<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from _______ to_________.
Commission File Number: 0-18048
SA Telecommunications, Inc.
- - ----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 75-2258519
- - ---------------------------- -----------------------------------
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or
organization)
1600 Promenade Center, 15th Floor, Richardson, TX 75080
- - ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(214) 690-5888
---------------------------
(Issuer's telephone number)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date: Common
Stock outstanding at May 13, 1996 - 15,406,488.
Transitional Small Business Disclosure Format (Check One:)
Yes [ ] No [X]
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information Page
Item 1. - Financial Statements
Consolidated Balance Sheets 1-2
Consolidated Statements of Operations 3
Consolidated Statements of Shareholders'
Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-11
Part II. Other Information
Item 1. - Legal Proceedings 12
Item 2. - Changes in Securities 12
Item 3. - Defaults Upon Senior Securities 12
Item 4. - Submission of Matters to a Vote of Security
Holders 12
Item 5. - Other Information 12
Item 6. - Exhibits and Reports on Form 8-K 13
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Current assets:
Cash $ 270,528 $ 823,738
Accounts and notes receivable:
Trade, net of allowance for doubtful accounts
of $479,512 and $475,845, respectively 4,175,491 4,022,131
Other, net of allowance for doubtful
accounts of $46,122 891,662 407,550
Inventory 229,549 146,037
Prepaid expenses and other 343,951 292,439
----------- -----------
Total current assets 5,911,181 5,691,895
Property and equipment 4,278,872 3,911,652
Less accumulated depreciation and amortization (792,504) (495,613)
----------- -----------
Net property and equipment 3,486,368 3,416,039
Excess of cost over net assets acquired,
net of accumulated amortization of $1,308,183
and $1,068,833, respectively 16,943,515 16,869,648
Other assets 62,873 63,221
----------- -----------
Total assets $26,403,937 $26,040,803
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
1
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 524,081 $ 761,880
Accrued telecommunications expenses 2,099,794 2,337,420
Other accrued expenses 1,633,490 1,163,603
Short-term notes payable 685,610 475,610
Current maturities of long-term obligations 4,162,492 3,795,216
----------- -----------
Total current liabilities 9,105,467 8,533,729
----------- -----------
Long-term obligations, less current maturities 6,602,108 7,398,670
----------- -----------
Commitments and contingencies
Series A redeemable preferred stock, $.00001
par value, 250,000 shares authorized; 166,667
shares issued 1,149,670 1,129,459
Shareholders' equity:
Series B preferred stock, $.00001 par value,
250,000 shares authorized; 125,000 shares
issued 575,280 575,280
Common stock, $.0001 par value, 50,000,000
shares authorized; 14,179,134 and 13,462,120
issued, respectively 1,418 1,346
Additional paid-in capital 21,930,113 20,855,099
Retained deficit (12,503,518) (11,996,179)
Treasury stock (240,072 shares) at cost (456,601) (456,601)
----------- -----------
Total shareholders' equity 9,546,692 8,978,945
----------- -----------
Total liabilities and shareholders' equity $26,403,937 $26,040,803
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Telecommunications revenues $ 7,027,391 $ 2,309,227
Cost of revenue 4,345,313 1,812,154
----------- -----------
Gross profit 2,682,078 497,073
----------- -----------
Operating expenses:
General and administrative 2,248,100 594,019
Depreciation and amortization 535,944 132,231
----------- -----------
Total operating expenses 2,784,044 726,250
----------- -----------
Loss from operations before other
income (expense) (101,966) (229,177)
----------- -----------
Other income (expense):
Interest expense (345,267) (14,929)
Other 15,103 2,544
----------- -----------
Total other income (expense) (330,164) (12,385)
----------- -----------
Net loss (432,130) (241,562)
Preferred dividend requirements, including
accretion (75,209) -
----------- -----------
Net loss applicable to common shareholders $ (507,339) $ (241,562)
=========== ===========
Loss per weighted average common share
outstanding:
Net loss per share $ (0.03) $ (0.02)
=========== ===========
Net loss per share applicable to
common shareholders $ (0.04) $ (0.02)
=========== ===========
Weighted average number of common shares
outstanding 13,745,321 10,500,271
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Series B Additional
Preferred Stock Common Stock paid-in Retained Treasury
Shares Amount Shares Amount capital deficit Stock Total
------ ------ ------ ------ ------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 - $ - 10,566,139 $1,057 $15,629,114 $ (5,404,864) $(240,950) $9,984,347
Private placements of common
stock - - 100,000 10 149,990 - - 150,000
Issuance of common stock for
exercise of options - - 123,008 12 74,666 - (9,050) 65,628
Net loss for the period - - - - - (241,562) - (241,562)
------- -------- ---------- ------ ----------- ------------ --------- ----------
Balances at March 31, 1995 - - 10,789,147 $1,079 $15,853,770 $ (5,646,426) $(250,000) $9,958,423
======= ======== ========== ====== =========== ============ ========= ==========
Balances at December 31, 1995 125,000 $575,280 13,462,120 $1,346 $20,855,099 $(11,996,179) $(456,601) $8,978,945
Private placements of common
stock - - 251,700 25 369,975 - - 370,000
Issuance of common stock for:
Exercise of options - - 118,200 12 150,368 - - 150,380
Conversion of debt - - 267,856 27 449,973 - - 450,000
Other - - 79,258 8 104,698 - - 104,706
Preferred dividend requirements,
including accretion - - - - - (75,209) - (75,209)
Net loss for the period - - - - - (432,130) - (432,130)
------- -------- ---------- ------ ----------- ------------ --------- ----------
Balances at March 31, 1996 125,000 $575,280 14,179,134 $1,418 $21,930,113 $(12,503,518) $(456,601) $9,546,692
======= ======== ========== ====== =========== ============ ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(432,130) $(241,562)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 535,944 132,231
Provision for losses on accounts receivable 109,839 15,846
Other - (56,939)
(Increase) decrease in:
Accounts and notes receivable (637,472) (9,793)
Prepaid expenses and other (135,024) (68,428)
Other assets - 8,020
Increase (decrease) in:
Accounts payable and accrued expenses (5,538) (285,863)
--------- ---------
Net cash used in operating activities (564,382) (506,488)
--------- ---------
Cash flows from investing activities:
Additions to property and equipment (367,220) (2,704)
Other - (49,678)
--------- ---------
Net cash used in investing activities (367,220) (52,382)
--------- ---------
Cash flows from financing activities:
Borrowings 600,000 145,000
Proceeds from private placement of common stock - 150,000
Proceeds from exercise of options 150,380 40,629
Principal payments on long-term obligations (371,988) (24,764)
--------- ---------
Net cash provided by financing activities 378,392 310,865
--------- ---------
Decrease in cash (553,210) (248,005)
Cash at beginning of period 823,738 331,431
--------- ---------
Cash at end of period $ 270,528 $ 83,426
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements are those of
SA Telecommunications, Inc. and subsidiaries (the
"Company"). These interim consolidated financial statements
are prepared pursuant to the requirements for reporting on
Form 10-QSB. The December 31, 1995 consolidated balance
sheet data was derived from audited consolidated financial
statements but does not include all disclosures required by
generally accepted accounting principles. The interim
consolidated financial statements and notes thereto should
be read in conjunction with the consolidated financial
statements and notes included in the Company's latest annual
report on Form 10-KSB. In the opinion of management, the
interim consolidated financial statements reflect all
adjustments of a normal recurring nature necessary for a
fair presentation of the consolidated financial position and
consolidated results of operations for interim periods. The
current period consolidated results of operations are not
necessarily indicative of results which ultimately will be
reported for the full fiscal year ending December 31, 1996.
All significant intercompany accounts and transactions have
been eliminated. Certain prior period amounts have been
reclassified for comparative purposes.
NOTE B - SHORT-TERM NOTES PAYABLE
On February 9, 1996, $450,000 of the Company's 8%
Convertible Subordinated Debentures due in June 1996 were
converted into 267,856 shares of the Company's Common Stock.
In March 1996, the Company issued $600,000 of 9%
Convertible Subordinated Debentures due in March 1997. The
debentures are convertible into shares of the Company's
Common Stock at a conversion price per share equal to the
lower of seventy-five percent (75%) of the market price or
$1.75 per share.
NOTE C - STOCK OPTIONS
On March 28, 1996, the Board of Directors granted options
under the 1994 Employee Stock Option Plan to purchase up to
607,500 shares of the Company's Common Stock to employees at
a price of $2.03 per share (market value on the date of
grant). After a six-month waiting period, the shares
acquired upon exercise may not be sold earlier than periods
varying from eighteen to thirty months.
6
<PAGE>
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is a discussion of the consolidated financial
condition and results of operations of the Company for the three
months ended March 31, 1996 and 1995. It should be read in
conjunction with the Company's latest annual report on Form 10-
KSB.
General
The Company is a full-service, regional provider of long
distance telecommunications services that focuses on customers in
secondary and rural markets in the southwestern United States.
The Company's services include switched "1+" domestic long
distance service, in-bound domestic "800" service, debit card and
domestic travel card service, and operator services.
Prior to 1994, the Company's telecommunications revenues
primarily consisted of international call-back services. In
1994, the Company began the implementation of its existing
business strategy which focused on acquiring regional long
distance providers, expanding its network and emphasizing high
margin services. In 1994 and 1995, the Company acquired two
Texas-based switchless resellers, Long Distance Network, Inc.
("LDN") and U.S. Communications, Inc. ("USC"), respectively, which
significantly increased its telecommunications revenue base.
Following each of the LDN and USC acquisitions, the Company
installed switching equipment in Dallas and Phoenix,
respectively, to consolidate call volume and traffic. As part of
the USC acquisition, the Company acquired an operator service
type switch in Levelland, Texas. In addition, the Company
implemented a marketing strategy emphasizing growth in higher
margin "1+" long distance services and de-emphasizing lower
margin operator services, wholesale calls and international call-
back services.
Forward Looking Statements
Certain of the statements made in this report are forward
looking. Such statements are based on an assessment of a variety
of factors, contingencies and uncertainties deemed relevant by
management, including the Company's current negative cash flow
position, the Company's historical operating losses, the need for
integration of the Company's acquisitions, technological changes,
economic conditions, competitive products and services, the
regulatory environment, and other risks indicated in this and the
other filings with the Commission. As a result, the actual
results realized by the Company could differ materially from the
statements made herein. Readers of this report are cautioned
not to place undue reliance on the forward looking statements
made in this report.
7
<PAGE>
Results of Operations
The following table sets forth certain items in the
Company's Consolidated Statements of Operations as a percentage
of its revenues for the three months ended March 31, 1996 and
1995 and earnings (loss) before interest, taxes, depreciation,
amortization, and other income (expense) or "EBITDA" for the
respective periods.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1996 1995
---- ----
<S> <C> <C>
Operating revenue 100% 100%
Cost of revenue 62 78
--- ---
Gross profit 38 22
Operating expenses:
General and administrative 32 26
Depreciation and amortization 7 6
--- ---
Loss from operations before other (1) (10)
Other income (expense) (5) (1)
--- ---
Net loss (6)% (11)%
=== ===
EBITDA, as defined(1) (loss) $433,978 $(96,946)
======== ========
- - -------------------------
<FN>
(1) EBITDA is a commonly used measure of performance in the
telecommunications industry. As used herein, EBITDA is not
intended as either a substitute or replacement for
operating income (as presented according to generally
accepted accounting principles ("GAAP")), as a measure of the
financial results of operations or for cash flows from
operations (as presented according to GAAP).
</FN>
</TABLE>
Three months ended March 31, 1996 versus three months ended March
31, 1995
Revenues increased by $4,718,164 from $2,309,227 for the three
months ended March 31, 1995 to $7,027,391 for the three months
ended March 31, 1996. This represents an overall 204% increase
over the prior period. Of this total increase, $4,906,764 was
attributable to the increase in "1+" revenues, including
$4,699,201 from the USC acquisition effective June 1, 1995.
Existing "1+" revenues (excluding USC) increased by $207,563 or
29%. Operator services and wholesale call revenues exclusive of
the USC acquisition decreased by $218,939 and $197,071,
respectively. USC contributed $210,303 and $36,866 of operator
services and wholesale call revenues, respectively, for the three
months ended March 31, 1996. The increase in "1+" revenues and
decrease in operator services and wholesale call revenues is a
continuation of management's marketing strategy to aggressively
market "1+" services, which have a higher gross profit margin,
and to de-emphasize operator services and wholesale calls which
are less profitable product lines. International
telecommunications revenues decreased by $19,759 because of
increased competition and the Company's de-emphasis of this
market.
Gross profit increased by $2,185,005 from $497,073 for the three
months ended March 31, 1995 to $2,682,078 for the same quarter in
1996. The gross profit margin increased by 16% from 22% for the
three months ended March 31, 1995 to 38% for the three months
ended March 31, 1996. This increase was principally due to the
improved mix of call traffic provided by the USC revenues which
consisted of a higher percentage of "1+" calls. The percentage
of "1+" calls, which have a higher gross profit margin, has
increased as compared to the lower margin operator service and
wholesale calls.
General and administrative expense increased by $1,654,081 from
$594,019 for the three months ended March 31, 1995 to $2,248,100
for the same quarter in 1996, and as a percentage of revenues,
increased from 26% in 1995 to 32% in 1996. The increase in total
general and administrative expense was primarily attributable to
the USC acquisition. The increase as a percentage of revenues
reflects the expansion (principally personnel related and
facilities costs) required for the Company to be a full service
interexchange carrier with its own network including additional
capacity for future growth.
Depreciation and amortization expense increased by $403,713 from
$132,231 for the three months ended March 31, 1995 to $535,944
for the same quarter in 1996, and, as a percentage of revenues,
increased from 6% in 1995 to 7% in 1996. This increase resulted
from higher depreciation and amortization charges arising from
the acquisition of USC and increased depreciation from the
acquisition of switching equipment in December 1995.
EBITDA increased by $530,923 from a negative $96,946 for the
three months ended March 31, 1995 to a positive $433,977 for the
same quarter in 1996. This increase was primarily attributable
to improved gross profit margins, partially offset by small
increases in general and administrative expenses.
The Company incurred a loss from operations before other income
(expense) of $229,177 for the three months ended March 31, 1995
versus a $101,967 loss for the same quarter in 1996. This
decrease was principally attributable to an improvement in gross
profit margins, but was partially offset by small percentage of
revenue increases in general and administrative expense and
depreciation and amortization expense.
The Company had other expense of $12,385 for the three months
ended March 31, 1995 as compared to other expense of $330,164 for
the same quarter in 1996. This increase was primarily due to an
increase in interest expense related to the increased debt
incurred in connection with the USC acquisition.
The Company incurred a net loss of $241,562 for the three months
ended March 31, 1995 as compared to a net loss of $432,131 for
the same quarter in 1996. This increased net loss is
attributable to increased general and administrative expense
needed for expansion, increased depreciation and amortization
expense related to the USC acquisition, increased interest
expense related to the increased debt incurred in connection with
the USC acquisition, partially offset by improved gross profit
margins.
Liquidity and Capital Resources
The Company experienced negative cash flow from operating
activities of $564,382 for the three months ended March 31, 1996
as compared to $506,488 for the like period of 1995. The
negative cash flow of $564,382 in the three months ended March
31, 1996 includes a $494,790 claim for transmission charges which
the Company believes were overbilled by one of the Company's
long-line transmission carriers. The Company intends to
vigorously pursue the settlement of these disputed charges by
demanding cash repayments or credits against future billings.
Cash used in investing activities was $367,220 in the first
quarter of 1996 versus $52,382 in the like quarter of 1995. The
$367,220 in 1996 was used for additions to property and
equipment.
Cash provided by financing activities was $378,392 for the first
quarter of 1996 versus $310,865 in the like quarter of 1995. In
1996, additional borrowings and proceeds from the exercise of
stock options of $600,000 and $150,380, respectively, were offset
by $371,988 of principal payments on long-term obligations.
At March 31, 1996, the Company had $10,764,600 of long-term
obligations of which $4,162,492 was classified as current.
Although management believes that cash flows generated from
operations will improve with the integration of USC and expansion
of the Company's telecommunications network, the Company must
either refinance the existing indebtedness, borrow additional
funds on more favorable terms, or sell additional equity
securities for cash in order to meet its current debt
obligations. The Company has been successful in financing its
operations and expansion needs from proceeds from additional
borrowings, private placements of Common Stock and securities
convertible into Common Stock, and the exercise of stock options.
There can be no assurances that such sources of funds will
continue to be available.
At March 31, 1996, the Company had a cash balance of $270,528 as
compared to $823,738 at December 31, 1995. As of March 31, 1996,
working capital was a negative $3,194,286 as compared to a
negative $2,841,834 at December 31, 1995. The majority of this
negative working capital is due to the $3,150,000 of USC notes
which mature in July 1996.
In March and April 1996, the Company entered into private
placements whereby it sold an aggregate of $600,000 of its 9%
Convertible Subordinated Debentures due in March 1997 and
$400,000 of its 9% Convertible Subordinated Debentures due April
1997. All such debentures are convertible into Common Stock of
the Company at the lower of $1.75 per share or 75% of the average
closing price of the Company's shares of Common Stock prior to
the date of conversion. In connection with these transactions,
the Company paid $75,000 of finders fees and issued to certain
finders a warrant exercisable into 300,000 shares of Common Stock
at $1.40 per share and a warrant to purchase 250,000 shares of
Common Stock at $2.125 per share.
On May 7, 1996, six holders of Common Stock Purchase Warrants,
issued in the Company's September 20, 1995 private placement,
exercised such warrants for an aggregate of 1,070,000 shares of
Common Stock at an exercise price of $1.25 per share or $1,337,500.
In connection with such early exercise, the Company issued
additional Common Stock Purchase Warrants to such holders
exercisable into an aggregate of 1,337,500 shares of Common Stock
at an exercise price of $2.40 per share between November 7, 1996
and May 7, 1998. Such warrants cannot be exercised prior to
November 7, 1996 unless the market price of the Company's Common
Stock is greater than $4.00 per share for ten consecutive days.
Capital Expenditures
Capital expenditures for the three months ended March 31, 1996
totaled $367,220, none of which was financed. Other than
additional fixed facilities such as switching equipment
requirements as the network expands, future capital expenditures
are expected to be minimal. The Company's future capital
expenditures related to network expansion will be made primarily
to acquire switches and related equipment. Additional switching
equipment would require significant capital expenditures by the
Company.
Holiday and Seasonal Variations in Revenues
The Company's revenues, and thus its potential earnings, are
affected by holiday and seasonal variations. A substantial
portion of the Company's revenues are generated by direct dial
domestic long distance commercial customers, and, accordingly,
the Company experiences decreases in revenues around holidays
(both domestic and international) when commercial customers
reduce their usage. The Company's fourth fiscal quarter ending
December 31, which includes the Thanksgiving, Hanukkah, Christmas
and New Year's Eve holidays, and the Company's first fiscal
quarter ending March 31, historically have been the slowest
revenue periods of the Company's fiscal year. The Company's
fixed operating expenses, however, do not decrease during these
quarters. Accordingly, the Company will likely experience lower
revenues and earnings in its first and fourth quarters when
compared with the other fiscal quarters.
10
<PAGE>
Effect of Inflation
Inflation is not a material factor affecting the Company's
business. Historically, transmission and switched service costs
per minute have decreased as the volume of minutes increased.
General operating expenses such as salaries, employee benefits
and occupancy costs are, however, subject to normal inflationary
pressures. Management has been able to contain these expenses
through cost control measures.
New Accounting Standards
In October 1995, Statement of Financial Accounting Standards No.
123, "Accounting for Stock-based Compensation" (SFAS 123), was
issued. This statement requires the fair value of stock options
and other stock-based compensation issued to employees to either
be included as compensation expense in the income statement, or
the pro forma effect on net income and earnings per share of such
compensation expense to be disclosed in the footnotes to the
Company's financial statements commencing with the Company's 1996
fiscal year. The Company expects to adopt SFAS 123 on a
disclosure basis only. As such, implementation of SFAS 123 is
not expected to impact the Company's consolidated balance sheet
or statement of operations.
11
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
On July 20, 1995, a suit was filed in the 101st Judicial District
Court in Dallas, Texas, Cause No. 95-07136-E (Silvio Avyam v. SA
Holdings, Inc. and North American Telecommunications Corporation)
against the Company and its wholly-owned subsidiary North
American Telecommunications Corporation ("NATC"), in which the
plaintiff is seeking damages in excess of $1,500,000 for alleged
breach of contract, breach of fiduciary duty, conspiracy and
fraud arising out of the termination of the consultant agreement
between NATC and the plaintiff. The plaintiff is also seeking an
accounting with respect to his relationship with NATC, the
issuance of shares of the Company's Common Stock allegedly owed
to him and exemplary damages and attorney's fees. The Company
believes it has meritorious defenses to the alleged claims and
intends to vigorously defend such lawsuit. However, if the
Company were required to pay the alleged damages in such lawsuit,
it could have a material adverse effect on the Company's
financial condition and results of operations. On February 5,
1996, the Company and NATC filed a counterclaim against the
plaintiff for breach of his consulting agreement and other
related claims and alleging an unspecified amount of damages. On
March 7, 1996, the plaintiff filed a general denial in such
counterclaim.
The Company filed suit on January 23, 1996 against Dickinson &
Co., an investment banking firm ("Dickinson"), its parent,
Dickinson Holding Corp. and Polish Telephone and Microwave
Corporation ("PTMC") in the 298th Judicial District Court for
Dallas County, Texas, Cause No. 96-00768-M (SA
Telecommunications, Inc. f/k/a SA Holdings v. Dickinson Co.,
Dickinson Holding Corp. and Polish Telephone and Microwave
Corporation). The Company has alleged, among other claims, that
Dickinson intentionally and wilfully breached its fiduciary duty
to the Company under its financial consulting agreement with the
Company and that it interfered with the business relationship
between the Company and PTMC in conspiracy with the other two
defendants. The Company is seeking an unspecified amount of
actual and exemplary damages and recovery of attorneys' fees.
The Company is a party, from time to time, in routine litigation
incident to its business. Management believes that it is
unlikely that the final outcome of any of these claims or
proceedings to which the Company is currently a party if
determined adverse to the Company would have a material adverse
effect on the Company's financial position or results of
operations.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On May 7, 1996, six of the eleven holders of the Company's
warrants to purchase Common Stock issued in the September 20,
1995 private placement of the Company's Common Stock and
warrants exercised their warrants at an exercise price of $1.25
per share for an aggregate of 1,070,000 shares of Common Stock or
$1,337,500.
12
<PAGE>
In connection with such exercise, the Company issued to such
persons additional warrants to purchase Common Stock exercisable
into an aggregate of 1,337,500 shares of Common Stock at an
exercise price of $2.40 per share between November 7, 1996 and
May 7, 1998. Such warrants cannot be exercised prior to November
7, 1996 unless the market price of the Company's Common Stock is
greater than $4.00 per share for ten consecutive days.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
9.1 Voting Agreement dated as of April 11, 1996 among the
Company, Terry R. Houston and Jack W. Matz, Jr. (filed
herewith)
9.2 Form of Voting Agreement dated as of May 7, 1996 among
the Company and each of Laura Huberfeld/Naomi Bodner
Partnership, Fred Rudy, Seth Joseph Antine, Harry
Adler, Dr. Seymour Huberfeld and Jules Nordlicht (the
"Investors") and schedule of differences thereto (filed
herewith)
10.1 Amendment to Purchase Agreement dated as of April 12,
1996 among the Company, Howard Maddera, Bill L. Johnson
and Marianne Reed (filed herewith)
10.2 Second Amendment to Purchase Agreement dated as of
April 18, 1996 among the Company, Howard Maderra, Bill
L. Johnson and Marianne Reed (filed herewith)
10.3 Settlement Agreement dated as of April 11, 1996 between
the Company and Terry R. Houston (filed herewith)
10.4 Form of Subscription Agreement dated as of May 7, 1996
between the Company and each of the Investors and
schedule of differences thereto (filed herewith)
10.5 Form of Common Stock Purchase Warrant dated as of May
7, 1996 issued to each of the Investors and schedule of
differences thereto (filed herewith)
27.1 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
The Company filed on March 12, 1996 a Current Report on
Form 8-K dated February 29, 1996 announcing (i) the
consummation of the sale of all of the capital stock of
its wholly-owned subsidiary, Strategic Abstract & Title
Corporation, and (ii) the execution of an agreement
among the Company, Howard Maderra, William Johnson, and
Marianne Reed to purchase equity and debt securities of
the Company issued to such persons in connection with
the acquisition of USC.
13
<PAGE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed by
the undersigned thereunto duly authorized.
Date: May 15, 1996 SA Telecommunications, Inc.
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman and
Chief Executive Officer
By: /s/ J. David Darnell
J. David Darnell
Vice President, Finance and
Chief Financial Officer
EXHIBIT LIST
EXHIBIT NO. DOCUMENT DESCRIPTION
9.1 Voting Agreement dated as of April 1, 1996 among
the Company, Terry R. Houston and Jack W. Matz,
Jr.*
9.2 Form of Voting Agreement dated as of May 7, 1996
among the Company and each of Laura
Huberfeld/Naomi Bodner Partnership, Fred Rudy,
Seth Joseph Antine, Harry Adler, Dr. Seymour
Huberfeld and Jules Nordlicht (the "Investors")
and schedule of differences thereto*
10.1 Amendment to Purchase Agreement dated as of April
12, 1996 among the Company, Howard Maderra, Bill
L. Johnson and Marianne Reed*
10.2 Second Amendment to Purchase Agreement dated as of
April 12, 1996 among the Company, Howard Maderra,
Bill L. Johnson and Marianne Reed*
10.3 Settlement Agreement dated as of April 11, 1996
between the Company and Terry R. Houston*
10.4 Form of Subscription Agreement dated as of May 7,
1996 between the Company and each of the Investors
and schedule of differences thereto*
10.5 Form of Common Stock Purchase Warrant dated as of
May 7, 1996 issued to each of the Investors and
schedule of differences thereto*
27.1 Financial Data Schedule*
________________________
*Filed herewith
<PAGE>
Exhibit 9.1
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") made as of the 11th
day of April, 1996, by and among JACK W. MATZ, JR. or his
assignee(s) (collectively, the "Management Stockholder"), TERRY
R. HOUSTON (the "Individual Stockholder") (the Individual
Stockholder and the Management Stockholder being collectively
referred to herein as the "Stockholders") and SA
TELECOMMUNICATIONS, INC., a Delaware company (the "Company")
W I T N E S S E T H:
WHEREAS, Individual Stockholder has acquired 145,354 shares
(the "Shares") of authorized common stock, par value $0.0001 per
share (the "Common Stock") of the Company pursuant to a
Settlement Agreement of even date herewith among the Company, the
Individual Stockholder and Long Distance Network, Inc.
("Settlement Agreement"); and
WHEREAS, such parties desire to enter into certain
agreements hereinafter set forth with respect to the voting of
such shares of Common Stock in all matters submitted to the
stockholders of the Company for a vote or consent.
NOW, THEREFORE, for and in consideration of the premises and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed:
Section 1. This Agreement is made pursuant to the
provisions of Article 218 of the Delaware General Corporation Law
and shall become effective upon the Individual Stockholder's
acquisition of shares of Common Stock of the Company. A
counterpart of this Agreement shall be deposited with the Company
at its principal offices and shall be subject to the same rights
of examination of any stockholder of the Company, in person or by
agent or attorney, as are the books and records of the Company.
A counterpart of this Voting Agreement has been deposited with
the Company at its principal offices. It is intended that this
Agreement shall be specifically enforceable in accordance with
the principles of equity.
Section 2. At all meetings of the stockholders of the
Company, or with regard to any action taken pursuant to consent,
during the term of this Agreement, all Shares of Common Stock
held or owned by the Individual Stockholder shall be voted by the
Individual Stockholder in the manner designated by the Management
Stockholder.
1
<PAGE>
Section 3. To the extent necessary for the enforcement
hereof, this Agreement shall be deemed to provide the Management
Stockholder an irrevocable proxy for the term hereof, which such
proxy is expressly agreed between the parties hereto to be
coupled with an interest as contemplated by applicable law.
Section 4. Any share of the Common Stock subject to this
Agreement shall remain so subject until transferred in accordance
with the Settlement Agreement. The Company shall not permit the
voting of shares of Common Stock in contravention of the terms
hereof. Stock certificates representing any shares of Common
Stock subject to this Agreement shall include a legend as
follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
VOTING AGREEMENT DATED APRIL 11, 1996, A COPY OF WHICH IS ON
FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES.
Section 5. In case the Company is merged with, into or
consolidated with another corporation or other entity, or all or
substantially all of the assets of the Company are transferred to
another corporation or other entity, then in connection with such
transfer, the term "the Company" for all purposes of this
Agreement shall be taken to include such successor corporation,
and any stock of such successor corporation received on the
account of the ownership of the parties hereto of the stock of
the Company subject hereto prior to such merger, consolidation
and transfer shall be and become subject to this Agreement, and
the parties hereto shall use their best efforts to implement the
provisions of this Agreement to the maximum extent their voting
power will permit.
Section 6. This Agreement shall terminate and expire on the
earlier to occur of a transfer by the Individual Stockholder in
accordance with the Settlement Agreement or April 11, 2001.
Section 7. Unless otherwise specifically provided herein,
all notices and other communications required or permitted to be
given hereunder shall be in writing and shall be deemed to have
been duly given at the time of delivery against receipt at the
appropriate address set forth below, or at such other addresses
as shall be specified by the parties hereto, by like notice.
(a) If to the Management Stockholder:
Jack W. Matz, Jr.
1600 Promenade Center, 15th Floor
Richardson, TX 75080
(b) If to the Individual Stockholder:
2
<PAGE>
Terry R. Houston
2612 Prairie Creek East
Richardson, TX 75080
(c) If to the Company:
SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, TX 75080
or at such other address as a party hereto may specify by written
notice to the other parties to this Agreement.
Section 8. This Agreement shall be binding upon and shall
inure to the benefit of each party hereto and each such party's
heirs, legal representatives, transferees, successors and
assigns.
Section 9. This Agreement may be executed in multiple
counterparts, but all counterparts taken together shall
constitute one and the same agreement, binding upon all of the
parties hereto.
Section 10. If any provision of this Agreement is held to
be illegal, invalid and 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
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.
Section 11. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically,
to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any such breach or
threatened breach of the provisions of this Agreement and that
any party may in its sole discretion, in addition to any other
available remedies, apply to any court of law or equity of
competent jurisdiction for and be entitled to specific
performance and/or injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
Section 12. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, THE STATE
OF INCORPORATION OF THE COMPANY.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this
Agreement as of the day first above written.
Individual Stockholder:
/s/ Terry R. Houston
Terry R. Houston
Spousal Consent for purposes of
Community Property Laws
/s/ Patricia Houston
Patricia Houston
/s/ Jack W. Matz. Jr.
Management Stockholder:
/s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
SA TELECOMMUNICATIONS, INC.
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman & Chief Executive
Officer
4
<PAGE>
Exhibit 9.2
EXHIBIT C
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") made as of the 7th day
of May, 1996, by and among JACK W. MATZ, JR. or his assignee(s)
(collectively, the "Management Stockholder"), SETH JOSEPH ANTINE
(the "Investor Stockholder") (the Investor Stockholder and the
Management Stockholder being collectively referred to herein as the
"Stockholders") and SA TELECOMMUNICATIONS, INC., a Delaware company
(the "Company")
W I T N E S S E T H:
WHEREAS, Investor Stockholder has acquired that certain Common
Stock Purchase Warrant dated as of May 7, 1996 (the "Warrant") to
acquire 100,000 shares of common stock, par value $.0001 per share
(the "Common Stock") of the Company; and
WHEREAS, such parties desire to enter into certain agreements
hereinafter set forth with respect to the voting of such shares of
Common Stock issued upon exercise of the Warrant in all matters
submitted to the stockholders of the Company for a vote or consent.
NOW, THEREFORE, for and in consideration of the premises and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed:
Section 1. This Agreement is made pursuant to the provisions
of Article 218 of the Delaware General Corporation Law and shall
become effective upon the Investor Stockholder's acquisition of
shares of Common Stock of the Company. A counterpart of this
Agreement shall be deposited with the Company at its principal
offices and shall be subject to the same rights of examination of
any stockholder of the Company, in person or by agent or attorney,
as are the books and records of the Company. A counterpart of this
Voting Agreement has been deposited with the Company at its
principal offices. It is intended that this Agreement shall be
specifically enforceable in accordance with the principles of
equity.
Section 2. At all meetings of the stockholders of the
Company, or with regard to any action taken pursuant to consent,
during the term of this Agreement, all shares of Common Stock held
or owned by the Investor Stockholder (including without limitation
any shares of Common Stock acquired upon the exercise of any
warrant) shall be voted by the Investor Stockholder in the manner
designated by the Management Stockholder.
1
<PAGE>
Section 3. To the extent necessary for the enforcement
hereof, this Agreement shall be deemed to provide the Management
Stockholder an irrevocable proxy for the term hereof, which such
proxy is expressly agreed between the parties hereto to be coupled
with an interest as contemplated by applicable law.
Section 4. Except as set forth in Section 6(d)(v) of the
Subscription Agreement, any share of the Common Stock subject to
this Agreement shall remain so subject, regardless of any
conveyance thereof to any party, during the term of this Agreement,
and any party proposing to transfer any shares shall secure a
written agreement form the transferee that such party agrees to be
bound by the terms of this Agreement. The Company shall not permit
the voting of shares of Common Stock in contravention of the terms
hereof.
Section 5. In case the Company is merged with, into or
consolidated with another corporation or other entity, or all or
substantially all of the assets of the Company are transferred to
another corporation or other entity, then in connection with such
transfer, the term "the Company" for all purposes of this Agreement
shall be taken to include such successor corporation, and any stock
of such successor corporation received on the account of the
ownership of the parties hereto of the stock of the Company subject
hereto prior to such merger, consolidation and transfer shall be
and become subject to this Agreement, and the parties hereto shall
use their best efforts to implement the provisions of this
Agreement to the maximum extent their voting power will permit.
Section 6. This Agreement shall terminate and expire on May
7, 2006.
Section 7. Unless otherwise specifically provided herein, all
notices and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly
given at the time of delivery against receipt at the appropriate
address set forth below, or at such other addresses as shall be
specified by the parties hereto, by like notice.
(a) If to the Management Stockholder:
Jack W. Matz, Jr.
SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, Texas 75080
(b) If to the Investor Stockholder:
Seth Joseph Antine
2120 Bay Avenue
Brooklyn, New York 11210
2
<PAGE>
(c) If to the Company:
SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, Texas 75080
or at such other address as a party hereto may specify by written
notice to the other parties to this Agreement.
Section 8. Except for transferees which under Section 6(d)(v)
of the Subscription Agreement are not required to execute a Voting
Agreement as a condition to transfer, this Agreement shall be
binding upon and shall inure to the benefit of each party hereto
and each such party's heirs, legal representatives, transferees,
successors and assigns.
Section 9. This Agreement may be executed in multiple
counterparts, but all counterparts taken together shall constitute
one and the same agreement, binding upon all of the parties hereto.
Section 10. If any provision of this Agreement is held to be
illegal, invalid and 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 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.
Section 11. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement specifically,
to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights existing in its favor.
The parties hereto agree and acknowledge that money damages may not
be an adequate remedy for any such breach or threatened breach of
the provisions of this Agreement and that any party may in its sole
discretion, in addition to any other available remedies, apply to
any court of law or equity of competent jurisdiction for and be
entitled to specific performance and/or injunctive relief in order
to enforce or prevent any violations of the provisions of this
Agreement.
Section 12. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, THE STATE OF
INCORPORATION OF THE COMPANY.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Agreement
as of the 7th day of May, 1996.
INVESTOR STOCKHOLDER:
/s/ Seth Joseph Antine
Seth Joseph Antine
MANAGEMENT STOCKHOLDER:
/s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
SA TELECOMMUNICATIONS, INC.
By: /s/ Paul R. Miller
Paul R. Miller
President and Chief Operating
Officer
4
<PAGE>
SCHEDULE OF DIFFERENCES
The Registrant has entered into two (2) or more contracts
substantially identical in all material respects to the form filed
herewith. Pursuant to General Instruction 2 to Item 601, the
Registrant hereby files this Schedule of Differences to identify
the other documents omitted and the material details in which such
documents differ from the form filed.
Exhibit 9.2 - Voting Agreement
<TABLE>
<CAPTION>
Name of Individual Stockholder # Shares Common Stock
- - ------------------------------ ----------------------
<S> <C>
Laura Huberfeld/Naomi Bodner Partnership 750,000
Jules Nordlicht 375,000
Seth Joseph Antine 100,000
Fred Rudy 50,000
Harry Adler 50,000
Dr. Huberfeld 12,500
</TABLE>
<PAGE>
Exhibit 10.1
AMENDMENT TO PURCHASE AGREEMENT
This Amendment to Purchase Agreement ("Amendment") dated as
of April 12, 1996 is entered into by and among SA
Telecommunications, Inc., a Delaware corporation (the "
Purchaser"), and Howard Maddera, William L. Johnson and Marianne
Reed (collectively the "Sellers").
WHEREAS, Purchaser and Sellers entered into a Purchase
Agreement dated as of March 8, 1996 (the "Purchase Agreement),
whereby, subject to the conditions stated therein, Purchaser
agreed to purchase, and Sellers agreed to sell, the Purchase
Notes, the Offset Notes, the Preferred Shares and the Warrants
(as such terms are defined in the Purchase Agreement) for an
aggregate of $2,775,500;
WHEREAS, Purchaser and Sellers desire to amend the Purchase
Agreement to extend the Closing and Anticipated Closing Date
thereunder;
.
NOW, THEREFORE, 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 that the first sentence of
Section 2 of the Purchase Agreement is hereby amended in its
entirety to read as follows:
The Closing under this Agreement shall occur at the offices
of Purchaser at 3:00 p.m. on April 30, 1996 (the
"Anticipated Closing Date") on or prior to which date
Purchaser currently expects to (a) complete the financing of
the purchase price set forth in Section 1 and 2 hereof (the
"Financing) and (b) obtain the consent of Norwest Bank
Minnesota, National Association to the transactions
contemplated hereby and the Financing thereof (the "Bank
Consent").
This Amendment shall be governed by and construed in accordance
with the laws of the State of Texas without regard to conflicts
of laws. This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument, and all signatures need
not appear on any one counterpart. The terms of this Amendment
and the Purchase Agreement as amended by this Amendment shall be
binding upon, and inure to the benefit of, the parties and their
respective successors and permitted assigns whether so expressed
or not.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date above written.
SA TELECOMMUNICATIONS, INC. /s/ Howard Maddera
Howard Maddera
By: /s/ Jack W. Matz Jr. /s/ William L. Johnson
Jack W. Matz Jr. William L. Johnson
Chairman and Chief Executive Officer
/s/ Marianne Reed
Marianne Reed
Address: 1600 Promenade Center, Address for all Sellers:
15th Floor c/o Howard Maddera
Richardson, TX. 75080 110 Brentwood
Levelland, TX 79336
<PAGE>
Exhibit 10.2
SECOND AMENDMENT TO PURCHASE AGREEMENT
This Second Amendment to Purchase Agreement ("Amendment")
dated as of April 18, 1996 is entered into by and among SA
Telecommunications, Inc., a Delaware corporation (the "
Purchaser"), and Howard Maddera, William L. Johnson and Marianne
Reed (collectively the "Sellers").
WHEREAS, Purchaser and Sellers entered into a Purchase
Agreement dated as of March 8, 1996 (the "Purchase Agreement),
whereby, subject to the conditions stated therein, Purchaser
agreed to purchase, and Sellers agreed to sell, the Purchase Notes,
the Offset Notes, the Preferred Shares and the Warrants (as such
terms are defined in the Purchase Agreement) for an aggregate of
$2,775,500, and amended the Purchase Agreement on April 12, 1996;
WHEREAS, Purchaser and Sellers desire to further amend the
Purchase Agreement to extend the Closing and Anticipated Closing
Date thereunder and to adjust the payment schedule;
NOW, THEREFORE, 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:
1. The Purchase Agreement as amended prior to the date hereof is
hereby further amended as follows:
(A) the first sentence of Section 2 of the Purchase
Agreement entitled "Closing" is hereby amended in its entirety
to read as follows:
The Closing under this Agreement shall occur at the offices of
Purchaser at 3:00 p.m. on May 30, 1996 on such later date on
or prior to June 15, 1996 (the "Anticipated Closing Date") as
shall be required for Purchaser to (a) complete the financing
of the purchase price set forth in Section 1 and 2 hereof (the
"Financing) and (b) obtain the consent of Norwest Bank
Minnesota, National Association to the transactions
contemplated hereby and the Financing thereof (the "Bank
Consent"); provided, however, in no event shall the
Anticipated Closing Date be later than June 15, 1996 even if
the Bank Consent is not obtained and the Financing is not
complete.
(B) The second sentence of Section 2 of the Purchase
Agreement entitled "March 8 Payment" is hereby amended in its
entirety as follows:
If the Closing does not occur on or prior to the Anticipated
Closing Date, in accordance with the Modification Agreement:
(a) the second principal payment as set forth on Exhibit B
hereto and the accrued but unpaid interest on the unpaid
principal amount of such Offset Notes will be due on the
Anticipated Closing Date, subject to the Offset Rights, (b)
the final payment of principal and accrued interest on the
Offset Notes shall continue to be due on July 30, 1996; (c)
the remaining scheduled due dates for payment of accrued but
unpaid interest on the unpaid principal amount of the Purchase
Notes shall be the Anticipated Closing Date, July 31, 1996 and
October 31, 1996 (the "Maturity Date"); (d) the final
1
<PAGE>
payment of principal and accrued interest on the Purchase
Notes shall continue to be the Maturity Date; and (e) such
extension and modification of the terms of the Purchase Notes
and the Offset Notes are hereby effected without any further
action by the parties hereto.
(C) Exhibit C to the Purchase Agreement is hereby
amended in its entirety to read as follows:
EXHIBIT C
<TABLE>
<CAPTION>
Portion of Portion of
Purchase Price Payable Purchase Price Payable
Name of Seller On 3/8/96 At Closing
- - -------------- ---------------------- ----------------------
<S> <C> <C>
Howard Maddera $123,400 $1,160,000
William L. Johnson $123,400 $1,160,000
Marianne Reed $ 61,700 $ 580,000
-------- ----------
Total $308,500 $2,900,000
</TABLE>
2. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas without regard to
conflicts of laws. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument, and all signatures need not
appear on any one counterpart. The terms of this Amendment and the
Purchase Agreement as amended by this Amendment shall be binding
upon, and inure to the benefit of, the parties and their respective
successors and permitted assigns whether so expressed or not.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date above written.
SA TELECOMMUNICATIONS, INC. /s/ Howard Maddera
Howard Maddera
By: /s/ Jack W. Matz Jr. /s/ William L. Johnson
Jack W. Matz Jr. William L. Johnson
Chairman and Chief Executive Officer
/s/ Marianne Reed
Marianne Reed
Address: 1600 Promenade Center, Address for all Sellers:
15th Floor c/o Howard Maddera
Richardson, TX. 75080 110 Brentwood
Levelland, TX 79336
2
<PAGE>
Exhibit 10.3
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made as of this
11th day of April, 1996 by and between SA Telecommunications,
Inc., a Delaware corporation with its principal place of business
at 1600 Promenade Center, 15th Floor, Richardson, Texas (the
"Company") and Terry R. Houston ("Employee")
WHEREAS, Long Distance Network, Inc., a wholly-owned
subsidiary of the Company ("LDN") and Employee entered into an
Employment Agreement dated as of April 1, 1994 for a term of five
years, a copy of which is attached hereto as Exhibit A (the
"Employment Agreement");
WHEREAS, Employee is indebted to LDN pursuant to a
promissory note in the principal amount of $195,903.75, together
with interest thereon at 12% per annum, a copy of which is
attached as Exhibit B hereto (the "Employee Note");
WHEREAS, Employee desires to satisfy his obligations under
the Note and the Company, LDN and Employee desire to terminate
Employee's employment and the Employment Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
obligations set forth herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Company and LDN Consideration. The Company and LDN
hereby agree that (a) the Company shall issue to Employee
142,354 shares of the Company's Common Stock, $.0001 par value
(the "Shares") within five business days of the execution of this
Agreement, such Shares to be restricted in accordance with the
terms of Section 6 hereof, (b) the Employment Agreement is
hereby null and void and of no further force and effect, except
with respect to the amended and restated trade secret and
covenant not to compete provisions set forth in Section 7 hereof
(the "Surviving Obligations"), and (c) the Company and LDN shall
release Employee with respect to the Employment Agreements and
the Employee Note set forth Section 3(b) hereof (the "Company
Release") (all such consideration being collectively referred to
as the "Company Consideration").
1
<PAGE>
2. Employee Consideration. Employee hereby (a) accepts
the Company Consideration in lieu of any and all rights and/or
compensation Employee may have under the Employment Agreement,
and (b) agrees (i) the Employment Agreement is hereby null and
void and of no further force and effect except for the Surviving
Obligations, (ii) that the Employee shall release LDN and the
Company with respect to the Employment Agreement as set forth in
Section 3(a) hereof (the "Employee Release"), and (iii) be
available in person for advice and consultation with the Company
with respect to acquisitions and other matters which the Company
requests from the date hereof through March 31, 1999 without any
additional compensation other than reimbursement of reasonable
out-of-pocket expenses (all such consideration being
collectively referred to as the Employee Consideration").
3. Mutual Release.
(a) Employee Release. Employee, in consideration of
the Company Consideration and other good and valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, does hereby forever release, acquit,
relinquish and discharge the Company and LDN, each of their
respective present and past officers, directors,
stockholders, employees, parent and subsidiary corporations,
affiliates, partners, legal counsel, agents, servants,
successors and assigns (collectively, the "Company Released
Parties"), of and from any and all claims, duties, debts,
demands, sums of money, contracts, agreements, obligations,
indemnities, liabilities, costs, expenses, actions and
causes of action of whatever kind or character
(collectively, "Claims"), whether known or unknown, vested
or contingent, both in law and in equity, arising previously
or which may arise in the future from any and all events,
acts, conduct, transactions, matters, causes or things
occurring prior to the date this Agreement is executed by
Employee, arising out of or related to the Employment
Agreement, including without limitation, all obligations,
liabilities, and other amounts payable pursuant to such
Employment Agreement by any of the Released Parties
(collectively, the "Company Released Matters").
(b) Company Release. The Company and LDN, in
consideration of the Employee Consideration and other good
and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, does hereby forever release,
acquit, relinquish and discharge Employee and each of
Employee's personal representatives, heirs, executors,
administrators, successors and assigns (collectively, the
"Employee Released Parties"), of and from any and all
Claims, whether known or unknown, vested or contingent,
both in law and in equity, arising previously or which may
arise in the future from any and all events, acts, conduct,
transactions, matters, causes or things occurring prior to
the date this Agreement is executed by the Company and LDN,
arising out of or related to (1) the Employment Agreement,
including without limitation, all obligations and
liabilities performable or payable pursuant to such
Employment Agreement by any of the Employee Released Parties
other than the Surviving Obligations, and (2) the Employee
Note (collectively, the "Employee Released Matters").
(c) The Company Release is intended to be binding upon
the Company, LDN, and their respective legal
representatives, employees, officers, directors, agents and
successors and assigns and shall inure to the benefit of
each of the Employee Released Parties and their respective
successors and assigns. Nothing in the Employee Release is
intended to, or does modify, limit, or release the Company
from any continuing obligations under any other agreement
between Employee and the Company and/or LDN or any of the
Company's obligations under this Agreement. In connection
with the Company Release:
(i) The Company and LDN represent and warrant to
Employee that each of them has been fully advised by
its legal counsel with respect to its rights and
obligations under the Company Release and this
Agreement.
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(ii) The Company and LDN hereby agree (A) that
the Employee Release represents a compromise settlement
of various matters, and that the promises and payments
in consideration of the Employee Release shall not be
construed to be an admission of any liability or
obligation by any of the Employee Released Parties, and
(B) not to introduce the Employee Release or the fact
of settlement into evidence in any action for the
purpose of establishing or attempting to provide
liability against any of the Employee Released Parties.
(d) The Employee Release is intended to be binding
upon Employee and Employee's personal representatives,
heirs, executors, administrators, successors and assigns and
shall inure to the benefit of each of the Company Released
Parties and their respective successors and assigns.
Nothing in the Company Release is intended to, or does
modify, limit, or release the Employee from any continuing
obligations under the Surviving Obligations or any other
agreement between the Company and/or LDN and the Employee or
any of Employee's obligations under this Agreement. In
connection with the Employee Release:
(i) Employee represents and warrants to the
Company and LDN that Employee has been fully advised by
his legal counsel with respect to his rights and
obligations under the Employee Release and this
Agreement.
(ii) Employee hereby agrees (A) that the Company
Release represents a compromise settlement of various
matters, and that the promises and payments in
consideration of the Company Release shall not be
construed to be an admission of any liability or
obligation by any of the Company Released Parties, and
(B) not to introduce the Company Release or the fact of
settlement into evidence in any action for the purpose
of establishing or attempting to provide liability
against any of the Company Released Parties.
(e) The Company, LDN and the Employee hereby agree
that each of them shall bear their own legal fees and legal
expenses incurred by them through the date hereof in
connection with this Agreement.
4. Company and LDN Representations. Each of the Company
and LDN represent and warrant that (a) it has full right, power
and authority to enter into this Agreement and to perform all of
its obligations hereunder, and (b) this Agreement has been duly
authorized and executed and constitutes its valid and binding
agreement enforceable in accordance with its terms (subject to
bankruptcy,
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insolvency, reorganization, moratorium, and other similar laws
relating to the rights of creditors generally and to general
principles of equity).
5. Employee Representations. Employee represents and
warrants that (a) Employee has full right and authority to enter
into this Agreement and to perform all of hiss obligations
hereunder, (b) this Agreement has been duly authorized and
executed and constitutes a valid and binding agreement of
Employee enforceable in accordance with its terms (subject to
bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to the rights of creditors generally and to
general principles of equity), (c) Employee is capable of
evaluating the risk of his investment in the Shares being
purchased by Employee and is able to bear the economic risk of
such investment, (d) it is purchasing the Shares for his own
investment and not with a present view to any distribution
thereof in violation of any applicable securities laws, (e)
Employee understands that if Employee should in the future to
decide to dispose of any of the Shares, he may do so only in
compliance with the Securities Act and applicable state
securities laws, (f) Employee is an "accredited investor" as
defined in Rule 501(a) under the Securities Act, and (g) Employee
has received and reviewed copies of the Company's prospectus
dated January 3, 1996 and all reports on Form 10-KSB, Form 10-QSB
and Form 8-K incorporated by reference therein or filed since
such date through the date hereof.
6. Covenants and Restrictions with Respect to the Shares.
(a) Employee hereby agrees not to sell, transfer,
hypothecate or otherwise dispose of ("Transfer") any of the
Shares for a period of three years from the date hereof;
provided, however, that this restriction on transfer shall
lapse as to 1/12 of the Shares on the 11th day of each
month beginning May 1998 through April 1999.
(b) Upon any permitted Transfer, Employee agrees that
he will not Transfer any of the Shares unless (i) such
Shares have been registered under the Securities Act and, to
the extent required, under any applicable state securities
laws, or (ii) such 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 of
counsel to Employee (which counsel and opinion(s) shall be
reasonably satisfactory to the Company) to the effect that
registration under the Securities Act is not required for
the Transfer as proposed. The Company may endorse on all
stock certificates representing the Shares a legend stating
or referring to the Transfer restrictions in this Section 6;
provided, however, that no such legend shall be endorsed on
any certificates which, when issued, are no longer subject
to the restrictions of this Section 6; provided further,
that if a transfer is made pursuant to clause (i) or (ii)
(other than Rule 144A) of this Section 6(b) or if an
opinion of counsel provided pursuant to clause (iii) of this
Section 6(b) concludes that the legend is no longer
necessary, the Company will deliver upon transfer
certificates without such legends.
(c) The Shares shall be subject to the provisions of
the Voting Agreement attached as Exhibit C hereto, which
agreement shall be executed simultaneously with this
Agreement.
7. Surviving Obligations of Employee.
(a) During Employee's employment with LDN and the
Company, Employee has had access to, become familiar with,
and assisted in the development of various trade secrets,
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<PAGE>
including but not limited to proprietary formulas, patterns,
devices, secret inventions, processes, customer lists,
investor lists, vendor lists, potential acquisition targets,
and compilations of information, records and specifications,
all of which are owned by the Company and/or one or more of
its subsidiaries (the "Company Group"). All such trade
secret information relating to the business of the Company
Group whether prepared by Employee, brought to Employer by
the Employee or otherwise coming into his possession, shall
remain the exclusive property of the Company Group and shall
not be removed from the premises of the Company Group under
any circumstances whatsoever without the prior written
consent of the Company. Without the prior written consent
of the company, Employee shall not at any time or in any
manner, either directly or indirectly, divulge, disclose or
communicate to any person, firm or corporation in any manner
whatsoever any information concerning any matters affecting
or relating to the business of the Company Group, including
without limiting the generality of the foregoing any of its
customers, or investors, the prices it obtains or has
obtained for the sale of, or at which it sells or has sold,
their services or products, or any other information
concerning the business of the Company Group, their
respective manner of operations, their plans, processes, or
other data without regard to whether all of the foregoing
matters will be deemed confidential, material or important.
It is understood by Employee that all such information is
important, material, and confidential and gravely affects
the effective and successful conduct of the business of the
Company Group and the Company Group's goodwill, and that any
breach of this terms of this Section 7(a) will be a material
breach of this Agreement.
(b) For a period of three (3) years after termination
of Employee's employment on the date hereof, Employee agrees
that he shall not (i) directly or indirectly, either as an
employee, employer, consultant, agent principal, partner,
stockholder, joint venturer, corporate officer, director or
in any other individual or representative capacity, engage
or participate in any business that competes with any of the
Company Group within Texas, Louisiana, Arkansas, Oklahoma,
Arizona or New Mexico, (ii) recruit, hire, assist others in
recruiting or hiring, discuss employment with, or refer to
others for employment (collectively referred to as the
"Recruiting Activity") any person who is or within the
twelve (12) month period immediately preceding the date of
any such Recruiting Activity was, an employee or consultant
of the Company Group or any Successor; or (iii) in
competition with the Company Group or any Successor, solicit
the customers, suppliers, producers, distributors, dealers
or independent representatives or sales persons of the
Company or any Successor; or induce, attempt to induce, or
assist any other person or entity in inducing or attempting
to induce, any such customer, dealer, distributor or
independent sales person to discontinue their relationship
with the Company Group or any Successor. For the purposes
of this Agreement, the term (a) "Successor" means any person
or entity that succeeds to the business of the Company by
merger, recapitalization, sale of assets or otherwise.
(c) It is understood and agreed that the scope of each
of the covenants contained in this Section 7 is reasonable
as to time, area, persons and activities and is necessary to
protect the legitimate business interests of the Company.
It is further agreed that such
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<PAGE>
covenants will be regarded as divisible and, in the event
that any provision of this Section 7 is found by a court of
competent jurisdiction to be unenforceable by reason of its
breadth of time, territory and/or scope, then such provision
shall nevertheless remain valid and fully effective, but
shall be considered to be automatically amended so that the
period of time, territory and/or scope shall be operative to
the maximum extent possible and still be found to be
enforceable by such court. The terms of this Section 7
shall not apply to the ownership by the Employee of less
than five percent (5%) of a class of equity securities of an
entity, which securities are publicly traded on the New York
Stock Exchange, the American Stock Exchange, or the National
Market Systems of the National Association of Securities
Dealers Automated Quotation System.
(d) Employee acknowledges that a remedy at law alone
for any breach or attempted breach of this Agreement will be
inadequate, agrees that the Company will be entitled to
specific performance and injunctive and other equitable
relief in case of any breach or attempted breach, and agrees
not to use as a defense that the Company has an adequate
remedy at law. This Agreement shall be enforceable in a
court of equity, or other tribunal with jurisdiction, by a
decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection
herewith. Such remedy shall not be the exclusive remedy and
shall be in addition to any other remedies ow or hereafter
existing at law or in equity, by statute or otherwise. No
delay or omission in exercising any right or remedy set
forth in this Agreement shall operate as a waiver thereof or
of any other right or remedy and no single or partial
exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or
remedy.
8. No Third Party Beneficiaries. This Agreement has been
and is made solely for the benefit of Employee, the Company and
LDN and each of the persons, agents, employees, officers,
directors and controlling persons referred to in Section 3 hereof
and their respective heirs, executors, personal representatives,
successors and assigns, and nothing contained in this Agreement
shall confer any rights upon, nor shall this agreement be
construed to create any rights in, any person who is not a party
to such agreement, other than as set forth in this Section 8.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of Texas excluding conflict
of law rules which might result in the application of the laws of
any other jurisdiction. If all provisions cannot be validated
and made legal and enforceable by application of the laws of one
or more such jurisdictions, then the provisions hereof shall be
severable, and the illegal, invalid or unenforceable provisions
shall be deemed stricken, and all remaining provisions shall
remain in full force and effect and shall not be affected by the
provision so stricken and shall be enforceable to the greatest
extent possible.
10. Entire Agreement. This Agreement constitutes the
entire understanding and agreement between the parties with
respect to its subject matter and there are no agreements or
understanding with respect to the subject matter which are not
contained in the Agreement. This Agreement may be modified only
in writing signed by the party to be charged hereunder.
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<PAGE>
11. Counterparts. This Agreement may be executed in
multiple 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. FORUM AND VENUE. 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 AND WAIVES ANY ARGUMENT THAT VENUE IN ANY SUCH FORUM IS
NOT CONVENIENT. EACH PARTY AGREES THAT ANY LITIGATION INITIATED
BY EITHER OF THEM IN CONNECTION WITH THIS AGREEMENT (OTHER THAN
THE INDEMNIFICATION OBLIGATIONS) SHALL BE VENUED IN A COURT OF
COMPETENT JURISDICTION LOCATED IN DALLAS COUNTY, TEXAS.
13. Notices. All statements, requests, notices and advices
hereunder shall be in writing, and shall be sufficient in all
respects when delivered personally or by nationally recognized
overnight courier service or sent by certified or registered mail
postage or delivery fee prepaid to the address and persons stated
below:
if to the Company, to SA Telecommunications, Inc., 1600
Promenade Center, 15th Floor, Richardson Texas 75080,
Attention: Jack W. Matz, Jr., Chairman and Chief Executive
Officer, with a copy to Vice President and General Counsel
at the same address,
if to Employee, to Employee at 2612 E. Prairie Creek,
Richardson, Texas 75080,
or to such other persons or to such other addresses as one
party shall furnish to the other party hereafter. Any such
statements, requests, notices or advices shall be deemed
effective when delivered in person or by overnight courier
service or if sent by registered or certified mail, on the
third business day after such communication is deposited in
the mail as provided above.
14. Permission to Disclose. The parties hereto acknowledge
and agree that this Agreement may be described in and/or filed as
an exhibit to any registration statements, offering documents,
and any reports and proxy statements filed by the Company
pursuant to the Securities Act or the Securities Exchange Act of
1934.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day first above written.
SA TELECOMMUNICATIONS, INC. /s/ Terry R. Houston
Terry R. Houston
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman and Chief
Executive Officer
LONG DISTANCE NETWORK, INC.
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman and Chief
Executive Officer
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<PAGE>
Exhibit 10.4
CONFIDENTIAL
SUBSCRIPTION AGREEMENT
SA TELECOMMUNICATIONS, INC.
THE WARRANTS (AS DEFINED BELOW) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. THERE ARE RESTRICTIONS ON THE TRANSFERABILITY OF THE
WARRANTS AND THE SHARES (AS DEFINED BELOW) DESCRIBED IN THIS
SUBSCRIPTION AGREEMENT.
SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, Texas 75080
Ladies and Gentlemen:
The undersigned (the "Subscriber") has reviewed the most
recent report on Form 10-KSB of SA Telecommunications, Inc. (the
"Company"), and all reports on Forms 10-QSB and 8-K since such
report on Form 10-KSB. The Company represents and warrants to the
Subscriber that all such filings (i) are correct and accurate in
all material respects and (ii) state all material facts necessary
to make such filings not misleading in any material respects, in
each case as of the date such filing was made.
The Subscriber acknowledges that it is not acting on the basis
of any representations or warranties other than as set forth herein
and understands that the offer and sale of the Warrants (as
hereinafter defined) hereunder is being made without registration
of such Warrants under the Securities Act of 1933, as amended (the
"Securities Act"), or any securities, "blue sky" or other similar
laws of any state ("State Securities Laws").
1. Subscription. Subject to the terms and conditions
hereof, the Subscriber hereby subscribes for and agrees to purchase
the Common Stock Purchase Warrant set forth beside its name below
(the "Warrants") for the exercise of its Warrant dated as of
September 12, 1995 ("Prior Warrant") to the extent of all shares
into which such Warrant is exercisable on the Closing Date in
accordance with its terms (the "Prior Warrant Exercise"). Each
Warrant in the form of Exhibit A hereto which entitles the holder
thereof to purchase the number of shares of common stock of the
Company, par value $.0001 per share ("Common Stock") above such
Subscriber's name on the signature page hereto for the per share
price set forth herein.
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<PAGE>
2. The Closing. The closing of the purchase and sale of the
Warrants (the "Closing") shall take place at the offices of the
Company on or prior to May 7, 1996.
3. Payment for Warrants. The Subscriber agrees that the
purchase price for the Warrants is the Prior Warrant Exercise. At
the Closing the Subscriber shall deliver the Prior Warrant with an
executed conversion notice together with the exercise price
therefor in cash or wire transfer of immediately available funds.
4. Acceptance of Subscription. The Subscriber understands
and acknowledges that (a) the Company has the unconditional right,
exercisable in its sole and absolute discretion, to accept or
reject this Subscription Agreement, (b) no subscription shall be
valid unless and until accepted by the Company, (c) this
Subscription Agreement shall be deemed to be accepted by the
Company only when and if it is signed by an authorized officer of
the Company on behalf of the Company, and (d) notwithstanding
anything in this Subscription Agreement to the contrary, the
Company shall have no obligation to issue upon exercise of the
Warrants, the Shares (as hereinafter defined) to any person to whom
the issuance would constitute a violation of the Securities Act or
any State Securities Laws. The Company will deliver to the
Subscriber certificates representing the Warrants purchased by the
Subscriber at or promptly after the Closing.
5. Registration Rights.
(a) Subject to the provisions hereof, after receiving a
written request by the Subscriber and the other subscribers who
have purchased Common Stock Purchase Warrants constituting holders
of a majority of the aggregate number of shares of Common Stock
pursuant to the private placement of Warrants on May 7, 1996
("Purchasers") issued after November 7, 1996 in substantially the
form attached hereto as Exhibit B (the "Demand Notice"), the
Company shall prepare and within 45 days of the receipt of the
Demand Notice, file a registration statement (the "Registration
Statement") for the public sale by the Subscriber of the shares of
Common Stock to be acquired upon exercise of the Warrants) (the
"Shares") then owned or which at any time then or thereafter may be
acquired upon exercise of the Warrants regardless of any
prohibitions on the exercisability thereof by such Subscriber. The
Company shall use all reasonable efforts to cause the Registration
Statement to become effective as soon as practicable and to remain
effective until the earlier of (i) May 7, 1998 or (ii) such time as
all shares subject to such Registration Statement have been sold
thereunder. The Demand Notice shall be accompanied by a list of
blue sky jurisdictions as Subscriber may reasonably request and the
Company shall use all reasonable efforts to ensure compliance with
applicable blue sky laws in such listed jurisdictions subject to
the limitations set forth herein.
(b) The Company shall pay all expenses of the
registration hereunder. In no event, however, shall the Company
pay Subscriber's underwriting discounts or commissions or any fees
or costs of counsel to Subscriber.
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<PAGE>
(c) The Company shall supply to Subscriber a reasonable
number of copies of all registration materials and prospectuses.
The Company and Subscriber shall execute and deliver to each other
indemnity agreements which are conventional in registered offerings
of this type. The Subscriber shall reasonably cooperate with the
Company in the preparation and filing of the Registration Statement
and appropriate amendments thereto and in connection therewith
provide the Company with a representation letter as requested by
the Company.
(d) Subscriber may not transfer the registration rights
granted hereunder.
(e) Notwithstanding the foregoing, the Company shall not
be obligated to effect, or take any action to effect, any such
registration pursuant to this Section 5 in any particular
jurisdiction in which the Company would be required to execute a
general consent to service of process or otherwise qualify to do
business in effecting such registration, qualification, or
compliance, unless the Company has already consented to service or
qualify to do business in such jurisdiction or in any jurisdiction
in which the Company is not authorized to offer or sell its
securities;
(f) The Registration Statement filed pursuant to the
request of the Purchasers may include other securities of the
Company, with respect to which registration rights have been
granted or may be granted and may include securities of the Company
being sold for the account of the Company.
(g) Subscriber shall not have any right to take any
action to restrain, enjoin or otherwise delay any registration as
a result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.
(h) The right to request any such registration shall
expire on that date which is one year after the date of this
Subscription Agreement.
6. Representations and Warranties of the Subscriber. The
Subscriber hereby represents and warrants to and covenants with the
Company and to each officer, director and agent of the Company as
follows:
(a) Authority: The Subscriber has all requisite
authority to enter into this Subscription Agreement and to perform
all the obligations required to be performed by the Subscriber
hereunder.
(b) Information Concerning the Company:
(i) The Subscriber is familiar with the business
and financial condition, properties, operations and prospects of
the Company, and, at a reasonable time prior to the execution of
this Subscription Agreement, has been afforded the opportunity to
ask questions of and receive satisfactory answers from the Company
and the Company's officers and directors, or
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<PAGE>
other persons acting on the Company's behalf, concerning the
business and financial condition, properties, operations and
prospects of the Company and concerning the terms and conditions of
the offer of the Warrants and has asked such questions as it
desires to ask and all such questions have been answered to the
full satisfaction of the Subscriber.
(ii) The Subscriber understands that, unless the
Subscriber notifies the Company in writing to the contrary before
the Closing, all the representations and warranties contained in
this Subscription Agreement will be deemed to have been reaffirmed
and confirmed as of the Closing, taking into account all
information received by the Subscriber and will survive the
Closing.
(iii) No representations or warranties have been
made to the Subscriber by the Company as to the tax consequences of
this investment, or as to profits, losses or cash flow which may be
received or sustained as a result of this investment.
(iv) All documents, records and books pertaining to
a proposed investment in the Warrants which the Subscriber has
requested have been made available to Subscriber.
(v) The Subscriber has reviewed with its own tax
advisors the Federal, State, local and foreign tax consequences of
its investment in the Warrants and the transactions contemplated by
this Agreement. The Subscriber is relying solely on such advisors
in making its investment and not on any statements or
representations of the Company, or any of its agents. The
Subscriber has made independent determination that this investment
is in compliance with applicable laws.
(vi) The Subscriber is not purchasing the Warrants
based on any representation, oral or written, by the Company or any
person with respect to the future value of, or income from, the
Warrants or the Shares, but rather upon an independent examination
and judgment as to the prospects of the Company.
(vii) The Subscriber understands and
acknowledges that the Company has significant outstanding
indebtedness and a significant amount of Preferred Stock issued to
investors which such Preferred Stock has rights and preferences
superior to that of Common Stock.
(c) Status of the Subscriber: The Subscriber is able to
bear the economic risk of this investment. The Subscriber
consulted with the Subscriber's own attorney, accountant and/or
purchaser representative regarding the Subscriber's investment in
the Warrants and their suitability for purchase by the Subscriber,
and to the extent necessary, the Subscriber has retained and relied
upon, appropriate independent professional advice regarding the
investment, tax and legal merits, risks and consequences of this
Subscription Agreement and of purchasing and owning the Shares and
Warrants. The Subscriber is an accredited investor as that term is
defined under Regulation D promulgated under the Securities Act.
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<PAGE>
(d) Restrictions on Transfer or Sale of the Shares and
Warrants:
(i) The Subscriber is acquiring the Shares and
Warrants subscribed for solely for the Subscriber's own beneficial
account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution of the Shares or the
Warrants. The Subscriber understands that the offer and sale of
the Shares and Warrants have not been registered under the
Securities Act or any State Securities Laws by reason of specific
exemptions under the provisions thereof which depend in part upon
the investment intent of the Subscriber and/or the other
representations made by the Subscriber in this Subscription
Agreement. The Subscriber understands that the Company is relying
upon the representations, covenants and agreements contained in
this Subscription Agreement (and any supplemental information) for
the purpose of determining whether this transaction meets the
requirements for such exemptions.
(ii) The Subscriber understands that the Shares are
"restricted securities" under applicable federal securities laws
and that the Securities Act and the rules of the Securities and
Exchange Commission (the "Commission") provide in substance that
the Subscriber may dispose of the Shares and Warrants only pursuant
to an effective registration statement under the Securities Act or
an exemption therefrom, and the Subscriber understands that the
Company has no obligation or intention to register any of the
Shares and Warrants purchased by the Subscriber thereunder, or to
take action so as to permit sales pursuant to the Securities Act
(including Rule 144 thereunder) except as expressly provided
hereunder. The Subscriber understands that the Subscriber may not
at any time demand the purchase by the Company, or any shareholder
of the Company of the Shares or Warrants.
(iii) The Subscriber agrees (a) that the Subscriber
will not sell, assign, pledge, give, transfer or otherwise dispose
of the Warrants or Shares or any interest therein, or make any
offer or attempt to do any of the foregoing, except pursuant to a
registration of the Warrants or Shares under the Securities Act and
all applicable State Securities Laws or in a transaction which, in
the opinion of counsel satisfactory to the Company, is exempt from
the registration provisions of the Securities Act and all
applicable State Securities Laws; (b) that the Company and any
transfer agent for the Shares or Warrants shall not be required to
give effect to any purported transfer of any of the Shares or
Warrants except upon compliance with the foregoing restrictions;
and (c) that a legend in substantially the following form will be
placed on the certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN
WITHOUT A VIEW TO THE DISTRIBUTION THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF
THESE SHARES WILL NOT TRANSFER SUCH SHARES EXCEPT UPON RECEIPT OF
EVIDENCE SATISFACTORY TO THE COMPANY THAT THE REGISTRATION
PROVISIONS OF SUCH
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<PAGE>
ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT
REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE
STATE SECURITIES LAWS.
(iv) The Subscriber has not offered or sold any
portion of the subscribed for the Warrants or Shares and has no
present intention of dividing such Warrants or Shares with others
or of reselling or otherwise disposing of any portion of such
Warrants or Shares either currently or after the passage of a fixed
or determinable period of time or upon the occurrence or
nonoccurrence of any predetermined event or circumstance.
(v) Subscriber acknowledges that (i) in connection
herewith it will execute a voting agreement in the form of Exhibit
C hereto providing for the manner in which any Shares may be voted
(the "Voting Agreement"), (ii) it fully understands the terms and
conditions of the Voting Agreement and (iii) it shall not be
entitled to offer or sell any of the Shares (irrespective of the
registration thereof pursuant to Section 5) (except in (i) bona
fide broker transactions in which there is no intent for such
Shares to be acquired by any affiliate of any Purchaser or (ii) in
private transactions of blocks of 400,000 Shares or less to persons
not affiliated with any Purchaser (who will not have received in
such transactions, when aggregated with other block transactions
hereunder by Subscriber, any other Purchaser, and other purchasers
of the Old Warrants issued on September 12, 1995, more than 400,000
Shares) unless the transferee executes a counterpart of the Voting
Agreement as if it were an initial signatory hereto.
7. Survival. All representations, warranties and covenants
contained in this Subscription Agreement and the indemnification
contained in this Section 7 shall survive (i) the acceptance of
such Subscription Agreement by the Company, and (ii) changes in the
transactions, documents and instruments which are not material or
which are to the benefit of the Subscriber. The Subscriber
acknowledges the meaning and legal consequences of the
representations, warranties and covenants in Section 6 hereof and
that the Company has relied upon such representations, warranties
and covenants in determining the Subscriber's qualification and
suitability to purchase the Warrants and shall indemnify the
Company for any breach thereof.
8. Conditions to Obligations of the Company. The
obligations of the Company to sell the Shares specified herein is
subject to the condition that the representations and warranties of
the Subscriber contained in Section 6 hereof shall be true and
correct on and as of the Closing in all respects with the same
effect as though such representations and warranties had been made
on and as of the Closing.
9. Notices. All notices and other communications provided
for herein shall be in writing and shall be deemed to have been
duly given if and when delivered personally or sent by registered
or certified mail, return receipt requested, postage prepaid or by
a national overnight delivery or courier service:
6
<PAGE>
(a) if to the Company, to it at the following address:
SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, Texas 75080
Attention: Jack W. Matz, Jr.
(b) if to the Subscriber, to it at the address set forth
on the signature page hereto, or at such other address as either
party shall have specified by notice in writing to the other.
10. Notification of Changes. The Subscriber agrees and
covenants to notify the Company immediately upon the occurrence of
any event prior to the Closing which would cause any
representation, warranty, covenant or other statement contained in
this Subscription Agreement to be false or incorrect of any change
in any statement made herein occurring prior to the Closing.
11. Assignability. This Subscription Agreement is not
assignable by the Subscriber, and may not be modified, waived or
terminated except by an instrument in writing signed by the party
against whom enforcement of such modification, waiver or
termination is sought.
12. Binding Effect. Except as otherwise provided herein,
this Subscription Agreement shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and assigns, and the agreements,
representations, warranties and acknowledgments contained herein
shall be deemed to be made by and be binding upon such heirs,
executors, administrators, successors, legal representatives and
assigns. If the Subscriber is more than one person, the obligation
of the Subscriber shall be joint and several and the agreements,
representations, warranties and acknowledgements contained herein
shall be deemed to be made by and be binding upon each such person
and his heirs, executors, administrators and successors.
13. Obligations Irrevocable. The obligations of the
Subscriber shall be irrevocable, except with the prior written
consent of the Company, until the Closing (provided the Closing
occurs within five (5) business days of Subscriber's tender of this
Agreement and appropriate payment for the Warrants).
14. Entire Agreement. This Subscription Agreement and the
agreements contemplated hereby constitute the entire agreement of
the Subscriber and the Company relating to the matters contained
herein, superseding all prior contracts or agreements, whether oral
or written.
15. Governing Law. This Subscription Agreement shall be
governed and controlled as to validity, enforcement,
interpretation, construction and effect and in all other aspects by
the substantive laws of the State of Texas, without reference to
conflicts of laws principles.
7
<PAGE>
16. Severability. If any provision of this Subscription
Agreement or the application thereof to any Subscriber or
circumstance shall be held invalid or unenforceable to any extent,
the remainder of this Subscription Agreement and the application of
such provision to other subscriptions or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
17. Headings. The headings in this Subscription Agreement
are inserted for convenience and identification only and are not
intended to describe, interpret, define, or limit the scope, extent
or intent of this Subscription Agreement or any provision hereof.
18. Counterparts. This Subscription Agreement may be
executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of
which together shall be deemed to be one and the same agreement.
19. Documents Being Tendered. The Subscriber hereby tenders
two completed and executed copies of this Subscription Agreement
and Voting Agreement and irrevocably agrees to make the payments
set-forth herein upon acceptance of the Subscription Agreement by
the Company.
IN WITNESS WHEREOF, the undersigned Subscriber has executed
this Subscription Agreement as of this ___ day of May, 1996.
Subscription accepted as to Warrants to purchase 100,000 shares of
Common Stock
SUBSCRIBER:
/s/ Seth Joseph Antine
Seth Joseph Antine
SA TELECOMMUNICATIONS, INC.
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman & Chief Executive
Officer
8
<PAGE>
SCHEDULE OF DIFFERENCES
The Registrant has entered into two (2) or more contracts
substantially identical in all material respects to the form filed
herewith. Pursuant to General Instruction 2 to Item 601, the
Registrant hereby files this Schedule of Differences to identify
the other documents omitted and the material details in which such
documents differ from the form filed.
Exhibit 10.4 - Subscription Agreement
<TABLE>
<CAPTION>
Name of Individual Stockholder # Shares Common Stock
- - ------------------------------ ----------------------
<S> <C>
Laura Huberfeld/Naomi Bodner Partnership 750,000
Jules Nordlicht 375,000
Seth Joseph Antine 100,000
Fred Rudy 50,000
Harry Adler 50,000
Dr. Huberfeld 12,500
</TABLE>
<PAGE>
Exhibit 10.5
EXHIBIT A
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE ON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. NONE OF SUCH SECURITIES MAY BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR AN OPINION OF COUNSEL TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. THIS WARRANT
MAY NOT BE TRANSFERRED OR ASSIGNED EXCEPT AS EXPRESSLY PROVIDED
HEREIN.
SA Telecommunications, Inc.
COMMON STOCK PURCHASE WARRANT
Dated as of: May 7, 1996
Number of
Shares: 100,000
Holder: Seth Joseph Antine
Address: 2120 Bay Avenue
Brooklyn, New York 11210
THIS CERTIFIES THAT the Holder is entitled to purchase from SA
Telecommunications, Inc., a Delaware corporation (hereinafter
called the "Company"), at $2.40 per share the number of shares of
the Company's common stock set forth above ("Common Stock") on the
terms and conditions set forth herein.
1. All rights granted under this Warrant shall expire on the
earlier of (i) May 7, 1998 or (ii) the 46th day following written
notice from the Company to the Holder that this Warrant shall
expire on such 46th day (the "Early Expiration Notice"); and no
shares of Common Stock may be acquired under this Warrant from and
after such date. THIS WARRANT SHALL NOT BE EXERCISABLE UNTIL
NOVEMBER 7, 1996; PROVIDED, HOWEVER, THAT (i) IF THE COMPANY
PROVIDES THE EARLY EXPIRATION NOTICE PRIOR TO NOVEMBER 7, 1996 THIS
WARRANT SHALL BE IMMEDIATELY EXCISABLE UNTIL ITS EXPIRATION, AND
(ii) THE HOLDER MAY EXERCISE THIS WARRANT PRIOR TO NOVEMBER 7, 1996
IN THE EVENT THE MARKET PRICE OF COMMON STOCK IS GREATER THAN $4.00
PER SHARE (THE "SET PRICE") AS SUCH SET PRICE MAY HEREINAFTER BE
ADJUSTED WITH RESPECT TO SECTION 7 HEREOF. The Company may
exercise its right to provide the Early Expiration Notice only if
the shares issuable under this Warrant are registered under the
Securities Act of 1933 by giving such notice to the Holder at the
address stated above or such other address as designated in writing
to the Company. The Early Expiration Notice shall be of no further
force and effect if the shares issuable under this Warrant fail to
continue to be registered for such period ending on the 46th day,
provided that the Company will not be prohibited from providing
additional Early Expiration Notices in such event. For purposes
herein the term Market Price of a share of Common Stock shall mean
the average
1
<PAGE>
of the closing prices of sales of a share of Company Common Stock
on all securities exchanges on which such share may at the time be
listed, or, if there have been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all
such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 p.m., New
York time, or if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a
period of 10 days consisting of the day as of which "Market Price"
is being determined and the 9 consecutive business days prior to
such day.
2. This Warrant and the Common Stock issuable on exercise of
this Warrant (the "Underlying Shares") may be transferred, sold,
assigned or hypothecated, only if registered by the Company under
the Securities Act of 1933 (the "Act") or if the Company has
received from counsel to the Holder a written opinion acceptable to
the Company to the effect that registration of the Warrant or the
Underlying Shares is not necessary in connection with such
transfer, sale, assignment of hypothecation. The Warrant and the
Underlying Shares shall be appropriately legended to reflect this
restriction and stop transfer instructions shall apply.
3. Any permitted assignment of this Warrant shall be
effected by the Holder by (i) executing the form of assignment at
the end hereof, (ii) surrendering the Warrant for cancellation at
the office of the Company, accompanied by the opinion of counsel to
the Holder referred to above; and (iii) unless in connection with
an effective registration statement which covers the sale of this
Warrant and or the shares underlying the Warrant, delivery to the
Company of a statement by the transferees (in a form acceptable to
the Company and its counsel) that such Warrant is being acquired by
the Holder for investment and not with a view to its distribution
or resale; whereupon the Company shall issue, in the name or names
specified by the Holder (including the Holder) new Warrants
representing in the aggregate rights to purchase the same number of
Shares as are purchasable under the Warrant surrendered. Such
Warrants shall be exercisable immediately upon any such assignment
of the number of Warrants assigned. The transferor will pay all
relevant transfer taxes. Replacement warrants shall bear the same
legend as is borne by this Warrant.
4. The term "Holder" should be deemed to include any
permitted record transferee of this Warrant.
5. The Company covenants and agrees that all shares of
Common Stock which may be issued upon exercise hereof will, upon
issuance, be duly and validly issued, fully paid and non-
assessable. The Company further covenants and agrees that, during
the periods within which this Warrant may be exercised, the Company
will at all times have authorized and reserved a sufficient number
of shares of Common Stock for issuance upon exercise of this
Warrant.
2
<PAGE>
6. This Warrant shall not entitle the Holder to any voting
rights or other rights as a stockholder of the Company.
7. In the event that as a result of reorganization, merger,
consolidation, liquidation, recapitalization, stock split, reverse
stock split, combination of shares or stock dividends payable with
respect to such Common Stock, the outstanding shares of Common
Stock of the Company are at any time increased or decreased or
changed into or exchanged for a different number or kind of share
or other security of the Company or of an other corporation, then
appropriate adjustments in the number and kind of such securities
then subject to this Warrant shall be made effective as of the date
of such occurrence so that the position of the Holder upon exercise
will be the same as it would have been had it owned immediately
prior to the occurrence of such events the Common Stock subject to
this Warrant. Such adjustment shall be made successively whenever
any event listed above shall occur and the Company will notify the
Holder of the Warrant of each such adjustment. Any fraction of a
share resulting from any adjustment shall be eliminated, the price
per share of the remaining shares subject to this Warrant and the
Set Price referred to in Section 1 hereof shall be adjusted
accordingly.
8. The rights represented by this Warrant may be exercised
at any time within the period above specified by (i) surrender of
this Warrant (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such
other office or agency of the Company as it may designate by notice
in writing to the Holder at the address of the Holder appearing on
the books of the Company) during normal business hours; (ii)
payment to the Company of the exercise price in cash or immediately
available funds for the number of Shares specified in the above-
mentioned purchase form together with applicable stock transfer
taxes, if any; and (iii) unless in connection with an effective
registration statement which covers the sale of the shares
underlying the Warrant, the delivery to the Company of a statement
by the Holder (in a form acceptable to the Company and its counsel)
that such Shares are being acquired by the Holder for investment
and not with a view to their distribution or resale.
9. Holder acknowledges and agrees that any shares of Common
Stock issuable upon exercise of this Warrant shall be subject to a
Voting Agreement of even date herewith among the Company, the
Holder and Jack W. Matz, Jr. (the "Voting Agreement") except as
provided in the Voting Agreement.
The certificate for the Common Stock so purchased shall be
delivered to the Holder within a reasonable time, not exceed ten
(10) business days after all requisite documentation has been
provided, after the rights represented by this Warrant shall have
been so exercised, and shall bear a restrictive legend with respect
to any applicable securities laws.
11. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware. The Delaware
courts shall have exclusive jurisdiction over this instrument and
the enforcement thereof. Service of process shall be effective if
by certified mail, return receipt requested. All notices shall be
in writing and shall be deemed given upon receipt by the
3
<PAGE>
party to whom addressed. This instrument shall be enforceable by
decrees of specific performance as well as other remedies.
IN WITNESS WHEREOF, SA Telecommunications, Inc. has caused
this Warrant to be signed by its duly authorized officers under its
corporate seal, and to be dated as of the date set forth above.
SA TELECOMMUNICATIONS, INC.
By: /s/ Jack W. Matz, Jr.
Jack W. Matz, Jr.
Chairman and Chief Executive
Officer
(Seal)
Attest:
/s/ Lynn H. Johnson
Lynn H. Johnson, Secretary
4
<PAGE>
PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the registered holder of the foregoing
Warrant, hereby irrevocably elects to exercise the purchase rights
represented by such Warrant for, and to purchase thereunder, ______
shares of $.0001 par value Common Stock and herewith makes payments
of $_____________ thereof, and requests that the certificates for
shares of Common Stock be issued in the name(s) of, and delivered
to ___________________________ whose address(es) is (are)
_________________________________________________________________
______.
Dated: _____________, 19__.
___________________________________
___________________________________
Address
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Warrant)
For value received, the undersigned registered holder of this
Warrant hereby sells, assigns and transfers unto
_____________________________ the right to purchase shares of
Common Stock represented by the foregoing Warrant to the extent of
__________ shares of Common Stock, and appoints
________________________ attorney to transfer such rights on the
books of SA TELECOMMUNICATIONS, INC., with full power of
substitution in the premises.
Dated: _____________, 19___.
___________________________________
Holder
___________________________________
Address
In the presence of:
_________________________
<PAGE>
SCHEDULE OF DIFFERENCES
The Registrant has entered into two (2) or more contracts
substantially identical in all material respects to the form filed
herewith. Pursuant to General Instruction 2 to Item 601, the
Registrant hereby files this Schedule of Differences to identify
the other documents omitted and the material details in which such
documents differ from the form filed.
Exhibit 10.5 - Warrant
<TABLE>
<CAPTION>
Name of Individual Stockholder # Shares Common Stock
- - ------------------------------ ----------------------
<S> <C>
Laura Huberfeld/Naomi Bodner Partnership 750,000
Jules Nordlicht 375,000
Seth Joseph Antine 100,000
Fred Rudy 50,000
Harry Adler 50,000
Dr. Huberfeld 12,500
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SA TELECOMMUNICATIONS, INC. FOR THE QUARTER ENDED MARCH
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 270,528
<SECURITIES> 0
<RECEIVABLES> 4,175,491
<ALLOWANCES> 479,512
<INVENTORY> 229,549
<CURRENT-ASSETS> 5,911,181
<PP&E> 4,278,872
<DEPRECIATION> 792,504
<TOTAL-ASSETS> 26,403,937
<CURRENT-LIABILITIES> 9,105,467
<BONDS> 0
1,149,670
575,280
<COMMON> 1,418
<OTHER-SE> 9,546,692
<TOTAL-LIABILITY-AND-EQUITY> 26,403,937
<SALES> 0
<TOTAL-REVENUES> 7,027,391
<CGS> 0
<TOTAL-COSTS> 4,345,313
<OTHER-EXPENSES> 3,114,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 345,267
<INCOME-PRETAX> (432,130)
<INCOME-TAX> 0
<INCOME-CONTINUING> (432,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (432,130)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
