforceable. Moreover, if
any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be excessively broad as to time
duration, geographical scope, activity, or subject, it shall be
construed, by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
7.3 Disputes. In the event any party hereto seeks any
judicial determination of any of its rights or obligations
contained herein, the prevailing party or parties in such judicial
determination, whether plaintiff or defendant, shall be entitled to
recover damages, reasonable attorneys' fees, court costs and other
reasonable expenses resulting from such judicial determination on
the basis thereof.
7.4 Notices. In the event a notice or other document is
required to be sent hereunder, such notice or other document shall
be personally delivered or sent by registered or certified mail,
return receipt requested, to the party entitled to receive such
notice or other document at the address reflected in the Stock
Purchase Agreement.
7.5 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject
matter contained herein. This Agreement may be amended from time
to time by an instrument in writing signed by all those who are
parties to this Agreement at the time of such amendment.
7.6 Successors and Assigns. The terms, provisions and
agreements herein contained shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. SAH may assign this
Agreement to any Person without the consent of the Shareholder.
7.7 Waiver of Breach. The waiver by a party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
7.8 Governing Law. THE LAWS OF THE STATE OF TEXAS SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION
OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
SHAREHOLDER:
___________________________________
HOWARD MADDERA
SA HOLDINGS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT 5.1(d)(4) TO STOCK PURCHASE AGREEMENT
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (this "Agreement") is made and
entered into as of _______________, 1995 (the "Effective Date"), by
and between MARIANNE REED, ("Shareholder"), and SA HOLDINGS, INC.,
a Delaware corporation ("SAH").
R E C I T A L S:
WHEREAS, Shareholder is the holder of certain shares of the
outstanding capital stock of U.S. Communications, Inc., a Delaware
corporation (together, with its Subsidiaries and affiliates,
"USC"); and
WHEREAS, in accordance with the terms of that certain Stock
Purchase Agreement dated as of June 30, 1995 by and between SAH,
USC, the Shareholder and the holders of the remaining capital stock
of USC (the "Stock Purchase Agreement"), the Shareholder, in order
to preserve the value and good will of USC and as a material
inducement for the closing of the Stock Purchase Agreement, has
agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
AGREEMENTS:
ARTICLE I - INDUCEMENT OF CLIENTS
1.1 Nonsolicitation. During the Restricted Period (as
hereinafter defined), the Shareholder hereby agrees that he, she or
it shall not, directly or indirectly, solicit or interfere, for the
benefit of any Competing Business or in any manner detrimental to
SAH or USC, with the Clients, employees and business relationships
of SAH or USC. For purposes of this Agreement, the term "Competing
Business" shall mean any business enterprise which is engaged in
the Business of USC or the business of SAH in any area of the world
in which SAH or USC is then conducting or planning to conduct
business and the term "Clients" shall mean any individual,
proprietorship, partnership, corporation, association, or other
entity that is currently solicited or served by SAH or USC or has
been solicited or served by SAH or USC during the three (3) year
period immediately preceding the Effective Date. Without in any
manner limiting the scope of the foregoing provisions, if the
Shareholder engages in any of the following acts, he, she or it
shall be considered to have violated this covenant:
(a) induces or attempts to induce any Client or
prospective Client to withdraw, curtail, divert or cancel its
business or any agreements with SAH, USC or its Subsidiaries;
(b) induces or attempts to induce any employee of SAH,
USC or its Subsidiaries to terminate his or her employment
therewith;
(c) induces or attempts to induce any independent
contractor providing services on behalf of SAH, USC or its
Subsidiaries to terminate his or her business relationship
therewith;
(d) develops any materials or rights (whether
contractual, property or otherwise) utilizing the confidential
information of SAH, USC or its Subsidiaries, except for the benefit
of SAH or USC; or
(e) disrupts in any manner whatsoever any of SAH's,
USC's or its Subsidiaries existing business relationships.
ARTICLE II - CONFIDENTIALITY
2.1 Confidentiality and Non-Disclosure. The Shareholder
acknowledges and agrees that he, she or it has had and may in the
future have access to certain trade secrets and confidential
information of a proprietary nature to USC. The Shareholder
acknowledges and agrees that all trade secrets and confidential
information are valuable and unique assets of USC or its Clients,
the confidentiality of which is essential to USC's ability to
differentiate its products and services, to compete and to fulfill
its contractual obligations. The Shareholder also acknowledges and
agrees that USC or its Clients will retain a proprietary interest
in such information that will persist beyond termination of his or
her affiliation with USC. The Shareholder agrees that he, she or
it:
(a) will not intentionally disclose such information to
other parties; and
(b) will take reasonable precautions to protect against
the inadvertent disclosure of such information or the theft or
misappropriation of such information by others; and
(c) will make no use of such information except as
requested by SAH.
All documentation relating to the trade secrets and confidential
information of USC or its Clients shall remain the exclusive
property of USC or its Clients and such information shall not be
removed from the premises of USC or its Clients without USC's prior
written consent.
ARTICLE III - NONSOLICITATION FEE
Upon the Closing of the Stock Purchase Agreement, the
Shareholder shall be entitled to a Nonsolicitation Fee as partial
consideration for his, her or its performance under this Agreement
equal to $400,080 payable by check as provided by the appropriate
provisions of the Stock Purchase Agreement.
ARTICLE IV - SHAREHOLDER REPRESENTATION
4.1 No Breach. Shareholder represents and warrants that the
execution and delivery of this Agreement and his, her or its
performance and consummation of the transactions contemplated under
this Agreement, does not and will not, conflict, breach, or
constitute a default under any other agreement, instrument,
covenant or restriction that Shareholder is a party to or otherwise
bound by.
ARTICLE V - ENFORCEMENT OF COVENANTS
5.1 Relief. In the event of breach or threatened breach by
Shareholder of any provision of this Agreement, SAH shall be
entitled to (i) relief by temporary restraining order, temporary
injunction, permanent injunction or otherwise, as issued by a court
of law or equity, (ii) recovery of all attorneys' fees and costs
incurred by SAH in obtaining such relief, and (iii) any other legal
and equitable relief to which it may be entitled, including, but
not limited to, any and all monetary damages which SAH may incur as
a result of said breach or threatened breach or violation. SAH may
pursue any remedy available to it, including declaratory relief,
concurrently or consecutively in any order as to any breach,
violation, or threatened breach or violation, and the pursuit of
one such remedy at any time will not be deemed an election of
remedies or waiver of the right to pursue any other remedy. SAH
has the right to pursue partial enforcement and/or to seek
declaratory relief regarding the enforceable scope of this
Agreement without penalty and without waiving SAH's right to pursue
any other available remedy subject to or concurrently with
declaratory relief. The covenants contained in this Agreement are
independent, and the existence of any claim or cause of action of
the Shareholder against SAH, whether predicated on this Agreement,
the Stock Purchase Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by SAH.
5.2 Extension of Restricted Period for Injunctive Relief. If
the Shareholder violates the restrictive covenants of Article 1
above and SAH brings legal action for injunctive or other relief
under Section 5.1 above, SAH shall not be deprived of the benefit
of the full period of the Restricted Period as a result of the time
involved in obtaining the relief.
ARTICLE VI - TERM
6.1 Term. This Agreement shall commence as of the Effective
Date and shall terminate on the fifth anniversary of the Effective
Date (such time period being referred to as the "Restricted
Period").
ARTICLE VII - MISCELLANEOUS
7.1 Definitions. Terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Stock Purchase
Agreement.
7.2 Illegal, Invalid or Unenforceable Provisions. If any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the
term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of
this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added
automatically, as a part of this Agreement, a provision as similar
in terms to such illegal, invalid, or unenforceable provision as
may be possible and be legal, valid and enforceable. Moreover, if
any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be excessively broad as to time
duration, geographical scope, activity, or subject, it shall be
construed, by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
7.3 Disputes. In the event any party hereto seeks any
judicial determination of any of its rights or obligations
contained herein, the prevailing party or parties in such judicial
determination, whether plaintiff or defendant, shall be entitled to
recover damages, reasonable attorneys' fees, court costs and other
reasonable expenses resulting from such judicial determination on
the basis thereof.
7.4 Notices. In the event a notice or other document is
required to be sent hereunder, such notice or other document shall
be personally delivered or sent by registered or certified mail,
return receipt requested, to the party entitled to receive such
notice or other document at the address reflected in the Stock
Purchase Agreement.
7.5 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject
matter contained herein. This Agreement may be amended from time
to time by an instrument in writing signed by all those who are
parties to this Agreement at the time of such amendment.
7.6 Successors and Assigns. The terms, provisions and
agreements herein contained shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. SAH may assign this
Agreement to any Person without the consent of the Shareholder.
7.7 Waiver of Breach. The waiver by a party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
7.8 Governing Law. THE LAWS OF THE STATE OF TEXAS SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION
OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day
and year first above written.
SHAREHOLDER:
___________________________________
MARIANNE REED
SA HOLDINGS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT 5.1(d)(5) TO STOCK PURCHASE AGREEMENT
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (this "Agreement") is made and
entered into as of _______________, 1995 (the "Effective Date"), by
and between NTS COMMUNICATIONS, INC. ("Shareholder"), and SA
HOLDINGS, INC., a Delaware corporation ("SAH").
R E C I T A L S:
WHEREAS, Shareholder is the holder of certain shares of the
outstanding capital stock of U.S. Communications, Inc., a Delaware
corporation (together, with its Subsidiaries and affiliates,
"USC"); and
WHEREAS, in accordance with the terms of that certain Stock
Purchase Agreement dated as of June 30, 1995 by and between SAH,
USC, the Shareholder and the holders of the remaining capital stock
of USC (the "Stock Purchase Agreement"), the Shareholder, in order
to preserve the value and good will of USC and as a material
inducement for the closing of the Stock Purchase Agreement, has
agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
AGREEMENTS:
ARTICLE I - INDUCEMENT OF CLIENTS
1.1 Nonsolicitation. During the Restricted Period (as
hereinafter defined), the Shareholder hereby agrees that he, she or
it shall not, directly or indirectly, solicit or interfere, for the
benefit of any Competing Business or in any manner detrimental to
SAH or USC, with the Clients, employees and business relationships
of SAH or USC. For purposes of this Agreement, the term "Competing
Business" shall mean any business enterprise which is engaged in
the Business of USC or the business of SAH in any area of the world
in which SAH or USC is then conducting or planning to conduct
business and the term "Clients" shall mean any individual,
proprietorship, partnership, corporation, association, or other
entity that is currently solicited or served by SAH or USC or has
been solicited or served by SAH or USC during the three (3) year
period immediately preceding the Effective Date. Without in any
manner limiting the scope of the foregoing provisions, if the
Shareholder engages in any of the following acts, he, she or it
shall be considered to have violated this covenant:
(a) induces or attempts to induce any Client or
prospective Client to withdraw, curtail, divert or cancel its
business or any agreements with SAH, USC or its Subsidiaries;
(b) induces or attempts to induce any employee of SAH,
USC or its Subsidiaries to terminate his or her employment
therewith;
(c) induces or attempts to induce any independent
contractor providing services on behalf of SAH, USC or its
Subsidiaries to terminate his or her business relationship
therewith;
(d) develops any materials or rights (whether
contractual, property or otherwise) utilizing the confidential
information of SAH, USC or its Subsidiaries, except for the benefit
of SAH or USC; or
(e) disrupts in any manner whatsoever any of SAH's,
USC's or its Subsidiaries existing business relationships.
ARTICLE II - CONFIDENTIALITY
2.1 Confidentiality and Non-Disclosure. The Shareholder
acknowledges and agrees that he, she or it has had and may in the
future have access to certain trade secrets and confidential
information of a proprietary nature to USC. The Shareholder
acknowledges and agrees that all trade secrets and confidential
information are valuable and unique assets of USC or its Clients,
the confidentiality of which is essential to USC's ability to
differentiate its products and services, to compete and to fulfill
its contractual obligations. The Shareholder also acknowledges and
agrees that USC or its Clients will retain a proprietary interest
in such information that will persist beyond termination of his or
her affiliation with USC. The Shareholder agrees that he, she or
it:
(a) will not intentionally disclose such information to
other parties; and
(b) will take reasonable precautions to protect against
the inadvertent disclosure of such information or the theft or
misappropriation of such information by others; and
(c) will make no use of such information except as
requested by SAH.
All documentation relating to the trade secrets and confidential
information of USC or its Clients shall remain the exclusive
property of USC or its Clients and such information shall not be
removed from the premises of USC or its Clients without USC's prior
written consent.
ARTICLE III - NONSOLICITATION FEE
Upon the Closing of the Stock Purchase Agreement, the
Shareholder shall be entitled to a Nonsolicitation Fee as partial
consideration for his, her or its performance under this Agreement
equal to $400,080 payable by check as provided by the appropriate
provisions of the Stock Purchase Agreement.
ARTICLE IV - SHAREHOLDER REPRESENTATION
4.1 No Breach. Shareholder represents and warrants that the
execution and delivery of this Agreement and his, her or its
performance and consummation of the transactions contemplated under
this Agreement, does not and will not, conflict, breach, or
constitute a default under any other agreement, instrument,
covenant or restriction that Shareholder is a party to or otherwise
bound by.
ARTICLE V - ENFORCEMENT OF COVENANTS
5.1 Relief. In the event of breach or threatened breach by
Shareholder of any provision of this Agreement, SAH shall be
entitled to (i) relief by temporary restraining order, temporary
injunction, permanent injunction or otherwise, as issued by a court
of law or equity, (ii) recovery of all attorneys' fees and costs
incurred by SAH in obtaining such relief, and (iii) any other legal
and equitable relief to which it may be entitled, including, but
not limited to, any and all monetary damages which SAH may incur as
a result of said breach or threatened breach or violation. SAH may
pursue any remedy available to it, including declaratory relief,
concurrently or consecutively in any order as to any breach,
violation, or threatened breach or violation, and the pursuit of
one such remedy at any time will not be deemed an election of
remedies or waiver of the right to pursue any other remedy. SAH
has the right to pursue partial enforcement and/or to seek
declaratory relief regarding the enforceable scope of this
Agreement without penalty and without waiving SAH's right to pursue
any other available remedy subject to or concurrently with
declaratory relief. The covenants contained in this Agreement are
independent, and the existence of any claim or cause of action of
the Shareholder against SAH, whether predicated on this Agreement,
the Stock Purchase Agreement or otherwise, shall not constitute a
defense to the enforcement of this Agreement by SAH.
5.2 Extension of Restricted Period for Injunctive Relief. If
the Shareholder violates the restrictive covenants of Article 1
above and SAH brings legal action for injunctive or other relief
under Section 5.1 above, SAH shall not be deprived of the benefit
of the full period of the Restricted Period as a result of the time
involved in obtaining the relief.
ARTICLE VI - TERM
6.1 Term. This Agreement shall commence as of the Effective
Date and shall terminate on the fifth anniversary of the Effective
Date (such time period being referred to as the "Restricted
Period").
ARTICLE VII - MISCELLANEOUS
7.1 Definitions. Terms not otherwise defined herein shall
have the meaning ascribed to such terms in the Stock Purchase
Agreement.
7.2 Illegal, Invalid or Unenforceable Provisions. If any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the
term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of
this Agreement; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added
automatically, as a part of this Agreement, a provision as similar
in terms to such illegal, invalid, or unenforceable provision as
may be possible and be legal, valid and enforceable. Moreover, if
any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be excessively broad as to time
duration, geographical scope, activity, or subject, it shall be
construed, by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
7.3 Disputes. In the event any party hereto seeks any
judicial determination of any of its rights or obligations
contained herein, the prevailing party or parties in such judicial
determination, whether plaintiff or defendant, shall be entitled to
recover damages, reasonable attorneys' fees, court costs and other
reasonable expenses resulting from such judicial determination on
the basis thereof.
7.4 Notices. In the event a notice or other document is
required to be sent hereunder, such notice or other document shall
be personally delivered or sent by registered or certified mail,
return receipt requested, to the party entitled to receive such
notice or other document at the address reflected in the Stock
Purchase Agreement.
7.5 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject
matter contained herein. This Agreement may be amended from time
to time by an instrument in writing signed by all those who are
parties to this Agreement at the time of such amendment.
7.6 Successors and Assigns. The terms, provisions and
agreements herein contained shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. SAH may assign this
Agreement to any Person without the consent of the Shareholder.
7.7 Waiver of Breach. The waiver by a party hereto of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
7.8 Governing Law. THE LAWS OF THE STATE OF TEXAS SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION
OF THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day
and year first above written.
SHAREHOLDER:
NTS COMMUNICATIONS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
SA HOLDINGS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT 5.3(b) TO STOCK PURCHASE AGREEMENT
John Vickers, III, Esq.
______________, 1995
SA Holdings, Inc.
Attention: J. David Darnell
1912 Avenue K, Suite 100
Plano, Texas 75074-5959
Re: Stock Purchase Agreement by and between SA Holdings,
Inc., a Delaware corporation, and U. S. Communications,
Inc., a Texas corporation, among others, dated June 30,
1995 (the "Stock Purchase Agreement")
Gentlemen:
We have acted as counsel to U. S. Communications, Inc., a
Texas corporation ("USC"), and Bill L. Johnson, Howard Maddera,
Marianne Reed and NTS Communications, the shareholders of USC
(collectively, the "Shareholders") in connection with the proposed
purchase by SA Holdings, Inc., a Delaware corporation ("SAH"), of
all of the issued and outstanding capital stock of USC from the
Shareholders, in accordance with the terms and provisions of the
Stock Purchase Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed such terms in the
Stock Purchase Agreement.
We have examined the Stock Purchase Agreement and related
documentation. We have also examined the Articles of
Incorporation, corporate bylaws, meeting minutes and/or consents,
and similar documentation, as well as various officers' and
Shareholders' certificates and certificates issued by various state
agencies.
In making such examinations and in rendering our opinions, we
have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the conformity to the
originals of all documents submitted to us as copies, and the
accuracy of all documents, certificates and statements made or
provided to us.
Based on the foregoing, and subject to the qualifications and
exceptions specified below, we advise you that:
1. USC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas, with full
corporate power and authority to own, operate and lease its
properties and assets, and to carry on its business as now being
conducted. USC is duly qualified as a foreign corporation and is
in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of business
conducted by it makes such qualification necessary.
2. USC and each of the Shareholders have full power
(corporate and otherwise) and authority to execute, deliver and
perform the Stock Purchase Agreement and to consummate the
transactions contemplated thereby. The execution and delivery by
USC and the Shareholders of the Stock Purchase Agreement, and the
consummation of the transactions contemplated thereby, have been
duly and validly authorized by the Board of Directors of USC and no
other corporate proceedings on the part of USC are necessary with
respect thereto. The Stock Purchase Agreement has been duly and
validly executed and delivered by USC and each of the Shareholders
and constitutes the legal, valid and binding obligation of USC and
each of the Shareholders, enforceable against each of them in
accordance with its terms.
3. The authorized, issued and outstanding capital stock of
USC is as set forth in Section 2.3 of the Stock Purchase Agreement
with such outstanding shares of capital stock being duly
authorized, validly issued, fully paid and nonassessable. The
Shareholders collectively own One Hundred Percent (100%) of the
outstanding capital stock of USC. As of the date of this opinion,
there are 1500 shares of USC Common Stock held in the treasury of
USC. Moreover, as of the date of this opinion, there are no
outstanding options, warrants, rights or other commitments to issue
or sell any shares of capital stock or any securities or
obligations convertible into or exchangeable for, or giving any
person a right to acquire from USC, any shares of its capital
stock. No shares of USC's capital stock have been issued in
violation of any preemptive rights or applicable federal or state
securities laws. There are no restrictions on the retained
earnings of USC or on the ability of USC to declare and pay
dividends except as set forth in the USC Disclosure Schedule.
There are no outstanding obligations of USC to repurchase, redeem
or otherwise acquire any capital stock or other securities of USC.
4. Each of USC's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation with full corporate power and
authority to own all of its properties and assets and to carry on
its business as it is now being conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. As of
the date of this opinion, there are no outstanding options,
warrants, rights or other commitments to issue or sell any shares
of the capital stock or any securities or obligations convertible
into or exchangeable for, or giving any person any right to acquire
from any of USC's Subsidiaries, any shares of their capital stock.
No shares of capital stock of any of USC's Subsidiaries have been
issued in violation of any preemptive rights or applicable federal
or state securities laws. USC owns, directly or indirectly, all of
the outstanding capital stock of each of its Subsidiaries, free and
clear of all liens, claims, charges, pledges, security interests,
options or other encumbrances, and all such capital stock is duly
authorized, validly issued and outstanding, fully paid and
nonassessable, and neither USC nor any of its Subsidiaries owns or
holds any securities of, or any interest in, any person or entity
or is subject to any joint venture, partnership or other
arrangement that is created as a partnership for federal income tax
purposes. There are no voting trusts or other agreements by and
between or among USC, any Subsidiary or any or all of their
respective stockholders, whether or not USC or a Subsidiary is a
party thereto, imposing any restrictions upon the transfer or
voting of or otherwise pertaining to the securities of USC or any
Subsidiary or the ownership thereof.
5. The execution, delivery and performance by USC and each
of the Shareholders of the Stock Purchase Agreement and the
consummation of the transactions contemplated thereby requires no
consent, approval, order or authorization of action by or in
respect of or registration or filing with, any federal, state,
municipal or other governmental department, commission, board,
bureau, agency, or instrumentality ("Governmental Body"), court,
agency or authority.
6. The execution, delivery and performance of the Stock
Purchase Agreement by USC and each of the Shareholders, the
consummation by USC and each of the Shareholders of the
transactions contemplated thereby or compliance by USC and each of
the Shareholders with any of the provisions thereof does not and
will not (a) conflict with or result in any breach or violation of
any provision of the Certificate of Incorporation or Bylaws of USC
or any of its Subsidiaries, (b) result in a default, or give rise
to any right of termination, cancellation or acceleration or loss
of any material benefit (with or without giving of notice or lapse
of time or both), or require the consent, approval, waiver or other
action by any person under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, trust
(constructive or otherwise), agreement, lease (of real or personal
property) or instrument or obligation to which any Shareholder, USC
or any of its Subsidiaries is a party or by which any Shareholder,
USC or any of its Subsidiaries may be bound, (c) result in the
creation or imposition of any claim, lien, pledge, security
interest, obligation, restriction or other encumbrance on any of
the property of any Shareholder, USC or any of its Subsidiaries or
(d) violate any judgment, order, writ, injunction, decree, statute,
rule or regulation applicable to any Shareholder, USC or any of its
Subsidiaries.
7. USC and each of its Subsidiaries have good and marketable
title to any and all assets reflected in the USC Financial
Statements currently owned and used in the operations of their
respective businesses, and such assets are free and clear of all
Liens, except as set forth in the USC Disclosure Schedule. Each of
the leases listed on the USC Disclosure Schedule is a valid and
binding obligation of the parties thereto and neither USC, nor any
of its Subsidiaries nor the lessor thereunder is in default under,
and no condition exists that with notice or lapse of time or both
would constitute a default under any such lease. The buildings,
structures, improvements, assets and operations of USC and each of
its Subsidiaries conform with all applicable restrictive covenants,
deeds, leases, and restrictions and all applicable federal, state
and local laws, ordinances, rules and regulations, including but
not limited to, those relating to zoning and working conditions.
8. Except as may be reflected on the USC Disclosure
Schedule, to the best of my knowledge after due inquiry, there is
no action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice pending or threatened
against, relating to or affecting USC or any of its Subsidiaries,
or any of their respective properties or assets or any officer or
director of USC or any of its Subsidiaries at law or in equity,
before any Governmental Body. Neither USC nor any of its
Subsidiaries nor any of their respective properties or assets is
specifically by name, subject to any currently existing order,
judgment, writ, decree or injunction.
The conclusions set forth above are subject to the following
qualifications:
A. The enforceability against any party of any instrument,
document or obligation referred to in this opinion letter is
subject to the provisions of any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights,
generally.
B. The enforceability against any party of any instrument,
document or obligation referred to in this letter is subject to
general principles of law and equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
C. We assume the due authorization, execution and delivery
of all documents referred to in this letter, and the validity,
binding effect and enforceability of each of such documents against
the parties hereto, in the capacities in which they are executed
and delivered.
This opinion letter is delivered solely for your benefit and
for the benefit of any third party providing all or part of the
financing required by SAH to effect the transactions contemplated
by the Stock Purchase Agreement, and no other party or entity is
entitled to rely hereon without our express prior written consent.
Without our prior written consent, the opinion letter may not be
circulated or quoted in whole or in part or otherwise referred to
in any document or report and may not be furnished to any other
person or entity.
Sincerely,
John Vickers, III, Esq.
June 30, 1995
U.S. Communications, Inc.
1107 Austin
Levelland, Texas 79336
Howard Maddera
Bill L. Johnson
Marianne Reed
1107 Austin
Levelland, Texas 79336
SA Holdings, Inc.
1912 Avenue K, Suite 100
Plano, Texas 75074
Re: Side Letter Agreement Concerning Issues Relating to that
certain Stock Purchase Agreement By And Among SA Holdings,
Inc. ("STEL"), U.S. Communications, Inc. ("USC"), Howard
Maddera, Bill L. Johnson, Marianne Reed, and NTS
Communications, Inc. ("NTS") dated June 30, 1995 (the
"Purchase Agreement") and that certain Nonsolicitation
Agreement (the "Nonsolicitation Agreement) between NTS and
STEL dated June 30, 1995, and attached to the Purchase
Agreement as Exhibit 5.1(d)(5).
Involved Parties:
This Side Letter Agreement (this "Letter Agreement") is
executed in connection with the above-referenced Purchase Agreement
and Nonsolicitation Agreement. This Letter Agreement sets forth the
understanding and agreement of the undersigned regarding certain
matters related to the proprietary rights of NTS in the name, logo
and service mark associated with the words "NTS Communications" and
various derivatives thereof, as the same are registered with the
United States Patent and Trademark Office under registration
numbers 1,293,303, 1,296,928, and 1,798,210 (collectively,
the "NTS Rights"), and various other obligations and restrictions
of the parties under the Purchase Agreement and Nonsolicitation
Agreement. The parties hereto agree as follows:
1. Effectiveness. This Letter Agreement will not be
effective until the "Closing Date" (as defined by the Purchase
Agreement).
2. No Transfer. The parties hereto acknowledge that NTS is
not transferring any of the NTS Rights, or any interest therein, to
any party pursuant to the terms of the Purchase Agreement,
hereunder, or otherwise and, except for the limited right to use
the NTS Rights set forth in Paragraph 3 hereunder, all parties
(except NTS) hereby expressly and irrevocably disclaim any and all
rights or interest in the NTS Rights.
3. Limited Right to Use. Without in any way limiting
Paragraph 2 hereunder, USC shall be entitled to use the NTS Rights,
without additional consideration being paid to NTS, for a period of
six (6) months after the Closing Date to the extent and for the
purposes that USC has so used the NTS Rights during the twelve (12)
months preceding the Closing Date.
4. Franchise Agreement. NTS and USC hereby acknowledge and
agree that the Franchise Agreement entered into on or about July
15, 1988 between USC and NTS, as amended by that Addendum dated
January 12, 1991 (the "Franchise Agreement") shall be, and is
hereby, terminated as of the Closing Date without liability to any
party and, as of the Closing Date, shall be without further force
or effect and that no party shall have any remaining obligations
thereunder; provided, however, that the foregoing shall not affect
the liability of USC to NTS for telecommunications services charges
billed in accordance with prior practice in 1995 and not paid prior
to the Closing Date or billed thereafter in accordance with such
prior practice and all such charges shall be paid to NTS as and
when the same are due and payable notwithstanding any termination
of the Franchise Agreement. Without limiting the foregoing, NTS
expressly and irrevocably waives any and all rights and options
provided under the Franchise Agreement, including, without
limitation, (1) any right or option related to the acquisition of
the capital stock of USC (whether upon exercise of a right of
refusal, an option or otherwise) provided in such Franchise
Agreement; (ii) any right to require notice of any proposed sale;
(iii) any covenants concerning noncompetition; and (iv) all right
to receive royalty payments from USC under said Franchise
Agreement.
5. Change of Nonsolicitation Clause and Nonsolicitation
Agreement. Section 9.7 of the Purchase Agreement and the entirety
of the Nonsolicitation Agreement shall, notwithstanding the
respective terms thereof, in all cases be construed and/or limited
to an agreement between STEL, NTS and USC (including their
respective Affiliates and Subsidiaries) that no such party shall,
for a period of five (5) years from the Closing Date, solicit the
Existing Customers of any other such party. For purposes hereof the
term "Existing Customers" shall mean customers of a party at any
time on or during the one year prior to the Closing Date which the
other party has knowledge is the customer of the other party.
Furthermore, NTS shall retain whatever rights are granted to STEL
in the Purchase Agreement and/or Nonsolicitation Agreement to
enforce this construction against STEL, USC, and their respective
Affiliates and Subsidiaries.
6. Failure to Close. In the event the transaction
contemplated by the Purchase Agreement and Nonsolicitation
Agreement is not closed as and when contemplated by those
agreements, then all agreements, consents, and/or waivers set forth
herein or otherwise related to this matter shall become immediately
void and of no further force or effect.
Sincerely,
NTS Communications, Inc.
Barbara Andrews
President
ACCEPTED & AGREED:
SA Holdings, Inc.
By:
Name:
Title:
Date:
U.S. Communications, Inc.
By:
Name:
Title:
Date:
Howard Maddera
Date:
Bill L. Johnson
Date:
Marianne Reed
Date:
CERTIFICATE OF DESIGNATIONS, PREFERENCE AND RIGHTS
OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.00001 PAR VALUE PER SHARE)
of
SA HOLDINGS, INC.
_________________________
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
_________________________
I, Jack W. Matz, Jr., Chief Executive Officer of SA
Holdings, Inc. (hereinafter called the "Corporation"), a
corporation organized and existing under and by virtue of the
provisions of the General Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: The Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of the Corporation authorizes the
issuance of 12,500,000 shares of preferred stock, $.00001 par value
per share ("Preferred Stock"), in one or more series, and further
authorizes the Board of Directors of the Corporation to provide by
resolution for the issuance of shares of Preferred Stock in one or
more series not exceeding the aggregate number of shares of
Preferred Stock authorized by the Certificate of Incorporation and
to determine with respect to each such series, the voting powers,
if any (which voting powers if granted may be full or limited),
designations, preferences, the relative, participating, optional
and other rights, and the qualifications, limitations and
restrictions appertaining thereto.
SECOND: A resolution providing for and in connection
with the issuance of the Preferred Stock was duly adopted by the
Board of Directors of the Corporation pursuant to authority
conferred on the Board of Directors by the provisions of the
Certificate of Incorporation as aforesaid, which resolution
provides as follows:
RESOLVED: that the Board of Directors, pursuant to
authority vested in it by the provisions of the Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), of
SA Holdings, Inc. (the "Corporation"), hereby authorizes the
issuance of a series of convertible preferred stock ("Convertible
Preferred Stock") of the Corporation and hereby establishes the
powers, designations, preferences, the relative, participating,
optional and other rights, and the qualifications, limitations and
restrictions appertaining thereto in addition to those set forth in
such Certificate of Incorporation (or otherwise provided by law) as
follows (the following, referred to hereinafter as "this
resolution" or "this Certificate of Designations," is to be filed
as part of a Certificate of Designations under Section 151(g) of
the General Corporation Law of the State of Delaware):
1. General.
(a) Designation and Number. The designation of
Convertible Preferred Stock created by this resolution shall be
Series A Cumulative Convertible Preferred Stock, $.00001 par value
per share, of the Corporation (hereinafter referred to as the
"Series A Preferred Stock"), and the number of shares of Series A
Preferred Stock of the Corporation shall be authorized to issue
shall be 250,000 shares.
(b) Priority. The Series A Preferred Stock shall rank
prior to the Common Stock (as hereinafter defined), and to all
other capital stock of the Corporation (now or hereafter authorized
or issued), other than the Series B Cumulative Convertible
Preferred Stock of the Corporation (the "Series B Preferred Stock")
with which it shall rank pari passu, in each case as to dividends
or upon liquidation, dissolution or winding up.
2. Certain Definitions.
(a) For purposes of this Certificate of Designations,
the following terms shall have the meanings indicated:
(i) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions
in the State of Texas are authorized or obligated by law
or executive order to close.
(ii) "Commission" means the Securities and Exchange
Commission and any other similar or successor agency of
the federal government administering the Securities Act
or the Securities Exchange Act.
(iii) "Common Shares" has the meaning set forth in
Section 7(a) hereof.
(iv) "Common Stock" means the Corporation's Common
Stock, as presently authorized by the Certificate of
Incorporation and as such Common Stock may hereafter be
changed or for which such Common Stock may be exchanged
after giving effect to the terms of such change or
exchanged (by way of reorganization, recapitalization,
merger, consolidation or otherwise).
(v) The phrase "current conversion price" has the
meaning set forth in Section 7(h) hereof.
(vi) "Event of Default" means (A) the failure by
the Corporation to redeem shares of Series A Preferred
Stock in accordance with the provisions of Section 6(a)
or 6(b) hereof for any reason, and such failure in such
redemption of such shares shall have continued for one
hundred eighty (180) days or (B) the equivalent of one
year's dividend payment son all outstanding shares of
Series A Preferred Stock shall be accrued and unpaid, if
funds are legally available for the payment therefor, and
such failure has continued for sixty (60) days.
(vii) "full cumulative dividends" means as of any
date the amount of accumulated, accrued and unpaid
dividends payable on shares of Series A Preferred Stock
as provided by Section 4 hereof, whether or not earned or
declared and whether or not there shall be funds legally
available for the payment thereof.
(viii) "Junior Preferred Stock" means capital stock
(other than Common Stock) of the Corporation ranking
junior to the Series A Preferred Stock as to dividends
and upon liquidation, dissolution or winding up.
(ix) "Person" or "person" means an individual,
corporation, partnership, firm, association, joint
venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other
entity.
(x) "Preferred Liquidation Value," has the meaning
set forth in Section 5(a) hereof.
(xi) "Purchase Agreements" means the separate Share
Purchase Agreements dated as of July 31, 1995 between the
Corporation and each of the original holders of shares of
Series A Preferred Stock (as from time to time assigned,
supplemented or amended or as the terms thereof may be
waived, each in accordance with its terms).
(xii) "Qualified Level of Public Trading" shall
exist if, and only if, on the date of notice of the
Corporation's election of its right to redeem the shares
of Series A Preferred Stock pursuant to Section 6(b)
hereof, (a) Common Shares are listed or admitted to
trading on a national securities exchange or are traded
on the National Association of Securities Dealers Inc.,
Automated Quotation System Level 1, National Market
System ("National Market System") or in the over-the-
counter market, and (b) either (i) the last reported sale
price regular way for Common Shares on the principal
national securities exchange on which Common Shares are
listed or admitted to trading or, if Common Shares are
not listed or admitted to trading on any national
securities exchange, on the National Market Systems, or
(ii) if Common Shares are listed or admitted to trading
on neither any national securities exchange nor on the
National Market System, the average of the highest
reported bid and lowest reported asked prices as
furnished by the National Association of Securities
Dealers Inc., Automated Quotation System Level I, or
comparable system, shall (in the case of (i) or (ii))
have equalled or exceeded an amount per share equal to at
least 250% of the then current conversion price for at
least twenty (20) consecutive trading days.
(xiii) "Senior Credit Agreement" means the Term
Credit Agreement between the Corporation and NorWest Bank
Minnesota, National Association, dated as of July 31,
1995.
(xiv) "Subsidiary" means any corporation,
association or other entity of which more than 80% of the
total voting power of shares of stock or other equity
interests entitled (without regard to the occurrence of
any contingency or any pledge of shares) to vote in the
election of directors, managers or trustees thereof is,
at the time as of which any determination is being made,
owned or controlled, directly or indirectly, by the
Corporation or one or more of its Subsidiaries, or both.
(b) The words "hereof," "herein" and "hereunder" and
other words of similar import refer to this Certificate of
Designations as a whole and not to any particular Section or other
subdivision.
(c) References herein to the Certificate of
Incorporation include such Certificate as amended by this
Certificate of Designations.
3. Voting Rights.
(a) Generally No Voting Rights. Except as otherwise
provided specifically herein or by law, each share of Series A
Preferred Stock shall have no voting rights. To the extent holders
of shares of Series A Preferred Stock have the right to vote, each
holder of shares of Series A Preferred Stock shall be entitled to
that number of votes for each share of Series A Preferred Stock
held by such holder equal to the number of Common Shares obtainable
upon conversion of such share of Series A Preferred Stock pursuant
to Section 7 hereof at the current conversion price on the record
date for the vote which is being taken or, if no such record date
is established, at the date such vote is taken or any written
consent of stockholder is solicited.
(b) Consent Required. So long as any shares of the
Series A Preferred Stock remain outstanding, unless the vote or
consent of the holders of a greater number of shares shall then be
required by law, the affirmative vote or consent of the holders of
at least fifty-one percent (51%) of all of the shares of Series A
Preferred Stock at the time outstanding, voting separately as a
class, given in person or by proxy either in writing (as may be
permitted by law and the Certificate of Incorporation and By-laws
of the Corporation) or at any special or annual meeting, shall be
necessary to permit, effect or validate the taking of any of the
following actions by the Corporation:
(i) create, authorize or issue any class or series
of capital stock ranking prior to the Series A Preferred
Stock as to dividends or upon liquidation, dissolution or
winding up;
(ii) amend the Certificate of Incorporation of the
Corporation, or in any other manner alter or change the
powers, rights, privileges or preferences of the Series
A Preferred Stock, if such amendment or action would
adversely affect the powers, rights, privileges or
preferences of the holders of the Series A Preferred
Stock; except that the Corporation may amend the
Certificate of Incorporation and/or the By-laws of the
Corporation to increase the amount of shares of Common
Stock or amend the terms of any Common Stock, or to
create, authorize or issue shares of Junior Preferred
Stock;
(iii) amend this Certificate of Designations; or
(iv) approve and adopt any agreement, plan or
proposal for the sale and other disposition of all or
substantially all of the assets and rights of the
Corporation other than in the ordinary course of
business, or any agreement, plan or proposal for the
consolidation, merger or dissolution of the Corporation
(other than aa merger of a subsidiary of the Corporation
into the Corporation in which the Corporation is the
surviving corporation or any other merger in which the
Corporation is the surviving corporation), or any
agreement, plan or proposal for a share exchange which is
submitted to a vote of the stockholders of the
Corporation.
(c) Additional Voting Rights. (i) So long as there are
at least 100,000 shares of Series A Preferred Stock then
outstanding (subject to adjustment after the date hereof for stock
splits, combinations, etc.), upon the occurrence of an Event of
Default, the holders of the Series A Preferred Stock shall be
entitled to elect (as provided below) a number of directors to the
Board of Directors of the Corporation equal to the number obtained
by (x) multiplying the (A) a fraction, the numerator of which is
the number of shares of Common Stock obtainable upon conversion of
all of the shares of Series A Preferred Stock then outstanding and
the denominator of which is the total number of shares of Common
Stock (on a fully-diluted basis) then outstanding, by (B) the
number of directors on the Board of Directors of the Corporation
and then (y) rounding such number down to the nearest whole number
(except for any number below the number 1, such number shall be
rounded upwards to 1 and not downward to zero). The size of the
Board of Directors of the Corporation shall be increased by such
number as may be necessary to allow for directors elected by the
holders of the Series A Preferred Stock. During the period
(hereinafter in this Section 3(c) called the "Class Voting Period")
commencing upon the occurrence of such Event of Default and ending
at such time upon which no Event of Default shall continue, the
holders of at least fifty-one percent (51%) of the then outstanding
shares of Series A Preferred Stock, by the affirmative vote in
person or by proxy at a special meeting of stockholders called for
such purpose (or at any adjournment thereof) by holders of at least
25% of the then outstanding shares of Series A Preferred Stock or
at any annual meeting of stockholders, or by written consent
delivered to the Secretary of the Corporation, with the holders of
such Series A Preferred Stock voting as a class and with each such
share of Series A Preferred Stock having one vote, shall be
entitled, as a class, to the exclusion of the holders of all other
classes or series of capital stock of the Corporation, to elect
such directors.
(ii) At any time when such voting right under this
Section 3(c) shall have vested in the holders of shares
of Series A Preferred Stock entitled to vote thereon, and
if such right shall not already have been initially
exercised, an officer of the Corporation shall, upon the
written request of at least 25% of the holders of record
of shares of the Series A Preferred Stock then
outstanding, addressed to the Treasurer (or similar
officer) of the Corporation, call a special meeting of
holders of shares of the Series A Preferred Stock. Such
meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place
designated by the Treasurer (or similar officer) of the
Corporation. If such meeting shall not be called by the
proper officers of the Corporation within 30 days after
the personal service of such written request upon the
Treasurer (or similar officer) of the Corporation, or
within 30 days after mailing the same within the United
States, by registered mail, addressed to the Treasurer
(or similar officer) of the Corporation at its principal
office (such mailing to be evidenced by the registry
receipt issued by the postal authorities), then the
holders of record of at least 25% of the shares of Series
A Preferred Stock then outstanding may designate in
writing any person to call such meeting at the expense of
the Corporation, and such meeting may be called by such
person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same
place as is elsewhere provided in this paragraph or, if
none, at a place designated by the person selected to
call the meeting. Any holder of shares of Series A
Preferred Stock then outstanding that would be entitled
to vote as such meeting shall have access to the stock
books of the Corporation for the purpose of causing a
meeting of stockholders to be called pursuant to the
provisions of this paragraph.
(iii) Any director who shall have been elected by
the holders of Series A Preferred Stock pursuant to this
Section 3(c) may be removed at any time during a Class
Voting Period, by the vote of the holders of at least
fifty-one percent (51%) of all of the then outstanding
shares of Series A Preferred Stock, voting as a separate
class in person or by proxy at a special meeting of
stockholders called for such purpose by holders of at
least 25% of the outstanding shares of Series A Preferred
Stock. Any director who shall have been elected by the
holders of Series A Preferred Stock may not be removed at
any time during a Class Voting Period without the consent
of the holders of at least fifty-one percent (51%) of all
of the outstanding shares of Series A Preferred Stock.
any vacancy created by the removal, death or resignation
of a director elected by the holders of Series A
Preferred Stock may be filled during such Class Voting
Period by the holders of at least fifty-one percent (51%)
of all of the outstanding shares of Series A Preferred
Stock by vote in person or by proxy at a special meeting
of stockholders of the Corporation called for such
purpose by holders of at least 25% of the outstanding
shares of Series A Preferred Stock.
(iv) During the Class Voting Period, other than to
increase the size of the Board of Directors in accordance
with clause (i) of this Section 3(c), the size of the
Board of Directors of the Corporation shall not otherwise
be changed without the vote of the holders of at least
fifty-one percent (51%) of all of the then outstanding
shares of Series A Preferred Stock, voting as a separate
class.
(v) At the end of the Class Voting Period, the
holders of Series A Preferred Stock shall be
automatically divested of all voting power vested in them
under this Section 3(c) except as herein or by law
expressly provided, subject always to the subsequent
vesting hereunder of such voting power in the holders of
Series A Preferred Stock upon the occurrence of any
subsequent Event of Default. The term of any director
elected pursuant to the provisions of this Section 3(c)
shall in all size of the Board shall be reduced
accordingly.
4. Dividend Rights.
(a) General Dividend Obligations. The Corporation shall
pay, when and as declared by the Corporation's Board of Directors,
to the holders of the Series A Preferred Stock, out of the assets
of the Corporation legally available therefor, stock dividends,
payable in shares of Series A Preferred Stock (or at the election
of the Corporation, in cash) (provided that upon liquidation or
redemption, accrued and unpaid dividends will be paid in cash), at
the times, in the amounts and with such priorities as are provided
for in this Section 4. Notwithstanding the foregoing, without the
consent of a majority in interest of the lenders under the Senior
Credit Agreement, no dividends may be paid in cash to holders of
the Series A Preferred Stock so long as indebtedness is outstanding
and unpaid under the Senior Credit Agreement.
(b) Accrual Of Dividends. Dividends on each share of
Series A Preferred Stock shall accrue cumulatively on a daily basis
from and including the date of issuance of such share. The date on
which the Corporation shall initially issue any shares of Series A
Preferred Stock shall be deemed to be its "date of issuance"
regardless of the number of times transfer of such share of Series
A Preferred Stock shall be 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 of Series A Preferred
Stock (whether by reason of transfer of such share of Series A
Preferred Stock or for any other reason).
(c) Dividend Rates. Dividends shall accrue cumulatively
on each share of Series A Preferred Stock from the date of issuance
at a rate per annum equal to $.072 per share of Series A Preferred
Stock calculated on the basis of the actual number of days elapsed
in a year. Dividends paid in shares of Series A Preferred Stock
shall be paid assuming each share of Series A Preferred Stock used
to so pay has a value of $9.00.
(d) Payment Dates. Full cumulative dividends on the
Series A Preferred Stock shall be payable annually, on the last day
of July in each year (each, a "Dividend Payment Date"). The first
Dividend Payment Date shall be July 31,1996. If any Dividend
Payment Date shall be on a day other than a Business Day, then the
Dividend Payment Date shall be on the next succeeding Business Day.
An amount equal to the full cumulative dividends shall also be
payable (in cash), in satisfaction of such dividend obligation,
upon liquidation as provided under Section 5 hereof, and upon
redemption as provided under Section 6 hereof.
(e) Amounts Payable. The amount of dividends payable on
Series A Preferred Stock on each Dividend Payment Date shall be the
full cumulative dividends which are unpaid through and including
such Dividend Payment Date. Dividends which are not paid for any
reason whatsoever on a Dividend Payment Date shall cumulate until
paid and shall be payable on the next Dividend Payment Date on
which payment can lawfully be made (or upon liquidation or
redemption as provided herein). Holders of shares of Series A
Preferred Stock called for redemption on a redemption date falling
between the close of business on a dividend payment record date and
the opening of business on the corresponding Dividend Payment Date
shall, in lieu of receiving such dividend payment on the Dividend
Payment Date fixed therefor, receive an amount equal to such
dividend payment (consisting of all accumulated and unpaid
dividends through and including the redemption date) on the date
fixed for redemption. If for whatever reason all payments have not
been made with respect to any share of Series A Preferred Stock as
required by Section 5 on a distribution date or all payments have
not been made with respect to any share of Series A Preferred Stock
as required by Section 6 on a redemption date (other than because
of a failure by the holder thereof to tender such shares for
payment on such ate), then, notwithstanding any other provision
hereof, dividends shall continue to accumulate on such outstanding
shares until paid. Dividends paid by payment-in-kind shall not be
paid in fractional shares (all such fractional shares being rounded
down to the nearest whole number of shares); such dividends so
rounded down shall be deemed paid in full).
(f) Priority. So long as any shares of the Series A
Preferred Stock are outstanding if an Event of Default has occurred
and is continuing or if an Event of Default (as defined in the
Senior Credit Agreement) has occurred and is continuing, (A) no
dividends shall be declared or paid or set apart for payment and no
other distribution shall be declared or made or set apart for
payment, in each case upon the Common Stock (other than dividends
paid in shares of Common Stock made to the holders of Common
Stock), the Series A Preferred Stock (other than dividends paid in
shares of the Series A Preferred Stock to the holders of the Series
A Preferred Stock) or any Junior Preferred Stock, and (B) no
capital stock of the Company (other than the Series A Preferred
Stock) shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any
shares of any such stock) by the Corporation.
5. Liquidation Rights.
(a) Priority. (i) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of
the Corporation (whether from capital or surplus) shall be made to
or set apart for the holders of Common Stock or any other shares of
capital stock of the Corporation, the holders of the shares of
Series A Preferred Stock shall be entitled to receive from the
assets of the Corporation, whether represented by capital, surplus,
reserves or earnings, payment in cash of an amount (the "Preferred
Liquidation Value") equal to the greater of (i) $9.00 per share
plus the value of accrued and unpaid dividends per share through
the date thereof or (ii) the amount per share of Series A Preferred
Stock that would have been payable had each such share been
converted to Common Shares immediately prior to such event of
liquidation, dissolution or winding-up pursuant to Section 7
hereof. If the assets distributable upon such liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary, shall be insufficient to permit payment to the holders
of the shares of Series A Preferred Stock of the full preferential
amounts as set forth in this Section 5(a), then such assets shall
be distributed ratably among the shares of Series A Preferred
Stock.
(ii) If, in the event of any liquidation, dissolution or
winding up of the Corporation, the Preferred Liquidation Value of
the Series B Preferred Stock and the Preferred Liquidation Value of
the Series A Preferred Stock are not paid in full, the respective
holders of the Series B Preferred Stock and of the Series A
Preferred Stock shall share ratably in any distribution of assets
in proportion to the full Preferred Liquidation Value to which each
such series of Preferred Stock is entitled.
(b) Junior Stock. After payment shall have been made in
full to the holders of Series A Preferred Stock as provided in this
Section 5 upon any liquidation, dissolution or winding up of the
Corporation, the Common Stock and any other series or class or
classes of stock of the Corporation shall, subject to the
respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or
distributed upon such liquidation, dissolution or winding up, and
the holders of Series A Preferred Stock shall not be entitled to
share therein.
(c) Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when and the place or places where the
amounts distributable in such circumstances shall be payable, shall
be given (not less than thirty (30) days prior to any payment date
stated therein), to the holders of record of the Series A Preferred
Stock at their respective addresses as the same shall appear on the
stock register of the Corporation.
(d) Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, share of stock,
securities or other consideration) of all or substantially all the
property or assets of the Corporation nor the consolidation, merger
or other business combination of the Corporation with or into one
or more corporations shall be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary, of the
Corporation.
6. Redemption.
(a) Mandatory Redemption. The Corporation shall redeem
on July 31, 2000 all of the then outstanding shares of Series A
Preferred Stock, in cash at a price per share (the "Mandatory
Redemption Price") equal to the sum of (a) $9.00 plus (B) the value
of accrued and unpaid dividends on such share through such date.
(b) Special Optional Redemption. On or after July 31,
1997 (but not before), if there has been a Qualified Level of
Public Trading as of the date of the notice provided for below, at
the option of the Corporation, the Corporation may redeem all or
part of the shares of Series A Preferred Stock then outstanding at
a cash price per share equal to the sum of $9.00 plus the value of
accrued and unpaid dividends on such share through the date set for
redemption.
Notwithstanding the foregoing, without the consent of a
majority in interest of the lenders under the Senior Credit
Agreement, the Corporation may not redeem all or any part of the
shares of Series A Preferred Stock pursuant to the preceding
sentence so long as indebtedness is outstanding and unpaid under
the Senior Credit Agreement.
Such option under this Section 6(b) shall be exercised by
written notice to the holders of Series A Preferred Stock given at
any time not less than thirty (30) days and not more than sixty
(60) days prior to the date of such redemption.
(c) Partial Redemption. In any such optional redemption
by the Corporation, if all shares of Series A Preferred Stock are
not being redeemed, then the number of shares of Series A Preferred
Stock to be redeemed shall be allocated among all shares of Series
A Preferred Stock so that the shares of Series A Preferred Stock
are redeemed from such holders in proportion to the respective
number of shares of Series A Preferred Stock held by each such
holder (or in such other proportion as agreed by all such holders
who accept the Corporation's offer).
7. Conversion.
(a) General. Each holder of a share of Series A
Preferred Stock shall have the right, at the option of such holder
at any time to convert, upon the terms and provisions of this
Section 7, one or more shares of Series A Preferred Stock into
fully paid and nonassessable shares of Common Stock of the
Corporation or any capital stock or other securities into which
such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof (such
shares, the "Common Shares"). Such conversion of shares of Series
A Preferred Stock to Common Shares shall be made at a conversion
rate of one share of Series A Preferred Stock for a number of
Common Shares equal to (x) $9.00 plus the value of accrued and
unpaid dividends on such shares divided by (y) the then current
conversion price, as further described below. Every share of
Series A Preferred Stock shall continue to be convertible, in whole
or in part, even though the Corporation or a holder may have given
notice of redemption with respect to such share of Series A
Preferred Stock or any part thereof pursuant to Section 6 hereof,
so long as such share of Series A Preferred Stock and the holder's
election to convert shall have been delivered to the Corporation
pursuant to Section 7(c) hereof prior to the date fixed for such
redemption. The Common Shares issuable upon conversion of the
shares of Series A Preferred Stock, when such Common Share shall be
issued in accordance with the terms hereof, are hereby declared to
be and shall be duly authorized, validly issued, fully paid and
nonassessable Common Shares held by the holders thereof.
(b) Reference to "Conversion". For convenience, the
conversion pursuant to this Section 7 of all or a part of the
shares of Series A Preferred Stock into Common Shares is herein
sometimes referred to as the "conversion" of the share sof Series
A Preferred Stock.
(c) Surrender, Election and Payment. Each share of
Series A Preferred Stock may be converted by the holder thereof, in
whole, or in part, during normal business hours on any Business Day
by surrender of the share of Series A Preferred Stock, accompanied
by written evidence of the holder's election to convert the
preferred share of Series A Preferred Stock or portion thereof, to
the Corporation at its office designated pursuant to Section 9
hereof (or, if such conversion is in connection with an
underwritten public offering of Common Shares, at the location at
which the underwriting agreement requires that such Common Shares
(or shares of Series A Preferred Stock) be delivered). Payment of
the conversion price for the Common Shares specified in such
election shall be made by applying an aggregate number of shares of
Series A Preferred Stock equal to the number obtained by dividing
(x) the number of Common Shares specified in such election by (y)
the amount obtained by dividing (A) $9.00 by (B) the then current
conversion price. Such holder shall thereupon be entitled to
receive the number of Common Shares specified in such election
(plus cash in lieu or any fractional share as provided in Section
7(j) hereof).
(d) Effective Date. Each conversion of a shares of
Series A Preferred Stock pursuant to Section 7(c) hereof shall be
deemed to have been effected immediately prior to the close of
business on the Business Day on which such share of Series A
Preferred Stock shall have been surrendered to the Corporation as
provided in Section 7(c) hereof (except that if such conversion is
in connection with an underwritten public offering of Common
Shares, then such conversion shall be deemed to have been effected
upon such surrender), and such conversion shall be at the current
conversion price in effect at such time. On each such day that the
conversion of a share of Series A Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for Common Shares are issuable upon
such conversion, as provided in Section 7(e) hereof, shall be
deemed to have become the holder or holders of record of such
Common Shares.
(e) Share Certificates. As promptly as practicable
after the conversion of a share of Series A Preferred Stock, in
whole or in part, and in any event within five (5) Business Days
thereafter (unless such conversion is in connection with an
underwritten public offering of Common Shares, in which event
concurrently with such conversion), the Corporation at its expense
(including the payment by it of any applicable issue, stamp or
other taxes, other than any income taxes) will cause to be issued
in the name of and delivered to the holder thereof or as such
holder may direct, a certificate or certificates for the number of
Common Shares to which such holder shall be entitled upon such
conversion on the effective date of such conversion plus cash in
lieu of any fractional shares as provided in Section 7(j) hereof.
(f) Acknowledgement of Obligation. The Corporation
will, at the time of or at any time after each conversion of a
share of Series A Preferred Stock, upon the request of the holder
thereof or of any Common Shares issued upon such conversion,
acknowledge in writing its continuing obligation to afford to such
holder all rights, if any, to which such holder shall continue to
be entitled; provided, that if any such holder shall fail to make
any such request, the failure shall not affect the continuing
obligations of the Corporation to afford such rights to such
holder.
(g) Payment of Dividends. Within five (5) Business Days
after receipt of any share of Series A Preferred Stock and an
election to convert all or a portion of such share of Series A
Preferred Stock under Section 7(c) hereof, the Corporation will
pay, out of funds legally available therefor, to the holder of such
share of Series A Preferred Stock in shares of Series A preferred
Stock, or at the option of the Company, in cash, an amount equal to
full cumulative dividends accrued to the effective date of
conversion of such shares of Series A Preferred Stock.
(h) Current Conversion Price. The term "conversion
price" shall mean initially $1.125 per Common Share, subject to
adjustment. The term "current conversion price" as used herein
shall mean the conversion price, as the same may be adjusted from
time to time as hereinafter provided, in effect at any given time.
In determining the current conversion price, the result shall be
expressed to the nearest $0.01, but any such lesser amount shall be
carried forward and shall be considered at the time of (and
together with) the next subsequent adjustment which, together with
any adjustments to be carried forward, shall amount of $0.01 per
Common Share or more.
(i) Reservation of Shares of Common Stock. The
Corporation shall at all times reserve and keep available out of
authorized but unissued the maximum number of shares of Common
Stock into which all shares of Series A Preferred Stock from time
to time outstanding are convertible, but shares of Common Stock
held in the treasury of the Corporation may, in its discretion, be
delivered upon any conversion of shares of Series A Preferred
Stock.
(j) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred Stock,
but, in lieu of any fraction of a Common Share which would
otherwise be issuable in respect of the aggregate number of shares
of Series A Preferred Stock surrendered by the holder thereof for
conversion, the holder shall have the right to receive an amount in
cash equal to the same fraction of the current market Price (as
defined below) on the effective date of the conversion of such
shares of Series A Preferred Stock. Dividends payable pursuant to
Section 7(g) above upon conversion of shares of Series A Preferred
Stock which are paid by payment-in-kind shall be paid with cash in
lieu of fractional shares to the extent of any fractional shares.
8. Adjustment to Conversion Price.
The conversion price shall be adjusted, from time to
time, as follows:
(a) Adjustments for Stock Dividends, Recapitalizations,
Etc. In case the Corporation shall, after August 1, 1995, (w) pay
a stock dividend or make a distribution (on or in respect of its
common Stock) in shares of its Common Stock (except there shall be
no adjustment with respect to the payment by the Company of a stock
dividend to holders of its Common Stock of the shares of Strategic
Abstract & Title Corporation, a Texas corporation), (x) subdivide
the outstanding shares of its Common Stock, (y) combine the
outstanding shares of its Common Stock into a smaller number of
shares, or (z) issue by reclassification of shares of its Common
Stock, any shares of capital stock of the Corporation, then, in any
such case, the current conversion price in effect immediately prior
to such action shall be adjusted to a price such that if the holder
of a share of Series A Preferred Stock were to convert such share
of Series A Preferred Stock in full immediately after such action,
such holder would be entitled to receive the number of shares of
capital stock of the Corporation which such holder would have owned
immediately following such action had such share of Series A
Preferred Stock been converted immediately prior thereto (with any
record date requirement being deemed to have been satisfied), and,
in any such case, such conversion price shall thereafter be subject
to further adjustments under this Section 8. An adjustment made
pursuant to this subsection (1) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or reclassification.
(b) Adjustments for Issuances of Additional Stock. In
case the Corporation shall at any time or from time to time after
August 1, 1995 issue any additional shares of the Corporation's
Common Stock ("Additional Common Stock"), for a consideration per
share either (I) less than the then current conversion price
immediately prior to the issuance of such Additional Common Stock,
or (II) without consideration, then (in the case of either clause
(I) or (II)), and thereafter successively upon each such issuance,
the current conversion price shall forthwith be reduced to a price
equal to the price determined by multiplying such current
conversion price by a fraction, of which
(1) the numerator shall be
(i) the number of shares of the Corporation's common
Stock outstanding when the then current conversion price became
effective, plus
(ii) the number of shares of the Corporation's Common
Stock which the aggregate amount of consideration, if any, received
by the Corporation upon all issuances of the Corporation's Common
Stock since the current conversion price became effective
(including the consideration, if any, received for such Additional
Common Stock) would purchase at the then current conversion price
per share, and
(2) the denominator shall be
(i) the number of share sof the Corporation's Common
Stock outstanding when the current conversion price became
effective, plus
(ii) the number of shares of the Corporation's Common
Stock issued since the current conversion price became effective
(including the number of shares of such Additional Common Stock);
provided, however, that such adjustment shall be made only if such
adjustment results in a current conversion price less than the
current conversion price in effect immediately prior to the
issuance of such Additional Common Stock. The Corporation may, but
shall not be required to, make any adjustment of the current
conversion price if the amount of such adjustment shall be less
than one percent (1%) of the current conversion price immediately
prior to such adjustment, but any adjustment that would otherwise
be required then to be made which is not so made shall be carried
forward and shall be made at the time of (and together with) the
next subsequent adjustment which, together with any adjustments to
carried forward, shall amount to not less than one percent (1%) of
the current conversion price immediately prior to such adjustment.
(c) Certain Rules in Applying the Adjustment for
Additional Stock Issuances. For purposes of any adjustment as
provided in Section 8(b) hereof, the following provisions shall
also be applicable:
(1) Cash Consideration. In case of the issuance of
Additional Common Stock for cash, the consideration received
by the Corporation therefor shall be deemed to be the cash
proceeds received by the Corporation for such Additional
Common Stock after deducting any commissions or other expenses
paid or incurred by the Corporation for any underwriting of,
or otherwise in connection with the issuance of such
Additional Common Stock.
(2) Non-Cash Consideration. In case of the issuance of
Additional Common Stock for a consideration other than cash,
or a consideration a part of which shall be other than cash,
the amount of the consideration other than cash so received or
to be received by the Corporation shall be deemed to be the
value of such consideration at the time of its receipt by the
Corporation as determined in good faith by the Board of
Directors, except that where the non-cash consideration
consists of the cancellation, surrender or exchange of
outstanding obligations of the Corporation (or where such
obligations are otherwise converted into shares of the
Corporation's Common Stock), the value of the non-cash
consideration shall be deemed to be the principal amount of
the obligations cancelled, surrendered, satisfied, exchanged
or converted. If the Corporation receives consideration, part
or all of which consists of publicly traded securities (i.e.,
in lieu of cash), the value of such non-cash consideration
shall be the aggregate market value of such securities (based
on the latest reported sale price regular way) as of the close
of the day immediately preceding the date of their receipt by
the Corporation.
(3) Options, Warrants, Convertibles, Etc. In case of
the issuance after the date hereof, whether by distribution or
sale to holders of its Common Stock or to others, by the
Corporation of (i) any security (other than the shares of
Series A Preferred Stock) that is convertible into Common
Stock, or (ii) any rights, options or warrants to purchase the
Corporation's Common Stock, if inclusion thereof in
calculating adjustments under this Section 8 would result in
a current conversion price lower than if excluded, the
Corporation shall be deemed to have issued, for the
consideration described below, the number of shares of the
Corporation's Common Stock into which such convertible
security may be converted when first convertible, or the
number of shares of the Corporation's Common stock deliverable
upon the exercise of such rights, options or warrants when
first exercisable, as the case may be (and such share shall be
deemed to be Additional Common Stock for the purposes of
Section 8(b) hereof). The consideration deemed to be received
by the Corporation at the time of the issuance of such
convertible securities or such rights, options or warrants
shall be the consideration so received determined as provided
in Section 8(c) (1) and (2) hereof plus (x) any consideration
or adjustment payment to be received by the Corporation in
connection with such conversion or, as applicable, (y) the
aggregate price at which shares of the Corporation's Common
Stock are to be delivered upon the exercise of such rights,
options or warrants when first exercisable (or, if no price is
specified and such shares are to be delivered at an option
price related to the market value of the subject Common Stock,
an aggregate option price bearing the same relation to the
market value of the subject common Stock at the time such
rights, options or warrants were granted). If, subsequently,
(1) such number of shares into which such convertible security
is convertible, or which are deliverable upon the exercise of
such rights, options or warrants, is increased or (2) the
conversion or exercise price of such convertible security,
rights, options or warrants is decreased, then the
calculations under the preceding two sentences (and any
resulting adjustment to the current conversion price under
Section 8(b) hereof) with respect to such convertible
security, rights, options or warrants, as the case may be,
shall be recalculated as of the time of such issuance but
giving effect to such changes (but any such recalculation
shall not result in the current conversion price being higher
than that which would be calculated without regard to such
issuance). On the expiration of termination of such rights,
options or warrants, or rights to convert, the conversion
price hereunder shall be readjusted (up or down as the case
may be) to such current conversion price as would have been
obtained had the adjustments made with respect to the issuance
of such rights, options, warrants or convertible securities
been made upon the basis of the delivery of only the number of
shares of the Corporation's Common Stock actually delivered
upon the exercise of such rights, options or warrants or upon
the conversion of any such securities an dat the actual
exercise or conversion prices (but any such recalculations
shall not result in the current conversion price being higher
than that which would be calculated without regard to such
issuance).
(4) Number of Shares Outstanding. The number of shares
of the Corporation's Common Stock as at the time outstanding
shall exclude all shares of the Corporation's Common stock
then owned or held by or for the account of the Corporation
but shall include the aggregate number of shares of the
Corporation's Common Stock at the time deliverable in respect
of the convertible securities, rights, options and warrants
referred to in Section 8(c) (3) hereof; provided, that to the
extent that such rights, options, warrants or conversion
privileges are not exercised, such shares of the Corporation's
Common Stock shall be deemed to be outstanding only until the
expiration dates of the rights, warrants, options or
conversion privileges or the prior cancellation thereof.
(d) Exclusion from the Adjustment for Additional Stock
Issuances. No adjustment of the current conversion price under
Section 8(b) hereof shall be made as a result of or in connection
with the issuance of Common Shares (i) upon conversion of the
shares of Series A Preferred Stock or Series B Preferred Stock (or
the issuance of any shares of Series A Preferred Stock or Series B
Preferred Stock under any Purchase Agreement) or (ii) upon exercise
or conversion of the Warrants or the stock options granted to
employees of the Corporation on or before July 31, 1995.
(e) Accountants' Certification. Whenever the current
conversion price is adjusted as provided in this Section 8, the
Corporation will promptly obtain a certificate of a firm of
independent public accountants of recognized national standing
selected by the Board of Directors of the Corporation (who may be
the regular auditors of the Corporation) setting forth the current
conversion price as so adjusted, the computation of such adjustment
and a brief statement of the facts accounting for such adjustment,
and will mail to the holders of the shares of Series A Preferred
Stock a copy of such certificate from such firm of independent
public accountants.
(f) Antidilution Adjustments Under other Securities.
Without limiting any other rights available hereunder to the
holders of shares of Series A Preferred Stock, if there is an
antidilution adjustment (x) under any security which is convertible
into Common Stock of the Corporation whether issued prior to or
after the date hereof (except for the shares of Series A Preferred
Stock) or (y) under any right, option or warrant to purchase Common
Stock of the Corporation whether issued prior to or after the date
hereof, which (in the case of clause (x) or (y)) results in a
reduction in the exercise or purchase price with respect to such
security, right, option or warrant to an amount less than the then
current conversion price or results in an increase in the number of
shares obtainable under such security, right, option or warrant
which has an effect equivalent to lowering a conversion or exercise
price to an amount less than the then current conversion price,
then an adjustment shall be made under this Section 8(f) to the
then current conversion price hereunder. Any such adjustment under
this Section 8(f) shall be whichever of the following results in a
lower current conversion price:
(A) a reduction in the current conversion price
equal to the percentage reduction in such exercise or
purchase price with respect to such security, right,
option or warrant, or
(B) a reduction in the current conversion price
which will result in the same percentage increase in the
number of Common Shares available under this Section 8 as
the percentage increase in the number of shares available
under such security, right, option or warrant.
Any such adjustment under this Section 8(f) shall only be made if
it would result in a lower current conversion price than that which
would be determined pursuant to any other antidilution adjustment
otherwise required under this Section 8 as a result of the event or
circumstance which triggered the adjustment to the security, right,
option or warrant described in clause (x) or (y) above (and if any
such adjustment is so made under this Section 8(f), then such other
antidilution adjustment otherwise required under this Section 8
shall not be made as a result of such event or circumstance).
(g) Other Adjustments. In case any event shall occur as
to which any of the provisions of this Section 8 are not strictly
applicable but the failure to make any adjustment would not fairly
protect the conversion rights represented by the shares of Series
A Preferred Stock in accordance with the essential intent and
principles of Sections 7 and 8 hereof, then, in each such case, the
Corporation shall appoint a firm of independent public accountants
of recognized national standing selected by the Board of Directors
of the Corporation (who may be the regular auditors of the
Corporation), which shall give their opinion upon the adjustment,
if any, on a basis consistent with the essential intent and
principles established in Sections 7 and 8 hereof, necessary to
preserve, without dilution, the conversion rights represented by
the shares of Series A Preferred Stock. Upon receipt of such
opinion, the Corporation will promptly mail copies thereof to the
holders of the shares of Series A Preferred Stock and shall make
the adjustments described therein.
(h) "Meaning of Issuance". References in this Agreement
to "issuances" of stock by the Corporation include issuances by the
Corporation of previously unissued shares and issuances or other
transfers by the Corporation of treasury stock.
(i) Consolidation or Merger. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale of
all or substantially all of the Corporations' assets to another
Person or other transaction 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 Corporation shall made appropriate provision (in form
and substance reasonably satisfactory to holders of Series A
Preferred Stock representing a majority of the Series A Preferred
Stock then outstanding) to insure that each of the holders of the
Series A 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 Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series A Preferred
Stock, such shares of stock, securities or assets as may be
issuable or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon conversion of such holder's Series A Preferred
Stock had such Organic Change not taken place.
In any such case, the Corporation shall make appropriate
provision (in form and substance reasonably satisfactory to the
holders of Series A Preferred Stock representing a majority of the
Series A Preferred Stock then outstanding) with respect to such
holders' rights and interest to insure that the provisions hereof
shall thereafter be applicable to the Series A 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
reflect the value for the Series A Preferred Stock reflected by the
terms of such consideration, merger or sale, if the value so
reflected would cause an increase to 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 such
consolidation or merger or the Corporation purchasing such assets
assumes by written instrument (which may be the agreement of
consolidation, merger or sale), in form and substance reasonably
satisfactory to the holders of Series A Preferred Stock
representing a majority of the Series A 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.
(j) Notices. In case at any time
(i) the Corporation shall take any action which would
require an adjustment in the current conversion price pursuant
to Section 8(a) or 8(b); or
(ii) there shall be any reorganization, reclassification
or change of the Corporation's Common Stock (other than a
change in par value or from par value to no par value or from
no par value to par value), or any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or any sale,
transfer or lease of all or substantially all of the assets of
the Corporation; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation;
then, in any one or more of such cases, the Corporation shall give
written notice to the holders of the shares of Series A Preferred
Stock, not less than ten (10) days before any record date or other
date set for definitive action, of the date on which such action,
distribution, reorganization, reclassification, change, sale,
transfer, lease, consolidation, merger, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of any such
action (to the extent such effect may be known at the date of such
notice) on the current conversion price and the kind and amount of
the shares and other securities and property deliverable upon
conversion of the shares of Series A Preferred Stock. Such notice
shall also specify any date as of which the holders of the Common
Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon any such
reorganization, reclassification, change, sale, transfer, lease,
consolation, merger, dissolution, liquidation or winding-up, as the
case may be.
9. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands,
consents and other communications hereunder shall be in writing and
shall be delivered by hand or shall be sent by telex or telecopy
(confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), to the following addresses:
(a) if to the holder of a share of Series A Preferred
Stock, at the holder's address as set forth in the stock register
of the Corporation, or at such other address as may have been
furnished to the Corporation by the holder in writing; or
(b) if to the Corporation, at SA Holdings, Inc. 1912
Avenue K, Suite 100, Plano, TX 75074-5959 or at such other address
as may have been furnished in writing by the Corporation to the
holders of the shares of Series A Preferred Stock.
Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such
notice is delivered or, if sent by telex or telecopier, when
received, unless otherwise expressly specified or permitted by the
terms hereof.
IN WITNESS WHEREOF, SA Holdings, Inc. caused this
Certificate of Designations to be signed by its chief Executive
Officer this 31st day of July, 1995.
SA HOLDINGS, INC.
By ______________________________
Jack W. Matz, Jr.
Chief Executive Officer
IMPORTANT NOTICE ON REVERSE SIDE
DELAWARE
Number
Shares
001
166,668
Picture of Eagle
SA HOLDINGS, INC.
THIS CERTIFIES THAT Jesup & Lamont Capital Markets, Inc. is
the owner of 166,667
Series A Cumulative Convertible fully paid and non-assessable
Shares Preferred Stock, Par
Value $.00001 per Share transferrable only upon the books of the
Company by the holder hereof
in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this
Certificate to be signed by its
duly authorized officers and to be sealed with the Seal of the
Corporation this 31st day of July
A.D. 1995.
______________________________ ______________________________
John Ebert, Secretary Jack W. Matz, President
_________________________________________________________________
LEGEND ON REVERSE SIDE
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW. THE SHARES HAVE BEEN ACQUIRED FOR
PRIVATE INVESTMENT AND MAY NOT BE OFFERED FOR SALE OR SOLD IN THE
ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, OR (ii) AN OPINION OF COUNSEL SATISFACTORY
TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
SUCH
REQUEST MAY BE MADE TO THE CORPORATION OR THE TRANSFER AGENT.
Exhibit B
_________________________________________________________________
Warrant Purchase Agreement
Dated As Of July 31, 1995
Regarding
Common Stock Purchase Warrants
Of
SA Holdings, Inc.
a Delaware corporation
_________________________________________________________________
WARRANT PURCHASE AGREEMENT dated as of
July 31, 1995 by and between SA Holdings, Inc., a Delaware
corporation (the "Company"), and the Purchaser listed on the
signature page of this Agreement (the "Purchaser").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. SALE AND PURCHASE OF WARRANTS
(a) The Company agrees to sell to the Purchaser and,
subject to the terms and conditions hereof and in reliance upon
the representations and warranties of the Company contained
herein or made pursuant hereto, the Purchaser agrees to purchase
from the Company on the Closing Date specified in Section 2
hereof, a Warrant for 500,000 shares of the Company's common
stock.
(b) As used herein, "Warrants" means the aggregate of
Common Stock Purchase Warrants evidenced by certificates
substantially in the form of Exhibit A hereto, together with all
Warrants issued in exchange therefor or replacement thereof.
Such Warrants in the aggregate initially entitle the holders
thereof to purchase 500,000 shares of the Company's common stock,
$.0001 par value per share, at a exercise price of $1.125 per
share, such number and such price being subject to adjustment as
provided in the form of Warrant attached hereto as Exhibit A.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the
closing of the purchase and sale of the Warrants to be purchased
by the Purchaser (the "Closing") will take place at the offices
of Arter, Hadden, Johnson & Bromberg, Dallas, Texas, on July 31,
1995 or such other time and date as shall be mutually agreed to
by the Company and the Selling Shareholders for the closing of
the acquisition of the stock of US Communications, Inc., a Texas
corporation ("USC"), provided that the Closing shall occur no
later than August 3, 1995. Such date and time are referred to
herein as the "Closing Date.
(b) Subject to the terms and conditions hereof, on the
Closing Date (i) the Company will deliver to the Purchaser a
Warrant or Warrants evidenced by certificates substantially in
the form of Exhibit A hereto and dated the Closing Date, to
purchase 500,000 shares of the Company's Common Stock. The
Warrants are being issued as partial payment of fees due from the
Company to the Purchaser for services rendered in connection with
the Company's acquisition of USC.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement and the Warrants,
the following definitions shall apply (such definitions to be
equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means (a) any director, officer or employee
of the Company, (b) any Person who, individually or with his
or her immediate family or any other Affiliate, directly or
indirectly, beneficially owns or holds 5% or more of the
voting interest in the Company, or (c) any corporation,
partnership or other Person in which any Person described
above owns a 5% or greater equity interest. Without
limiting the generality of the foregoing, Jack W. Matz, Jr.
shall at all times be deemed to be an Affiliate of the
Company.
"Agreement" means this Agreement (together with
exhibits and schedules) as from time to time assigned,
supplemented or amended or as the terms hereof may be
waived.
"Business Day" means any day, other than a Saturday,
Sunday or legal holiday, on which banks in the State of
Texas are open for business.
"Closing" has the meaning set forth in Section 2
hereof.
"Closing Date" has the meaning set forth in Section 2
hereof.
"Commission" means the Securities and Exchange
Commission and any other similar or successor agency of the
federal government administering the Securities Act or the
Securities Exchange Act.
"Common Stock" means that class of stock or other
equivalent evidences of ownership of a corporation, the
holders of which are entitled to vote generally to elect the
Board of such corporation. "Common Stock" includes without
limitation the Common Stock, $.0001 par value per share, of
the Company.
"Company" means SA Holdings, Inc., a Delaware
corporation, its successors and assigns.
"Loan Document" has the meaning provided in Section 4.1
hereof.
"Outstanding" or "outstanding" means, when used with
reference to the Warrants as of a particular time, all
Warrants as the case may be, theretofore duly issued except
(i) Warrants theretofore reported as lost, stolen, mutilated
or destroyed or surrendered for transfer, exchange or
replacement, in respect of which new or replacement Warrants
have been issued by the Company, and (ii) Warrants
theretofore fully exercised; except that for the purpose of
determining whether holders of the requisite principal
amount of Warrants have made or concurred in any
declaration, waiver, consent, approval, notice, annulment of
acceleration or other communication under this Agreement or
under any Warrants, Warrants registered in the name of, as
well as Warrants owned beneficially by, the Company, any
Subsidiary or any of their Affiliates (other than the
Purchaser) shall not be deemed to be outstanding.
Person" or "person" means an individual, corporation,
company, partnership, firm, association, joint venture,
trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"Preferred Stock" means any class of the capital stock
of a corporation (whether or not convertible into any other
class of such capital stock) which has any right, whether
absolute or contingent, to receive dividends or other
distributions of the assets of such corporation (including,
without limitation, amounts payable in the event of the
voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to
the rights of another class of the capital stock of such
corporation. "Preferred Stock" includes without limitation
(i) the Series A Cumulative Preferred Stock, $.00001 par
value per share, of the Company and (ii) the Series B
Cumulative Preferred Stock, $.00001 par value per share, of
the Company.
"Public Offering" means an underwritten public offering
of equity securities of the Company.
"Purchaser" means the person who accepts and agrees to
the terms hereof as indicated by such person's signature (as
"the undersigned Purchaser") on the execution page of this
Agreement, together with successors and assigns.
"Rule 144" means (i) Rule 144 under the Securities Act
as such Rule is in effect from time to time, and (ii) any
successor rule, regulation or law, as in effect from time to
time.
"Rule 144A" means (i) Rule 144A under the Securities
Act as such Rule is in effect from time to time and (ii) any
successor rule, regulation or law, as in effect from time to
time.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules, regulations and
interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, and the rules,
regulations and interpretations thereunder.
"Senior Credit Agreement" means the Term Credit
Agreement between the Company and NorWest Bank Minnesota,
National Association, dated as of the date hereof.
"Senior Indebtedness" means the principal of, premium,
if any, and interest on Indebtedness of the Company under
the Senior Credit Agreement, and any renewals,
modifications, refundings or extensions of any such
Indebtedness.
"Senior Lender" means Norwest Bank Minnesota, National
Association, its successors and assigns.
"Share" or "Shares" means shares of the Company's
Common Stock, or other securities which can be obtained or
have been obtained by an exercise in whole or in part of any
Warrant or are obtained upon an exchange of Shares pursuant
to the terms of a Warrant or are obtained upon an exchange
of Shares pursuant to the terms of the Company's articles of
incorporation.
"Stock Purchase Agreement" means the Stock Purchase
Agreement by and among the Company, USC, Bill L. Johnson,
Howard Maddera, Marianne Reed and NTS Communications, Inc.,
dated as of June 30, 1995, as amended.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than
80% of the total voting power of shares of stock or other
equity interests entitled (without regard to the occurrence
of any contingency or any pledge of shares) to vote in the
election of directors, managers or trustees thereof is, at
the time as of which any determination is being made, owned
or controlled, directly or indirectly, by such Person or one
or more of its Subsidiaries, or both. The term "Subsidiary"
or "Subsidiaries" when used herein without reference to any
particular Person, means a Subsidiary or Subsidiaries of the
Company.
"USC" means US Communications, Inc., a Texas
corporation.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser as
follows:
4.1. Corporate Existence and Power.
The Company is a business corporation duly
incorporated, validly existing and in good standing under the
laws of Delaware, and is duly licensed or qualified to transact
business in Texas and Delaware. The Company has all requisite
power and authority, corporate or otherwise, to conduct its
business, to own its properties and to execute and deliver, and
to perform all of its obligations under, the Agreement, the
Warrants or any documents required thereunder (hereinafter the
"Loan Documents").
4.2. Authorization of Borrowing; No Conflict as to Law
or Agreements.
The execution, delivery and performance by the Company
of the Loan Documents have been duly authorized by all necessary
corporate action of the Company and do not and will not (i)
require any consent or approval of the shareholders of the
Company, or any authorization, consent or approval by any
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision
of any law, rule or regulation or of any order, writ, injunction
or decree presently in effect having applicability to the Company
or of its Articles of Incorporation or Bylaws or (iii) result in
a breach of or constitute a default under any material indenture
or loan or credit agreement or any other agreement, lease or
instrument to which the Company is a party or by which it or its
properties may be bound or affected.
4.3. Legal Agreements.
The Loan Documents constitute the legal, valid and
binding obligations of the Company enforceable against the
Company in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to the rights of creditors generally.
4.4. Capitalization.
The authorized capital stock of the Company consists of
(i) 50,000,000 shares of Common Stock, $.0001 par value per
share, and (ii) 12,500,000 shares of Convertible Preferred Stock,
$.00001 par value per share, of which, after giving effect to the
Certificate of Designations, 250,000 shares have been designated
as Series A Convertible Preferred Stock and 250,000 shares have
been designated as Series B Convertible Preferred Stock. The
shares of the Company's Common Stock issuable upon exercise of
the Warrants will, when issued, be duly authorized, validly
issued, fully paid and non-assessable.
SECTION 5. REPRESENTATIONS OF THE PURCHASER
(a) The Purchaser hereby makes the representations and
warranties to the Company contained in this Section 5(a), as of
the date hereof. The Purchaser has all requisite power,
authority and legal right to execute, deliver, enter into,
consummate and perform this Purchase Agreement. For purposes of
the application of state securities laws, each Purchaser
represents that it is a resident of the state set forth in the
Purchaser's address on the signature page of this Agreement. The
Purchaser has duly executed and delivered this Purchase
Agreement, and this Purchase Agreement constitutes the legal,
valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to the rights of creditors generally.
(b) The Purchaser hereby represents to the Company (as
of the date hereof and as of the Closing Date hereunder) that the
Purchaser is capable of evaluating the risk of its investment in
the Warrants being purchased by it and is able to bear the
economic risk of such investment, that (except as the Purchaser
has otherwise advised the Company and the Purchaser's counsel in
writing) it is purchasing the Warrants to be purchased by it for
its own account, and that the Warrants are being purchased by the
Purchaser for investment and not with a present view to any
distribution thereof in violation of any applicable securities
laws. It is understood that the disposition of the Purchaser's
property shall at all times be within the Purchaser's control.
If the Purchaser should in the future decide to dispose of any of
its Warrants or Shares, it is understood that it may do so but
only in compliance with the Securities Act and applicable
securities laws. The Purchaser hereby represents to the Company
(as of the date hereof and as of the Closing Date hereunder) that
the Purchaser is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(c) The Purchaser has received and reviewed copies of
the Company's Forms 10-K (year ending 1994), 10-Q (quarter ending
March 31, 1994), 8-Ks filed in calendar year 1995 prior to the
date hereof, and a copy of the Confidential Information
Memorandum dated March 1995 prepared by Jesup & Lamont Capital
Markets, Inc.
SECTION 6. AFFIRMATIVE COVENANTS OF THE COMPANY
So long as the Warrants shall remain outstanding, the
Company will comply with the following requirements, unless the
Purchaser shall otherwise consent in writing:
6.1. Reservation of Shares. There have been reserved,
and the Company shall at all times keep reserved, free from
preemptive rights, out of its authorized Common Stock, $.0001 par
value per share, a number of shares of Common Stock, $.0001 par
value per share, sufficient to provide for the exercise of the
Warrants.
6.2. Listing of Shares. If any shares of the
Company's Common Stock are listed on any national securities
exchange (or on the National Association of Securities Dealers,
Inc., Automated Quotation System or comparable system), then the
Company will take such action as may be necessary, from time to
time, to list Shares, as the case may be, on such exchange (or
system as the case may be).
6.3. Securities Exchange Act Registration. As soon as
the Company is either required to or does file a registration
statement with respect to the Company's Common Stock under
Section 6 of the Securities Act or Section 12(b) or Section
12(g), whichever is applicable, of the Securities Exchange Act,
then, thereafter:
(a) The Company will maintain effective a registration
statement (containing such information and documents as the
Commission shall specify and otherwise complying with the
Securities Exchange Act) under Section 12(b) or Section 12(g),
whichever is applicable, of the Securities Exchange Act, with
respect to the Company's Common Stock, as the case may be, and
will file on time such information, documents and reports as the
Commission may require or prescribe for companies whose stock has
been registered pursuant to such Section 12(b) or Section 12(g),
whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or
otherwise make generally available to the public such financial
and other information, as any such holder may deem reasonably
necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
6.4. Private Placement Status. Neither the Company
nor any agent nor other Person acting on the Company's behalf
will do or cause to be done (or will omit to do or to cause to be
done) any act which act (or which omission) would result in
bringing the issuance or sale of the Warrants within the
provisions of Section 5 of the Securities Act or the filing,
notification or reporting requirements of any state securities
law (other than in accordance with a registration and
qualification of Shares pursuant to Section 10 hereof).
6.5. Delivery of Information. If a holder of Shares
proposes to transfer any such Shares pursuant to Rule 144A, the
Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the
prospective transferee any information concerning the Company and
its Subsidiaries which is required to be delivered to any
transferee of such Shares pursuant to such Rule 144A.
6.6. Financial Reports. The Company will deliver to
the Purchaser:
(a) as soon as made available, copies of all Forms 10-
K, 10-Q, 8-K, financial statements, proxy statements, reports
which the Company has sent to its stockholders or filed with the
Commission or any national securities exchange; and
(b) copies of any notice sent to the Senior Lender
notifying the Senior Lender of the occurrence of a default or
event of default under the terms of the Senior Credit Agreement,
together with any supporting statements attached thereto and
delivered to the Senior Lender.
SECTION 7. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase the Warrants
hereunder is subject to satisfaction of the following conditions
at the Closing (any of which may be waived by the Purchaser):
7.1. Intentionally Omitted.
7.2. Accuracy of Representations and Warranties. The
representation and warranties of the Company herein or in any
certificates or document delivered pursuant hereto shall be
correct and complete on and as of the Closing Date with the same
effect as though made on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement).
7.3. Proceedings. All corporate and other proceedings
in connection with the transactions contemplated by the Warrants
and all documents incident thereto, shall be in form and
substance satisfactory to the Purchaser and its counsel, and the
Purchaser shall have received all such originals or certified or
other copies of such documents as the Purchaser or its counsel
may reasonably request.
7.4. Acquisition. The Company and the Senior Lender
shall have executed and delivered the Senior Credit Agreement,
which shall be in full force and effect and the Company shall
have made a borrowing thereunder sufficient, together with
proceeds from the sale of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock and the Subordinated Notes
of the Company issued on the date hereof to close under the terms
of the Stock Purchase Agreement.
SECTION 8. AMENDMENT; WAIVER; CONSENT
(a) This Agreement and the Warrants may be amended (or
any provision hereof or thereof waived) only with the written
consent of the holders of a majority in interest of the Warrants.
(b) The Company agrees that all holders of Warrants
shall be notified by the Company in advance of any proposed
amendment or waiver, but failure to give such notice shall not in
any way affect the validity of any such amendment or waiver. In
addition, promptly after obtaining the written consent of the
holders herein provided, the Company shall transmit a copy of any
amendment or waiver which has been adopted to all holders of
Warrants then outstanding, but failure to transmit copies shall
not in any way affect the validity of any such amendment or
waiver.
(c) The Company and each holder of Warrants then or
thereafter outstanding shall be bound by any amendment or waiver
effected in accordance with the provisions of this Section 10.
(d) Any provision of this Agreement relating to the
consent, determination, decision or waiver of a holder or holders
of Warrants such holder's consent, determination, decision or
waiver, as the case may be, in such holder's sole discretion.
SECTION 9. RESTRICTIONS ON TRANSFER
(a) Each holder of a Warrant by acceptance thereof
agrees that it will not sell or otherwise dispose of any Warrants
or Shares unless (i) such Warrants or Shares have been registered
under the Securities Act and, to the extent required, under any
applicable state securities laws, or (ii) such Warrants or Shares
are sold in accordance with the applicable requirements and
limitations of Rule 144 or Rule 144A and any applicable state
securities laws or (iii) the Company has been furnished with an
opinion or opinions from counsel to such holder (which counsel
and opinion(s) shall be reasonably satisfactory to the Company
and which counsel may be inside counsel of such holder) to the
effect that registration under the Securities Act is not required
for the transfer as proposed (which opinion may be conditioned
upon the transferee's assuming the obligations of a holder of
Warrants or Shares under this Section) or (iv) the Company has
been furnished with a letter from the Division of Corporate
Finance of the Commission to the effect that such Division would
not recommend any action to the Commission if such proposed
transfer were effected without a registration statement effective
under the Securities Act. The Company agrees that within five
(5) Business Days after receipt of any opinion referred to in
(iii) above, it will notify the holder supplying such opinion
whether such opinion is satisfactory to the Company's counsel.
(b) The Company may endorse on all Warrant
certificates and Share certificates a legend stating or referring
to the transfer restrictions contained in paragraph (a) above;
provided, that no such legend shall be endorsed on any Warrant or
Share certificates which, when issued, are no longer subject to
the restrictions of this Section 9; provided, further, that if a
transfer is made pursuant to clause (i), (ii) (other than
pursuant to Rule 144A) or (iv) of paragraph (a) or if an opinion
of counsel provided pursuant to clause (iii) of paragraph (a)
concludes that the legend is no longer necessary, the Company
will deliver upon transfer Warrant certificates or Share
certificates, as the case may be, without such legends.
SECTION 10. REGISTRATION RIGHTS
10.1. Registration at the Request of Holders.
The Company agrees that on or after July 31, 1996,
upon receipt by the Company of a Registration Demand satisfying
the conditions under Section 10.1(b) hereof, the Company will (A)
promptly (at least thirty (30) days prior to the filing date)
give written notice of the proposed registration to each holder
of a Note or Share, and (B) with reasonable promptness, and in
any case not later than ninety (90) days after receipt by the
Company of the Registration Demand, use reasonable efforts to
file as soon as practicable a registration statement with the
Commission relating to the Shares as to which registration is
requested in the Registration Demand. The Company shall use its
reasonable best efforts to make such registration statement
become effective and to qualify the same under the Blue Sky laws
of such states as may be requested; provided, however, that with
respect to compliance with Blue Sky laws, the Company shall not
be obligated to qualify as a foreign corporation or to execute or
file any general consent to service of process under the laws of
any such state where it is not so subject. The Company shall
also include under such registration statement (and in such state
qualifications) any Shares requested to be so included by any
other holder of Notes or Shares by written notice delivered to
the Company within thirty (30) days after the sending of the
notice provided for in (A) above.
(a) A "Registration Demand" means a written notice
from one or more holders of Notes or Shares stating that such
holder or holders desire to sell all of their Shares under
circumstances requiring registration under the Securities Act and
requesting that the Company effect registration with respect to
all of the Shares held, or to be held after conversion of Notes,
by such holder or holders; provided, that such holder or holders
giving such notice hold Notes or Shares representing, or
entitling the holder thereof to obtain upon conversion, in the
aggregate not less than 150,000 Shares (as such number may be
adjusted from time to time hereafter as a result of a stock
split, combination, etc.).
(b) The Company is obligated to effect registration
and qualification pursuant to this Section 10.1 no more than two
times.
(c) If the holder or holders who gave the Registration
Demand under this Section 10.1 inform the Company by written
notice that they are withdrawing their Registration Demand and
pay all of the Company's out-of-pocket expenses with respect to
such registration and qualification incurred to the date of the
notice under this Section 10.1(d), then the registration
statement need not be filed and the whole effort will not count
as a registration and qualification (or an exercise of rights)
under this Section 10.1.
(d) The Company may, upon written notice to the holder
or holders giving a Registration Demand, require such holder or
holders to withdraw such Registration Demand upon the good faith
determination by the Company that such postponement is necessary
(i) to avoid disclosure of non-public information or (ii) as a
result of a pending financial transaction, and in each case, the
holders may not give another Registration Demand for a period of
up to ninety (90) days, as specified by the Company in such
notice; provided that the Company may exercise this right not
more than once in any 12-month period. The Company may only give
such a notice where the giving of such a notice has been
specifically approved by the Company's Board of Directors. Upon
receipt of any such written notice from the Company, such
Registration Demand shall be deemed to be rescinded and retracted
(subject to being given again after any holdback period specified
in such notice in accordance with the second preceding sentence)
and shall not be counted as, or deemed or considered to be or to
have been, a Registration Demand for any purpose.
10.2. Piggyback Rights.
(a) If the Company at any time proposes to file a
registration statement under the Securities Act for any sales of
at least 300,000 shares (as such number may be adjusted from time
to time hereafter as a result of a stock split, combination,
etc.) of the Company's Common Stock (or any warrants, units,
convertibles, rights or other securities related or linked to any
shares of the Company's Common Stock) on behalf of the Company or
otherwise, the Company shall give written notice of such
registration no later than thirty (30) days before its filing
with the Commission to all holders of Warrants or Shares;
provided, that registrations relating solely to securities to be
issued by the Company in connection with any employee stock
option or employee stock purchase or savings plan on Form S-8 (or
successor forms) or Form S-4 (or successor forms) under the
Securities Act shall not be subject to this Section 10.2. If
holders of Warrants or Shares so request within thirty (30) days,
the Company shall include in any such registration the Shares
held or to be held after exercise of Warrants by such holders and
requested to be included in such registration, subject to Section
10.2(b) hereof.
(b) The Company shall not be obligated to so include
the Shares to the extent any underwriter or underwriters of such
securities being otherwise registered by the Company determines
in good faith that the inclusion of such Shares would jeopardize
the successful sale of such other securities proposed to be sold
by such underwriter or underwriters, in which case holders of
Warrants or Shares desiring to participate in such registration
shall be entitled to participate in any such reduced number of
Shares (if any) which may be included in such registration (along
with other holders of Common Stock exercising piggyback rights
with respect to such registration) in proportion to the amount of
shares of the Company's Common Stock held by such holders
(whether held directly or through the right to obtain Shares upon
exercise of Warrants held by such holders).
(c) The obligations and rights of the Company and the
holders under this Section 10.2 shall not affect in any way their
obligations and rights under Section 10.1 hereof.
(d) The Company may propose including Common Stock to
be publicly offered and sold by it in any registration statement
to be filed pursuant to a Registration Demand under Section 10.1.
If, in the written opinion of underwriters selected for the
proposed offering, the inclusion of the securities proposed to be
offered and sold by both the Company and the holders of Notes or
Shares would jeopardize the success of the offering, the selling
holders may elect (i) to exclude the amount of securities (up to
all of the securities) proposed to be sold by the Company which,
in the opinion of such underwriters, would jeopardize the success
of the offering by the selling holders, or (ii) to convert their
proposed offering to an offering pursuant to this Section 10.2.
If the selling holders elect to convert the offering to one under
this Section 10.2, then such registration shall not be deemed (or
counted as) a registration and qualification (or an exercise of
rights) under Section 10.1 hereof.
10.3. Expenses.
Subject to the limitations contained in this Section
10.3 and except as otherwise specifically provided in this
Section 10, the entire costs and expenses of registration and
qualification pursuant to Section 10.1 hereof and of registration
and qualification pursuant to Section 10.2 hereof shall be borne
by the Company. Such costs and expenses shall include, without
limitation, underwriting fees or commissions in connection with
the registration and qualification pursuant to Section 10.1
hereof (other than with respect to the Shares to be sold by the
holders of Warrants or Shares, as to which underwriting discounts
and commissions shall be paid by the selling holders), the fees
and expenses of counsel for the Company and of its accountants,
all other costs, fees and expenses of the Company incident to the
preparation, printing, registration and filing under the
Securities Act of the registration statement and all amendments
and supplements thereto, up to $20,000 of reasonable fees and
expenses of one counsel to the holders of Warrants or Shares
relating to such registration and qualification, the cost of
furnishing copies of each preliminary prospectus, each final
prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of the Shares and the
costs and expenses (including reasonable fees and disbursements
of counsel) incurred in connection with the qualification of the
Shares under the Blue Sky laws of various jurisdictions;
provided, however, that if any jurisdiction in which the Company
shall qualify or register in connection with the proposed sale of
the Shares shall require that expenses incurred in connection
with the qualification or registration of such Shares in that
jurisdiction be borne in whole or in part by the holders selling
those Shares, then such expenses shall be payable by such holders
pro rata to the extent required by such jurisdiction and in the
event that any such holder is required by any such applicable
jurisdiction to bear such expense, the Company shall promptly
reimburse each such holder for the amount paid therefor.
10.4. Procedures.
(a) In the case of each registration or qualification
pursuant to Section 10.1 or 10.2, the Company will keep all
holders of Warrants or Shares advised in writing as to the
initiation of proceedings for such registration and qualification
and as to the completion thereof, and will advise any such
holder, upon request, of the progress of such proceedings.
(b) At the Company's expense, the Company will keep
each registration and qualification under this Section 10
effective (and in compliance with the Securities Act) by such
action as may be necessary or appropriate for a period of one
hundred twenty (120) days after the effective date of such
registration statement, including, without limitation, the filing
of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration
statement current and the further qualification under any
applicable Blue Sky or other state securities laws to permit such
sale or distribution, all as requested by such holder or holders.
(c) The Company will immediately notify each holder on
whose behalf Shares have been registered pursuant to this
Section 10, 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, as then in effect,
includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing.
(d) The Company will furnish to each holder on whose
behalf Shares have been registered pursuant to this Section 10 a
signed counterpart, addressed to such holder, of an opinion of
counsel for the Company, dated the effective date of such
registration statement.
(e) Without limiting any other provision hereof, in
connection with any registration of Shares under this Section 10,
the Company will use its reasonable best efforts to comply with
the Securities Act, the Securities Exchange Act and all
applicable rules and regulations of the Commission, and will make
generally available to its securities holders, as soon as
reasonably practicable, an earnings statement covering a period
of at least twelve (12) months, beginning with the first month of
the first fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act.
(f) In connection with any registration of Shares
under this Section 10, the Company will provide a transfer agent
and registrar for the Shares not later than the effective date of
such registration statement.
(g) The Company shall not be required to include any
of the holders' Shares in an underwritten offering of the
Company's securities unless such holders accept the terms of the
underwriting as agreed upon between the Company and the
underwriters selected by it, which terms shall include customary
provisions with respect to indemnification and contribution and
customary representations and warranties by the Company (which
shall be made to and for the benefit of the underwriters and the
holders of Shares to be sold in such offering).
(h) In connection with the preparation and filing of
each registration statement registering Shares under this
Section 10, the Company will give the holders of Notes or Shares
on whose behalf such Shares are to be so registered and their
underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business
of the Company with its officers, its counsel and the independent
public accountants who have certified its financial statements,
as shall be reasonably necessary, in the reasonable opinion of
such holders or such underwriters or their counsel, in order to
conduct a reasonable and diligent investigation within the
meaning of the Securities Act.
10.5. Indemnification.
The Company will indemnify and hold harmless each
holder of Warrants or Shares and any underwriter (as defined in
the Securities Act) for such holder and each person, if any, who
controls the holder or underwriter within the meaning of the
Securities Act against any losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable
attorneys' fees and expenses and reasonable costs of
investigation) to which the holder or underwriter or such
controlling person may be subject, under the Securities Act or
otherwise, insofar as any thereof arise out of or are based upon
(a) any untrue statement or alleged untrue statement of a
material fact contained in (i) any registration statement under
which such Shares were registered under the Securities Act
pursuant to Section 10.1 or 10.2 hereof, any prospectus or
preliminary prospectus contained therein, or any amendment or
supplement thereto, or (ii) any other document incident to the
registration of the Shares under the Securities Act or the
qualification of the Shares under any state securities laws
applicable to the Company, or (b) the omission or alleged
omission to state in any item referred to in the preceding clause
(a) a material fact required to be stated therein or necessary to
make the statements therein not misleading or (c) any violation
or alleged violation by the Company of the Securities Act, the
Securities Exchange Act or any other federal or state securities
law, rule or regulation applicable to the Company and relating to
action or inaction by the Company in connection with any such
registration or qualification, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are
based upon any untrue statement or alleged untrue statement or
omission or alleged omission based upon information furnished to
the Company in writing by such holder or by any underwriter for
such holder expressly for use therein (with respect to which
information such holder or underwriter shall so indemnify and
hold harmless the Company, any underwriter for the Company and
each person, if any, who controls the Company or such underwriter
within the meaning of the Securities Act).
10.6. Holdback.
Except for transfers made in transactions exempt from
the registration requirements under the Securities Act pursuant
to Section 4(2) thereof or pursuant to Rule 144A, the Company and
each holder of Warrants or Shares agrees not to offer, sell,
contract to sell or otherwise dispose of any of their respective
shares of the Company's Common Stock within seven (7) days before
or one hundred eighty (180) days after the date of any final
prospectus relating to any underwritten public offering of the
Company's Common Stock on behalf of the Company or otherwise, in
each case except pursuant to such prospectus or with the written
consent of underwriters for such offering.
SECTION 11. NOTICES
Unless otherwise expressly specified or permitted by
the terms hereof, all notices, requests, elections, demands,
consents and other communications hereunder or with respect to
any Warrant shall be in writing and shall be delivered by hand or
shall be sent by telecopy (and if sent by telecopy, shall be
confirmed by registered mail, return receipt requested, or by
overnight mail or courier, postage and delivery charges prepaid),
to the following addresses:
(a) if to the Purchaser, at the Purchaser's address as
set forth in Exhibit A hereto, or at such other address as may be
furnished to the Company by the Purchaser in writing; or
(b) if to any other holder of a Warrant, at such
address as the payee or registered holder thereof shall have
designated to the Company in writing; or
(c) if to the Company, 1912 Avenue K, Suite 100,
Plano, Texas 75074-5959, attention: Chief Executive Officer, or
at such other address as may be furnished in writing by the
Company to the Purchaser and to the other holders of Warrants.
Whenever any notice is required to be given hereunder, such
notice shall be deemed given and such requirement satisfied only
when such notice is delivered or, if sent by telecopier, when
received. Addresses may be changed upon notice of such change
given as provided in this Section 11.
SECTION 12. MISCELLANEOUS
12.1. Entire Agreement.
The Purchase Agreements and, upon the closing
hereunder, the Warrants issued hereunder, together with any
further agreements entered into by the Purchaser and the Company
at the closing hereunder, contain the entire agreement among the
Purchaser and the Company, and supersede any prior oral or
written agreements, commitments, terms or understandings,
regarding the subject matter hereof.
12.2. Survival.
All agreements, representations and warranties
contained in this Agreement, the Warrants, or any document or
certificate delivered pursuant hereto or thereto shall survive,
and shall continue in effect following, the execution and
delivery of this Agreement, the closings hereunder and
thereunder, any investigation at any time made by the Purchaser
or on its behalf or by any other Person, the issuance, sale and
delivery of the Warrants and any disposition thereof.
12.3. Counterparts.
This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument, and all
signatures need not appear on any one counterpart.
12.4. Headings.
The headings and captions in this Agreement and the
table of contents are for convenience of reference only and shall
not define, limit or otherwise affect any of the terms or
provisions hereof.
12.5. Binding Effect, Benefit and Assignment.
(a) The terms of this Agreement shall be binding upon,
and inure to the benefit of, the parties and their respective
successors and permitted assigns whether so expressed or not.
(b) The Company may not assign any of its obligations,
duties or rights under this Agreement, or under the Warrants
issued hereunder, except with the Purchaser's consent.
(c) In addition to any assignment by operation of law,
the Purchaser may assign, in whole or in part, any or all of its
rights (and/or obligations) under this Agreement or under the
Warrants to any permitted transferee of any or all of its
Warrants or Shares, and (unless such assignment expressly
provides otherwise) any such assignment shall not diminish the
rights the Purchaser would otherwise have under this Agreement or
with respect to any remaining Warrants or Shares held by the
Purchaser or with respect to any indemnity or reimbursement
rights (or with respect to any other provisions which expressly
provide that they survive any termination of this Agreement).
12.6. Severability.
Any provision hereof or of the Warrants which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or thereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any
provision of law which may render any provision hereof prohibited
or unenforceable in any respect.
12.7. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than
any conflict of laws rules which might result in the application
of the laws of any other jurisdiction).
12.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
EACH PARTY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF TEXAS IN CONNECTION WITH
ANY CONTROVERSY RELATED TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, WAIVES ANY ARGUMENT THAT VENUE IN ANY SUCH FORUM IS NOT
CONVENIENT, AND AGREES THAT ANY LITIGATION INITIATED BY ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE VENUED IN EITHER THE DISTRICT COURT OF DALLAS COUNTY,
TEXAS, OR THE UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF
TEXAS.
12.9. WAIVER OF JURY TRIAL. THE COMPANY AND THE
PURCHASER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
SA HOLDINGS, INC.
By:________________________________
Name:
Title:
Address in Accepted and agreed to as of the date
State of first above written by the undersigned
Residence: Purchaser:
650 Fifth Ave.
New York, NY 10019
JESUP & LAMONT CAPITAL MARKETS, INC.
By:________________________________
Name:
Title:<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF WARRANTS . . . . . . . . . .1
SECTION 2. THE CLOSING . . . . . . . . . . . . . . . . . . .1
SECTION 3. DEFINITIONS . . . . . . . . . . . . . . . . . . .2
SECTION 4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . .5
4.1. Corporate Existence and Power. . . . . . . . . . . . .5
4.2. Authorization of Borrowing; No Conflict
as to Law or Agreements.. . . . . . . . . . . . . . .5
4.3. Legal Agreements.. . . . . . . . . . . . . . . . . . .5
4.4. Capitalization.. . . . . . . . . . . . . . . . . . . .5
SECTION 5. REPRESENTATIONS OF THE PURCHASER. . . . . . . . .6
SECTION 6. AFFIRMATIVE COVENANTS OF THE COMPANY. . . . . . .7
6.1. Reservation of Shares. . . . . . . . . . . . . . . . .7
6.2. Listing of Shares. . . . . . . . . . . . . . . . . . .7
6.3. Securities Exchange Act Registration . . . . . . . . .7
6.4. Private Placement Status . . . . . . . . . . . . . . .7
6.5. Delivery of Information. . . . . . . . . . . . . . . .8
SECTION 7. CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . .8
7.1. Intentionally Omitted. . . . . . . . . . . . . . . . .8
7.2. Accuracy of Representations and Warranties.. . . . . .8
7.3. Proceedings. . . . . . . . . . . . . . . . . . . . .8
7.4. Acquisition. . . . . . . . . . . . . . . . . . . . .8
SECTION 8. AMENDMENT; WAIVER; CONSENT. . . . . . . . . . . .9
SECTION 9. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . .9
SECTION 10. REGISTRATION RIGHTS . . . . . . . . . . . . . . 10
10.1. Registration at the Request of Holders. . . . . 10
10.2. Piggyback Rights. . . . . . . . . . . . . . . . 11
10.3. Expenses. . . . . . . . . . . . . . . . . . . . 13
10.4. Procedures. . . . . . . . . . . . . . . . . . . 13
10.5. Indemnification.. . . . . . . . . . . . . . . . 15
10.6. Holdback. . . . . . . . . . . . . . . . . . . . 16
SECTION 11. NOTICES . . . . . . . . . . . . . . . . . . . . 16
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . 17
12.1. Entire Agreement. . . . . . . . . . . . . . . . 17
12.2. Survival. . . . . . . . . . . . . . . . . . . . 17
12.3. Counterparts. . . . . . . . . . . . . . . . . . 17
12.4. Headings. . . . . . . . . . . . . . . . . . . . 17
12.5. Binding Effect, Benefit and Assignment. . . . . 17
12.6. Severability. . . . . . . . . . . . . . . . . . 18
12.7. Governing Law.. . . . . . . . . . . . . . . . . 18
12.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. 18
12.9. WAIVER OF JURY TRIAL. . . . . . . . . . . . 18
EXHIBITS
Exhibit A - Form of Warrant Certificate
Exhibit C
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER
SECURITIES ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY
APPLICABLE LAW OR REGULATION OF ANY STATE AND ARE NOT
TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN SECTION 9 OF
THE PURCHASE AGREEMENT REFERRED TO HEREIN.
SA HOLDINGS, INC.
Common Stock Purchase Warrant Certificate
Dated July 31, 1995
New York, New York
FOR VALUE RECEIVED, the undersigned, SA Holdings, Inc.,
a Delaware corporation (herein referred to as the "Company"),
hereby certifies and agrees that Jesup & Lamont Capital Markets,
Inc., or its registered assigns, is entitled to purchase from the
Company up to an aggregate of 500,000 duly authorized, validly
issued, fully paid and non-assessable shares of the Company's
Common Stock, or any stock into which such Common Stock shall
have been changed or converted or any stock or other securities
resulting from a reclassification thereof (the "Shares") at a
purchase price per Share of $1.125 at any time and from time to
time from the date hereof until the Expiration Date (as
hereinafter defined). The foregoing agreement and rights are all
subject to the terms, conditions and adjustments (in both the
number of Shares and the purchase price per Share) set forth
below in this Warrant Certificate.
This Warrant Certificate is one of the Common Stock
Purchase Warrant Certificates (the "Warrants", which term
includes all Warrants issued in substitution therefor) originally
issued pursuant to the Warrant Purchase Agreement dated as of
July 31, 1995 (the "Purchase Agreement") between the Company and
Jesup & Lamont Capital Markets, Inc. The Warrants originally so
issued evidence rights to purchase an aggregate of 500,000 Shares
at an exercise price of $1.125 per share, subject to adjustment
as provided herein. This Warrant is subject to the provisions,
and is entitled to the benefits, of the Purchase Agreement.
Section 1. Exercise of Warrant.
1.1. Surrender, Subscription and Payment. This
Warrant may be exercised by the holder hereof, in whole or in
part, at any time from the date hereof until the close of
business on the Expiration Date, during normal business hours on
any Business Day (as defined in the Purchase Agreement), by
surrender of this Warrant, together with the form of subscription
attached as Annex A hereto (or a reasonable facsimile thereof)
duly executed by such holder in substantially such form, to the
Company at its office designated pursuant to Section 17 of the
Purchase Agreement (or, if such exercise is in connection with an
underwritten public offering of Shares subject to this Warrant or
of securities into which Shares subject to this Warrant may be
converted, at the location at which the underwriting agreement
requires that such Shares be delivered). Payment of the exercise
price for the Shares specified in such subscription shall be
made, at the option of the holder, (a) by certified or official
bank check (or wire transfer) payable to the order of the Company
in federal or other immediately available funds in an amount
equal to (i) the number of Shares specified in such form of
subscription, multiplied by (ii) the then current exercise price
(as hereinafter defined), or (b) by conversion of this Warrant,
or any portion hereof, in the manner provided in Section 1.6
hereof. Such holder shall thereupon be entitled to receive the
number of Shares specified in such form of subscription (plus
cash in lieu of any fractional share as provided in Section 1.4
hereof).
1.2. Effective Date. Each exercise of this Warrant
pursuant to Section 1.1 hereof shall be deemed to have been
effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to
the Company as provided in Section 1.1 hereof (except that if
such exercise is in connection with an underwritten public
offering of Shares subject to this Warrant or of securities into
which Shares subject to this Warrant may be converted, then such
exercise shall be deemed to have been effected upon such
surrender of this Warrant), and such exercise shall be at the
current exercise price in effect at such time. On each such day
that an exercise of this Warrant is deemed effected, the person
or persons in whose name or names any certificate or certificates
for Shares are issuable upon such exercise, as provided in
Section 1.4 hereof, shall be deemed to have become the holder or
holders of record thereof.
1.3. Expiration Date. This Warrant will expire, and
thereafter will not be exercisable, at the close of business on
July 31, 1998 (the "Expiration Date").
1.4. Share Certificates, Cash for Fractional Shares
and Reissuance of Warrants. As promptly as practicable after the
exercise of this Warrant, in whole or in part, and in any event
within five (5) Business Days thereafter (unless such exercise is
in connection with a public offering of Shares subject to this
Warrant or of securities into which Shares subject to this
Warrant may be converted, in which event concurrently with such
exercise), the Company at its expense (including the payment by
it of any applicable issue, stamp or other taxes other than any
income taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to Section 14 of the
Purchase Agreement, as such holder may direct:
(i) a certificate or certificates for the number of
Shares to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per Share
(determined in accordance with Section 1.6(b) hereof) on the
effective date of such exercise; and
(ii) in case such exercise is in part only, a new
Warrant or Warrants of like tenor, calling in the aggregate
on the face or faces thereof for the number of Shares
(without giving effect to any adjustment therein) equal to
the number of such Shares called for on the face of this
Warrant minus the number of Shares which could have been
obtained upon such exercise for the exercise price paid if
the current exercise price had been $1.125 per Share.
1.5. Acknowledgment of Obligation. The Company will,
at the time of or at any time after each exercise of this
Warrant, upon the request of the holder hereof or of any Shares
issued upon such exercise, acknowledge in writing its continuing
obligation to afford to such holder all rights (including,
without limitation, any rights to registration of any such Shares
pursuant to the Purchase Agreement) to which such holder shall
continue to be entitled under this Warrant, the Purchase
Agreement, and the Notes; provided, that if any such holder shall
fail to make any such request, the failure shall not affect the
continuing obligation of the Company to afford such rights to
such holder.
1.6. Conversion of Warrant. (a) In addition to and
without limiting the rights of the holder under the terms of this
Warrant, the holder of this Warrant shall have the option, but
not the obligation, to convert this Warrant, or any portion
hereof (the "Conversion Right"), into Shares as provided in this
Section 1.6 at any time on or prior to the Expiration Date. Upon
exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other
consideration) that number of Shares equal to the quotient
obtained by dividing (i) the value of this Warrant (or the
specified portion hereof) on the effective date of the exercise
of the Conversion Right, as provided in Section 1.2 hereof (the
"Conversion Date"), which value shall be determined by
subtracting (x) the aggregate exercise price of the Converted
Warrant Shares immediately prior to the exercise of the
Conversion Right from (y) the aggregate Market Price of such
Converted Warrant Shares on the Conversion Date by (ii) the
Market Price of one Share on the Conversion Date.
(b) Determination of Market Price. For purposes of
this Warrant, "Market Price" of the Company's Shares shall mean:
(i) if traded on a stock exchange, the Market Price
of the Company's Shares shall be deemed to be the average of the
daily closing selling prices of the Shares on the stock exchange
reasonably determined by the Company's Board of Directors to be
the primary market for the Shares over the ten (10) trading day
period ending on the date prior to the effective date of the
exercise or conversion of this Warrant, as such prices are
officially quoted in the composite tape of transactions on such
exchange;
(ii) if traded over-the-counter, the Market Price of
the Shares shall be deemed to be the average of the daily closing
selling prices (or, if such information is not available, the
average of the daily closing bid and asked prices) of the Shares
over the ten (10) trading day period ending on the date prior to
the effective date of the exercise or conversion of this Warrant,
as such prices are reported by the National Association of
Securities Dealers through its NASDAQ system or any successor
system; and
(iii) if there is no public market for the Shares,
then the Market Price shall be determined by mutual agreement of
the holder of the Warrant and the Company, and if the holder and
the Company are unable to so agree within twenty (20) days after
the event giving rise to the need to determine the Market Price,
by an investment banker of national reputation selected by mutual
agreement of the Company and the holder of the Warrant.
Section 2. Exercise Price and Adjustments.
2.1. Current Exercise Price. The term "exercise
price", shall mean initially $1.125 per Share, subject to
adjustment. For purposes of this Section 2.1, the exercise price
of $1.125 shall be deemed to have become effective at the close
of business on the date hereof but shall be subject to adjustment
as set forth in Sections 2.2 and 2.3 hereof. The term "current
exercise price" as used herein shall mean the exercise price, as
the same may be adjusted from time to time as hereinafter
provided, in effect at any given time. In determining the
current exercise price, the result shall be expressed to the
nearest $0.01, but any such lesser amount shall be carried
forward and shall be considered at the time of and together with
the next subsequent adjustment which, together with any
adjustments to be carried forward, shall amount to $0.01 per
Share or more.
2.2. Adjustment of Exercise Price.
The exercise price shall be adjusted, from time
to time, as follows:
(a) Adjustments for Stock Dividends,
Recapitalizations, Etc. In case the Corporation shall, after
August 1, 1995, (w) pay a stock dividend or make a distribution
(on or in respect of its Common Stock) in shares of its Common
Stock (except there shall be no adjustment with respect to the
payment by the Company of a stock dividend to holders of its
Common Stock of the shares of Strategic Abstract & Title
Corporation, a Texas corporation), (x) subdivide its outstanding
shares of Common Stock, (y) combine its outstanding shares of
Common Stock into a smaller number of shares, or (z) issue by
reclassification of its shares of Common Stock, any shares of
capital stock of the Corporation, then, in any such case, the
current exercise price in effect immediately prior to such action
shall be adjusted to a price such that if the holder of a Warrant
were to exercise such Warrant in full immediately after such
action, such holder would be entitled to receive the number of
shares of capital stock of the Corporation which such holder
would have owned immediately following such action had such
Warrant been exercised immediately prior thereto (with any record
date requirement being deemed to have been satisfied), and, in
any such case, such exercise price shall thereafter be subject to
further adjustments under this Section 2.2. An adjustment made
pursuant to this subsection (a) shall become effective
retroactively on the record date in the case of a dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) Adjustments for Issuances of Additional Stock. In
case the Corporation shall at any time or from time to time after
August 1, 1995 issue any additional shares of the Corporation's
Common Stock ("Additional Common Stock"), for a consideration per
share either (I) less than the then current exercise price
immediately prior to the issuance of such Additional Common
Stock, or (II) without consideration, then (in the case of either
clause (I) or (II)), and thereafter successively upon each such
issuance, the current exercise price shall forthwith be reduced
to a price equal to the price determined by multiplying such
current exercise price by a fraction, of which
(1) the numerator shall be
(i) the number of shares of the Corporation's Common
Stock outstanding when the then current exercise price became
effective, plus
(ii) the number of shares of the Corporation's Common
Stock which the aggregate amount of consideration, if any,
received by the Corporation upon all issuances of the
Corporation's Common Stock since the current exercise price
became effective (including the consideration, if any, received
for such Additional Common Stock) would purchase at the then
current exercise price per share, and
(2) the denominator shall be
(i) the number of shares of the Corporation's Common
Stock outstanding when the current exercise price became
effective, plus
(ii) the number of shares of the Corporation's Common
Stock issued since the current exercise price became effective
(including the number of shares of such Additional Common Stock);
provided, however, that such adjustment shall be made only if
such adjustment results in a current exercise price less than the
current exercise price in effect immediately prior to the
issuance of such Additional Common Stock. The Corporation may,
but shall not be required to, make any adjustment of the current
exercise price if the amount of such adjustment shall be less
than one percent (1%) of the current exercise price immediately
prior to such adjustment, but any adjustment that would otherwise
be required then to be made which is not so made shall be carried
forward and shall be made at the time of (and together with) the
next subsequent adjustment which, together with any adjustments
so carried forward, shall amount to not less than one percent
(1%) of the current exercise price immediately prior to such
adjustment.
(c) Certain Rules in Applying the Adjustment for
Additional Stock Issuances. For purposes of any adjustment as
provided in Section 2.2(b) hereof, the following provisions shall
also be applicable:
(1) Cash Consideration. In case of the issuance of
Additional Common Stock for cash, the consideration received
by the Corporation therefor shall be deemed to be the cash
proceeds received by the Corporation for such Additional
Common Stock after deducting any commissions or other
expenses paid or incurred by the Corporation for any
underwriting of, or otherwise in connection with the
issuance of such Additional Common Stock.
(2) Non-Cash Consideration. In case of the issuance
of Additional Common Stock for a consideration other than
cash, or a consideration a part of which shall be other than
cash, the amount of the consideration other than cash so
received or to be received by the Corporation shall be
deemed to be the value of such consideration at the time of
its receipt by the Corporation as determined in good faith
by the Board of Directors, except that where the non-cash
consideration consists of the cancellation, surrender or
exchange of outstanding obligations of the Corporation (or
where such obligations are otherwise converted into shares
of the Corporation's Common Stock), the value of the non-
cash consideration shall be deemed to be the principal
amount of the obligations cancelled, surrendered, satisfied,
exchanged or converted. If the Corporation receives
consideration, part or all of which consists of publicly
traded securities (i.e., in lieu of cash), the value of such
non-cash consideration shall be the aggregate market value
of such securities (based on the latest reported sale price
regular way) as of the close of the day immediately
preceding the date of their receipt by the Corporation.
(3) Options, Warrants, Convertibles, Etc. In case of
the issuance after the date hereof, whether by distribution
or sale to holders of its Common Stock or to others, by the
Corporation of (i) any security (other than the shares of
the Corporation's Series A Preferred Stock) that is
convertible into Common Stock, or (ii) any rights, options
or warrants to purchase the Corporation's Common Stock, if
inclusion thereof in calculating adjustments under this
Section 2.2 would result in a current exercise price lower
than if excluded, the Corporation shall be deemed to have
issued, for the consideration described below, the number of
shares of the Corporation's Common Stock into which such
convertible security may be converted when first
convertible, or the number of shares of the Corporation's
Common Stock deliverable upon the exercise of such rights,
options or warrants when first exercisable, as the case may
be (and such shares shall be deemed to be Additional Common
Stock for purposes of Section 2.2(b) hereof). The
consideration deemed to be received by the Corporation at
the time of the issuance of such convertible securities or
such rights, options or warrants shall be the consideration
so received determined as provided in Section 2.2(c)(1) and
(2) hereof plus (x) any consideration or adjustment payment
to be received by the Corporation in connection with such
exercise or, as applicable, (y) the aggregate price at which
shares of the Corporation's Common Stock are to be delivered
upon the exercise of such rights, options or warrants when
first exercisable (or, if no price is specified and such
shares are to be delivered at an option price related to the
market value of the subject Common Stock, an aggregate
option price bearing the same relation to the market value
of the subject Common Stock at the time such rights, options
or warrants were granted). If, subsequently, (1) such
number of shares into which such convertible security is
convertible, or which are deliverable upon the exercise of
such rights, options or warrants, is increased or (2) the
exercise or exercise price of such convertible security,
rights, options or warrants is decreased, then the
calculations under the preceding two sentences (and any
resulting adjustment to the current exercise price under
Section 2.2(b) hereof) with respect to such convertible
security, rights, options or warrants, as the case may be,
shall be recalculated as of the time of such issuance but
giving effect to such changes (but any such recalculation
shall not result in the current exercise price being higher
than that which would be calculated without regard to such
issuance). On the expiration or termination of such rights,
options or warrants, or rights to convert, the exercise
price hereunder shall be readjusted (up or down as the case
may be) to such current exercise price as would have been
obtained had the adjustments made with respect to the
issuance of such rights, options, warrants or convertible
securities been made upon the basis of the delivery of only
the number of shares of the Corporation's Common Stock
actually delivered upon the exercise of such rights, options
or warrants or upon the exercise of any such securities and
at the actual exercise or exercise prices (but any such
recalculation shall not result in the current exercise price
being higher than that which would be calculated without
regard to such issuance).
(4) Number of Shares Outstanding. The number of
shares of the Corporation's Common Stock as at the time
outstanding shall exclude all shares of the Corporation's
Common Stock then owned or held by or for the account of the
Corporation but shall include the aggregate number of shares
of the Corporation's Common Stock at the time deliverable in
respect of the convertible securities, rights, options and
warrants referred to in Section 2.2(c)(3) hereof; provided,
that to the extent that such rights, options, warrants or
exercise privileges are not exercised, such shares of the
Corporation's Common Stock shall be deemed to be outstanding
only until the expiration dates of the rights, warrants,
options or exercise privileges or the prior cancellation
thereof.
(d) Exclusion from the Adjustment for Additional Stock
Issuances. No adjustment of the current exercise price under
Section 2.2(b) hereof shall be made as a result of or in
connection with the issuance of Common Shares (i) upon conversion
of the shares of Series A Preferred Stock or Series B Preferred
Stock (or the issuance of any shares of Series A Preferred Stock
or Series B Preferred Stock under any Purchase Agreement) or (ii)
upon exercise or conversion of the Warrants or the stock options
granted to employees of the Corporation on or before July 31,
1995.
(e) Accountants' Certification. Whenever the current
exercise price is adjusted as provided in this Section 2.2, the
Corporation will promptly obtain a certificate of a firm of
independent public accountants of recognized national standing
selected by the Board of Directors of the Corporation (who may be
the regular auditors of the Corporation) setting forth the
current exercise price as so adjusted, the computation of such
adjustment and a brief statement of the facts accounting for such
adjustment, and will mail to the holders of the Warrants a copy
of such certificate from such firm of independent public
accountants.
(f) Antidilution Adjustments under other Securities.
Without limiting any other rights available hereunder to the
holders of shares of Warrants, if there is an antidilution
adjustment (x) under any security which is convertible into
Common Stock of the Corporation whether issued prior to or after
the date hereof or (y) under any right, option or warrant to
purchase Common Stock of the Corporation whether issued prior to
or after the date hereof, which (in the case of clause (x) or
(y)) results in a reduction in the exercise or purchase price
with respect to such security, right, option or warrant to an
amount less than the then current exercise price or results in an
increase in the number of shares obtainable under such security,
right, option or warrant which has an effect equivalent to
lowering a exercise or exercise price to an amount less than the
then current exercise price, then an adjustment shall be made
under this Section 2.2(f) to the then current exercise price
hereunder. Any such adjustment under this Section 2.2(f) shall
be whichever of the following results in a lower current exercise
price:
(A) a reduction in the current exercise price
equal to the percentage reduction in such exercise or
purchase price with respect to such security, right,
option or warrant, or
(B) a reduction in the current exercise price
which will result in the same percentage increase in
the number of Common Shares available under this
Section 2.2 as the percentage increase in the number of
shares available under such security, right, option or
warrant.
Any such adjustment under this Section 2.2(f) shall only be made
if it would result in a lower current exercise price than that
which would be determined pursuant to any other antidilution
adjustment otherwise required under this Section 2.2 as a result
of the event or circumstance which triggered the adjustment to
the security, right, option or warrant described in clause (x) or
(y) above (and if any such adjustment is so made under this
Section 2.2(f), then such other antidilution adjustment otherwise
required under this Section 2.2 shall not be made as a result of
such event or circumstance).
(g) Other Adjustments. In case any event shall occur
as to which any of the provisions of this Section 2.2 are not
strictly applicable but the failure to make any adjustment would
not fairly protect the exercise rights represented by the
Warrants in accordance with the essential intent and principles
of this Section 2.2, then, in each such case, the Corporation
shall appoint a firm of independent public accountants of
recognized national standing selected by the Board of Directors
of the Corporation (who may be the regular auditors of the
Corporation), which shall give their opinion upon the adjustment,
if any, on a basis consistent with the essential intent and
principles established in this Section 2.2, necessary to
preserve, without dilution, the exercise rights represented by
the Warrants. Upon receipt of such opinion, the Corporation will
promptly mail copies thereof to the holders of the Warrants and
shall make the adjustments described therein.
(h) "Meaning of "Issuance". References in this
Agreement to "issuances" of stock by the Corporation include
issuances by the Corporation of previously unissued shares and
issuances or other transfers by the Corporation of treasury
stock.
2.3. Recapitalization, Consolidation or Merger or Sale
of Assets. Any recapitalization, reorganization, reclassi-
fication, consolidation, merger, sale of all or substantially all
of the Corporation's assets to another Person or other
transaction 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 Corporation shall make appropriate provision (in form
and substance reasonably satisfactory to holders of Warrants
representing a majority of the Shares then outstanding) to insure
that each of the holders of the Warrants shall thereafter have
the right to acquire and receive in lieu of or in addition to (as
the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such
holder's Warrants, such shares of stock, securities or assets as
may be issuable or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of such holder's Warrants
had such Organic Change not taken place.
In any such case, the Corporation shall make
appropriate provision (in form and substance reasonably
satisfactory to the holders of Warrants representing a majority
of the Warrants then outstanding) with respect to such holders'
rights and interest to insure that the provisions hereof shall
thereafter be applicable to the Warrants (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 exercise price to reflect the value
for the Warrants reflected by the terms of such consolidation,
merger or sale, if the value so reflected would cause an increase
to the exercise 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 such consolidation or merger or the
Corporation purchasing such assets assumes by written instrument
(which may be the agreement of consolidation, merger or sale), in
form and substance reasonably satisfactory to the holders of
Warrants representing a majority of the shares 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.
Section 3. Notice to Holders of Warrants.
In case at any time
(i) the Company shall take any action which would
require an adjustment in the current exercise price pursuant
to Section 2.2 or 2.3; or
(ii) there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or from par value to no par value or
from no par value to par value of the Company's Common
Stock), or any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the
Company is required, or any sale, transfer or lease of all
or substantially all of the assets of the Company; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give
written notice to the holders of the Warrants, not less than
twenty (20) days before any record date or other date set for
definitive action, of the date on which such action,
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding-up shall
take place, as the case may be. Such notice shall also set forth
such facts as shall indicate the effect of any such action (to
the extent such effect may be known at the date of such notice)
on the current exercise price and the kind and amount of the
shares and other securities and property deliverable upon
exercise of the Warrants. Such notice shall also specify any
date as of which the holders of record of the Company's Common
Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding-up, as the
case may be.
Section 4. Adjustments to Number of Shares Issuable
Hereunder. The number of Shares called for on the face of this
Warrant is the number of Shares which can be purchased under this
Warrant on the date of original issuance of this Warrant at an
exercise price of $1.125 per Share (subject to reduction from
time to time pursuant to clause (ii) of Section 1.4 hereof).
Without limiting any other provision of this Warrant,
notwithstanding the number of Shares so called for on the face of
this Warrant, the aggregate number of Shares that can be acquired
upon an exercise of this Warrant in whole or in part shall be
adjusted from time to time pursuant to Section 2 hereof.
Section 5. Specific Performance. The Company agrees
and stipulates that the remedies at law of a holder of this
Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
Section 6. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of
the Company (prior to exercise of all or a portion of this
Warrant) or as imposing any liabilities on such holder to
purchase any securities or any liabilities as a stockholder of
the Company, whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.
Section 7. Ownership; Transfer. The Company may treat
the person in whose name this Warrant is registered as the owner
and holder of this Warrant for all purposes, and the Company
shall not be affected by any notice to the contrary (except that
the Company shall comply with the provisions of Section 14 of the
Purchase Agreement regarding the issuance of a new Warrant or
Warrants to permitted transferees). This Warrant is transferable
only upon the conditions, and subject to the restrictions,
specified in Section 14 of the Purchase Agreement.
Section 8. Headings. The headings and captions in
this Warrant are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions
hereof.
Section 9. Governing Law. This Warrant shall be
governed by, and construed in accordance with, the laws of the
State of New York (other than any conflict of laws rule which
might result in the application of the laws of any other
jurisdiction).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, SA HOLDINGS, INC. has caused this
Warrant to be executed and issued on its behalf by its officer
thereunto duly authorized as of the date first above written.
SA HOLDINGS, INC.
By ________________________________
Name:
Title:
[Signature page to Common Stock Warrant Certificate]
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise or conversion
of the Warrant in whole or in part)
To SA Holdings, Inc.:
The undersigned registered holder of the accompanying
Warrant hereby exercises such Warrant or portion thereof for, and
purchases thereunder, ____________1 Shares (as defined in such
Warrant) and herewith [makes payment therefor of $ __________]
[or] [makes payment therefor by conversion of ___ Shares
represented by such Warrant pursuant to Section 1.6 of such
Warrant]. The undersigned requests that the certificates for
such Shares be issued in the name of, and delivered to,
__________________________________ whose address is
_______________________________________________.
Dated: _________________________
______________________________
(Name must conform to name of
holder as specified on the
face of the Warrant)
By ___________________________
Name:
Title:
Address of holder:
______________________________
______________________________
______________________________
___________________________________
1[Insert the number of Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the
unexercised portion of this Warrant, to the holder surrendering
the same.]
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.00001 PAR VALUE PER SHARE)
of
SA HOLDINGS, INC.
__________________________
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
__________________________
I, Jack W. Matz, Jr., Chief Executive Officer of SA Holdings,
Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the provisions of the
General Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: The Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of the Corporation authorizes the
issuance of 12,500,000 shares of preferred stock, $.00001 par value
per share ("Preferred Stock"), in one or more series, and further
authorizes the Board of Directors of the Corporation to provide by
resolution for the issuance of shares of Preferred Stock in o;ne or
more series not exceeding the aggregate number of shares of
Preferred Stock authorized by the Certificate of Incorporation and
to determine with respect to each such series, the voting powers,
if any (which voting powers if granted may be full or limited),
designations, preferences, the relative, participating, optional
and other rights, and the qualifications, limitations and
restrictions appertaining thereto.
SECOND: A resolution providing for and in connection with the
issuance of the Preferred Stock was duly adopted by the Board of
Directors of the Corporation pursuant to authority conferred on
the Board of Directors by the provisions of the Certificate of
Incorporation as aforesaid, which resolution provides as follows:
RESOLVED: that the Board of Directors, pursuant to authority
vested in it by the provisions of the Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), of SA Holdings,
Inc. (the "Corporation"), hereby authorizes the issuance of a
series of convertible preferred stock ("Convertible Preferred
Stock") of the Corporation and hereby establishes the powers,
designations, preferences, the relative, participating, optional
and other rights, and the qualifications, limitations and
restrictions appertaining thereto in addition to those set forth in
such Certificate of Incorporation (or otherwise provided by law) as
follows (the following, referred to hereinafter as "this
resolution" or "this Certificate of Designations", is to be filed
as part of a Certificate of Designations under Section 151(g) of
the General Corporation Law of the State of Delaware):
1. General
(a) Designation and Number. The designation of
Convertible Preferred Stock created by this resolution shall be
Series B Cumulative Convertible Preferred Stock, $.00001 par value
per share, of the Corporation (hereinafter referred to as
the"Series A Preferred Stock"), and the number of shares of Series
B Preferred Stock which the Corporation shall be authorized to
issue shall be 250,000 shares.
(b) Priority. The Series B Preferred Stock shall rank
prior to the Common Stock (as hereinafter defined), and to all
other capital stock of the Corporation (now or hereafter authorized
or issued), other than the Series A Cumulative Convertible
Preferred Stock of the Corporation (the "Series A Preferred Stock")
with which it shall rank pari passu, in each case as to dividends
or upon liquidation, dissolution or winding up.
2. Certain Definitions.
(a) For purposes of this Certificate of Designations,
the following terms shall have the meanings indicated:
(i) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions in the
State of Texas are authorized or obligated by law or executive
order to close.
(ii) "Commission" means the Securities and Exchange
Commission and any other similar or successor agency of the federal
government administering the Securities Act or the Securities
Exchange Act.
(iii) "Common Shares" has the meaning set forth in
Section 7(a) hereof.
(iv) "Common Stock" means the Corporation's Common
Stock, as presently authorized by the Certificate of Incorporation
and as such Common Stock may hereafter be changed or for which such
Common Stock may be exchanged after giving effect to the terms of
such change or exchange (by way of reorganization,
recapitalization, merger, consolidation or otherwise).
(v) The phrase "current conversion price" has the
meaning set forth in Section 7(h) hereof.
(vi) "Event of Default" means (A) the failure by the
Corporation to redeem shares of Series B Preferred Stock in
accordance with the provisions of Section 6(a) or 6(b) hereof for
any reason, and such failure in such redemption of such shares
shall have continued for one hundred eighty (180) days or (B) the
equivalent of one year's dividend payments on all outstanding
shares of Series B Preferred Stock shall be accrued and unpaid, if
funds are legally available for the payment therefor, and such
failure has continued for sixty (60) days.
(vii) "Full cumulative dividends" means as of any
date the amount of accumulated, accrued and unpaid dividends
payable on shares of Series B Preferred Stock as provided by
Section 4 hereof, whether or not earned or declared and whether or
not there shall be funds legally available for the payment thereof.
(viii) "Junior Preferred Stock" means capital stock
(other than Common Stock) of the Corporation ranking junior to the
Series B Preferred Stock as to dividends and upon liquidation,
dissolution or winding up.
(ix) "Person" or "person" means an individual,
corporation, partnership, firm, association, joint venture, trust,
unincorporated organization, government, governmental body, agency,
political subdivision or other entity.
(x) "Preferred Liquidation Value" has the meaning
set forth in Section 5(a) hereof.
(xi) "Purchase Agreements" means the separate Share
Purchase Agreements dated as of July 31, 1995 between the
Corporation and each of the original holders of shares of Series B
Preferred Stock (as from time to time assigned, supplemented or
amended or as the terms thereof may be waived, each in accordance
with its terms).
(xii) "Qualified Level of Public Trading" shall
exist if, and only if, on the date of notice of the Corporation's
election of its right to redeem the shares of Series B Preferred
Stock pursuant to Section 6(b) hereof, (a) Common Shares are listed
or admitted to trading on a national securities exchange or are
traded on the National Association of Securities Dealers, Inc.,
Automated Quotation System Level 1, National Market System
("National Market System") or in the over-the-counter market, and
(b) either (i) the last reported sale price regular way for Common
Shares on the principal national securities exchange on which
Common Shares are listed or admitted to trading or, if Common
Shares are not listed or admitted to trading on any national
securities exchange on the National Market System, or (ii) if
Common Shares are listed or admitted to trading on neither any
national securities exchange nor on the National Market System, the
average of the highest reported bid and lowest reported asked
prices as furnished by the National Association of Securities
Dealers, Inc., Automated Quotation System Level I, or comparable
system, shall (in the case of (i) or (ii)) have equalled or
exceeded an amount per share equal to at least 250% of the then
current conversion price for at least twenty (20) consecutive
trading days.
(xiii) "Senior Credit Agreement" means the Term
Credit Agreement between the Corporation and NorWest Bank
Minnesota, National Association, dated as of July 31, 1995.
(xiv) "Subsidiary" means any corporation,
association or other entity of which more than 80% of the total
voting power of shares of stock or other equity interests entitled
(without regard to the occurrence of any contingency or any pledge
of shares) to vote in the election of directors, managers or
trustees thereof is, at the time as of which any determination is
being made, owned or controlled, directly or indirectly, by the
Corporation or one or more of its Subsidiaries, or both.
(b) The words "hereof," "herein" and "hereunder" and
other words of similar import refer to this Certificate of
Designations as a whole and not to any particular Section or other
subdivision.
(c) References herein to the Certificate of
Incorporation include such Certificate as amended by this
Certificate of Designations.
3. Voting Rights.
(a) Generally No Voting Rights. Except as otherwise
provided specifically herein or by law, each share of Series B
Preferred Stock shall have no voting rights. To the extent holders
of shares of Series B Preferred Stock have the right to vote, each
holder of shares of Series B Preferred Stock shall be entitled to
that number of votes for each share of Series B Preferred Stock
held by such holder equal to the number of Common Shares obtainable
upon conversion of such share of Series B Preferred Stock pursuant
to Section 7 hereof at the current conversion price on the record
date for the vote which is being taken or, if no such record date
is established, at the date such vote is taken or any written
consent of stockholder is solicited.
(b) Consent Required. So long as any shares of the
Series B Preferred Stock remain outstanding, unless the vote or
consent of the holders of a greater number of shares shall then be
required by law, the affirmative vote or consent of the holders of
at least fifty-one percent (51%) of all of the shares of Series B
Preferred Stock at the time outstanding, voting separately as a
class, given in person or by proxy either in writing (as may be
permitted by law and the Certificate of Incorporation and Bylaws of
the Corporation) or at any special or annual meeting, shall be
necessary to permit, effect or validate the taking of any of the
following actions by the Corporation:
(i) create, authorize or issue any class or series
of capital stock ranking prior to the Series B Preferred Stock as
to dividends or upon liquidation, dissolution or winding up;
(ii) amend the Certificate of Incorporation of the
Corporation, or in any other manner alter or change the powers,
rights, privileges or preferences of the Series B Preferred Stock,
if such amendment or action would adversely affect the powers,
rights, privileges or preferences of the holders of the Series B
Preferred Stock; except that the Corporation may amend the
Certificate of Incorporation and/or the Bylaws of the Corporation
to increase the amount of shares of Common Stock or amend the terms
of any Common Stock, or to create, authorize or issue shares of
Junior Preferred Stock; or
(iii) amend this Certificate of Designations.
(c) Additional Voting Rights.
(i) So long as there are at least 100,000 shares of
Series B Preferred Stock then outstanding (subject to adjustment
after the date hereof for stock splits, combinations, etc.), upon
the occurrence of an Event of Default, the holders of the Series B
Preferred Stock shall be entitled to elect (as provided below) a
number of directors to the Board of Directors of the Corporation
equal to the number obtained by (x) multiplying the (A) a fraction,
the numerator of which is the number of shares of Common Stock
obtainable upon conversion of all of the shares of Series B
Preferred Stock then outstanding and the denominator of which is
the total number of shares of Common Stock (on a fully-diluted
basis) then outstanding, by (B) the number of directors on the
Board of Directors of the Corporation and then (y) rounding such
number down to the nearest whole number (except for any number
below the number 1, such number shall be rounded upwards to 1 and
not downward to zero). The size of the Board of Directors of the
Corporation shall be increased by such number as may be necessary
to allow for directors elected by the holders of the Series B
Preferred Stock. During the period (hereinafter in this Section
3(c) called the "Class Voting Period") commencing upon th
occurrence of such Event of Default and ending at such time upon
which no Event of Default shall continue, the holders of at least
fifty-one percent (51%) of the then outstanding shares of Series B
Preferred Stock, by the affirmative vote in person or by proxy at
a special meeting of stockholders called for such purpose (or at
any adjournment thereof) by holders of at least 25% of the then
outstanding shares of Series B Preferred Stock or at any annual
meeting of stockholders, or by written consent delivered to the
Secretary of the Corporation, with the holders of such Series B
Preferred Stock voting as a class and with each such share of
Series B Preferred Stock having one vote, shall be entitled, as a
class, to the exclusion of the holders of all other classes or
series of capital stock of the Corporation, to elect such
directors.
(ii) At any time when such voting right under this
Section 3(c) shall have vested in the holders of shares of Series
B Preferred Stock entitled to vote thereon, and if such right shall
not already have been initially exercised, an officer of the
Corporation shall, upon the written request of at least 25% of the
holders of record of shares of the Series B Preferred Stock then
outstanding, addressed to the Treasurer (or similar officer) of the
Corporation, call a special meeting of holders of shares of the
Series B Preferred Stock, such meeting shall be held at the
earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings
of stockholders of the Corporation or, if none, at a place
designated by the Treasurer (or similar officer) of the
Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal
service of such written request upon the Treasure r(or similar
officer) of the Corporation, or within 30 days after mailing the
same within the United States, by registered mail, addressed to the
Treasurer (or similar Officer) of the Corporation at its principal
office (such mailing to be evidenced by the registry receipt issued
by the postal authorities), then the holders of record of at least
25% of the shares of Series B Preferred Stock then outstanding may
designate in writing any person to call such meeting at the expense
of the Corporation, and such meeting may be called by such person
so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere
provided in this paragraph or, if none, at a place designated by
the person selected to call the meeting. Any holder of shares of
Series B Preferred Stock then outstanding that would be entitled to
vote at such meeting shall have access to the stock books of the
Corporation for the purpose of causing a meeting of stockholders to
be called pursuant to the provisions of this paragraph.
(iii) Any director who shall have been elected by
the holders of Series B Preferred Stock pursuant to this Section
3(c) may be removed at any time during a Class Voting Period, by
the vote of the holders of at least fifty-one percent (51%) of all
of the then outstanding shares of Series B Preferred Stock, voting
as a separate class in person or by proxy at a special meeting of
stockholders called for such purpose by holders of at least 25% of
the outstanding shares of Series B Preferred Stock. Any director
who shall have been elected by the holders of Series B Preferred
Stock may not be removed at any time during a Class Voting Period
without the consent of the holders of at least fifty-one percent
(51%) of all of the outstanding shares of Series B Preferred Stock.
Any vacancy created by the removal, death or resignation of a
director elected by the holders of Series B Preferred Stock may be
filled during such Class Voting Period by the holders of at least
fifty-one percent (51%) of all of the outstanding shares of Series
B Preferred Stock by vote in person or by proxy at a special
meeting of stockholders of the Corporation called for such purpose
by holders of at least 25% of the outstanding shares of Series B
Preferred Stock.
(iv) During the Class Voting Period, other than to
increase the size of the Board of Directors in accordance with
clause (i) of this Section 3(c), the size of the Board of Directors
of the Corporation shall not otherwise be changed without the vote
of the holders of at least fifty-one percent (51%) of all of the
then outstanding shares of Series B Preferred Stock, voting as a
separate class.
(v) At the end of the Class Voting Period, the
holders of Series B Preferred Stock shall be automatically divested
of all voting power vested in them under this Section 3(c) except
as herein or by law expressly provided, subject always to the
subsequent vesting hereunder of such voting power in the holders of
Series B Preferred Stock upon the occurrence of any subsequent
Event of Default. The term of any director elected pursuant to the
provisions of this Section 3(c) shall in all events expire at the
end of the Class Voting Period and the size of the Board shall be
reduced accordingly.
4. Dividend Rights.
(a) General Dividend Obligations. The Corporation shall
pay, when and as declared by the Corporation's Board of Directors,
to the holders of the Series B Preferred Stock, out of the assets
of the Corporation legally available therefor, stock dividends,
payable in shares of Series B Preferred Stock (or at the election
of the Corporation, in cash) (provided that upon liquidation or
redemption, accrued and unpaid dividends will be paid in cash), at
the times, in the amounts and with such priorities as are provided
for in this Section 4. Notwithstanding the foregoing, without the
consent of a majority in interest of the lenders under the Senior
Credit Agreement, no dividends may be paid in cash to holders of
the Series A Preferred Stock so long as indebtedness is outstanding
and unpaid under the Senior Credit Agreement.
(b) Accrual of Dividends. Dividends on each share of
Series B Preferred Stock shall accrue cumulatively on a daily basis
from and including the date of issuance of such share. The date on
which the Corporation shall initially issue any share of Series B
Preferred Stock shall be deemed to be its "date of issuance"
regardless of the number of times transfer of such share of Series
B Preferred Stock shall be 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 of Series B Preferred
Stock (whether by reason of transfer of such share of Series B
Preferred Stock or for any other reason).
(c) Dividend Rates. Dividends shall accrue cumulatively
on each share of Series B Preferred Stock from the date of issuance
at a rate per annum equal to $0.80 per share of Series B Preferred
Stock calculated on the basis of the actual number of days elapsed
on a year. Dividends paid in shares of Series B Preferred Stock
shall be paid assuming each share of Series B Preferred Stock used
to so pay has a value of $10.00.
(d) Payment Dates. Full cumulative dividends on the
Series B Preferred Stock shall be payable annually, on the last day
of July in each year (each, a "Dividend Payment Date"). The first
Dividend Payment Date shall be July 31, 1996. If any Dividend
Payment Date shall be on a day other than a Business Day, then the
Dividend Payment Date shall be on the next succeeding Business Day.
An amount equal to the full cumulative dividends shall also be
payable (in cash), in satisfaction of such dividend obligation,
upon liquidation as provided under Section 5 hereof, and upon
redemption as provided under Section 6 hereof.
(e) Amounts Payable. The amount of dividends payable on
series B Preferred Stock on each Dividend Payment Date shall be the
full cumulative dividends which are unpaid through and including
such Dividend Payment Date. Dividends which are not paid for any
reason whatsoever on a Dividend Payment Date shall cumulate until
paid and shall be payable on the next Dividend Payment Date on
which payment can lawfully be made (or upon liquidation or
redemption as provided herein). Holders of shares of Series B
Preferred Stock called for redemption on a redemption date falling
between the close of business son a dividend payment record date
and the opening of business on the corresponding Dividend Payment
Date shall, in lieu of receiving such dividend payment on the
Dividend Payment Date fixed therefor, receive an amount equal to
such dividend payment (consisting of all accumulated and unpaid
dividends through and including the redemption date) on the date
fixed for redemption. If for whatever reason all payments have not
been made with respect to any share of Series B Preferred Stock as
required by Section 5 on a distribution date or all payments have
not been made with respect to any share of Series B Preferred Stock
as required by Section 5 on a redemption date (other than because
of a failure by the holder thereof to tender such shares for
payment on such date), then, notwithstanding any other provision
hereof, dividends shall continue to accumulate on such outstanding
shares until paid. Dividends paid by payment-in-kind shall not be
paid in fractional shares (all such fractional shares being rounded
down to the nearest whole number of shares); such dividends so
rounded down shall be deemed paid in full).
(f) Priority. So long as any shares of the Series B
Preferred Stock are outstanding if any Event of Default has
occurred and in continuing or if an Event of Default (as defined in
the Senior Credit Agreement) has occurred and is continuing, (A) no
dividends shall be declared or made or set apart for payment, in
each case upon the Common Stock (other than dividends paid in
shares of Series A Preferred Stock made to the holders of Series A
shares of Series A Preferred Stock made to the holders of Series A
Preferred Stock) or any Junior Preferred Stock, and (B) no capital
stock of the Company (other than the Series B Preferred Stock)
shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sharing fund or otherwise for the purchase or redemption of any
shares of any such stock) by the Corporation.
5. Liquidation Rights.
(a) Priority. (i) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of
the Corporation (whether from capital or surplus) shall be made to
or set apart for the holders of Common Stock or any other shares of
Junior Preferred Stock of the Corporation, the holders of the
shares of Series B Preferred Stock shall be entitled to receive
from the assets of the Corporation, whether represented by capital,
surplus, reserves or earnings, payment in cash of any amount (the
"Preferred Liquidation Value") equal to the greater of (i) $10.00
per share plus the value of accrued and unpaid dividends per share
through the date thereof or (ii) the amount per share of Series B
Preferred Stock that would have been payable had each such share
been converted to Common Shares immediately prior to such event of
liquidation, dissolution or winding-up pursuant to Section 7
hereof. If the assets distributable upon such liquidation,
dissolution, or winding-up of the Corporation, whether voluntary or
involuntary, shall be insufficient to permit payment to the holders
of the shares of Series B Preferred Stock of the full preferential
amounts as set forth in the Section 5(a), the such assets shall be
distributed ratably among the shares of Series B Preferred Stock.
(ii) If, in the event of any liquidation, dissolution or
winding up of the Corporation, the Preferred Liquidation Value of
the Series B Preferred Stock and the Preferred Liquidation Value of
the Series A Preferred Stock are not paid in full, the respective
holders of the Series B Preferred Stock and of the Series A
Preferred Stock shall share ratably in any distribution of assets
in proportion to the full Preferred Liquidation Value to which each
such series of Preferred Stock is entitled.
(b) Junior Stock. After payment shall have been made i
full to the holders of Series B Preferred Stock as provided in this
Section 5 upon any liquidation, dissolution or winding up of the
Corporation, the Common Stock and any other series or class or
classes of stock of the Corporation shall, subject to the
respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining the be paid or
distributed upon such liquidation, dissolution or winding up, and
the holders of Series B Preferred Stock shall not be entitled to
share therein.
(c) Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when and the place or places where the
amounts distributable in such circumstances shall be payable, shall
be given (not less than thirty (30) days prior to any payment date
stated therein), to the holders of record of the Series B Preferred
Stock at their respective addresses as the same shall appear on the
stock register of the Corporation.
(d) Liquidation. Neither the voluntary sale,conveyance,
exchange or transfer (for cash, shares of stock, securities or
other consideration) of all substantially all the property or
assets of the Corporation nor the consolidation, merger or other
business combination of the Corporation with or intro one or more
corporations shall be deemed to be a liquidation, dissolution or
winding-up,, voluntary or involuntary, of the Corporation.
6. Redemption.
(a) Special Optional Redemption. On or after July 31,
1997 (but not before), if there has been a Qualified Level of
Public Trading as of the date of the notice provided for below, at
the option of the Corporation, the Corporation may redeem all or
part of the shares of Series B Preferred Stock then outstanding at
a cash price per share equal to the sum of $10.00 plus the value of
accrued and unpaid dividends on such share through the date set for
redemption.
Notwithstanding the foregoing, without the consent of a
majority in interest of the lenders under the Senior Credit
Agreement, the Corporation may not redeem all or any part of the
shares of Series B Preferred Stock pursuant to the preceding
sentence so long as indebtedness is outstanding and unpaid under
the Senior Credit Agreement.
Such option under this Section 6(b) shall be exercised by
written notice to the holders of Series B Preferred Stock given at
any time not less than thirty (30) days and not more than sixty
(60) days prior to the date of such redemption.
(b) Partial Redemption. In any such optional redemption
by the Corporation, if all shares of Series B Preferred Stock are
not being redeemed, then the n umber of shares of Series B
Preferred Stock to be redeemed shall be allocated among all shares
of Series B Preferred Stock so that the shares of Series B
Preferred Stock are redeemed from such holders in proportion to the
respective number of shares of Series B Preferred Stock held by
each such holder (or in such other proportion as agreed by all such
holders who accept the Corporation's offer).
7. Conversion.
(a) General. Each holder of a share of Series B
Preferred Stock shall have the right, at the option of such older,
at any time to convert, upon the terms and provisions of the
Section B, one or more shares of Series B Preferred Stock into
fully paid and nonassessable shares of Common Stock of the
Corporation or any capital stock or other securities into which
such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof (such
shares, the "Common Shares"). Such conversion of shares of Series
B Preferred Stock to Common shares shall be made at a conversion
rate of one share of Series B Preferred Stock for a number of
Common Shares equal to (x) $10.00 per share plus the value of
accrued and unpaid dividends per share divided by (y) the then
current conversion price, as further described below. Every share
of Series B Preferred Stock shall continue to be convertible, in
whole or in part, even though the Corporation or a holder may have
given notice of redemption with respect to such share of Series B
Preferred Stock or any part thereof pursuant to Section 6 hereof,
so long as such share of Series B Preferred Stock and the holder's
election to convert shall have been delivered to the Corporation
pursuant to Section 7(c) hereof prior to the date fixed for such
redemption. The Common Shares issuable upon conversion of the
shares of Series B Preferred Stock, when such Common Shares shall
be issued in accordance with the terms hereof, are hereby declared
to be and shall be duly authorized, validly issued, fully paid and
on assessable Common Shares held by the holders thereof.
(b) Reference to Conversion. For convenience, the
conversion pursuant to the Section 7 of all or a part of the shares
of Series B Preferred Stock into Common Shares is herein sometimes
referred to as the "conversion" of the shares of Series B Preferred
Stock.
(c) Surrender, Election and Payment. Each share of
Series B Preferred Stock may be converted by the holder thereof, in
whole, or in part, during normal business hours on any Business Day
by surrender of the share of Series B Preferred Stock, accompanied
by written evidence of the holder's election to convert the
preferred share of Series B Preferred Stock or portion thereof, to
the Corporation at its office designated pursuant to Section 9
hereof (or, if such conversion is in connection with an
underwritten public offering of Common Shares, at the location at
which the underwriting agreement requires that such Common Shares
or shares of Series B Preferred Stock be delivered). Payment of
the conversion price for the common Shares specified in such
election shall be made by applying an aggregate number of shares of
Series B Preferred Stock equal to the number obtained by dividing
(x) the number of Common Shares specified in such election by (y)
the amount obtained by dividing (A) $10.00 by (B) the then current
conversion price. Such holder shall thereupon be entitled to
receive the number of Common Shares specified in such election
(plus cash in lieu of any fractional share as provided in Section
7(j) hereof).
(d) Effective Date. Each conversion of a share of
Series B Preferred Stock pursuant to Section 7(c) hereof shall be
deemed to have been effected immediately prior to the close of
business on the Business Day on which such share of Series B
Preferred Stock shall have been surrendered to the Corporation as
provided in Section 7(c) hereof (except that if such conversion is
in connection with an underwritten public offering of Common
Shares, then such conversion shall be deemed to have been effected
upon such surrender), and such conversion shall be at the current
conversion price in effect at such time. On each such day that the
conversion of a share of Series B Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for Common Shares are issuable upon
such conversion, as provided in Section 7(e) hereof, shall be
deemed to have become the holder or holders of record of such
Common Shares.
(e) Share Certificates. As promptly as practicable
after the conversion of a share of Series B Preferred Stock, in
whole or in part, and in any event within five (5) Business Days
thereafter (unless such conversion is in connection with an
underwritten public offering of Common Shares, in which event
concurrently with such conversion), the Corporation at its expense
(including the payment by it of any applicable issue, stamp or
other taxes, other than any income taxes) will cause to be issued
in the name of and delivered to the holder thereof or as such
holder may direct, a certificate or certificates for the number of
Common Shares to which such holder shall be entitled upon such
conversion on the effective date of such conversion plus cash in
lieu of any fractional shares as provided in Section 7(j) hereof.
(f) Acknowledgment of Obligation. The Corporation will,
at the time of or at any time after each conversion of a share of
Series B Preferred Stock, upon the request of the holder thereof or
of any Common Shares issued upon such conversion, acknowledge in
writing its continuing obligation to afford to such holder all
rights, if any, to which such holder shall continue to be entitled;
provided, that if any such holder shall fail to make any such
request, the failure shall not affect the continuing obligations of
the Corporation to afford such rights to such holder.
(g) Payment of Dividends. Within five (5) Business Days
after receipt of any share of Series B Preferred Stock and an
election to convert all or a portion of such share of Series B
Preferred Stock under Section 7(c) hereof, the Corporation will
pay, out of funds legally available therefor, to the holder of such
share of Series B Preferred Stock in shares of Series B Preferred
Stock or, at the option of the Company, in cash, an amount equal to
full cumulative dividends accrued to the effective date of
conversion of such shares of Series B Preferred Stock.
(h) Current Conversion Price. The term "conversion
price" shall mean initially $1.25 per Common Share, subject to
adjustment. The term "current conversion price" as used herein
shall mean the conversion price, as the same may be adjusted from
time to time as hereinafter provided, in effect at any given time.
In determining the current conversion price, the result shall be
expressed to the nearest $0.01, but any such lesser amount shall be
carried forward and shall be considered at the time of (and
together with) the next subsequent adjustment which, together with
any adjustments to be carried forward, shall amount of $0.01 per
Common Share or more.
(i) Reservation of Shares of Common Stock. The
Corporation shall at all times reserve and keep available out of
authorized but unissued the maximum number of shares of Common
Stock into which all shares of Series B Preferred Stock from time
to time outstanding are convertible, but shares of Common Stock
held in the treasury of the Corporation may, in its discretion, be
delivered upon any conversion of shares of Series B Preferred
Stock.
(j) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series B Preferred Stock,
but, in lieu of any fraction of a Common Share which would
otherwise be issuable in respect of the aggregate number of shares
of Series B Preferred Stock surrendered by the holder thereof for
conversion, the holder shall have the right to receive an amount in
cash equal to the sam fraction of the current Market Price (as
defined below) on the effective date of the conversion of such
shares of Series B Preferred Stock. Dividends payable pursuant to
Section V(g) above upon conversion of shares of Series B Preferred
Stock which are paid by payment-in-kind shall be paid with cash in
lieu of fractional shares to the extent of any fractional shares.
8. Adjustment to Conversion Price.
The conversion price shall be adjusted, from time to
time, as follows:
(a) Adjustments for Stock Dividends, Recapitalizations,
Etc. In case the Corporation shall, after August 1, 1995, (w) pay
a stock dividend or make a distribution (on or in respect of its
Common Stock) in shares of its Common Stock (except there shall be
no adjustment with respect to the payment by the Company of a stock
dividend to holders of its Common Stock of the shares of Strategic
Abstract & Title Corporation, a Texas corporation), (x) subdivide
the outstanding shares of its Common Stock, (y) combine the shares
of its Common Stock into a smaller number of shares, or (z) issue
by reclassification of shares of its Common Stock, any share sof
capital stock of the Corporation, then, in any such case, the
current conversion price in effect immediately prior to such action
shall be adjusted to a price such that if the holder of a share of
Series B Preferred Stock were to convert such share of Series B
Preferred Stock in full immediately after such action, such holder
would be entitled to receive the number of shares of capital stock
of the Corporation which such holder would have owned immediately
following such action had such share of Series B Preferred Stock
been converted immediately prior thereto (with any record date
requirement being deemed to have been satisfied), and, in any such
case, such conversion price shall thereafter be subject to further
adjustments under this Section 8. An adjustment made pursuant to
this subsection (a) shall become effective retroactively
immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) Consolidation or Merger. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale of
all or substantially all of the Corporation's assets to another
person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or
under 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 provision (in form
and substance reasonably satisfactory to holders of Series B
Preferred Stock representing a majority of the Series B Preferred
Stock then outstanding) to insure that each of the holders of the
Series B 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 Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series B Preferred
Stock, such shares of stock, securities or assets as may be
issuable or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon conversion of such holder's Series B Preferred
Stock had such Organic Change not taken place.
In any such case, the Corporation shall make appropriate
provision (in form and substance reasonably satisfactory to the
holders of Series B Preferred Stock representing a majority of the
Series B Preferred Stock then outstanding) with respect to such
holders rights and interest to insure that the provisions hereof
shall thereafter be applicable to the Series B 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
reflect the value for the Series B Preferred Stock reflected by the
terms of such consolidation, merger or sale, if the value so
reflected would cause an increase to 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 such
consolidation or merger or the Corporation purchasing such assets
assumes by written instrument (which may be the agreement of
consolidation, merger or sale), in form and substance reasonably
satisfactory to the holders of Series B Preferred Stock
representing a majority of the Series B Preferred Stock then
outstanding, the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance wi th the
foregoing provisions, such holder may be entitled to acquire.
(c) Notices. In case at any time.
(i) the Corporation shall take any action which
would require an adjustment in the current conversion price
pursuant to Section 8(a); or
(ii) there shall be any reorganization,
reclassification or change of the Corporation's Common Stock (other
than a change in par value or from par value to no par value or
from no par value to par value), or any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or any sale, transfer
or lease of all or substantially all of the assets of the
Corporation; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation;
then, in any one or more of such cases, the Corporation shall give
written notice to the holders of the shares of Series B Preferred
Stock, not less than ten (10) days before any record date or other
date set for definitive action, of the date on which such action,
distribution, reorganization, reclassification, change, sale,
transfer, lease, consolidation, merger, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of any such
action (to the extent such effect may be known at the date of such
notice) on the current conversion price and the kind and amount of
the shares and other securities and property deliverable upon
conversion of the shares of Series B Preferred Stock. Such notice
shall also specify any date as of which the holders of the Common
Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon any such
reorganization, reclassification, change, sale, transfer, lease,
consolidation, merger, dissolution, liquidation or winding-up, as
the case may be.
9. Notices. Unless otherwise expressly specified
or permitted by the terms hereof, all notices, requests, demands,
consents and other communications hereunder shall be in writing and
shall be delivered by hand or shall be sent by telex or telecopy
(confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), to the following addresses:
(a) if to the holder of a share of Series B
Preferred Stock, at the holder's address as set forth in the stock
register of the Corporation, or at such other address as may have
been furnished to the Corporation by the holder in writing; or
(b) if to the Corporation, at SA Holdings, Inc.,
1912 Avenue K, Suite 100, Plano, TX 75074-5959 or at such other
address as may have been furnished in writing by the Corporation to
the holders of the shares of Series B Preferred Stock.
Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such
notice is delivered or, if sent by telex or telecopies, when
received, unless otherwise expressly specified or permitted by the
terms hereof.
IN WITNESS WHEREOF, SA Holdings, Inc. caused this Certificate
of Designations to be signed by its Chief Executive Officer this
31st day of July, 1995.
SA HOLDINGS, INC.
By_____________________________
Jack W. Matz, Jr.
Chief Executive Officer
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY APPLICABLE LAW OR REGULATION OF
ANY STATE AND IS NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS
SPECIFIED IN SECTION 14 OF THE PURCHASE AGREEMENT REFERRED TO
HEREIN.
SA HOLDINGS, INC.
Subordinated Note
Due October 1, 1996
Dated July 31, 1995
New York, New York
FOR VALUE RECEIVED, the undersigned, SA HOLDINGS, INC.,
a Delaware corporation (herein, together with any successor,
referred to as the "Company"), hereby promises to pay to Howard
Maddera or registered assigns, the principal sum of One Million
One Hundred Thousand Dollars ($1,100,000) on October 1, 1996,
with interest (computed on the basis of the actual number of days
elapsed over a 360-day year) on the unpaid balance of such
principal sum from the date hereof at eleven percent (11%) per
annum (the "Interest Rate") payable in arrears, commencing on the
date hereof and thereafter in arrears on October 31, 1995,
January 31, 1996, April 30, 1996, July 31, 1996 and at maturity,
commencing on July 31, 1995, until the entire principal amount
hereof shall have become due and payable.
If any payment of interest due hereunder becomes due
and payable on a day which is not a Business Day (as defined in
the Purchase Agreement referred to below), the due date thereof
shall be the next preceding day which is a Business Day, and the
interest payable on such next preceding Business Day shall be the
interest which would otherwise have been payable on the due date
which was not a Business Day.
Payments of principal and interest shall be made in
lawful money of the United States of America, at the principal
office of the Company at 1912 Avenue K, Suite 100, Plano, Texas
75074-5959, or at such other place as the Purchaser shall have
designated for such purpose to the Company in writing, may be
paid by check mailed, or shall be made by wire transfer, to the
Purchaser, all as provided in the Purchase Agreement referred to
below, to the address or account designated by the holder hereof
for such purpose.
This Note is one of a duly authorized issue of Notes
issued pursuant to Note & Warrant Purchase Agreements dated as of
July 31, 1995 between the Company and the Purchaser named in each
such Note & Warrant Purchase Agreement. Such Note & Warrant
Purchase Agreement under which this Note has been issued is
herein referred to as the "Purchase Agreement".
This Note is entitled to the benefits of the security
interests created by the Security Agreements among Howard
Maddera, as agent for the Purchasers, the Company and the
subsidiaries of the Company.
This Note is subject to the provisions of and is
entitled to the benefits of the Purchase Agreement. The Purchase
Agreement provides, inter alia, for prepayments of principal upon
the terms set forth therein. Each holder of this Note, by
accepting the same, agrees to and shall be bound by the
provisions of the Purchase Agreement.
This Note is transferable only upon the terms and
conditions specified in the Purchase Agreement.
In case an Event of Default (as defined in the Purchase
Agreement) shall occur and be continuing, the principal of this
Note may be declared due and payable in the manner and with the
effect provided in the Purchase Agreement.
From and after the occurrence of an Event of Default,
the Company shall pay all costs of collection and reasonable
attorney's fees incurred by the Purchaser in connection with the
collection of amounts due hereunder.
No reference herein to the Purchase Agreement and no
provision hereof or thereof shall alter or impair the obligations
of the Company, which is absolute and unconditional, to pay the
principal hereof and interest hereon at the respective times and
places specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of New York (other than any conflict of laws rules which might
result in the application of the laws of any other jurisdiction).
Subject to the provisions of Section 14 of the Purchase
Agreement, the Company may treat the person in whose name this
Note is registered as the owner and holder of this Note for the
purpose of receiving payment of principal of, premium, if any,
and interest on this Note and for all other purposes whatsoever,
and the Company shall not be affected by any notice to the
contrary (except that the Companies shall comply with the
provisions of Section 14 of the Purchase Agreement regarding the
issuance of a new Note or Notes to permitted transferees).
IN WITNESS WHEREOF, SA Holdings, Inc. has caused this
Note to be dated and to be executed and issued on its behalf by
its duly authorized officer.
SA HOLDINGS, INC.
By_________________________
Name:
Title:
<PAGE>
SCHEDULE OF DIFFERENCES
PURCHASE NOTE:
Name of Payee Principal Amount
1. Howard Maddera $1,100,000
2. Bill J. Johnson 1,100,000
3. Marianne Reed 500,000
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY APPLICABLE LAW OR REGULATION OF
ANY STATE AND IS NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS
SPECIFIED IN SECTION 14 OF THE PURCHASE AGREEMENT REFERRED TO
HEREIN.
SA HOLDINGS, INC.
Subordinated Note
Due July 30, 1996
Dated July 31, 1995
New York, New York
FOR VALUE RECEIVED, the undersigned, SA HOLDINGS, INC.,
a Delaware corporation (herein, together with any successor,
referred to as the "Company"), hereby promises to pay to Howard
Maddera or registered assigns, the principal sum of Six Hundred
Thousand Dollars ($600,000) on July 30, 1996, with interest
(computed on the basis of the actual number of days elapsed over
a 360-day year) on the unpaid balance of such principal sum from
the date hereof at eleven percent (11%) per annum (the "Interest
Rate") payable in arrears, commencing on the date hereof and
thereafter at maturity, commencing on July 31, 1995, until the
entire principal amount hereof shall have become due and payable.
The Company shall pay the principal amount in equal installments
of $300,000 and accrued and unpaid interest on January 31, 1996
and at maturity.
If any payment of interest due hereunder becomes due
and payable on a day which is not a Business Day (as defined in
the Purchase Agreement referred to below), the due date thereof
shall be the next preceding day which is a Business Day, and the
interest payable on such next preceding Business Day shall be the
interest which would otherwise have been payable on the due date
which was not a Business Day.
This Note, and the obligations of the Company
hereunder, are subject to setoff and reduction in accordance with
the provisions of that certain Stock Purchase Agreement by and
among the Company, U.S. Communications, Inc., Bill L. Johnson,
Howard Maddera, Marianne Reed and NTS Communications, Inc. dated
as of June 30, 1995, as amended.
Payments of principal and interest shall be made in
lawful money of the United States of America, at the principal
office of the Company at 1912 Avenue K, Suite 100, Plano, Texas
75074-5959, or at such other place as the Purchaser shall have
designated for such purpose to the Company in writing, may be
paid by check mailed, or shall be made by wire transfer, to the
Purchaser, all as provided in the Purchase Agreement referred to
below, to the address or account designated by the holder hereof
for such purpose.
This Note is one of a duly authorized issue of Notes
issued pursuant to Note & Warrant Purchase Agreements dated as of
July 31, 1995 between the Company and the Purchaser named in each
such Note & Warrant Purchase Agreement. Such Note & Warrant
Purchase Agreement under which this Note has been issued is
herein referred to as the "Purchase Agreement".
This Note is entitled to the benefits of the security
interests created by the Security Agreements among Howard
Maddera, as agent for the Purchasers, the Company and the
subsidiaries of the Company.
This Note is subject to the provisions of and is
entitled to the benefits of the Purchase Agreement. The Purchase
Agreement provides, inter alia, for prepayments of principal upon
the terms set forth therein. Each holder of this Note, by
accepting the same, agrees to and shall be bound by the
provisions of the Purchase Agreement.
This Note is transferable only upon the terms and
conditions specified in the Purchase Agreement.
In case an Event of Default (as defined in the Purchase
Agreement) shall occur and be continuing, the principal of this
Note may be declared due and payable in the manner and with the
effect provided in the Purchase Agreement.
From and after the occurrence of an Event of Default,
the Company shall pay all costs of collection and reasonable
attorney's fees incurred by the Purchaser in connection with the
collection of amounts due hereunder.
No reference herein to the Purchase Agreement and no
provision hereof or thereof shall alter or impair the obligations
of the Company, which is absolute and unconditional, to pay the
principal hereof and interest hereon at the respective times and
places specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of New York (other than any conflict of laws rules which might
result in the application of the laws of any other jurisdiction).
Subject to the provisions of Section 14 of the Purchase
Agreement, the Company may treat the person in whose name this
Note is registered as the owner and holder of this Note for the
purpose of receiving payment of principal of, premium, if any,
and interest on this Note and for all other purposes whatsoever,
and the Company shall not be affected by any notice to the
contrary (except that the Companies shall comply with the
provisions of Section 14 of the Purchase Agreement regarding the
issuance of a new Note or Notes to permitted transferees).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, SA Holdings, Inc. has caused this
Note to be dated and to be executed and issued on its behalf by
its duly authorized officer.
SA HOLDINGS, INC.
By_________________________
Name:
Title:
<PAGE>
SCHEDULE OF DIFFERENCES
OFFSET NOTE:
Name of Payee Principal Amount
1. Howard Maddera $600,000, payable in
installments of $300,000
2. Bill L. Johnson $600,000, payable in
installments of $300,000
3. Marianne Reed $600,000, payable in
installments of $150,000
IMPORTANT NOTICE ON REVERSE SIDE
DELAWARE
Number Shares
001 50,000
Picture of Eagle
SA HOLDINGS, INC.
THIS CERTIFIES THAT Howard Maddera is the owner of 50,000
Series B Cumulative Convertible fully paid and non-assessable
Shares Preferred Stock, Par Value $.00001 per Share transferrable
only upon the books of the Company by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this
Certificate to be signed by its duly authorized officers and to be
sealed with the Seal of the Corporation this 31st day of July A.D.
1995.
______________________________ ______________________________
John Ebert, Secretary Jack W. Matz, President
_________________________________________________________________
LEGEND ON REVERSE SIDE
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW. THE SHARES HAVE BEEN ACQUIRED FOR
PRIVATE INVESTMENT AND MAY NOT BE OFFERED FOR SALE OR SOLD IN THE
ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, OR (ii) AN OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF OF THE CORPORATION, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
SUCH REQUEST MAY BE MADE TO THE CORPORATION OR THE TRANSFER AGENT.
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER
SECURITIES ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY
APPLICABLE LAW OR REGULATION OF ANY STATE AND ARE NOT
TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN SECTION 14
OF THE PURCHASE AGREEMENT REFERRED TO HEREIN.
SA HOLDINGS, INC.
Common Stock Purchase Warrant Certificate
Dated July 31, 1995
New York, New York
FOR VALUE RECEIVED, the undersigned, SA Holdings, Inc.,
a Delaware corporation (herein referred to as the "Company"),
hereby certifies and agrees that Howard Maddera, or its
registered assigns, is entitled to purchase from the Company up
to an aggregate of 420,000 duly authorized, validly issued, fully
paid and non-assessable shares of the Company's Common Stock, or
any stock into which such Common Stock shall have been changed or
converted or any stock or other securities resulting from a
reclassification thereof (the "Shares") at a purchase price per
Share of $1.25 at any time and from time to time from the date
hereof until the Expiration Date (as hereinafter defined). The
foregoing agreement and rights are all subject to the terms,
conditions and adjustments (in both the number of Shares and the
purchase price per Share) set forth below in this Warrant
Certificate.
This Warrant Certificate is one of the Common Stock
Purchase Warrant Certificates (the "Warrants", which term
includes all Warrants issued in substitution therefor) originally
issued in connection with the issue and sale by the Company on
the date hereof of (i) $2,750,000 aggregate principal amount of
its Subordinated Notes due October 1, 1996 and (ii) $1,500,000
aggregate principal amount of its Subordinated Notes due July 30,
1996 (together with all notes issued in substitution or
replacement therefor, the "Notes"). The Warrants and the Notes
have been issued pursuant to separate Note, Preferred Stock &
Warrant Purchase Agreements dated as of July 31, 1995
(collectively, the "Purchase Agreement") between the Company and
the purchasers named therein (each, a "Purchaser"). The Warrants
originally so issued evidence rights to purchase an aggregate of
1,050,000 Shares at an exercise price of $1.25 per share, subject
to adjustment as provided herein. This Warrant is subject to the
provisions, and is entitled to the benefits, of the Purchase
Agreement.
Section 1. Exercise of Warrant.
1.1. Surrender, Subscription and Payment. This
Warrant may be exercised by the holder hereof, in whole or in
part, at any time from the date hereof until the close of
business on the Expiration Date, during normal business hours on
any Business Day (as defined in the Purchase Agreement), by
surrender of this Warrant, together with the form of subscription
attached as Annex A hereto (or a reasonable facsimile thereof)
duly executed by such holder in substantially such form, to the
Company at its office designated pursuant to Section 17 of the
Purchase Agreement (or, if such exercise is in connection with an
underwritten public offering of Shares subject to this Warrant or
of securities into which Shares subject to this Warrant may be
converted, at the location at which the underwriting agreement
requires that such Shares be delivered). Payment of the exercise
price for the Shares specified in such subscription shall be
made, at the option of the holder, (a) by applying a principal
amount of Notes, in the manner provided in Section 1.6 hereof,
(b) by certified or official bank check (or wire transfer)
payable to the order of the Company in federal or other
immediately available funds, in the case of either (a) or (b), in
an amount equal to (i) the number of Shares specified in such
form of subscription, multiplied by (ii) the then current
exercise price (as hereinafter defined), or (a) by conversion of
this Warrant, or any portion hereof, in the manner provided in
Section 1.7 hereof. Such holder shall thereupon be entitled to
receive the number of Shares specified in such form of
subscription (plus cash in lieu of any fractional share as
provided in Section 1.4 hereof).
1.2. Effective Date. Each exercise of this Warrant
pursuant to Section 1.1 hereof shall be deemed to have been
effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to
the Company as provided in Section 1.1 hereof (except that if
such exercise is in connection with an underwritten public
offering of Shares subject to this Warrant or of securities into
which Shares subject to this Warrant may be converted, then such
exercise shall be deemed to have been effected upon such
surrender of this Warrant), and such exercise shall be at the
current exercise price in effect at such time. On each such day
that an exercise of this Warrant is deemed effected, the person
or persons in whose name or names any certificate or certificates
for Shares are issuable upon such exercise, as provided in
Section 1.4 hereof, shall be deemed to have become the holder or
holders of record thereof.
1.3. Expiration Date. This Warrant will expire, and
thereafter will not be exercisable, at the close of business on
July 31, 2000 (the "Expiration Date").
1.4. Share Certificates, Cash for Fractional Shares
and Reissuance of Warrants. As promptly as practicable after the
exercise of this Warrant, in whole or in part, and in any event
within five (5) Business Days thereafter (unless such exercise is
in connection with a public offering of Shares subject to this
Warrant or of securities into which Shares subject to this
Warrant may be converted, in which event concurrently with such
exercise), the Company at its expense (including the payment by
it of any applicable issue, stamp or other taxes other than any
income taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to Section 14 of the
Purchase Agreement, as such holder may direct:
(i) a certificate or certificates for the number of
Shares to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per Share
(determined in accordance with Section 1.7(b) hereof) on the
effective date of such exercise; and
(ii) in case such exercise is in part only, a new
Warrant or Warrants of like tenor, calling in the aggregate
on the face or faces thereof for the number of Shares
(without giving effect to any adjustment therein) equal to
the number of such Shares called for on the face of this
Warrant minus the number of Shares which could have been
obtained upon such exercise for the exercise price paid if
the current exercise price had been $1.25 per Share.
1.5. Acknowledgment of Obligation. The Company will,
at the time of or at any time after each exercise of this
Warrant, upon the request of the holder hereof or of any Shares
issued upon such exercise, acknowledge in writing its continuing
obligation to afford to such holder all rights (including,
without limitation, any rights to registration of any such Shares
pursuant to the Purchase Agreement) to which such holder shall
continue to be entitled under this Warrant, the Purchase
Agreement, and the Notes; provided, that if any such holder shall
fail to make any such request, the failure shall not affect the
continuing obligation of the Company to afford such rights to
such holder.
1.6. Payment by Application of the Notes.
(a) The holder of this Warrant shall have the option,
but not the obligation, upon any exercise of this Warrant, to
apply to the payment required by Section 1.1 hereof all or any
part of the principal amount then unpaid of any one or more Notes
at the time held by such holder. The Company will accept the
amount of principal, if such election is selected, specified in
such form of subscription in satisfaction of the exercise price
for such Shares to be purchased. Within five (5) Business Days
after receipt of any such notice, the Company will pay to the
holder of Notes submitting such subscription, in the manner
provided in such Notes and the Purchase Agreement, any unpaid
interest accrued to the date of exercise of this Warrant on the
principal amount so specified in such form of subscription. In
the event that less than the entire unpaid principal amount of
any Note is applied to the payment required by Section 1.1
hereof, such Note shall be surrendered together with the form of
subscription and cancelled in accordance with Section 12 of the
Purchase Agreement, and the Company will promptly issue a new
Note representing the remaining unpaid principal balance. In the
event that the entire unpaid principal amount of any Note is
applied to the payment required by Section 1.1 hereof, such Note
shall be surrendered together with the form of subscription and
cancelled in accordance with the provisions of Section 12 of the
Purchase Agreement.
(b) The holder of this Warrant shall have the right to
apply all or any portion of the principal amount of a Note to
exercise all or any portion of this Warrant (i) whether or not
payment on the Notes is prohibited by the subordination
provisions of the Purchase Agreement and (ii) even though the
Company or such holder may have given notice of prepayment with
respect to all or any portion of the principal amount of such
Note pursuant to Section 6 of the Purchase Agreement, so long as
the subscription form with respect to such principal amount of
such Note shall, together with this Warrant, have been delivered
to the Company in accordance with Section 1.1 hereof prior to the
date fixed for such prepayment.
1.7. Conversion of Warrant. (a) In addition to and
without limiting the rights of the holder under the terms of this
Warrant, the holder of this Warrant shall have the option, but
not the obligation, to convert this Warrant, or any portion
hereof (the "Conversion Right"), into Shares as provided in this
Section 1.7 at any time on or prior to the Expiration Date. Upon
exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without
payment by the holder of any exercise price or any cash or other
consideration) that number of Shares equal to the quotient
obtained by dividing (i) the value of this Warrant (or the
specified portion hereof) on the effective date of the exercise
of the Conversion Right, as provided in Section 1.2 hereof (the
"Conversion Date"), which value shall be determined by
subtracting (x) the aggregate exercise price of the Converted
Warrant Shares immediately prior to the exercise of the
Conversion Right from (y) the aggregate Market Price of such
Converted Warrant Shares on the Conversion Date by (ii) the
Market Price of one Share on the Conversion Date.
(b) Determination of Market Price. For purposes of
this Warrant, "Market Price" of the Company's Shares shall mean:
(i) if traded on a stock exchange, the Market Price
of the Company's Shares shall be deemed to be the average of the
daily closing selling prices of the Shares on the stock exchange
reasonably determined by the Company's Board of Directors to be
the primary market for the Shares over the ten (10) trading day
period ending on the date prior to the effective date of the
exercise or conversion of this Warrant, as such prices are
officially quoted in the composite tape of transactions on such
exchange;
(ii) if traded over-the-counter, the Market Price of
the Shares shall be deemed to be the average of the daily closing
selling prices (or, if such information is not available, the
average of the daily closing bid and asked prices) of the Shares
over the ten (10) trading day period ending on the date prior to
the effective date of the exercise or conversion of this Warrant,
as such prices are reported by the National Association of
Securities Dealers through its NASDAQ system or any successor
system; and
(iii) if there is no public market for the Shares,
then the Market Price shall be determined by mutual agreement of
the holder of the Warrant and the Company, and if the holder and
the Company are unable to so agree within twenty (20) days after
the event giving rise to the need to determine the Market Price,
by an investment banker of national reputation selected by mutual
agreement of the Company and the holder of the Warrant.
Section 2. Exercise Price and Adjustments.
2.1. Current Exercise Price. The term "exercise
price", shall mean initially $1.25 per Share, subject to
adjustment. For purposes of this Section 2.1, the exercise price
of $1.25 shall be deemed to have become effective at the close of
business on the date hereof but shall be subject to adjustment as
set forth in Sections 2.2 and 2.3 hereof. The term "current
exercise price" as used herein shall mean the exercise price, as
the same may be adjusted from time to time as hereinafter
provided, in effect at any given time. In determining the
current exercise price, the result shall be expressed to the
nearest $0.01, but any such lesser amount shall be carried
forward and shall be considered at the time of and together with
the next subsequent adjustment which, together with any
adjustments to be carried forward, shall amount to $0.01 per
Share or more.
2.2. Adjustment of Exercise Price. The exercise price
shall be subject to adjustment, from time to time in the event
the Company should at any time or from time to time after the
date hereof (w) pay a stock dividend or make a distribution (or
in respect of its Common Stock) in shares of its Common Stock
(except there shall be no adjustment with respect to the payment
by the Company of a stock dividend to holders of its Common Stock
of the shares of Strategic Abstract & Title Corporation, a Texas
corporation), (x) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock (y) combine
its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (z) issue by reclassification of
shares of its Common Stock, any shares of capital stock of the
Company, then (i) the number of Shares for which this Warrant is
exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of Shares which a record
holder of the same number of Shares for which this Warrant is
exercisable immediately prior to the occurrence of such event
would own or be entitled to receive after the happening of such
event, and (ii) the exercise price shall be adjusted to equal (x)
the exercise price multiplied by the number of Shares for which
this Warrant is exercisable immediately prior to such adjustment
divided by (y) the number of Shares for which this Warrant is
exercisable immediately after such adjustment.
2.3. Recapitalization, Consolidation or Merger or Sale
of Assets. Any recapitalization, reorganization, reclassi-
fication, consolidation, merger, sale of all or substantially all
of the Corporation's assets to another Person or other
transaction 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 Corporation shall make appropriate provision (in form
and substance reasonably satisfactory to holders of Warrants
representing a majority of the Shares then outstanding) to insure
that each of the holders of the Warrants shall thereafter have
the right to acquire and receive in lieu of or in addition to (as
the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such
holder's Warrants, such shares of stock, securities or assets as
may be issuable or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of such holder's Warrants
had such Organic Change not taken place.
In any such case, the Corporation shall make
appropriate provision (in form and substance reasonably
satisfactory to the holders of Warrants representing a majority
of the Warrants then outstanding) with respect to such holders'
rights and interest to insure that the provisions hereof shall
thereafter be applicable to the Warrants (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 exercise price to reflect the value
for the Warrants reflected by the terms of such consolidation,
merger or sale, if the value so reflected would cause an increase
to the exercise 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 such consolidation or merger or the
Corporation purchasing such assets assumes by written instrument
(which may be the agreement of consolidation, merger or sale), in
form and substance reasonably satisfactory to the holders of
Warrants representing a majority of the shares 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.
Section 3. Notice to Holders of Warrants.
In case at any time
(i) the Company shall take any action which would
require an adjustment in the current exercise price pursuant
to Section 2.2 or 2.3; or
(ii) there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or from par value to no par value or
from no par value to par value of the Company's Common
Stock), or any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the
Company is required, or any sale, transfer or lease of all
or substantially all of the assets of the Company; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give
written notice to the holders of the Warrants, not less than
twenty (20) days before any record date or other date set for
definitive action, of the date on which such action,
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding-up shall
take place, as the case may be. Such notice shall also set forth
such facts as shall indicate the effect of any such action (to
the extent such effect may be known at the date of such notice)
on the current exercise price and the kind and amount of the
shares and other securities and property deliverable upon
exercise of the Warrants. Such notice shall also specify any
date as of which the holders of record of the Company's Common
Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon any such
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding-up, as the
case may be.
Section 4. Adjustments to Number of Shares Issuable
Hereunder. The number of Shares called for on the face of this
Warrant is the number of Shares which can be purchased under this
Warrant on the date of original issuance of this Warrant at an
exercise price of $1.25 per Share (subject to reduction from time
to time pursuant to clause (ii) of Section 1.4 hereof). Without
limiting any other provision of this Warrant, notwithstanding the
number of Shares so called for on the face of this Warrant, the
aggregate number of Shares that can be acquired upon an exercise
of this Warrant in whole or in part shall be adjusted from time
to time pursuant to Section 2 hereof.
Section 5. Specific Performance. The Company agrees
and stipulates that the remedies at law of a holder of this
Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and that, to the
fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
Section 6. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a stockholder of
the Company (prior to exercise of all or a portion of this
Warrant) or as imposing any liabilities on such holder to
purchase any securities or any liabilities as a stockholder of
the Company, whether such liabilities are asserted by the Company
or by creditors or stockholders of the Company or otherwise.
Section 7. Ownership; Transfer. The Company may treat
the person in whose name this Warrant is registered as the owner
and holder of this Warrant for all purposes, and the Company
shall not be affected by any notice to the contrary (except that
the Company shall comply with the provisions of Section 14 of the
Purchase Agreement regarding the issuance of a new Warrant or
Warrants to permitted transferees). This Warrant is transferable
only upon the conditions, and subject to the restrictions,
specified in Section 14 of the Purchase Agreement.
Section 8. Headings. The headings and captions in
this Warrant are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions
hereof.
Section 9. Governing Law. This Warrant shall be
governed by, and construed in accordance with, the laws of the
State of New York (other than any conflict of laws rule which
might result in the application of the laws of any other
jurisdiction).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, SA HOLDINGS, INC. has caused this
Warrant to be executed and issued on its behalf by its officer
thereunto duly authorized as of the date first above written.
SA HOLDINGS, INC.
By ________________________________
Name:
Title:
[Signature page to Common Stock Warrant Certificate]
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise or conversion
of the Warrant in whole or in part)
To SA Holdings, Inc.:
The undersigned registered holder of the accompanying
Warrant hereby exercises such Warrant or portion thereof for, and
purchases thereunder, ____________1 Shares (as defined in such
Warrant) and herewith [makes payment therefor by application
pursuant to Section 1.6 of such Warrant of $__________ aggregate
principal amount of Notes (as defined in such Warrant)] [or]
[makes payment therefor of $ __________] [or] [makes payment
therefor by conversion of ___ Shares represented by such Warrant
pursuant to Section 1.7 of such Warrant]. The undersigned
requests that the certificates for such Shares be issued in the
name of, and delivered to, ___________________________________
whose address is _____________________________________________.
Dated: _________________________
(Name must conform to name of
holder as specified on the
face of the Warrant)
By ___________________________
Name:
Title:
Address of holder:
______________________________
______________________________
______________________________
__________________________________
1[Insert the number of Shares as to which this Warrant is being
exercised. In the case of a partial exercise, a new Warrant or
Warrants will be issued and delivered, representing the
unexercised portion of this Warrant, to the holder surrendering
the same.]
FOR IMMEDIATE RELEASE
SA TELECOMMUNICATIONS ANNOUNCES THE
ACQUISITION OF U.S. COMMUNICATIONS, INC.
DALLAS, TEXAS, August 1, 1995 -- SA Holdings, Inc. d/b/a SA
Telecommunications
(NASDAQ-STEL), announced today the consummation of its $12 million
acquisition of U.S.
Communications, Inc. (USC).
USC was a privately-owned, 10 year old Interexchange Long Distance
Carrier headquartered
in Levelland, Texas. The Company was profitable last year on
revenues of $16,000,000.
SA Telecommunications is a diversified global telecommunications
long distance carrier which
offers domestic and international telecommunications services to
its customer base.
###
For more information:
Jack W. Matz, Jr. - Chief Executive Officer John A. Germinario
SA Holdings, Inc. Tel: 201-543-0870
d/b/a SA Telecommunications
Tel: 214-516-0662
Fax: 214-881-0656
