<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 EXCHANGE
ACT
For the quarterly period ended June 30, 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
of incorporation or organization) Identification Number
1600 Promenade Center, 15th Floor, Richardson, Texas 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 [ ]
There were 16,580,053 shares of the registrant's common stock
outstanding as of August 13, 1996.
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 6-8
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-15
Part II. Other Information
Item 1. - Legal Proceedings 15
Item 2. - Change in Securities 16
Item 3. - Defaults Upon Senior Securities 16
Item 4. - Submission of Matters to a Vote of Security
Holders 16
Item 5. - Other Information 16
Item 6. - Exhibits and Reports on Form 8-K 17
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
SA TELECOMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
ASSETS
<CAPTION>
June 30,
December 31,
1996
1995
--------
------------
<S> <C>
<C>
Current assets
Cash $ 1,956,104
$ 823,738
Accounts and notes receivable:
Trade, net of allowance for doubtful accounts
of $629,025 and $475,845, respectively 4,359,859
4,022,131
Other, net of allowance for doubtful
accounts of $31,479 820,241
407,550
Inventory 66,021
146,037
Prepaid expenses and other 892,782
292,439
-----------
-----------
Total current assets 8,095,007
5,691,895
-----------
-----------
Property and equipment 6,759,870
3,911,652
Less accumulated depreciation and amortization (955,679)
(495,613)
-----------
-----------
Net property and equipment 5,804,191
3,416,039
-----------
-----------
Excess of cost over net assets acquired, net of
accumulated amortization of $1,556,583 and
$1,068,833, respectively 16,728,213
16,869,648
-----------
-----------
Other assets 443,854
63,221
-----------
-----------
Total assets $31,071,265
$26,040,803
===========
===========
- Continued
- -
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
SA TELECOMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS - Continued
(Unaudited)
LIABILITIES AND
SHAREHOLDERS' EQUITY
June 30,
December 31,
1996
1995
--------
------------
Current liabilities
Accounts payable - trade $ 993,369
$ 761,880
Accrued telecommunications expenses 2,271,279
2,337,420
Other accrued expenses 1,354,795
1,163,603
Short-term notes payable 2,055,000
475,610
Current maturities of long-term debt 1,632,586
3,795,216
-----------
-----------
Total current liabilities 8,307,029
8,533,729
-----------
-----------
Long-term obligations, less current maturities 6,855,488
7,398,670
-----------
-----------
Commitments and contingencies
Series A redeemable preferred stock, $.00001
par value, 250,000 shares authorized;
166,667 shares issued 1,169,881
1,129,459
-----------
-----------
Shareholders' equity:
Series B Preferred stock, $.00001 par
value, 12,500,000 shares authorized;
250,000 shares issued -
575,280
Common stock, $.0001 par value, 50,000,000
shares authorized; 16,499,147 and 13,462,120
issued, respectively 1,650
1,346
Additional paid-in capital 25,533,474
20,855,099
Retained deficit (10,339,656)
(11,996,179)
Treasury stock 240,072 shares, at cost (465,601)
(465,601)
-----------
-----------
Total shareholders' equity 14,738,867
8,978,945
-----------
-----------
Total liabilities and shareholders' equity $31,071,265
$26,040,803
===========
===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
<CAPTION>
For the
three months For the six months
ended
June 30, ended June 30,
- -------------------- ------------------
1996
1995 1996 1995
<S> <C>
<C> <C> <C>
Telecommunications revenues $
7,210,554 $ 4,004,348 $14,237,945 $ 6,313,575
Cost of revenues
3,994,445 2,818,043 8,289,758 4,630,197
- ----------- ----------- ----------- -----------
Gross profit
3,266,109 1,186,305 5,948,187 1,683,378
Operating expenses:
General and administrative
2,450,747 1,387,361 4,698,847 1,981,381
Depreciation and amortization
411,872 243,570 947,816 375,802
- ----------- ----------- ----------- -----------
Total operating expenses
2,862,619 1,630,931 5,646,663 2,357,183
- ----------- ----------- ----------- -----------
Income (loss) from continuing operations before other
income (expense) and extraordinary item
403,490 (444,626) 301,524 (673,805)
- ----------- ----------- ----------- -----------
Other income (expense):
Interest expense
(348,593) (103,377) (693,860) (118,306)
Other
32,487 2,585 47,950 5,129
- ----------- ----------- ----------- -----------
Total other income (expense)
(316,106) (100,792) (646,270) (113,177)
- ----------- ----------- ----------- -----------
Income (loss) from continuing operations before
extraordinary item
87,384 (545,418) (344,746) (786,982)
- ----------- ----------- ----------- -----------
Discontinued operations -
Provision for operating losses during phase-out
period
- (250,000) - (250,000)
- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item
87,384 (795,418) (344,746) (1,036,982)
- ----------- ----------- ----------- -----------
Extraordinary item - gain on extinguishment of debt
2,149,191 - 2,149,191 -
Net income (loss)
2,236,575 (795,418) 1,804,445 (1,036,982)
Preferred dividend requirements, including accretion
(72,713) - (147,922) -
- ----------- ----------- ----------- -----------
Net income (loss) applicable to common shareholders $
2,163,862 $ (795,418) $ 1,656,523 $(1,036,982)
=========== =========== =========== ===========
Income (loss) per common share and common share
equivalent:
Continuing operations $
0.01 $ (0.05) $ (0.02) $ (0.07)
Discontinued operations
- (0.02) - (0.02)
Extraordinary item
0.11 - 0.12 -
- ----------- ----------- ----------- -----------
Net income (loss) per share $
0.12 $ (0.07) $ 0.10 $ (0.09)
=========== =========== =========== ===========
Net income (loss) per share applicable to common
shareholders $
0.12 $ (0.07) $ 0.10 $ (0.09)
=========== =========== =========== ===========
Weighted average number of common share
& common share equivalents outstanding
18,556,471 11,098,947 17,285,266 10,801,218
=========== =========== =========== ===========
Income (loss) per common share - assuming full dilution:
Continuing operations $
0.01 $ (0.02)
Extraordinary item
0.10 0.11
- ----------- -----------
Net income per share $
0.11 $ 0.09
=========== ============
Net income per share applicable to common
shareholders $
0.11 $ 0.09
=========== ===========
Weighted average number of common shares outstanding
- assuming full dilution
20,493,575 19,022,802
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(Unaudited)
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) $ 9,984,357
Private placements of
common stock - - 274,792 27
316,025 - - 316,052
Issuance of common
stock for exercise of
options - - 829,175 91
716,211 - (165,959) 550,333
Net loss for the period - - - -
- (1,036,982) - (1,036,982)
-------- -------- ---------- ------
- ----------- ------------ --------- -----------
Balances at June 30,
1995 - - 11,670,106 $1,175
$16,661,350 $ (6,441,846) $(406,919) $ 9,813,760
======== ======== ========== ======
=========== ============ ========= ===========
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 - - 347,836 35
137,004 - - 137,039
Exercise of warrants - - 1,090,000 109
1,362,391 - - 1,362,500
Conversion of debt - - 267,856 27
449,973 - - 450,000
Other - - 236,612 24
376,875 - - 376,899
Issuance of common stock
for acquisitions of USC
securities (125,000) (575,280) 843,023 84
1,613,230 - - 1,038,034
Issuance of warrants - - - -
368,927 - - 368,927
Preferred dividend
requirements including
accretion - - - -
- (147,922) - (147,922)
Net income for the period - - - -
- 1,804,445 - 1,804,445
-------- -------- ---------- ------
- ----------- ------------ --------- -----------
Balances at June 30,
1996 - $ - 16,499,147 $1,650
$25,533,474 $(10,339,656) $(456,601) $14,738,867
======== ======== ========== ======
=========== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
SA TELECOMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
<CAPTION>
For the six months
ended June 30,
- ------------------
1996 1995
<S>
<C> <C>
Cash flows from operating activities:
Net income (loss)
$1,804,445 $(1,036,982)
Adjustments to reconcile net loss to net cash used by
operating activities:
Loss from discontinued operations
- 250,000
Extraordinary item - gain on extinguishment of debt
(2,149,191) -
Depreciation and amortization
947,816 375,801
Provision for losses on accounts receivable
400,063 61,894
Cash used for discontinued SATC business
- (91,623)
Other
- 20,774
(Increase) decrease
Accounts and notes receivable
(1,043,584) (363,961)
Prepaid expenses and other
(116,138) 102,136
Other assets
(590,321) (152,290)
Increase (decrease) in
Accounts payable and accrued expenses
403,995 (186,512)
- ---------- -----------
Net cash used in operating activities
(342,915) (1,020,763)
- ---------- -----------
Cash flows from investing activities:
Additions to property and equipment
(1,534,857) (45,083)
Cash used for discontinued SATC business
- (89,911)
Other
- (26,108)
- ---------- -----------
Net cash used in investing activities
(1,534,857) (161,102)
- ---------- -----------
Cash flows from financing activities:
Net changes in short-term loans
2,000,000 117,225
Proceeds from private placement of common stock
- 316,052
Proceeds from exercise of warrants
1,359,149 -
Proceeds from exercise of options
200,380 550,331
Principal payments on long-term obligations
(549,391) (46,075)
- ---------- -----------
Net cash provided by financing activities
3,010,138 937,535
- ---------- -----------
Increase (decrease) in cash
1,132,366 (244,330)
Cash at beginning of period
823,738 331,431
- ---------- -----------
Cash at end of period
$1,956,104 $ 87,101
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<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 and April 1996, the Company entered into private
placements whereby it sold an aggregate of $600,000 of its
March Debenture and $400,000 of its April Debenture. All
such debentures are convertible into Common Stock of the
Company at the lower of $1.75 per share or 75% of the five
day 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 June 21, 1996 the Company effected a private placement of
$1,000,000 of the June Debentures. The June Debentures are
convertible into Common Stock of the Company at the lower of
$2.00 or 80% of the five day 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 a $45,000 finders fee and issued to certain
finders warrants to purchase an aggregate of 200,000 shares
of Common Stock at $2.00 per share with respect to the June
Debentures.
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.
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE D - COMMON STOCK PURCHASE WARRANTS
On May 7, 1996, six holders of the 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 $2.50 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.
NOTE E - EARNINGS (LOSS) PER SHARE
For the three months and the six months ended June 30, 1996,
earnings per share were calculated based upon the weighted
average number of shares outstanding during the period plus
the dilutive effect of stock options, stock warrants,
convertible debentures and Series A Preferred Stock using
the Modified Treasury Stock method.
For the comparable periods ended June 30, 1995, earnings per
share were calculated based upon the weighted average number
of shares outstanding during the periods. The effect of
common stock equivalents was not included because their
effect would have been anti-dilutive.
<TABLE>
<CAPTION>
For the Three Months
For the Six Months
Ended June 30,
Ended June 30,
--------------------
------------------
1996 1995
1996 1995
---- ----
---- ----
<S> <C> <C>
<C> <C>
Primary:
Average Shares Outstanding 15,689,431 11,098,947
15,397,430 10,802,218
Stock Options 3,540,249 --
3,242,197 --
Stock Warrants 2,572,606 --
1,799,097 --
---------- ----------
---------- ----------
Total 21,802,286 11,098,947
20,438,724 10,802,218
Less: Shares purchased under
the Treasury Stock Method (3,245,815) --
(3,153,457) --
---------- ----------
---------- ----------
18,556,471 11,098,947
17,285,267 10,802,218
========== ==========
========== ==========
Full Dilution:
Average Shares Outstanding 15,689,431 11,098,947
15,459,243 10,802,218
Stock Options 3,540,249 --
3,242,197 --
Stock Warrants 2,572,606 --
1,799,097 --
Convertible Debentures 603,768 --
342,386 --
Series A Preferred Stock 1,333,336 --
1,333,336 --
---------- ----------
---------- ----------
Total 23,739,390 11,098,947
22,176,259 10,802,218
Less: Shares purchased under
the Treasury Stock Method (3,245,815) --
(3,153,457) --
---------- ----------
---------- ----------
20,493,575 11,098,947
19,022,802 10,802,218
========== ==========
========== ==========
</TABLE>
<PAGE>
SA TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE F - PURCHASE OF USC SECURITIES
In 1995, in connection with the USC acquisition, the Company
issued the USC securities comprised of (i) the USC notes
having an original principal amount of $4,250,000 (ii) 125,000
shares of Series B Preferred Stock and (iii) warrants
exercisable into 1,050,000 shares of Common Stock at $1.25 per
share.
On June 21, 1996, the Company completed the acquisition of all
of the USC securities for an aggregate of $308,500 of cash and
the issuance of 843,023 shares of the Company's Common Stock,
resulting in an extraordinary gain on early extinguishment of
debt in the amount of $2,149,191.
NOTE G - SUBSEQUENT EVENT
On August 12, 1996, the Company announced that it had
consummated a private placement of $27,200,000 of its 10%
Convertible Notes due 2006 (the "Notes"). The Notes will be
convertible into the Company's Common Stock at a conversion
price of $2.55 per share. The net proceeds from the sale of
the Notes were approximately $25.4 million after giving effect
to transaction related fees and expenses. The Company expects
to use approximately $12.1 million of the net proceeds from
the private placement to repay certain indebtedness, and to
repurchase or redeem certain shares of the Company's Common
Stock and outstanding debentures (if not converted prior to
redemtion or repurchase). The Company plans to utilize
the balance of the net proceeds (approximately $13.3
million) primarily to effect acquisitions and strategic
alliances.
<PAGE>
Part I. Financial Information
Item II. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is a discussion of the consolidated financial
conditions and results of operations of the Company for the three
month and six month periods ended June 30, 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 regional interexchange carrier ("IXC") providing
a wide range of domestic long distance services through its network
of owned and leased facilities. The Company's customer base is
primarily composed of small and medium sized commercial accounts
and residential customers concentrated in secondary and rural
markets in the southwestern United States. In addition to
providing "1+" domestic long distance services, the Company also
offers international long distance services, operator services and
other long distance products such as direct access private lines,
"800" services, travel cards and wholesale long distance services.
The Company entered the telecommunications business in 1991 through
the acquisition of North American Telecommunications ("NATC"), a
telecommunications provider offering international long distance
service to foreign customers. In 1994 and 1995, the Company
acquired two Texas-based interexchange carriers, Long Distance
Network, Inc. ("LDN") of Dallas, Texas and U.S. Communications,
Inc. ("USC") of Levelland, Texas. During the first half of 1996,
the Company completed a small acquisition of the assets of a
switched reseller of metered and flat rate long distance telephone
services operating in north central Texas, and expanded its network
through the acquisition of switching companies in Phoenix, Arizona
and the additions of leased transmission facilities between that
switch and the Company's switches in Dallas and Levelland, Texas.
The Company markets its services in areas in the southwestern
United States served by its network primarily under the "USC" and
"USI" product names. To date, growth of the Company's customer
base has been largely the results of its acquisition of LDN and
USC. The Company anticipates future growth will result from sales
and marketing efforts of its employees and from continued
acquisitions of companies providing domestic long distance service
within its market area or adjacent thereto.
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 to 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, 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.
<PAGE>
Results of Operations
The following table sets forth certain items in the Company's
Consolidated Statements of Operations as a percentage of its
operating revenues for the three and six month periods ended June
30, 1996 and 1995.
<TABLE>
<CAPTION>
For the three
For the six
months ended
months ended
June 30,
June 30,
-------------
- ------------
1996 1995
1996 1995
---- ----
- ---- ----
<S> <C> <C>
<C> <C>
Revenue 100% 100%
100% 100%
Cost of revenue 55 70
58 73
--- ---
- --- ---
Gross profit 45 30
42 27
Operating expenses:
General and administrative 34 35
33 31
Depreciation and
amortization 6 6
7 6
--- ---
- --- ---
Income (loss) from continuing
operations 5 (11)
2 (10)
Other income (expense) (4) (3)
(4) (2)
Discontinued operations - (6)
- - (4)
Extraordinary gain on
extinguishment of debt 30 -
15 -
--- ---
- --- ---
Net income (loss) 31 (20)
13 (16)
EBITDA(1) (loss), as defined $815,362 $(201,056)
$1,249,340 $(298,003)
======== =========
========== =========
- -------------------------
<FN>
(1) Earnings (loss) before interest, taxes, depreciation,
amortization, nonrecurring charges, and other income
(expense) or "EBITDA" (as defined), 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 GAAP) as a measure of
financial results of operations or for cash flows from
operations (as presented according to GAAP).
</FN>
</TABLE>
Three Months Ended June 30, 1996 Versus Three Months Ended June
30, 1995
Revenues increased by $3,206,206, or 80%, from $4,004,348 for the
three months ended June 30, 1995 to $7,210,554 for the three months
ended June 30, 1996. This $3,206,206 net increase in revenues was
the result of (i) the customers, net of attrition, obtained in the
USC acquisition which contributed $2,289,350, (ii) a $1,139,107
increase in the Company's "1+" revenues primarily arising from new
customers (excluding the USC acquisition) and (iii) a decline of
$222,251 in revenue relating to certain operator services, and
the Company's wholesale and international business which the
Company is de-emphasizing. The Company has continued to emphasize
the generation of "1+" revenue and de-emphasize the marketing of
its operator service, wholesale and international business because
"1+" business carries higher gross profit margins. As a result,
the Company expects its operator services, wholesale and
international revenues to decline in the future.
Gross profit increased by $2,079,804 from $1,186,305 for the three
months ended June 30, 1995 to $3,266,109 for the
<PAGE>
same quarter in 1996. The gross profit margin increased by 15%
from 30% for the three months ended June 30, 1995 to 45% for the
three months ended June 30, 1996. This increase was primarily
attributable to the formal transition, integration and operation of
the Company's network coupled with increased numbers of calls
originating and terminating on the network. Additionally, the
acquisition of USC provided an improved mix of call traffic because
the USC revenues 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 $1,063,386 from
$1,387,361 for the three months ended June 30, 1995 to $2,450,747
for the same quarter in 1996, and, as a percentage of revenue,
decreased from 35% in 1995 to 34% in 1996. The increase in total
general and administrative expense is primarily attributable to the
USC acquisition. The small decrease as a percentage of revenues
reflects management's continued focus on cost containment to
maintain costs in line with revenue levels.
Depreciation and amortization expense increased by $168,302 from
$243,570 for the three months ended June 30, 1995 to $411,872 for
the same quarter in 1996, and, as a percentage of revenues,
remained constant at 6% during each respective period. This
increase resulted from higher depreciation and amortization charges
arising from the acquisition of USC and increased depreciation from
the acquisition of switching equipment.
EBITDA increased by $1,016,418 from a negative $201,056 for the
three months ended June 30,1995 to a positive $815,362 for the same
quarter in 1996. This increase is primarily attributable to
improved gross profit margins.
The Company incurred a loss from continuing operations of $444,626
for the three months ended June 30, 1995 versus income from
continuing operations of $403,490 for the same quarter in 1996.
This improvement was primarily attributable to improved gross
profit margins.
The Company had net other expense of $100,792 for the three months
ended June 30, 1995 compared to net other expense of $316,106 for
the same quarter in 1996. This increase was primarily due to an
increase in interest expense from $103,377 to $348,593 related to
the increased debt incurred in connection with the USC acquisition.
The Company recorded a $250,000 provision for operating losses
during the phase-out period for its discontinued Strategic Abstract
and Title Corporation ("SATC") subsidiary for the three months
ended June 30, 1995. On February 29, 1996, SATC was sold to a key
member of SATC management and an impairment loss was recorded as of
December 31, 1995.
The Company recognized a gain on extinguishment of debt of
$2,149,191 for the three months ended June 30, 1996. This gain
relates to the Company's redemption of securities issued in
connection with the USC acquisition for an aggregate of 843,023
shares of the Company's Common Stock and $308,500 of cash. These
securities redeemed included (i) notes having an aggregate
principal amount of $3,150,000 and bearing interest at 11% per
annum, (ii) an aggregate of 125,000 shares of Series B Cumulative
Convertible Preferred Stock and (iii) a warrant which was
exercisable into an aggregate of 1,050,000 shares of the Company's
Common Stock at any time prior to July 31, 2000 at a per share
exercise price of $1.25.
The Company incurred a net loss of $795,418 for the three months
ended June 30, 1995 as compared to net income of $2,236,575 for the
same quarter in 1996. This improvement is primarily attributable
to the one time extraordinary gain on extinguishment of debt and
improved profit margins on increased revenues.
<PAGE>
Six Months Ended June 30, 1996 Versus Six Months Ended June 30,
1995
Revenues increased $7,924,370, or 126%, from $6,313,575 for the six
months ended June 30, 1995 to $14,237,945 for the six months ended
June 30, 1996. This $7,924,370 net increase in revenues was the
result of (i) the customers, net of attrition, obtained in the USC
acquisition which contributed $5,971,677, (ii) a $2,610,713
increase in the Company's "1+" revenue primarily arising from new
customers (excluding the USC acquisition) and (iii) a decline of
$658,020 in revenue relating to certain operator services, and
the Company's wholesale and international business which the
Company is de-emphasizing. The Company has continued to emphasize
the generation of "1+" revenue and de-emphasize the marketing of
its operator services, wholesale and international business because
"1+" business carries a higher gross profit margin. As a result,
the Company expects its operator services, wholesale and
international revenues to decline in the future.
Gross profit increased by $4,264,809 from $1,683,378 for the six
months ended June 30, 1996 to $5,948,187 for the same period in
1996. The gross profit margin increased by 15% from 27% for the
six months ended June 30, 1995 to 42% for the six months ended
June 30, 1996. This increase was primarily attributable to the
formal transition, integration and operation of the Company's
network coupled with increased numbers of calls originating
and terminating on the network. Additionally, the acquisition of
USC provided an improved mix of call traffic because the USC
revenues 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 $2,717,466 from
$1,981,381 for the six months ended June 30, 1995 to $4,698,847 for
the same quarter in 1996, and as a percentage of revenues,
increased
from 31% in 1995 to 33% in 1996. The increase in total general and
administrative expense is primarily attributable to the USC
acquisition. The small increase as a percentage of revenues
reflects an expansion (primarily personnel related and facilities
costs) of expenses during the first quarter of 1996 required for
the Company to be a regional interexchange carrier and to meet
increased call volumes in the second quarter of 1996.
Depreciation and amortization expense increased by $572,014 from
$375,802 for the six months ended June 30, 1995 to $947,816 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.
EBITDA increased by $1,547,343 from negative $298,003 for the six
months ended June 30, 1995 to a positive $1,249,340 for the same
quarter in 1996. This increase is primarily attributable to
improved gross profit margins.
The Company incurred a loss from operations of $673,805 for the six
months ended June 30, 1995 versus income from operations of
$301,524 for the same period in 1996. This improvement was
primarily attributable to improved gross profit margins.
The Company had net other expense of $113,177 for the six months
ended June 30, 1995 compared to the net other expense of $646,270
for the same period in 1996. This increase was primarily due to an
increase in interest expense from $118,306 to $693,860 related to
the increased debt incurred in connection with the USC acquisition.
The Company recorded a $250,000 provision for operating losses
during the phase-out period for its discontinued SATC subsidiary
for the six months ended June 30, 1995. On February 29, 1996, SATC
was sold to a key member
<PAGE>
of SATC management and an impairment loss was recorded as of
December 31, 1995.
The Company recognized a gain on extinguishment of debt of
$2,149,191 for the six months ended June 30, 1996. This gain
relates to the Company's redemption of securities issued in
connection with the USC acquisition for an aggregate of 843,023
shares of the Company's Common Stock and $308,500 of cash. These
USC securities redeemed included (i) notes having an aggregate
principal amount of $3,150,000 and bearing interest at 11% per
annum, (ii) an aggregate of 125,000 shares of Series B Cumulative
Convertible Preferred Stock, and (iii) a warrant which was
exercisable into an aggregate of 1,050,000 shares of the Company's
Common Stock at any time prior to July 31, 2000 at a per share
exercise price of $1.25.
The Company incurred a net loss of $1,036,982 for the six months
ended June 30, 1995 as compared to net income of $1,804,445
for the same period in 1996. This improvement is primarily
attributable to the one time extraordinary gain on
extinguishment of debt and improved profit margins on increased
revenues.
Liquidity and Capital Resources
The Company experienced negative cash flow from operating
activities of $1,020,763 for the six months ended June 30, 1995 as
compared to a negative $342,915 for the like period of 1996.
This improvement was primarily attributable to improved
operating results from increased gross profit margins.
Cash used in investing activities was $161,102 for the six months
ended June 30, 1995 as compared to $1,534,857 for the like period
in 1996. This increase was attributable to increases in property
and equipment primarily related to switching equipment and network
associated costs.
Cash provided by financing activities was $937,535 for the six
months ended June 30, 1995 as compared to $3,010,138 for the like
period in 1996. In 1996, additional borrowings, proceeds from the
exercise of warrants, and proceeds from the exercise of stock
options of $2,000,000, $1,359,149 and $200,380, respectively, were
offset by $549,391 of principal payments on long-term obligations.
At June 30, 1996, the Company had a cash balance of $1,956,104 as
compared to $823,738 at December 31, 1995. As of June 30, 1996,
working capital was a negative $137,476 as compared to a negative
$2,841,834 at December 31, 1995. This improvement was primarily
due to the redemption of certain securities (including $3,150,000
of notes payable) issued in connection with the acquisition of USC
for 843,023 shares of the Company's Common Stock and $308,500 of
cash.
In March and April 1996, the Company entered into private
placements whereby it sold an aggregate of $600,000 of its March
Debenture and $400,000 of its April Debenture. All such debentures
are convertible into Common Stock of the Company at the lower of
$1.75 per share or 75% of the five day 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 the 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
<PAGE>
consecutive days.
On June 21, 1996 the Company effected a private placement of
$1,000,000 of the June Debentures. The June Debentures are
convertible into Common Stock of the Company at the lower of $2.00
or 80% of the five day 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 a $45,000
finders fee and issued to certain finders warrants to purchase an
aggregate of 200,000 shares of Common Stock at $2.00 per share with
respect to the June Debentures.
On August 12, 1996, the Company completed a $27,200,000 private
placement of its 10% Convertible Notes due 2006. These notes are
convertible at any time subsequent to 120 days after the original
issue date, at a conversion price of $2.55 per share, subject to
adjustments in certain circumstances. The Notes will be redeemable
at the option of the Company in whole or in part at any time on or
after August 15, 1999 at annual redemption prices starting at 107%
of principal, plus accrued interest to the redemption date. Each
holder of the notes will have the right to require the Company to
repurchase the notes in the event that (i) the Company incurs
certain indebtedness, (ii) the pro-forma interest coverage (as
defined) is less than 2.0 to 1 and (iii) the average closing price
of the Company's Common Stock is less than $2.00 per share for the
preceding twenty trading days.
The net proceeds of approximately $25,390,000 after deducting
estimated transaction related fees and expenses are expected to be
utilized (i) $7,000,000 to refinance existing bank debt (ii)
$2,900,000 to exercise the Company's option to purchase 843,023
shares of the Company's Common Stock from former USC shareholders,
(iii) $2,210,000 to redeem or repurchase certain of the Company's
outstanding debentures if not converted prior to redemption or
repurchase, and (iv) the balance of approximately $13,280,000 to
effect acquisitions and strategic alliances, to make capital
expenditures, and for general corporate purposes.
In connection with obtaining the consent of Norwest Bank
Minnesota, N.A. to the sale of the Notes, on July 17, 1996
the Company received a waiver from Norwest with respect to any
breach arising out of the computation of senior debt service
coverage and operating cash flow as of May 31, 1996 for the
Preceding six months and paid a waiver fee of $20,000.
These amendments and waivers to the Credit Agreement were
necessitated because (1) the general and administrative expenses
being incurred by USC exceeded those projected by the Company and
(2) the closing date of the acquisition was delayed beyond the
originally scheduled closing date.
Capital Expenditures
Capital expenditures for the six months ended June 30, 1996 totaled
$2,848,220, of which $900,115 was financed. The majority of these
capital expenditures relate to switching equipment acquired by
means of capital leases and network costs. 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. The Company
expects to use part of the proceeds of this Offering for capital
expenditures.
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
<PAGE>
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 fiscal quarters when compared with the other
fiscal quarters.
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.
<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 from the Company and NATC 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 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 alleging an unspecified amount of damages. On March 7,
1996, the plaintiff filed a general denial of such counterclaim.
The Company has filed a motion for summary judgment which is
currently being considered by the Court. In addition, an order has
been entered scheduling this matter for mandatory but nonbinding
mediation not later than September 6, 1996. A nonjury trial has
been scheduled for September 9, 1996.
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.
<PAGE>
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company on May
31, 1996, holders of 10,826,621 shares of the Company's Common
Stock were present in person or by proxy, constituting a quorum.
The proposals described below were voted on by such stockholders of
the Company as follows:
(1) A proposal to elect five (5) directors for a three-year term
or until their respective successors are elected and qualified
as follows: Igor I. Mamantov, Thomas L. Cunningham, John H.
Nugent, Howard F. Curd and Reuben F. Richards. Such Proposal
was approved as follows:
Nominee For Against Abstain
Igor I. Mamantov 10,690,444 21,110 31,690
Thomas L. Cunningham 10,708,444 3,110 31,690
John H. Nugent 10,689,594 21,960 31,690
Howard F. Curd 10,708,444 3,110 31,690
Reuben F. Richards 10,690,444 21,110 31,690
(2) A proposal to approve and adopt an amendment to the
Company's Certificate of Incorporation to effect a reverse
stock split. The proposal was approved as follows:
For Against Abstain
10,033,929 526,728 32,022
(3) A proposal to approve and adopt an amendment to the
Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock and Preferred
Stock. Such proposal was approved as follows:
For Against Abstain
9,412,370 628,029 26,451
(4) A proposal to approve and adopt certain amendments to the
Company's 1994 Employee Stock Option Plan. Such proposal was
approved as follows:
For Against Abstain
9,886,874 651,055 54,750
<PAGE>
(5) A proposal to ratify the Board of Director's appointment of
Price Waterhouse LLP as independent public accountants for
the Company for the fiscal year ending December 31, 1996.
Such proposal was approved as follows:
For Against Abstain
10,689,626 28,728 24,890
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Amendment of Certificate of Incorporation of
SA Telecommunications, Inc. filed with the Secretary of
State of Delaware on July 9, 1996*
3.2 Certificate of Elimination of Series B Cumulative
Convertible Preferred Stock of SA Telecommunications, Inc.
filed with the Secretary of State of Delaware on July 9,
1996*
4.1 Indenture dated as of August 12, 1996 between SA
Telecommunications, Inc. and United States Trust Company of
New York as Trustee*
10.1 Purchase Agreement dated as of August 5, 1996 among SA
Telecommunications, Inc., Furman Selz LLC and Rauscher
Pierce Refsnes, Inc.*
10.2 Registration Rights Agreement dated as of August 12, 1996
among SA Telecommunications, Inc., Furman Selz LLC and
Rauscher Pierce Refsnes, Inc.*
27.1 Financial Data Schedule*
_____________
* Filed herewith
(b) Reports on Form 8-K
The Company filed on May 28, 1996 a Current Report on Form 8-K
dated May 23, 1996 announcing the grant by the Public Utility
Commission of Texas to the Company's wholly-owned subsidiary,
U.S. Communications, Inc., of a Service Provider Certificate of
Authority to permit the resale of Southwestern Bell Telephone's
local telephone service in Texas. No financial statements were
filed.
In addition, the Company filed on July 3, 1996 a Current Report
on Form 8-K dated June 24, 1996 announcing the purchase from
Howard Maddera, William L. Johnson and Marianne Reed effective as
of June 14, 1996 of (1) all 125,000 outstanding shares of the
Company's Series B Cumulative Convertible Preferred Stock, (2)
warrants to purchase an aggregate of 1,050,000 shares of the
Company's Common Stock, (3) and promissory notes in an aggregate
principal amount outstanding of $3,150,000. The consideration
for such purchase consisted of an earlier cash payment of
$308,500 and the issuance of an aggregate of 843,023 shares of
the Company's Common Stock. No financial statements were filed.
<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: August 14, 1996 SA Telecommunications, Inc.
By: /s/ Jack W. Matz, Jr.
---------------------------
Jack W. Matz, Jr.
Chief Executive Officer
By: J. David Darnell
---------------------------
J. David Darnell
Vice President, Finance and
Chief Financial Officer
<PAGE>
INDEX OF EXHIBITS
No. Description
3.1 Certificate of Amendment of Certificate of Incorporation of
SA Telecommunications, Inc. filed with the Secretary of
State of Delaware on July 9, 1996*
3.2 Certificate of Elimination of Series B Cumulative
Convertible Preferred Stock of SA Telecommunications, Inc.
filed with the Secretary of State of Delaware on July 9,
1996*
4.1 Indenture dated as of August 12, 1996 between SA
Telecommunications, Inc. and United States Trust Company of
New York as Trustee*
10.1 Purchase Agreement dated as of August 5, 1996 among SA
Telecommunications, Inc., Furman Selz LLC and Rauscher
Pierce Refsnes, Inc.*
10.2 Registration Rights Agreement dated as of August 12, 1996
among SA Telecommunications, Inc., Furman Selz LLC and
Rauscher Pierce Refsnes, Inc.*
27.1 Financial Data Schedule*
_____________
* Filed herewith
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SA TELECOMMUNICATIONS, INC.
____________________
Pursuant to Section 242 of the
General Corporation Law of the
State of Delaware
____________________
SA TELECOMMUNICATIONS, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "DGCL"),
DOES HEREBY CERTIFY:
FIRST: On March 5, 1996, the Board of Directors of the
Corporation adopted resolutions which, among other things, set
forth a proposed amendment to the Certificate of Incorporation of
the Corporation, declaring said amendment advisable and submitting
it to the stockholders of the Company for their consideration. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that it is advisable that the Certificate
of Incorporation of the Corporation be amended by
striking Article 4 thereof and replacing therefor, in its
entirety, the following:
"4. The aggregate number of shares of
all classes of capital stock which the
Corporation shall have authority to issue is
Sixty Five Million (65,000,000) of which Fifty
Million (50,000,000) shares are common stock,
having a par value of $0.0001 per share (the
"Common Stock"), and Fifteen Million
(15,000,000) shares are preferred stock,
having a par value of $0.00001 per share (the
"Preferred Stock").
The Board of Directors is hereby
expressly vested with the authority to adopt a
resolution or resolutions providing for the
issue of authorized but unissued shares of
Preferred Stock and to divide the Preferred
Stock into such series as the Board of
Directors designates and to fix and determine
the relative rights and preferences of the
shares of any preferred series established to
the full extent permitted by the laws of the
State of Delaware and this Certificate of
Incorporation in respect to, among other
things, (a) the number of shares to constitute
a series and the distinctive designation
thereof, (b) the rate and preference of
dividends, if any, the time of payment of
dividends, whether dividends are cumulative
and the date from which any dividends begin
accruing,
<PAGE>
(c) whether shares may be redeemed and, if so,
the redemption price and the terms and
conditions of redemption, (d) the liquidation
preferences payable in the event of
involuntary or voluntary liquidation, (e)
sinking fund or other provisions, if any, for
the redemption or purchase of shares, (f) the
terms and conditions upon which shares may be
converted, if convertible, and (g) voting
rights, if any."
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the 1996 Annual Meeting of the Stockholders of said
Corporation was duly called and held on May 31, 1996, upon notice
in accordance with Section 222 of the DGCL at which meeting the
necessary number of shares required by statute were voted in favor
of the amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, said SA TELECOMMUNICATIONS, INC. has
caused this Certificate to be signed by its President and its
Secretary this 28th day of June, 1996.
By: /s/ Jack W. Matz, Jr.
----------------------------
Jack W. Matz, Jr.
Chairman and Chief Executive
Officer
ATTEST: /s/ Lynn H. Johnson
-------------------
Lynn H. Johnson
Secretary
<PAGE>
Exhibit 3.2
CERTIFICATE OF ELIMINATION
OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.00001 PAR VALUE PER SHARE)
OF
SA TELECOMMUNICATIONS, INC.
____________________
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
____________________
SA TELECOMMUNICATIONS, INC., a Delaware corporation (the
"Corporation"), pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: A Certificate of Designations, Preferences and Rights
of the Series B Cumulative Convertible Preferred Stock, par value
$.00001 per share (the "Series B Preferred"), was previously filed
with the Secretary of State of the State of Delaware, which such
Certificate established certain rights, preferences and privileges
of such shares of Series B Preferred and authorized the issuance
thereof.
SECOND: No shares of the Series B Preferred are currently
outstanding.
THIRD: The Board of Directors of the Corporation has adopted
the resolutions attached as Appendix A hereto providing for the
retirement and cancellation of said shares of Series B Preferred.
FOURTH: No such shares of Series B Preferred will be issued
subject to the Certificate of Designations previously filed with
respect to such series of stock.
FIFTH: Upon the effectiveness of this Certificate of
Elimination, the Series B Preferred shall be deemed retired and all
matters set forth in the Certificate of Designations with respect
to such series of stock shall be deemed eliminated from the
Certificate of Incorporation of the Corporation.
IN WITNESS WHEREOF, said SA Telecommunications, Inc. has
caused this Certificate to be signed by Jack W. Matz, Jr., its
Chairman and Chief Executive Officer, and attested to by Lynn H.
Johnson, its Secretary, this 28th day of June, 1996.
SA TELECOMMUNICATIONS, INC.
ATTEST:
By: /s/ Jack W. Matz, Jr.
----------------------------
Jack W. Matz, Jr.
/s/ Lynn H. Johnson Chairman and Chief Executive
- ------------------------- Officer
Lynn H. Johnson
Secretary
<PAGE>
ANNEX A
WHEREAS, the Certificate of Incorporation of the Corporation
provides that the Corporation shall have the authority to issue
12,500,000 shares of preferred stock, par value $0.00001 per share
(the "Preferred Stock");
WHEREAS, the Certificate of Incorporation of the Corporation
also provides that the Board of Directors is authorized to provide
for the issuance of the Preferred Stock in one or more series and
to fix for each such series such voting powers, full or limited, or
no voting powers, and such designations, preferences and relative
participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by
the Board of Directors providing for the issuance of such series;
WHEREAS, pursuant to that Certificate of Designations, Powers,
Preferences and Rights of the Series B Cumulative Convertible
Preferred Stock filed with the Delaware Secretary of State on
August 1, 1995 (the "Certificate of Designation"), the Board of
Directors approved and authorized a series of 250,000 shares of
Preferred Stock of the Corporation, known and designated as Series
B Cumulative Convertible Preferred Stock (the "Series B Preferred
Stock");
WHEREAS, certain shares of the Series B Preferred Stock were
issued and later redeemed pursuant to the Certificate of
Incorporation of the Corporation and the General Corporation Law of
the State of Delaware.
NOW, THEREFORE, BE IT RESOLVED, that upon redemption of the
Series B Preferred Stock of the Corporation, the Corporation
should, and hereby does, retire the Series B Preferred Stock; and
be it
FURTHER RESOLVED, that the officers of the Corporation be, and
they hereby are, authorized, directed and empowered by and on
behalf of the Corporation to execute, acknowledge and file a
Certificate of Elimination of the Series B Preferred Stock with the
Delaware Secretary of State; and be it
FURTHER RESOLVED, that when such Certificate becomes
effective, it shall have the effect of amending the Certificate of
Incorporation of the Corporation so as to eliminate from the
Certificate of Incorporation all references to the Series B
Preferred Stock; and be it
FURTHER RESOLVED, that in addition to and without limiting the
foregoing, the appropriate officers of this Corporation be, and
each of them hereby is, authorized, empowered and directed to take
or cause to be taken, such further action and to execute and
deliver, or cause to be executed and delivered, for and in the name
and on behalf of this Corporation, all such instruments and
documents as such proper officer may deem appropriate in order to
effect the purpose and intent of the foregoing resolutions (as
conclusively evidenced by the taking of such action or the
execution and delivery of such instruments, as the case may be, by
or under the direction of any authorized officer), and all action
heretofore taken by the officers of the Corporation in connection
with the subject of the foregoing resolutions be, and it hereby is,
approved, ratified and confirmed in all respects as the act and
deed of this Corporation.
<PAGE>
Exhibit 4.1
- ----------------------------------------------------------------
SA TELECOMMUNICATIONS, INC.
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
------------------
INDENTURE
Dated as of August 12, 1996
------------------
$25,000,000
10% Convertible Notes Due 2006
- ----------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Indenture
Trust Indenture Act Section Section
- --------------------------- ---------
Section 310(a)(1). . . . . . . . . . . . . . . 8.10
(a)(2) . . . . . . . . . . . . . . . . 8.10
(a)(3) . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . 8.08; 8.10;
13.02
(c). . . . . . . . . . . . . . . . . . N.A.
Section 311(a) . . . . . . . . . . . . . . . . 8.11
(b). . . . . . . . . . . . . . . . . . 8.11
(c). . . . . . . . . . . . . . . . . . N.A.
Section 312(a) . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . . 13.03
(c). . . . . . . . . . . . . . . . . . 13.03
Section 313(a) . . . . . . . . . . . . . . . . 8.06
(b)(1) . . . . . . . . . . . . . . . . 8.06
(b)(2) . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . 8.06; 13.02
(d). . . . . . . . . . . . . . . . . . 8.06
Section 314(a) . . . . . . . . . . . . . . . . 5.02; 5.03;
13.02
(b). . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . 13.04
(c)(2) . . . . . . . . . . . . . . . . 13.04
(c)(3) . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . N.A.
(e). . . . . . . . . . . . . . . . . . 13.05
(f). . . . . . . . . . . . . . . . . . N.A.
Section 315(a) . . . . . . . . . . . . . . . . 8.01(b)
(b). . . . . . . . . . . . . . . . . . 8.05; 13.02
(c). . . . . . . . . . . . . . . . . . 8.01(a)
(d). . . . . . . . . . . . . . . . . . 8.01(c)
(e). . . . . . . . . . . . . . . . . . 7.11
Section 316(a)(last sentence). . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . . 7.05
(a)(1)(B). . . . . . . . . . . . . . . 7.04
(a)(2) . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . 7.07
(c). . . . . . . . . . . . . . . . . . N.A.
Section 317(a)(1). . . . . . . . . . . . . . . 7.08
(a)(2) . . . . . . . . . . . . . . . . 7.09
(b). . . . . . . . . . . . . . . . . . 2.04
Section 318(a) . . . . . . . . . . . . . . . . 13.01
_________________
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Article Section Heading Page
- ------- ------- ------- ----
1 DEFINITIONS AND INCORPORATION BY
REFERENCE
1.01 Definitions. . . . . . . . . . . . . . . 1
1.02 Other Definitions. . . . . . . . . . . . 9
1.03 Incorporation by Reference of
Trust Indenture Act. . . . . . . . . . 9
1.04 Rules of Construction. . . . . . . . . . 10
2 THE SECURITIES
2.01 Form and Dating. . . . . . . . . . . . . 10
2.02 Execution and Authentication . . . . . . 11
2.03 Registrar, Paying Agent, Conversion
Agent, New York Presenting Agent
and Securities Custodian . . . . . . . 14
2.04 Payment on Securities; Paying Agent
to Hold Money in Trust . . . . . . . . 14
2.05 Securityholder Lists . . . . . . . . . . 15
2.06 Transfer and Exchange. . . . . . . . . . 16
2.07 Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . 17
2.08 Outstanding Securities . . . . . . . . . 17
2.09 Treasury Securities. . . . . . . . . . . 18
2.10 Temporary Securities . . . . . . . . . . 18
2.11 Cancellation . . . . . . . . . . . . . . 18
2.12 Defaulted Interest . . . . . . . . . . . 19
2.13 Restrictive Legends. . . . . . . . . . . 19
2.14 Book-Entry Provisions for Global
Security . . . . . . . . . . . . . . . 21
2.15 Special Transfer Provisions. . . . . . . 23
2.16 CUSIP Number . . . . . . . . . . . . . . 25
3 REDEMPTION
3.01 Notices to Trustee . . . . . . . . . . . 26
3.02 Selection of Securities to Be
Redeemed . . . . . . . . . . . . . . . 26
3.03 Notice of Redemption . . . . . . . . . . 26
3.04 Effect of Notice of Redemption . . . . . 27
3.05 Deposit of Redemption Price. . . . . . . 28
3.06 Securities Redeemed in Part. . . . . . . 28
<PAGE>
4 REPURCHASE OF SECURITIES AT THE
OPTION OF THE HOLDERS UPON A
FUNDAMENTAL CHANGE
4.01 Repurchase upon Fundamental Change . . . 28
4.02 Notices, Etc.. . . . . . . . . . . . . . 29
4.03 Exercising Repurchase Right. . . . . . . 29
4.04 Certain Definitions. . . . . . . . . . . 30
5 COVENANTS
5.01 Payment of Securities. . . . . . . . . . 32
5.02 SEC Reports. . . . . . . . . . . . . . . 33
5.03 Compliance Certificate . . . . . . . . . 34
5.04 Corporate Existence. . . . . . . . . . . 34
5.05 Notice of Defaults . . . . . . . . . . . 34
5.06 Further Instruments and Acts . . . . . . 34
5.07 Limitation on Liens. . . . . . . . . . . 34
5.08 Limitation on Acquisitions . . . . . . . 35
5.09 Limitation on Restricted Payments. . . . 35
5.10 Limitation on Transactions
with Affiliates. . . . . . . . . . . . 36
5.11 Conduct of Business. . . . . . . . . . . 37
5.12 Limitation on Incurrence of
Subordinated Indebtedness. . . . . . . 37
6 SUCCESSORS
6.01 When Company May Merge, Etc. . . . . . . 38
7 DEFAULTS AND REMEDIES
7.01 Events of Default. . . . . . . . . . . . 39
7.02 Acceleration . . . . . . . . . . . . . . 40
7.03 Other Remedies . . . . . . . . . . . . . 40
7.04 Waiver of Past Defaults. . . . . . . . . 41
7.05 Control by Majority. . . . . . . . . . . 41
7.06 Limitation on Suits. . . . . . . . . . . 41
7.07 Rights of Holders to Receive
Payment. . . . . . . . . . . . . . . . 42
7.08 Collection Suit by Trustee . . . . . . . 42
7.09 Trustee May File Proofs of Claim . . . . 42
7.10 Priorities . . . . . . . . . . . . . . . 43
7.11 Undertaking for Costs. . . . . . . . . . 43
8 TRUSTEE
8.01 Duties of Trustee. . . . . . . . . . . . 44
8.02 Rights of Trustee. . . . . . . . . . . . 45
8.03 Individual Rights of Trustee . . . . . . 46
<PAGE>
8.04 Trustee's Disclaimer . . . . . . . . . . 46
8.05 Notice of Defaults . . . . . . . . . . . 46
8.06 Reports by Trustee to Holders. . . . . . 46
8.07 Compensation and Indemnity . . . . . . . 47
8.08 Replacement of Trustee . . . . . . . . . 48
8.09 Successor Trustee, Agents by
Merger, Etc. . . . . . . . . . . . . . 49
8.10 Eligibility; Disqualification. . . . . . 50
8.11 Preferential Collection of Claims
Against Company. . . . . . . . . . . . 50
8.12 Compliance with Tax Laws . . . . . . . . 50
9 DISCHARGE OF INDENTURE
9.01 Termination of Company's
Obligations. . . . . . . . . . . . . . 50
9.02 Application of Trust Money . . . . . . . 51
9.03 Repayment to Company . . . . . . . . . . 51
9.04 Indemnity for Government
Obligations. . . . . . . . . . . . . . 52
9.05 Reinstatement. . . . . . . . . . . . . . 52
10 AMENDMENTS, SUPPLEMENTS AND WAIVERS
10.01 Without Consent of Holders . . . . . . . 52
10.02 With Consent of Holders. . . . . . . . . 53
10.03 Compliance With Trust Indenture Act. . . 54
10.04 Revocation and Effect of Consents. . . . 55
10.05 Notation on or Exchange of
Securities . . . . . . . . . . . . . . 55
10.06 Trustee to Sign Amendments, Etc. . . . . 55
11 CONVERSION
11.01 Conversion Privilege . . . . . . . . . . 56
11.02 Conversion Procedure . . . . . . . . . . 56
11.03 Fractional Shares. . . . . . . . . . . . 57
11.04 Taxes on Conversion. . . . . . . . . . . 57
11.05 Company to Provide Stock . . . . . . . . 58
11.06 Adjustment for Change in Capital
Stock. . . . . . . . . . . . . . . . . 58
11.07 Adjustment for Rights Issue. . . . . . . 59
11.08 Adjustment for Certain Distributions . . 60
11.09 Adjustment for All Cash Distribution . . 60
11.10 Adjustment for Tender or Exchange
Offer. . . . . . . . . . . . . . . . . 61
11.11 Current Market Price . . . . . . . . . . 62
11.12 When Adjustment May Be Deferred. . . . . 63
<PAGE>
11.13 Stockholder Rights Plan. . . . . . . . . 63
11.14 When No Adjustment Required. . . . . . . 63
11.15 Notice of Adjustment . . . . . . . . . . 64
11.16 Voluntary Reduction. . . . . . . . . . . 64
11.17 Notice of Certain Transactions . . . . . 64
11.18 Consolidation, Merger of the Company
or Transfer or Lease . . . . . . . . . 65
11.19 Company Determination Final. . . . . . . 66
11.20 Trustee's Disclaimer . . . . . . . . . . 66
12 REPURCHASE OF SECURITIES AT THE OPTION
OF THE HOLDERS UPON AN INCURRENCE EVENT
12.01 Repurchase upon an Incurrence
Event. . . . . . . . . . . . . . . . . 66
12.02 Notices, Etc.. . . . . . . . . . . . . . 67
12.03 Exercising Repurchase Right. . . . . . . 67
13 MISCELLANEOUS
13.01 Trust Indenture Act Controls . . . . . . 68
13.02 Notices. . . . . . . . . . . . . . . . . 69
13.03 Communications by Holders With
Other Holders. . . . . . . . . . . . . 69
13.04 Certificate and Opinions as to
Conditions Precedent . . . . . . . . . 70
13.05 Statements Required in Certificate
or Opinion . . . . . . . . . . . . . . 70
13.06 Rules by Trustee and Agents. . . . . . . 70
13.07 Legal Holidays . . . . . . . . . . . . . 70
13.08 Governing Law. . . . . . . . . . . . . . 71
13.09 No Recourse Against Others . . . . . . . 71
13.10 Successors . . . . . . . . . . . . . . . 71
13.11 Counterpart Originals. . . . . . . . . . 71
13.12 Severability . . . . . . . . . . . . . . 71
13.13 No Adverse Interpretation of
Other Agreements . . . . . . . . . . . 71
14 CORPORATE OBLIGATION ONLY
14.01 Indenture and Securities Solely
Corporate Obligations. . . . . . . . . 71
SIGNATURES
EXHIBIT A - FORM OF SECURITY
EXHIBIT B - FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS
EXHIBIT C - FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
________________
* This Table of Contents shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE>
INDENTURE dated as of August 12, 1996, between SA
TELECOMMUNICATIONS, INC., a Delaware corporation ("Company"), and
UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking
corporation ("Trustee").
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders
of the Company's 10% Convertible Notes Due 2006 ("Securities"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Additional Permitted Indebtedness" means any
Indebtedness incurred by the Company or its Subsidiaries, as the
same may be amended, modified, renewed, refunded, replaced or
refinanced from time to time, where the aggregate principal
amount of borrowings available or Indebtedness outstanding
thereunder does not exceed (i) 85% of the consolidated inventory
and accounts receivable (excluding accounts receivable subject to
third party accounts receivable billing arrangements or overdue
for more than 90 days) of the Company and its Subsidiaries
determined on a pro forma basis as if any acquisition or
disposition of stock or assets to be made on or about the time of
any required calculation of Additional Permitted Indebtedness had
occurred plus (ii) the product of (a) consolidated revenues of
the Company and its Subsidiaries for the most recent six-month
period for which financial statements are available, calculated
in accordance with GAAP (except for the absence of footnotes and
subject to normally recurring year-end audit adjustments) and
determined on a pro forma basis as if any acquisition or
disposition of stock or assets had occurred at the beginning of
such six-month period and (b) 2/3.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company. For the purposes of this definition,
"control" when used with respect to any specified Person means
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion
Agent, New York Presenting Agent or Co-Registrar.
<PAGE>
"Beneficial Holder" shall mean each participant in the
Depository who holds an interest in a Security as indicated in
the Participants List (provided, however, that the Trustee shall
be under no duty to make any inquiry regarding the accuracy of
the Participants List).
"Board of Directors" or "Board" means the Board of
Directors of the Company or any duly authorized committee of the
Board.
"Business Day" means any day that is not a Legal
Holiday.
"Capital Lease Obligations" of any Person means, at the
time any determination thereof is to be made, the amount of the
liability in respect of a capital lease for property leased by
such Person that would at such time be required to be capitalized
on the balance sheet of such Person in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
corporate stock or other equity participations, including
partnership interests, whether general or limited, of such
Person, including any capital stock that has preferential rights
to any other capital stock with respect to dividends or
redemption or upon liquidation.
"Common Stock" has the meaning provided in Section
11.01.
"Company" means the party named as such above until a
successor replaces it pursuant to the applicable provisions
hereof and thereafter means the successor.
"Consolidated Interest Expense" means, with respect to
any period, the sum, without duplication, of (i) the interest
expense of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP
consistently applied, including, without limitation,
(a) amortization of debt discount (other than debt discount in
relation to debentures to be redeemed from the proceeds of the
Offering), (b) the net payments, if any, under interest rate
agreements (including amortization of discounts), (c) the
interest portion of any deferred payment obligation and
(d) accrued interest, plus (ii) the interest component of all
Capital Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and its Subsidiaries during such
<PAGE>
period (other than the interest component relating to up to
$2 million of Capital Lease Obligations of the Company and its
Subsidiaries), and all capitalized interest of the Company and
its subsidiaries, in each case as determined on a consolidated
basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any
period, the net income (or loss) of the Company and its
Subsidiaries, on a consolidated basis, determined in accordance
with GAAP consistently applied, minus (i) extraordinary net gains
and net net gains realized on any sale or disposition of assets
during such period, minus (ii) the portion of net income (or
loss) of the Company and its subsidiaries allocable to interests
in unconsolidated Persons, except to the extent of the amount of
dividends or distributions actually paid in cash to the Company
or its subsidiaries by such Person during such period, minus
(iii) the net income of any Person combined with the Company or
any of its subsidiaries on a "pooling-of-interests" basis
attributable to any period prior to the date of combination.
"Default" means any event which is, or after notice or
passage of time would be, an Event of Default.
"Depository" means, with respect to the Securities
issuable or issued in whole or in part as a Global Security, the
Person specified in Section 2.03 as the Depository with respect
to the Securities, until a successor shall have been appointed
and become such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include
such successor.
"Disqualified Capital Stock" means that portion of any
Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an
event which would constitute a Fundamental Change), matures
(excluding any maturity as the result of an optional redemption
by the issuer thereof) or is mandatorily redeemable, pursuant to
a sinking fund obligation or otherwise, or is redeemable at the
sole option of the holder thereof (except, in each case, upon the
occurrence of a Fundamental Change) on or prior to the final
maturity date of the Securities.
"GAAP" means, as of any date, generally accepted
accounting principles in the United States and not including any
interpretations or regulations that have been proposed but that
have not become effective.
<PAGE>
"Holder" or "Securityholder" means the Person in whose
name a Security is registered on the Registrar's books.
"Indebtedness" means, with respect to any Person,
without duplication, and whether or not contingent, (i) all
indebtedness of such Person for borrowed money or which is
evidenced by a note, bond, debenture or similar instrument,
(ii) all obligations of such Person in respect of letters of
credit or bankers' acceptances issued or created for the account
of such Person, (iii) all liabilities secured by any consensual
Lien (including capital leases and Liens arising in connection
with purchase money debt) on any property owned by such Person
even if such Person has not assumed or otherwise become liable
for the payment thereof to the extent of the lesser of the amount
of the debt secured thereby or the value of the property subject
to such Lien, (iv) all Disqualified Capital Stock issued by such
Person after the date hereof (other than any Series A Cumulative
Convertible Preferred Stock of the Company issued as a pay-in-
kind dividend pursuant to the terms of the Company's Series A
Cumulative Convertible Preferred Stock outstanding on the date of
the Indenture), and (v) to the extent not otherwise included, any
guarantee by such Person of any other Person's indebtedness or
other obligations described in clauses (i) through (iv) above.
"Indebtedness" of the Company and its Subsidiaries shall not
include trade payables (including, without limitation,
obligations under third party accounts receivable billing
agreements) incurred in the ordinary course of business and
payable in accordance with customary practices and non-interest
bearing installment obligations and accrued liabilities incurred
in the ordinary course of business and any current liability for
federal, state, local or other taxes and inter-company
indebtedness among the Company and its Subsidiaries.
"Indenture" means this Indenture, as amended or
supplemented from time to time.
"Independent Director" means non-management directors
of any Person.
"Issue Date" means August 12, 1996, the date of
original issuance of the Securities.
"Liens" means any lien, mortgage, deed of trust,
pledge, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention
agreement, any lease in the nature thereof and any agreement to
give any security interest).
<PAGE>
"Officer" means the Chairman and Chief Executive
Officer, the President, any Vice President, the Chief Financial
Officer, the Controller or the Secretary or Assistant Secretary
of the Company.
"Officers' Certificate" means a certificate signed by
two Officers. See Sections 13.04 and 13.05.
"Operating Cash Flow" means, with respect to any
period, the net income (or loss) of the Company and its
Subsidiaries on a consolidated basis, determined in accordance
with GAAP consistently applied, plus, without duplication,
(i) extraordinary net losses and net losses realized on any sale
or other disposition of assets during such period, to the extent
such losses were deducted in computing net income (or loss), plus
(ii) provision for taxes based on income or profits, to the
extent such provision for taxes was included in computing such
net income (or loss), and any provision for taxes utilized in
computing the net losses under clause (i) hereof, plus
(iii) Consolidated Interest Expense of the Company and its
subsidiaries for such period, plus (iv) depreciation,
amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges were
deducted in computing such net income (or loss) (including
amortization of goodwill and other intangibles).
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company. See Sections 13.04 and
13.05.
"Over-Allotment Option" means the option granted by the
Company to Furman Selz LLC and Rauscher Pierce Refsnes, Inc. to
purchase up to $3,750,000 aggregate principal amount of
additional Securities pursuant to the Purchase Agreement, dated
August 5, 1996, between such parties, the Company and certain
subsidiaries of the Company.
"Participants List" means the position listings showing
Persons that have a beneficial interest in the Securities
evidenced by the Global Security held by the Depository and the
amount of such interest, but only to the extent that a copy
thereof is furnished by the Depository to the Trustee.
"Permitted Liens" means (i) Liens securing purchase
money debt; (ii) Liens arising in connection with capital leases;
(iii) Liens in favor of the Company or any Subsidiary of the
Company; (iv) Liens to secure debt of any Person which merges
<PAGE>
with or into or consolidates with or is otherwise acquired by the
Company or any Subsidiary of the Company or debt encumbering any
asset acquired by the Company or any Subsidiary of the Company,
in either case which debt was not incurred in anticipation of,
and was outstanding prior to, such merger, consolidation or
acquisition; (v) Liens outstanding on the date of this Indenture;
(vi) Liens in favor of the Trustee under this Indenture and any
Liens securing the Securities; (vii) Liens in connection with any
Additional Permitted Indebtedness, including interest rate
agreements related thereto; (viii) Liens for taxes, assessments,
governmental charges or claims which are not yet delinquent or
which are being contested in good faith by appropriate
proceedings, if a reserve is maintained to the extent required by
GAAP; (ix) other Liens incidental to the conduct of the Company's
and its Subsidiaries' business or the ownership of its property
and assets not securing any debt for borrowed money, and which do
not in the aggregate materially detract from the value of the
Company's and its Subsidiaries' property or assets when taken as
a whole, or materially impair the use thereof in the operation of
its business; (x) Liens incurred or pledges and deposits made in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of statutory
obligations (including to secure government contracts);
(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, and other obligations of like nature
(including appeal, surety and performance bonds) incurred in the
ordinary course of business (exclusive of obligations for the
payment of borrowed money); (xii) zoning restrictions,
servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course
of business which, in the aggregate, do not materially detract
from the value of the property subject thereto or interfere in
any material respect with the ordinary conduct of the business of
the Company or its Subsidiaries; (xiii) Liens arising out of
judgments or awards against the Company or any of its
Subsidiaries with respect to which the Company or such Subsidiary
is prosecuting an appeal or proceeding for review and the Company
or such Subsidiary is maintaining adequate reserves to the extent
required by GAAP; (xiv) any interest or title of a lessor in the
property subject to any lease other than a capital lease; and
(xv) any statutory warehousemen's, materialmen's, mechanic's,
carrier's, supplier's, vendor's or other similar Lien for sums
not then due and payable (or which, if due and payable, are being
contested in good faith and with respect to which adequate
reserves are being maintained to the extent required by GAAP).
"Permitted Liens" shall also include the extension, renewal,
amendment, refinancing or refunding of debt secured by any
Permitted Lien set forth above, except that in the case of the
<PAGE>
extension, renewal, amendment, refinancing or refunding of any
debt secured by a Lien under clause (iv) or (v) of this
definition, such Lien does not extend to any other property not
contemplated by the terms of such existing Lien and the principal
amount of debt so secured is not increased.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Pro Forma Interest Coverage" means, with respect to
any date of determination, the ratio of (i) Operating Cash Flow
for the most recent full fiscal quarter ending on or immediately
prior to such date, determined on a pro forma basis as if any
acquisition or disposition of stock or assets had occurred at the
beginning of such quarter, to (ii) Consolidated Interest Expense
for the most recent full fiscal quarter ending on or immediately
prior to such date, determined on a pro forma basis in the case
of each of clauses (i) and (ii) as if any obligations of the
Company or its subsidiaries incurred or repaid during such
quarter had been incurred or repaid at the beginning of such
quarter, to the extent any such obligation gives rise to
Consolidated Interest Expense.
"Quoted Prices" of the Common Stock means the last sale
price regular way or, in case no such sale takes place on such
day, the average of the closing bid and asked prices regular way,
in either case on the national securities exchange on which the
Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any national
securities exchange, the last sale price regular way or, in case
no such sale takes place on such day, the average of the highest
reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq
or a similar organization if Nasdaq is no longer reporting such
information, or if on any such Trading Day the Common Stock is
not quoted by any such organization, the average of the highest
reported bid and lowest reported asked prices as available in any
other over-the-counter market, or if on such Trading Day the
Common Stock is not reported in any such market, the fair value
of a share of Common Stock on such day, as determined in good
faith by, and evidenced by a resolution of, the Board of
Directors.
"Restricted Payment" means (i) any dividend or other
distribution declared or paid on any Capital Stock of the Company
(other than dividends or distributions payable solely in Capital
<PAGE>
Stock of the Company); (ii) any payment to purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the
Company, (iii) any principal payment on, purchase, defeasance,
redemption or other prepayment of any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes,
other than any such subordinate or junior Indebtedness which is
issued by the Company as part of the purchase consideration paid
to the seller of any stock, assets or property to the Company or
any of its subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above
issued, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Custodian" means United States Trust
Company of New York, as custodian with respect to the Global
Securities, or any successor entity thereto.
"Subsidiary" means a corporation, a majority of the
voting stock of which is owned, directly or indirectly, by the
Company or by one or more Subsidiaries, or by the Company and one
or more other Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended
and as in effect on the date of this Indenture, except to the
extent any amendment to the Trust Indenture Act expressly
provides for application of the Trust Indenture Act as in effect
on another date.
"Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday other than any day on which securities are
not traded on the principal exchange or market on which the
securities in question are traded.
"Trust Officer" means any officer or assistant officer
of the Trustee assigned by the Trustee to administer its
corporate trust matters.
"Trustee" means the party named as such above until a
successor replaces it pursuant to the applicable provisions
hereof and thereafter means the successor.
"USC" means U.S. Communications, Inc., a Texas
corporation acquired by the Company.
<PAGE>
SECTION 1.02 Other Definitions.
Defined
Term In Section
"Acquisition" . . . . . . . . . . . . . . . . . . . 5.08
"Annualized Revenues" . . . . . . . . . . . . . . . 5.08
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . 7.01
"Common Stock" . . . . . . . . . . . . . . . . . . . 11.01
"Company Notice" . . . . . . . . . . . . . . . . . . 4.02
"Conversion Agent" . . . . . . . . . . . . . . . . . 2.03
"Current Market Price" . . . . . . . . . . . . . . . 11.11
"Custodian" . . . . . . . . . . . . . . . . . . . . 7.01
"Entity" . . . . . . . . . . . . . . . . . . . . . . 5.08
"Event of Default" . . . . . . . . . . . . . . . . . 7.01
"Exchange Act" . . . . . . . . . . . . . . . . . . . 4.04
"Expiration Time". . . . . . . . . . . . . . . . . . 11.10
"Final Surrender Date" . . . . . . . . . . . . . . . 4.03
"Fundamental Change" . . . . . . . . . . . . . . . . 4.04
"Global Security". . . . . . . . . . . . . . . . . . 2.01
"Junior Capital Stock" . . . . . . . . . . . . . . . 4.04
"Legal Holiday" . . . . . . . . . . . . . . . . . . 13.07
"New York Presenting Agent" . . . . . . . . . . . . 2.03
"Non-Cash Consideration . . . . . . . . . . . . . . 5.08
"Paying Agent" . . . . . . . . . . . . . . . . . . . 2.03
"Person" . . . . . . . . . . . . . . . . . . . . . . 4.04
"Purchased Shares" . . . . . . . . . . . . . . . . . 11.10
"Record Date" . . . . . . . . . . . . . . . . . . . 11.07, 11.08
"Registrar" . . . . . . . . . . . . . . . . . . . . 2.03
"Repurchase Date" . . . . . . . . . . . . . . . . . 4.03
"Repurchase Price" . . . . . . . . . . . . . . . . . 4.01
"U.S. Government Obligations" . . . . . . . . . . . 9.01
"Voting Shares" . . . . . . . . . . . . . . . . . . 4.04
SECTION 1.03 Incorporation by Reference of Trust
Indenture Act. Whenever this Indenture refers to a provision of
the TIA, the provision is incorporated by reference in and made a
part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
<PAGE>
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Company
or any successor to the Company.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by Commission rule and not otherwise defined herein
have the meanings assigned to them therein.
SECTION 1.04 Rules of Construction. Unless the
context otherwise requires:
(1) A term has the meaning assigned to it;
(2) An accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles;
(3) "Or" is not exclusive;
(4) Words in the singular include the plural, and
words in the plural include the singular; and
(5) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
(6) Provisions apply to successive events and
transactions.
ARTICLE 2.
THE SECURITIES
SECTION 2.01 Form and Dating. The Securities and the
Trustee's certificate of authentication shall be substantially in
the form of Exhibit A hereto. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall
approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of
its authentication.
The terms and provisions contained in the Securities,
annexed hereto as Exhibit A, shall constitute, and are hereby
expressly made, a part of this Indenture and, to the extent
<PAGE>
applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A
shall be issued initially in the form of one or more permanent
global Securities in registered form, substantially in the form
set forth in Exhibit A (the "Global Security"), deposited with
the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Security
may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of permanent
certificated Securities in registered form in substantially the
form set forth in Exhibit A (the "Offshore Physical Securities").
Securities offered and sold in reliance on any other exemption
from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and
Securities offered and sold in reliance on Rule 144A may be
issued, in the form of permanent certificated Securities in
registered form, in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities"). The Offshore Physical
Securities and the U.S. Physical Securities are sometimes
collectively herein referred to as the "Physical Securities."
SECTION 2.02 Execution and Authentication. Two
Officers shall sign the Securities on behalf of the Company by
manual or facsimile signature.
If an Officer whose signature is on a Security no
longer holds that office at the time the Security is
authenticated, the Security shall nevertheless be valid.
A Security shall not be valid until authenticated by
the manual signature of the Trustee. The Trustee's signature
shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and make available for
delivery Securities for original issue in an aggregate principal
amount of $25,000,000 upon an Officers' Certificate without any
further action by the Company; provided, however, that in the
event that the Company sells any Securities pursuant to the
Over-Allotment Option granted pursuant to Section 3 of the
<PAGE>
Purchase Agreement, dated August 5, 1996, between the Company,
certain subsidiaries of the Company and the Initial Purchasers,
then the Trustee shall authenticate and deliver Securities for
original issue in an aggregate principal amount of $25,000,000
plus up to an additional $3,750,000 aggregate principal amount of
the Securities sold pursuant to the Over-Allotment Option upon an
Officers' Certificate without any further action by the Company.
The Officers' Certificate shall specify the amount of Securities
to be authenticated, the date on which the Securities are to be
authenticated and the aggregate principal amount of Securities
outstanding on the date of authentication, and shall further
specify the amount of such Securities to be issued as the Global
Security, Offshore Physical Securities or U.S. Physical
Securities. The aggregate principal amount of the Securities
outstanding at any time may not exceed the amount set forth
above, subject to the proviso set forth therein, except as
provided in Section 2.07.
The Trustee shall not be required to authenticate
Securities if the issuance of such Securities pursuant to this
Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture in a manner
which is not reasonably acceptable to the Trustee.
At any time when any of the Securities remain
outstanding, the Trustee may appoint an Authenticating Agent or
Agents with respect to the Securities which shall be authorized
to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer
or partial redemption thereof or pursuant to Section 2.07, and
Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. Any such
appointment shall be evidenced by an instrument in writing signed
by a Trust Officer of the Trustee, a copy of which instrument
shall be promptly furnished to the Company. Wherever reference
is made in this Indenture to the authentication and delivery of
Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed
on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall
at all times be a corporation organized and doing business under
the laws of the United States of America, any state thereof or
the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or
<PAGE>
examination by federal or state authority. If such
Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent for the Securities may resign
at any time by giving written notice thereof to the Trustee and
to the Company. The Trustee may at any time terminate the
agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating Agent
shall cease to be eligible in accordance with the provisions of
this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage
prepaid, to all Holders of Securities, as their names and
addresses appear in the Security register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as
an Authenticating Agent. No successor Authenticating Agent shall
be appointed unless eligible under the provisions of this
Section.
The Securities shall be issuable in fully registered
form only, without coupons, in denominations of $1,000 and any
integral multiple thereof.
<PAGE>
SECTION 2.03 Registrar, Paying Agent, Conversion
Agent, New York Presenting Agent and Securities Custodian. The
Company shall maintain an office or agency where Securities may
be presented for registration of transfer or exchange
("Registrar"), an office or agency where Securities may be
presented for payment ("Paying Agent") and an office or agency
where Securities may be presented for conversion ("Conversion
Agent"). The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may appoint one
or more Co-Registrars, one or more additional paying agents and
one or more additional conversion agents. The Company may act as
Registrar, Conversion Agent, Paying Agent or Co-Registrar. The
term "Paying Agent" includes any additional paying agent; the
term "Conversion Agent" includes any additional conversion agent.
The Company shall notify the Trustee of the name and address of
any Agent not a party to this Indenture and shall give the
Trustee at least thirty days' notice prior to changing the
Registrar, Paying Agent or Conversion Agent. If the Company
fails to maintain a Registrar, Paying Agent or Conversion Agent,
the Trustee shall act as such. The Company initially appoints
the Trustee as Paying Agent, Registrar and Conversion Agent.
If there is not at least one of each such Registrar or
Co-Registrar, Paying Agent and Conversion Agent located in the
Borough of Manhattan, City of New York, the Company shall also
maintain an office in the Borough of Manhattan, City of New York
where the securities may be presented for purposes of transfer
and exchange, payment and conversion (the "New York Presenting
Agent"). The Company initially appoints United States Trust
Company of New York, New York, New York, to serve as New York
Presenting Agent.
The Company initially appoints The Depository Trust
Company ("DTC") to act as Depository with respect to the Global
Securities.
The Company initially appoints United States Trust
Company of New York to act as Securities Custodian with respect
to the Global Securities.
SECTION 2.04 Payment on Securities; Paying Agent to
Hold Money in Trust. (a) Subject to the following provisions,
no later than 2:00 p.m., New York, New York time, on the due date
of principal of and premium, if any, and interest on the
Securities, the Company will pay to the Paying Agent in
immediately available funds the amounts, in money of the United
States that at the time of payment is legal tender for payment of
public or private debts, in the manner, at the times and for the
<PAGE>
purposes set forth herein and in the text of the Securities, and
the Company hereby authorizes and directs the Paying Agent from
funds so paid to it to make or cause to be made payment of the
principal of and premium, if any, and interest on the Securities
set forth herein and in the text of the Securities. The Paying
Agent will make payment, from the funds furnished by the Company,
of the principal of and premium, if any, and interest on the
Securities by wire transfer.
(b) Interest on a Security (other than defaulted
interest) shall be paid on each interest payment date to the
Holder thereof at the close of business on the relevant record
date specified in the Securities. Principal of and premium, if
any, on Securities shall be payable only against presentation and
surrender thereof at the principal office of the Paying Agent,
unless the Company shall have otherwise instructed the Trustee in
writing.
(c) The Company shall require each Paying Agent other
than the Trustee to agree in writing that the Paying Agent will
hold in trust for the benefit of Securityholders or the Trustee
all money held by the Paying Agent for the payment of principal
of or premium, if any, or interest on the Securities, and will
notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the
Trustee. If the Company acts as Paying Agent, it shall segregate
the money held by it for the payment of principal of and premium,
if any, and interest on the Securities and hold it as a separate
trust fund. The Company shall provide ten days' prior written
notice to the Trustee that it is to act as Paying Agent with
respect to such payment and the Trustee may rely on such notice.
The Company at any time may require a Paying Agent to pay all
money held by the Paying Agent to the Trustee. Upon doing so the
Paying Agent shall have no further liability for the money so
paid.
SECTION 2.05 Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of
Securityholders (the "Securities Register"). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee not
less than five Business Days prior to each interest payment date
and at such other times as the Trustee may reasonably request in
writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of
Securityholders.
<PAGE>
SECTION 2.06 Transfer and Exchange. Subject to the
provisions of Sections 2.13 and 2.14, when Securities are
presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other
authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its
requirements for such transaction are met; provided, however,
that the Securities presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfer and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at the
Registrar's or co-Registrar's request. No service charge shall
be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchanges or transfers pursuant
to Sections 2.10, 3.06, 4.03, 10.05 or 11.02, in which event the
Company shall be responsible for the payment of such taxes).
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Neither the Company nor the Registrar shall be required
(i) to issue, register the transfer of or exchange Securities
during a period beginning at the opening of business 15 days
before the day of any selection of Securities for redemption
under Section 3.02 and ending at the close of business on the day
of selection, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
Any Holder of the Global Security shall, by acceptance
of such Global Security, agree that transfers of beneficial
interests in such Global Securities may be effected only through
a book entry system maintained by the Holder of such Global
Security (or its agent), and that ownership of a beneficial
interest in the Security shall be required to be reflected in a
book entry.
<PAGE>
SECTION 2.07 Mutilated, Destroyed, Lost and Stolen
Securities. If any mutilated Security is surrendered to the
Trustee or the Company, together with such security, bond or
indemnity as may be required by the Company or the Trustee to
save each of them and any agent of either of them harmless, the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the destruction,
loss or theft of any Security and (ii) such security, bond or
indemnity in a form satisfactory to both of them to save each of
them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company
shall execute and the Trustee shall authenticate and deliver, in
lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
Notwithstanding the provisions of the previous
paragraphs of this Section 2.07, in case any such mutilated,
destroyed, lost or stolen Security has become or is about to
become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this
Section, the Company or the Trustee shall require the payment of
a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee), if any,
connected therewith.
Every new Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute
an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder. A new Security
shall have such legends as are on the old Security, unless the
Company provides otherwise.
SECTION 2.08 Outstanding Securities. The Securities
outstanding at any time are all Securities authenticated by the
Trustee (or an Authenticating Agent appointed pursuant to Section
<PAGE>
2.02) except for (i) Securities cancelled by the Trustee,
(ii) Securities delivered to the Trustee for cancellation,
(iii) reductions in the interests in the Global Security effected
by the Trustee hereunder, (iv) Securities for whose payment or
redemption money in the necessary amount has been previously
deposited with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for
the Holders of such Securities; provided that if such Securities
are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture and (v) Securities which have been
paid pursuant to Section 2.07 or in exchange for or in lieu of
which other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company; and those described in this Section
as not outstanding.
A Security does not cease to be outstanding because the
Company or an Affiliate holds the Security.
SECTION 2.09 Treasury Securities. In determining
whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or an Affiliate shall be
disregarded, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction,
waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded.
SECTION 2.10 Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and
execute and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Every temporary
Security shall be executed by the Company and authenticated by
the Trustee, and registered by the Registrar, upon the
conditions, and with like effect, as a definitive Security.
Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for
temporary Securities.
SECTION 2.11 Cancellation. The Company at any time
may deliver Securities to the Trustee for cancellation. The
Registrar, Paying Agent and Conversion Agent shall promptly
<PAGE>
forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange, payment or conversion. The
Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, conversion or cancellation and
may destroy cancelled Securities and deliver a certificate of
such destruction to the Company, unless the Company directs the
Trustee to deliver cancelled Securities to the Company. The
Company may not issue new Securities to replace Securities that
it has paid or delivered to the Trustee for cancellation or that
any Securityholder has converted pursuant to Article 11.
SECTION 2.12 Defaulted Interest. If the Company
defaults in a payment of interest on the Securities, it shall pay
the defaulted interest in any lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities are listed, if any. It may pay the defaulted
interest, plus any interest payable on the defaulted interest, to
the Persons who are Securityholders on a subsequent special
record date. The Company shall fix the record date and payment
date for the payment of any defaulted interest. At least 15 days
before the record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record
date, payment date and amount of interest to be paid.
SECTION 2.13 Restrictive Legends. Each Global
Security, Physical Security and certificates representing shares
of Common Stock issued upon conversion of a Security that
constitutes a Restricted Security shall bear the following legend
(the "Private Placement Legend") on the face thereof until
August 12, 1999, unless otherwise agreed by the Company and the
Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE
<PAGE>
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE
OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Security shall also bear the following
legend on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE
OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF
SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
<PAGE>
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.14 OF THE INDENTURE.
SECTION 2.14 Book-Entry Provisions
for Global Security.
(a) The Global Security initially shall (i) be
registered in the name of the Depository or the nominee of such
Depository, (ii) be delivered to the Trustee as custodian for
such Depository and (iii) bear legends as set forth in Sec-
tion 2.13.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Security held on their behalf by the Depository, or
the Trustee as its custodian, or under the Global Security, and
the Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the
Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or impair, as between the Depository and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Security.
(b) Transfers of the Global Security shall be limited
to transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in the Global Security may be transferred or exchanged for
Physical Securities in accordance with the rules and procedures
of the Depository and the provisions of Section 2.15. In
addition, Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in
the Global Security if (i) the Depository notifies the Company
<PAGE>
that it is unwilling or unable to continue as Depository for the
Global Security and a successor depositary is not appointed by
the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has
received a written request from the Depository to issue Physical
Securities.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in the Global Security to
beneficial owners pursuant to paragraph (b), the Registrar shall
(if one or more Physical Securities are to be issued) reflect on
its books and records the date and a decrease in the principal
amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire
Global Security to beneficial owners pursuant to paragraph (b),
the Global Security shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the
Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial
interest in the Global Security, an equal aggregate principal
amount of Physical Securities of authorized denominations.
(e) Any Physical Security constituting a Restricted
Security delivered in exchange for an interest in the Global
Security pursuant to paragraph (b) or (c) shall, except as
otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.15, bear the legend regarding transfer restrictions applicable
to the Physical Securities set forth in Section 2.13.
(f) The Holder of the Global Security may grant
proxies and otherwise authorize any Person, including Agent
Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take
under this Indenture or the Securities.
(g) None of the Company, the Trustee, the Registrar,
the Paying Agent or any agent of the Company or the Trustee will
have any responsibility or liability for (i) any aspect of the
records relating to or payments made on account of the beneficial
ownership interests of the Global Security by the Depository or
any of its participants, or for maintaining, supervising or
reviewing any records of the Depository or any of its
participants relating to the beneficial ownership interests of
<PAGE>
the Global Security, (ii) the payments to the beneficial owners
of the Global Security of amounts paid to the Depository or the
Depository's nominee or (iii) any other matter relating to the
actions and practices of the Depository or any of its
participants. Neither the Company nor the Trustee will be liable
for any delay by the Holder of the Global Security or the
Depository or any of its participants in identifying the
beneficial owners of the Securities, and the Company and the
Trustee may conclusively rely on, and will be protected in
relying on, instruction from the Global Security Registered Owner
or the Depository for all purposes (including with respect to the
registration and delivery, and the respective principal amounts,
of the Securities to be issued).
SECTION 2.15 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited
Investors and Non-U.S. Persons. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Security constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of
any Security constituting a Restricted Security, whether
or not such Security bears the Private Placement Legend,
if (x) the requested transfer is after August 12, 1999 or
(y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-
U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of
Exhibit B hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to
the Registrar a certificate substantially in the form of
Exhibit C hereto; and
(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in the Global Security,
upon receipt by the Registrar of (x) the certificate, if
any, required by paragraph (i) above and (y) instructions
given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer
of outstanding Physical Securities) a decrease in the principal
amount of the Global Security in an amount equal to the principal
amount of the beneficial interest in the Global Security to be
<PAGE>
transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Securities of
like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Security constituting a Restricted Security to a QIB
(excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Security
stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for
on the form of Security stating, or has otherwise advised
the Company and the Registrar in writing, that it is
purchasing the Security for its own account or an account
with respect to which it exercises sole investment
discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information
regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule
144A; and
(ii) if the proposed transferee is an Agent Member,
and the Securities to be transferred consist of Physical
Securities which after transfer are to be evidenced by an
interest in the Global Security, upon receipt by the
Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date
and an increase in the principal amount of the Global
Security in an amount equal to the principal amount of
the Physical Securities to be transferred, and the
Trustee shall cancel the Physical Securities so
transferred.
(c) Private Placement Legend. Upon the transfer,
exchange or replacement of Securities not bearing the Private
Placement Legend, the Registrar shall deliver Securities that do
not bear the Private Placement Legend. Upon the transfer,
<PAGE>
exchange or replacement of Securities bearing the Private
Placement Legend, the Registrar shall deliver only Securities
that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section
2.15 exist or (ii) there is delivered to the Registrar an Opinion
of Counsel reasonably satisfactory to the Company and the Trustee
to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(d) Applicability to Common Stock. The provisions and
requirements of this Section 2.15 shall apply equally to any
proposed transfers of shares of Common Stock issuable upon
conversion of the Securities, except that Sections 2.15(a)(ii)
and (b)(ii) shall be inapplicable and that the documentation
required to be delivered thereunder shall be so delivered to the
registrar for the Common Stock rather than the Registrar.
(e) General. By its acceptance of any Security
bearing the Private Placement Legend, each Holder of such a
Security acknowledges the restrictions on transfer of such
Security set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.14 or this Section 2.15. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
(f) Trustee Obligations. The Trustee shall have no
obligation or duty to monitor, determine or inquire as to
compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of
any interest in any Security (including any transfers between or
among Depository participants, members or beneficial owners in
any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the
terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements
hereof.
SECTION 2.16 CUSIP Number. The Company in issuing the
Securities may use a "CUSIP" number, and if so, the Trustee shall
use the CUSIP number in notices of redemption or exchange as a
<PAGE>
convenience to Holders; provided that no representation is hereby
deemed to be made by the Trustee as to the correctness or
accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company
shall promptly notify the Trustee of any change in the CUSIP
number.
ARTICLE 3.
REDEMPTION
SECTION 3.01 Notices to Trustee. If the Company
wishes to redeem Securities pursuant to paragraph 5 of the
Securities, it shall notify the Trustee of the redemption date
and the principal amount of Securities to be redeemed at least 45
days before the redemption date (unless a shorter notice shall be
satisfactory to the Trustee).
SECTION 3.02 Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed by lot or on a pro
rata basis from Securities outstanding and not previously called
for redemption (unless the Company specifically directs the
Trustee otherwise) or in such manner as complies with applicable
legal and securities exchange requirements, if any. The Trustee
shall make the selection (and provide the Company with written
notice of such selection and the Securities to be redeemed) at
least 40 days but not more than 60 days before the redemption
date. Securities and portions of them the Trustee selects for
redemption shall be in amounts of $1,000 or integral multiples of
$1,000. In the event that the Trustee is not the Registrar, the
Registrar shall provide to the Trustee such information as the
Trustee may reasonably request to implement the selection.
Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
redemption.
SECTION 3.03 Notice of Redemption. At least 30 days
but not more than 60 days before a redemption date, the Company
shall mail a notice of redemption to the Trustee and each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed
and shall state:
(1) the redemption date;
<PAGE>
(2) the redemption price;
(3) the CUSIP number;
(4) the conversion price;
(5) the name and address of the Paying Agent and
Conversion Agent;
(6) that Securities called for redemption may be
converted at any time before the close of business on the
tenth calendar day immediately preceding the redemption
date, or if such day is not a Business Day, then the close
of business on the next succeeding day which is a Business
Day;
(7) that Holders who want to convert Securities must
satisfy the requirements set forth in paragraph 8 of the
Securities;
(8) that Securities called for redemption must be
surrendered to the Paying Agent in order to collect the
redemption price;
(9) that interest on Securities called for redemption
ceases to accrue on and after the redemption date, and the
amount of interest accrued on the Securities called for
redemption up to but not including the redemption date; and
(10) if less than all of any Security is to be
redeemed, the principal amount of such Security to be
redeemed.
Upon ten days' prior notice to the Trustee (or such
shorter notice as shall be satisfactory to the Trustee), the
Company may request that the Trustee mail the notice of
redemption (prepared by the Company) in the Company's name and at
its expense.
SECTION 3.04 Effect of Notice of Redemption. Once
notice of redemption is mailed, Securities called for redemption,
unless theretofore converted into Common Stock pursuant to the
terms of this Indenture, shall become due and payable on the
redemption date at the redemption price. Upon surrender to the
Paying Agent, such Securities shall be paid at the redemption
price, plus accrued interest to the redemption date; provided,
however, that any regular semi-annual payment of interest
becoming due on the redemption date shall be payable to the
<PAGE>
Holder of any such Security as provided in paragraph 2 of the
Securities.
SECTION 3.05 Deposit of Redemption Price. No later
than 2:00 p.m., New York, New York time, on the redemption date,
the Company shall deposit in immediately available funds with the
Paying Agent money sufficient to pay the redemption price of and
interest accrued to the redemption date on all Securities to be
redeemed on that date other than Securities or portions thereof
called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation. The Paying Agent
shall return to the Company any money not required for that
purpose because of conversion of Securities.
If the Company complies with the preceding paragraph,
then, unless the Company defaults in the payment of such
redemption price, interest on the Securities to be redeemed will
cease to accrete or accrue, as the case may be, on and after the
applicable redemption date, whether or not such Securities are
presented for payment. If any Security called for redemption
shall not be so paid upon surrender thereof for redemption, the
principal, premium, if any, and, to the extent lawful, accreted
or accrued interest thereon, as the case may be, shall, until
paid, bear interest from the redemption date at the rate provided
in the Securities.
SECTION 3.06 Securities Redeemed in Part. Upon
surrender to the Trustee of a Security that is redeemed in part,
the Company shall execute and the Trustee shall authenticate for
the Holder a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
ARTICLE 4.
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDERS UPON A FUNDAMENTAL CHANGE
SECTION 4.01 Repurchase upon Fundamental Change. The
Company covenants and agrees that, in the event that there occurs
a Fundamental Change (as defined in Section 4.04(b) hereof), each
Holder will have the right, at such Holder's option, to require
the Company to repurchase all, or any portion that is an integral
multiple of $1,000, of such Holder's Securities on the Repurchase
Date (as defined in Section 4.03 below) selected as provided
below at a repurchase price which is equal to 100% of the
principal amount of such Securities plus accrued interest to the
Repurchase Date.
<PAGE>
The Company shall comply with the requirements of
Rule 13e-4 and Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the
repurchase of Securities pursuant to this Article 4. To the
extent the provisions of any securities laws or regulations
conflict with the provisions under this Article 4, the Company
shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under
this Article 4 by virtue thereof.
SECTION Notices, Etc. Unless the Company shall
have theretofore called for redemption all the outstanding
Securities, on or before the 30th day after the occurrence of a
Fundamental Change, the Company shall deliver to the Trustee and
mail to each Holder at such Holder's address appearing in the
Securities register a written notice (the "Company Notice")
describing the occurrence of the Fundamental Change and of the
repurchase right set forth herein arising as a result thereof, as
well as stating the final date by which the Securities must be
surrendered for repurchase, the conversion price then in effect,
the Repurchase Date, the repurchase price and the procedure which
the Holder must follow to elect repurchase. If requested by the
Company upon ten days' prior written notice (or such shorter
notice as shall be satisfactory to the Trustee), the Trustee
shall, in the name of the Company and at its expense, mail the
Company Notice to each Holder. The Company shall also cause a
copy of such notice of the repurchase right to be sent at least
once to the Dow Jones News Service or similar business service in
the United States. The Trustee shall not be deemed to have
knowledge of the occurrence of a Fundamental Change until it
receives written notice thereof from the Company.
No failure of the Company to give the foregoing notices
or defect therein shall limit any Holder's right to exercise a
repurchase right or affect the validity of the proceedings for
the repurchase of Securities.
SECTION 4.03 Exercising Repurchase Right. (a) To
elect repurchase of any Securities or portion thereof, the Holder
will be required to surrender, on or before the Final Surrender
Date (as defined below), to the Trustee, such Security duly
endorsed or assigned to the Company or in blank, together with
written notice of the Holder's election to have the Company
repurchase all or any $1,000 portion of such Security specified
in such notice. Election of repurchase by a Holder shall be
irrevocable. "Final Surrender Date" shall mean the date which
is, subject to any contrary requirements of applicable law, 60
<PAGE>
days after the date of mailing of the Company Notice.
"Repurchase Date" shall mean the date selected by the Company for
the repurchase of the Securities that is not less than 10 and not
more than 30 days after the Final Surrender Date.
(b) In the event a repurchase right shall be exercised
in accordance with the terms hereof, the Company shall pay or
cause to be paid the repurchase price in cash to the Holder on
the Repurchase Date; provided, however, that installments of
interest that mature on or prior to the Repurchase Date shall be
payable in cash to the Holders of such Securities, registered as
such at the close of business on the relevant record date
specified in the Securities according to the terms and provisions
of Article 2. No later than 2:00 p.m., New York, New York time,
on the Repurchase Date, the Company shall deposit with the
Trustee in immediately available funds an amount equal to the
aggregate repurchase price of all Securities or portions thereof
accepted for payment.
(c) If any Security surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal amount which
is payable at maturity shall, until the repurchase price (as
calculated at the date of payment) is paid, continue to bear
interest from the Repurchase Date at the rate borne by the
Security and each such Security shall continue to remain
convertible into Common Stock until said repurchase price shall
have been paid to the Holder or duly provided for by deposit with
the Paying Agent in immediately available funds without
restriction.
(d) Any Security which is to be repurchased only in
part shall be surrendered to the Trustee (with, if the Company or
the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unrepurchased portion of
the principal of the Security so surrendered.
SECTION 4.04 Certain Definitions. For purposes of
this Article:
(a) The term "Junior Capital Stock" shall mean capital
stock of the Company that does not rank prior, as to the
payment of dividends or as to the distribution of assets
<PAGE>
upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, to shares of capital stock of
any other class of the Company;
(b) The term "Fundamental Change" shall mean any of
the following:
(i) a "Person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) other
than a Permitted Holder, becoming the "beneficial
owner" (as defined in Rule l3d-3 under the Exchange
Act) of Voting Shares (as defined below) of the Company
entitled to exercise more than 50% of the total voting
power of all outstanding Voting Shares of the Company
(including any Voting Shares that are not then
outstanding of which such Person or group is deemed the
beneficial owner) for purposes of Rule 13d-3; or
(ii) a change in the Board of Directors in which
the individuals who constituted the Board of Directors
at the beginning of the two-year period immediately
preceding such change (together with any other director
whose election by the Board of Directors or whose
nomination for election by the shareholders of the
Company was approved by a vote of at least a majority
of the directors then in office who either were
directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority
of the directors then in office; or
(iii) any consolidation of the Company with, or
merger of the Company into, any other Person, any
merger of another Person into the Company, or any sale
or transfer of all or substantially all of the assets
of the Company to another Person in a single
transaction or series of related transactions (other
than (x) a merger which does not result in any
reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock, (y) a merger
which is effected solely to change the jurisdiction of
incorporation of the Company or (z) any consolidation
with or merger of the Company into a wholly owned
subsidiary of the Company, or any sale or transfer by
the Company of all or substantially all of its assets
to one or more of its wholly owned subsidiaries, in any
one transaction or a series of transactions, provided,
<PAGE>
in any such case, that the resulting corporation or
each such subsidiary assumes or guarantees the
Company's obligations under the Securities); provided,
however, that a Fundamental Change shall not occur with
respect to any such transaction if either (i) the last
sale price of the Common Stock for any five Trading
Days during the ten Trading Days immediately preceding
the public announcement by the Company of such
transaction is at least equal to 105% of the conversion
price in effect on such Trading Day, (ii) the
consideration in such transaction to the holders of
Common Stock consists of cash, securities that are, or
immediately upon issuance will be, listed on a national
securities exchange or quoted on the Nasdaq National
Market, or a combination of cash and such securities,
and the aggregate fair market value of such
consideration (which, in the case of such securities,
shall be equal to the average of the last sale prices
of such securities during the ten consecutive Trading
Days commencing with the sixth Trading Day following
consummation of the transaction) is at least 105% of
the conversion price in effect on the date immediately
preceding the closing date of such transaction, or
(iii) in the case of a merger or consolidation, the
stockholders of the Company immediately prior to the
date of such transaction continue to beneficially own a
majority of the Voting Shares of the surviving entity;
(c) The term "Person" shall include any syndicate or
group which would be deemed to be a "Person" under
Section 13(d)(3) of the Exchange Act as in effect on the
date of the original execution of this Indenture;
(d) The term "Voting Shares" shall mean all
outstanding shares of any class or classes (however
designated) of Junior Capital Stock entitled to vote
generally in the election of members of the Board of
Directors; and
(e) The term "Permitted Holder" means Jack W. Matz,
Jr. or his Affiliates.
ARTICLE 5.
COVENANTS
SECTION 5.01 Payment of Securities. The Company shall
pay the principal of and premium, if any, and interest on, the
<PAGE>
Securities on the dates and in the manner provided in the
Securities and this Indenture. Principal, premium, if any, and
interest shall be considered paid on the date due if the Paying
Agent (other than the Company) holds on that date money
sufficient to pay all principal, premium, if any, and interest
then due and that is immediately available on such date for
payment to the Holders.
The Company shall pay interest on overdue principal and
premium, if any, at the rate per annum borne by the Securities;
it shall pay interest on overdue installments of interest at the
same rate per annum to the extent lawful.
SECTION 5.02 SEC Reports. The Company shall deliver
to the Trustee, within 15 days after it files them with the
Commission, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of
the foregoing as the Commission may be rules and regulations
prescribe) which the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act
within the time periods prescribed under such rules and
regulations. Notwithstanding that the Company may not be subject
to or required to remain subject to, the reporting requirements
of Section 13 or 15(d) of the Exchange Act or otherwise report on
an annual and quarterly basis on forms provided for such annual
and quarterly reporting pursuant to rules and regulations
promulgated by the Commission, the Company shall continue to file
with the Commission and provide to the Trustee such annual and
interim reports (each including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by
the Company's certified independent accountants) on Forms 10-K
and Q, respectively, as the Company would be required to file
were it subject to such reporting requirements within the time
periods prescribed under such rules and regulations, and all
reports that would be required to be filed with the Commission on
Form 8-K if the Company were required to file such reports. The
Company shall not be obligated to file any such reports with the
Commission if the Commission does not permit such filings but
shall remain obligated to provide such reports to the Trustee and
the Holders within the periods of time referred to above. The
Company shall provide to any Holder of Securities any information
reasonably requested by the Holder concerning the Company
(including financial statements) necessary in order to permit
such Holder to transfer Securities in accordance with Rule 144A
promulgated under the Securities Act. In addition, the Company
shall cause its annual reports to shareholders and any quarterly
or other financial reports furnished by it to shareholders
<PAGE>
generally to be filed with the Trustee and mailed at the expense
of the Company no later than the date such materials are mailed
or made available to the Company's shareholders, to the Holders
at their addresses as set forth in the register of Securities
maintained by the Registrar. Upon qualification of this
Indenture under the TIA, the Company also shall comply with the
provisions of TIA Section 314(a).
SECTION 5.03 Compliance Certificate. The Company
shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company a brief certificate from the
principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Indenture. For purposes of this Section 5.03, such compliance
shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. The first
certificate pursuant to this Section shall be for the year ending
on December 31, 1996.
SECTION 5.04 Corporate Existence. Subject to Article
6, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchise;
provided, however, that the Company shall not be required to
preserve any such right or franchise if the Board of Directors
shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect
to the Holders.
SECTION 5.05 Notice of Defaults. In the event that
indebtedness for borrowed money of the Company in an amount in
excess of $10,000,000 is accelerated because of the occurrence of
any default under such indebtedness, the Company will promptly
give written notice to the Trustee of such failure or
acceleration, as the case may be, or of the occurrence of an
event which, with the giving of notice or the passage of time, or
both, would entitle the holder or holders of such indebtedness to
declare such indebtedness due and payable before its maturity.
SECTION 5.06 Further Instruments and Acts. Upon
request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably
necessary to carry out more effectively the purposes of this
Indenture.
<PAGE>
SECTION 5.07 Limitation on Liens. The Company will
not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any Liens (other than Permitted Liens) of any
kind against or upon any of their respective property or assets,
or any proceeds therefrom, unless (i) in the case of Liens on
property, assets or proceeds securing Indebtedness that is
expressly subordinate or junior in right of payment to the
Securities, the Securities are secured by a Lien on such
property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Securities are equally and
ratably secured.
SECTION 5.08 Limitation on Acquisitions. The Company
will not, and will not permit any Subsidiary to, acquire (by
merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or any
division, operating unit, line of business or subdivision thereof
(each an "Entity"), in a single transaction or series of related
transactions (an "Acquisition"), for total consideration in
excess of $2,000,000 unless the fair market value at the time of
entering into such transaction (as evidenced by, in the case of
consideration other than cash or Common Stock of the Company
("Non-Cash Consideration"), (i) a resolution of the Board of
Directors of the Company set forth in an Officers' Certificate
delivered to the Trustee if the fair market value of such Non-
Cash Consideration is less than or equal to $1,000,000 or (ii) an
opinion issued by a nationally recognized investment banking
firm, nationally recognized telecommunications industry
consultant or nationally recognized independent public accounting
firm if the fair market value of such Non-Cash Consideration is
greater than $1,000,000) of the total consideration given for
such Acquisition is less than 200% of the Annualized Revenues of
the Entity acquired. "Annualized Revenues" for any such Entity
shall mean the product of (i) revenues of such Entity for the
most recent fiscal quarter for which financial statements are
available, calculated on a basis consistent with such Entity's
most recent audited annual statements (except for the absence of
footnotes and subject to normally recurring year-end audit
adjustments) or, if not available, actual billings for such
period, as certified to the Trustee either by an officer of the
Company or an officer of the Entity or the Seller of the Entity
and (ii) four.
SECTION 5.09 Limited on Restricted Payments. The
Company will not, and will not permit any Subsidiary to, directly
or indirectly, make any Restricted Payment, unless at the time of
and immediately after giving effect to the proposed Restricted
Payment (with the value of any such Restricted Payment, if other
<PAGE>
than cash, to be determined by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by
a resolution of the Board of Directors (including a majority of
the Independent Directors) set forth in an Officers' Certificate
delivered to the Trustee, (i) no Default or Event of Default (and
no event that, after notice or lapse of time, or both, would
become an "event of default" under the terms of any Indebtedness
of the Company or its Subsidiaries) shall have occurred and be
continuing or would occur as a consequence thereof, and (ii) the
aggregate amount of all Restricted Payments made after the Issue
Date shall not exceed the sum of (a) 50% of cumulative
Consolidated Net Income of the Company (or if cumulative
Consolidated Net Income is a loss, less 100% of such loss) from
the Issue Date to the last day of the full fiscal quarter for
which financial information is available (but in no event ending
more than 135 days prior to the date of such proposed Restricted
Payment), plus (b) the aggregate amount of all net cash proceeds
received after the Issue Date by the Company from the issuance
and sale (other than to a Subsidiary) of Capital Stock (other
than Disqualified Capital Stock).
The foregoing provisions will not prohibit (a) so long
as there is no Default or Event or Default continuing, the
payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment
would have been permitted under this Indenture, and such payment
shall be deemed to have been paid on such date of declaration for
purposes of clause (ii) of the preceding paragraph, (b) the
application of the net proceeds of the issuance of the Securities
to exercise the Company's option to purchase approximately
843,023 shares of Common Stock from former shareholders of USC
and to redeem $2.21 million aggregate principal amount and
accrued but unpaid interest of the Company's 9% Convertible
Subordinated Debentures due on March 7, March 18, April 10 or
June 21, 1997, (c) the payment of dividends on, or the redemption
or repurchase of, the 166,667 shares of the Company's Series A
Cumulative Convertible Preferred Stock outstanding on March 31,
1996, and any additional shares of Series A Preferred Stock,
issued as pay-in-kind dividends thereon, (d) the repurchase at
below then current fair market value (based on the average
closing price of the Common Stock for the twenty trading days
preceding such repurchase) of employee and director options or
shares in accordance with the Company's stock option plans or
agreements related thereto, (e) pay cash in lieu of fractional
shares for stock splits, reverse stock splits and
recapitalizations and upon conversions of Capital Stock or the
Securities or (f) redeem, repurchase of otherwise prepay up to
<PAGE>
$300,000 of subordinated Indebtedness of the Company outstanding
on the date of the Indenture.
SECTION 5.10 Limitation of Transactions with
Affiliates. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Subsidiary of the Company)
unless (i) such transaction or series of transactions is on terms
that are no less favorable to the Company or such Subsidiary, as
the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third
party, and (ii) the Company delivers to the Trustee (a) an
Officers' Certificate certifying that such transaction or series
of related transactions complies with clause (i) above and with
respect to any transaction or series of transactions involving
aggregate payments in excess of $500,000, an Officers'
Certificate certifying that such transaction or series of related
transactions has been approved by a majority of the members of
the Board of Directors of the Company and approved by a majority
of the Independent Directors. Notwithstanding the foregoing,
this provision will not apply to (i) employment agreements or
compensation or employee benefit arrangements with any officer,
director or employee of the Company entered into in the ordinary
course of business on customary terms (including customary
benefits thereunder), (ii) any transaction entered into by or
among the Company or one of its subsidiaries with one or more
subsidiaries of the Company, (iii) payment of reasonable and
customary fees to directors of the Company who are not employees
of the Company and the payment of reasonable and customary
compensation for director and Board of Director observer fees,
meeting expenses, insurance premiums and indemnities to the
extent permitted by law, and (iv) issuance and repurchase of
stock options (and shares of Capital Stock upon exercise thereof)
pursuant to stock options plans and agreements related thereto
and loans or advances to employees for relocation or travel
expenses in the ordinary course of business on customary terms.
SECTION 5.11 Conduct of Business. The Company and its
Subsidiaries will not engage in any businesses which are not the
same, similar, ancillary, complementary or related to the
businesses in which the Company and its Subsidiaries are engaged
on the date of the Indenture.
SECTION 5.12 Limitation on Incurrence of Subordinated
Indebtedness. The Company will not issue any Indebtedness
<PAGE>
subordinate or junior in right of payment to the Notes that
matures, or requires any mandatory payment of principal, prior to
120 days after the final maturity of the Notes, other than any
such subordinate or junior Indebtedness which is issued by the
Company as part of the purchase consideration paid to the seller
of any stock, assets or property to the Company or any of its
Subsidiaries.
ARTICLE 6.
SUCCESSORS
SECTION 6.01 When Company May Merge, Etc. The Company
shall not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its
assets to, any Person unless:
(1) the Company is the surviving Person or that Person
is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia or a
corporation or comparable legal entity organized under the
laws of a foreign jurisdiction and whose equity securities
are listed on a national securities exchange in the United
States or authorized for quotation on the Nasdaq National
Market;
(2) that Person assumes by supplemental indenture
executed and delivered to the Trustee, in form satisfactory
to the Trustee, all the obligations of the Company under the
Securities and this Indenture, except that it need not
assume the obligations of the Company as to conversion of
Securities if pursuant to Section 11.18 the Company or
another Person enters into a supplemental indenture
obligating it to deliver securities, cash or other assets
upon conversion of Securities;
(3) immediately after giving effect to such
transaction, no Default shall have occurred and be
continuing; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, transfer or lease
and such supplemental indenture comply with this Article and
that all conditions precedent herein provided for related to
such transaction have been complied with.
<PAGE>
The surviving, transferee or lessee corporation shall
be the successor Company. Upon compliance with these provisions
by a successor or transferee corporation or entity the Company
shall be released from its obligations under this Indenture and
the Securities.
ARTICLE 7.
DEFAULTS AND REMEDIES
SECTION 7.01 Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in the payment of interest on
any Security when the same becomes due and payable and the
Default continues uncured for a period of 30 days;
(2) the Company defaults in the payment of (A)
principal of or premium, if any, on any Security when the
same becomes due and payable, whether at maturity, upon
redemption or otherwise, or (B) the Repurchase Price in
respect of any Security when due;
(3) the Company fails to comply with any of its other
covenants or agreements set forth in this Indenture and the
Default continues for the period and after the notice
specified below;
(4) the Company defaults with respect to any
indebtedness for borrowed money of the Company, which
default results in acceleration of any such indebtedness
which is in an amount of in excess of $10,000,000;
(5) the Company pursuant to or within the meaning of
any Bankruptcy Law (as defined below):
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian
(as defined below) of it or for all or substantially
all of its property, or
(D) makes a general assignment for the benefit of
its creditors; or
<PAGE>
(6) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case,
(B) appoints a Custodian of the Company or for
all or substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for
90 consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
A Default under clause (3) above is not an Event of
Default until the Trustee or, subject to Section 2.09, the
Holders of at least 25% in principal amount of the Securities
notify the Company in writing of the Default and the Company does
not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default". When a
Default is cured, it ceases to exist.
SECTION 7.02 Acceleration. If any Event of Default
described in Section 7.01(1) through (4) occurs and is
continuing, the Trustee, by written notice to the Company, or,
subject to Section 2.09, the Holders of at least 25% in aggregate
principal amount of the outstanding Securities, by written notice
to the Company and the Trustee, may declare the principal of and
accrued interest on all Securities to be due and payable. Upon
such declaration such principal and interest shall be due and
payable immediately. If any Event of Default described in
Section 7.01(5) or (6) occurs the principal of and accrued
interest on all Securities shall automatically become due and
payable, without any action required of the Trustee or the
Holders. Subject to Section 2.09, the Holders of a majority in
principal amount of the Securities by written notice to the
Trustee may rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration, if the rescission would not conflict
with any judgment or decree of a court of competent jurisdiction,
<PAGE>
and if all payments (including fees and expenses) due to the
Trustee have been paid.
SECTION 7.03 Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal or the Repurchase
Price of or premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if the
Trustee does not possess any of the Securities or does not
produce any of them in the proceeding. A delay or omission by
the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the
Event of Default. To the extent permitted by law. no remedy is
exclusive of any other remedy and all remedies are cumulative.
SECTION 7.04 Waiver of Past Defaults. Subject to
Sections 2.09, 7.07 and 10.02, the Holders of a majority in
aggregate principal amount of the Securities by written notice to
the Trustee may waive an existing Default and its consequences
except a Default in the payment of the principal of or premium,
if any, or interest on any Security as specified in clauses (1)
and (2) of Section 7.01 or a Default under Article 11. When a
Default is waived, it is cured and ceases to exist. This
Section 7.04 shall be in lieu of TIA Section 316(a)(1)(B), and
TIA Section 316(a)(1)(B) is hereby expressly excluded from this
Indenture and Section, as permitted by the TIA.
SECTION 7.05 Control by Majority. Subject to Section
2.09, the Holders of a majority in aggregate principal amount of
the Securities may direct in writing the time, method and place
of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, is unduly prejudicial to
the rights of another Securityholder, or would expose the Trustee
to liability or expense for which it has not been offered
indemnity satisfactory to it in its sole discretion. This
Section 7.05 shall be in lieu of TIA Section 316(a)(1)(A), and
TIA Section 316(a)(1)(A) is hereby expressly excluded from this
Indenture and Section, as permitted by the TIA.
SECTION 7.06 Limitation on Suits. A Securityholder
may pursue any remedy with respect to this Indenture or the
Securities only if:
<PAGE>
(1) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(2) the Holders of at least 25% in principal amount of
the Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee
indemnity satisfactory to the Trustee against any loss,
liability or expense to be, or which may be, incurred by the
Trustee in pursuing the remedy;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer of
indemnity; and
(5) during such 60-day period the Holders of a
majority in principal amount of the Securities do not give
the Trustee a direction in writing inconsistent with the
request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or
priority over another Securityholder.
SECTION 7.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of the principal of and premium,
if any, and interest on the Security on or after the respective
due dates expressed in the Security, and to convert such Security
in accordance with Article 11, or to bring suit for the
enforcement of any such payment on or after such respective due
dates and such right to convert, is absolute and unconditional
and shall not be impaired or affected without the consent of the
Holder.
SECTION 7.08 Collection Suit by Trustee. If an Event
of Default specified in Section 7.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole
amount of principal, premium, if any, Repurchase Price, if any,
and interest remaining unpaid together with interest on overdue
principal and premium, if any, and on the principal amount of any
Security for which the Repurchase Price is overdue, and, to the
extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the rate per
annum set forth in the title of the Securities, and the amounts
provided for in Section 8.07 hereof.
<PAGE>
SECTION 7.09 Trustee May File Proofs of Claim. The
Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the
claims of the Trustee and the Securityholders allowed in any
judicial proceeding relative to the Company, its creditors or its
property.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities
or the rights of any holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such
proceedings.
Any Custodian is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and its counsel, and any other amounts
due the Trustee under Section 8.07.
SECTION 7.10 Priorities. If the Trustee collects any
money or property pursuant to this Article 7, it shall pay out
the money or property in the following order:
First: to the Trustee for amounts due under
Section 8.07 or any other provision of this Indenture;
Second: to Securityholders for amounts due and unpaid
on the Securities for principal, premium, if any, and
interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the
Securities for principal, premium, if any, and interest,
respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for
any payment to Securityholders pursuant to this Section 7.10.
SECTION 7.11 Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in
any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the
costs of the suit, and the court in its discretion may assess
<PAGE>
reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee,
a suit by a Holder pursuant to Section 7.07, or a suit by a
Holder or Holders of more than 10% in aggregate principal amount
of the Securities then outstanding.
ARTICLE 8.
TRUSTEE
SECTION 8.01 Duties of Trustee. (a) If to the
knowledge of a Trust Officer of the Trustee an Event of Default
has occurred and is continuing, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of
Default:
(1) The Trustee need perform only those duties that
are specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture, but need not
verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
paragraph (b) of this Section.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
<PAGE>
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a written direction received by it pursuant
to Section 7.05.
(4) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c)
of this Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law
and need not be invested except as agreed to by the Trustee.
SECTION 8.02 Rights of Trustee. Subject to
Section 8.01:
(a) The Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the
proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of
Counsel. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) The Trustee may consult with counsel reasonably
acceptable to the Trustee, which may be counsel to the
Company, and the advice or opinion of such counsel as to
<PAGE>
matters of law shall be full and complete authorization and
protection in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to ascertain or
inquire as to the performance or observance of any
covenants, conditions or agreements on the part of the
Company under this Indenture; but the Trustee may make
further inquiry as to the performance of the covenants,
conditions and agreements aforesaid.
(g) The Trustee shall not be required to give any bond
or surety in respect of the execution of its trusts and
powers or in respect of this Indenture.
SECTION 8.03 Individual Rights of Trustee. Subject to
Sections 8.10 and 8.11 and TIA SectionSection 310 and 311, the
Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the
Company or an Affiliate with the same rights the Trustee would
have if it were not Trustee. Any Agent may do the same with like
rights.
SECTION 8.04 Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Securities, shall
not be accountable for the Company's use of the proceeds from the
sale of the Securities or the use or application of any money
received by any Paying Agent other than the Trustee, and shall
not be responsible for any statement of the Company in this
Indenture or in any document issued in connection with the sale
of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 8.05 Notice of Defaults. If a Default occurs
and is continuing and if it is known to a Trust Officer of the
Trustee, the Trustee shall mail to each Securityholder, at the
name and address which appear in the Securities Register, a
notice of the Default within 90 days after the Default occurs.
Except in the case of a Default in payment of the principal of or
premium, if any, or interest on any Security, the Trustee may
withhold the notice if and so long as its board of directors, the
executive committee, or a trust committee of its directors and/or
responsible officers in good faith determines that withholding
the notice is in the interests of Securityholders. The Trustee
shall not be deemed to have notice of any Default or Event of
Default other than as described in clauses (1) or (2) of Section
7.01 unless it shall have received written notice thereof from
<PAGE>
the Company or any Securityholder, or a Trust Officer has actual
knowledge thereof. This Section 8.05 shall be in lieu of the
proviso to TIA Section 315(B), and such proviso to TIA Section
315(B) is hereby expressly excluded from this Indenture and
Section, as permitted by the TIA.
SECTION 8.06 Reports by Trustee to Holders. If
required by TIA Section 313(a), within 60 days after each April 1
beginning with the April 1 following the date of this Indenture,
the Trustee shall mail to each Securityholder a report dated as
of such April 1 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing
to Securityholders shall also be mailed to the Company and shall
be filed with the SEC and each stock exchange, if any, on which
the Securities are listed.
The Company shall promptly notify the Trustee in
writing if the Securities become listed on any stock exchange or
of any delisting thereof.
SECTION 8.07 Compensation and Indemnity. The Company
shall from time to time pay to the Trustee reasonable
compensation for its services. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee, within
45 days after receiving request therefor, for all reasonable out-
of-pocket disbursements, fees and expenses incurred by the
Trustee in connection with the performance of its duties under
this Indenture, including without limitation those incurred in
connection with the enforcement of any remedy hereunder or the
interpretation of any provision hereunder. Such expenses include
the reasonable compensation and reasonable out-of-pocket expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold
it harmless against, any loss or liability, including, without
limitation, reasonable fees and expenses of counsel, incurred by
it in connection with this Indenture, except those arising out of
its gross negligence or willful misconduct. The Trustee shall
promptly notify the Company of any claim for which the Trustee
may seek indemnity, including costs and expenses of defending
itself against any claim for liability arising from the exercise
or performance of any of its powers or duties hereunder. The
failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder unless such failure
results in the forfeiture by the Company of substantive rights or
<PAGE>
defenses. The Company will be entitled to participate in any
proceeding and, to the extent that it may wish, to assume the
defense thereof, at its expense, with counsel reasonably
satisfactory to the Trustee; provided, however, that if (i) the
use of counsel chosen by the Company to represent the Trustee
would present such counsel with a conflict of interest, (ii) the
defendants in any such action include both the Company and the
Trustee and the Trustee shall have been advised by counsel that
there may be one or more legal defenses available to it that are
different from or additional to those available to the Company,
or (iii) the Company shall not have employed counsel reasonably
satisfactory to the Trustee to represent the Trustee within a
reasonable time after receipt by the Company of notice of the
institution of such action, then, in each such case, the Company
shall not have the right to direct the defense of such action on
behalf of the Trustee and the Trustee shall have the right to
select separate counsel to defend such action at the Company's
expense. If the Company assumes the defense in any such
proceeding and the Trustee elects to have separate counsel
participate in such proceeding, except as otherwise provided by
this paragraph, the Trustee shall be solely responsible for the
fees and expenses of such counsel.
The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through its
gross negligence or bad faith.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on
all money or property held or collected by the Trustee, except
that held in trust to pay principal of, premium, if any, and
interest on particular Securities.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 7.01(5) or (6)
occurs, the expenses and the compensation for such services are
intended to constitute expenses of administration under any
Bankruptcy Law.
Notwithstanding any provision hereof to the contrary,
the Trustee's lien shall not be subordinated to that of Senior
Indebtedness.
SECTION 8.08 Replacement of Trustee. A resignation or
removal of the Trustee and appointment of a successor Trustee
shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
<PAGE>
The Trustee may resign by giving not less than 30 days
prior written notice to the Company specifying its intention to
resign and specifying the expected date of such resignation. The
Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee and the Company.
The Company may remove the Trustee:
(1) if the Trustee fails to comply with Section 8.10;
(2) if the Trustee is adjudged a bankrupt or an
insolvent;
(3) if a receiver or other public officer takes charge
of the Trustee or its property;
(4) if the Trustee becomes incapable of acting; or
(5) upon 30 days prior written notice from the Company
specifying such removal.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in
principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the Securities may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 8.10, any
Securityholder or Beneficial Holder may petition any court of
competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon the retiring Trustee shall transfer all property held
by it as Trustee to the successor Trustee (subject to the lien
provided for in Section 8.07), the resignation or removal of the
retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the
<PAGE>
Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Securityholders.
Notwithstanding the replacement of the Trustee pursuant
to this Section, the Company's obligations under Section 8.07
shall continue for the benefit of the retiring Trustee.
SECTION 8.09 Successor Trustee, Agents by Merger, Etc.
If the Trustee or any Agent consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee or Agent,
as the case may be.
SECTION 8.10 Eligibility; Disqualification. This
Indenture shall always have a Trustee who satisfies the
requirement of TIA SectionSection 310(a)(1) and 310(a)(5). The
Trustee (or in the case of a corporation included in a bank
holding company system, the related bank holding company) shall
have a combined capital and surplus of at least $50,000,000 as
set forth in its most recent published annual report of condition
and maintain a corporate trust office in the Borough of
Manhattan, City of New York. In addition, if the Trustee is a
corporation included in a bank holding company system, the
Trustee, independently of such bank holding company, shall meet
the capital requirements of TIA Section 310(a)(2). The Trustee
shall comply with TIA Section 310(b).
SECTION 8.11 Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a),
excluding any creditor relationship listed in TIA Section 311(b).
A Trustee who has resigned or been removed shall be subject to
TIA Section 311(a) to the extent indicated therein.
SECTION 8.12. Compliance with Tax Laws. The Paying
Agent hereby agrees to comply with all U.S. Federal income tax
information reporting and withholding requirements with respect
to payments of premium (if any) and interest on the Securities.
The Company shall provide to the Paying Agent such information as
the Paying Agent shall reasonably request in order to comply with
such requirements.
ARTICLE 9.
DISCHARGE OF INDENTURE
SECTION 9.01 Termination of Company's Obligations.
The Company may terminate all of its obligations under this
Indenture if:
<PAGE>
(a)(1) the Securities mature within one year or all of
them are to be called for redemption (and the Securities are
redeemable) within one year and arrangements satisfactory to
the Trustee are made with respect to the giving of the
notice of redemption; and
(2) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations sufficient to
pay, when due, the principal of and premium, if any, and
interest on the Securities to maturity or redemption, as the
case may be. The Company may make such deposit only during
the one-year period referred to in paragraph (1) above and
only if Article 12 permits it; or
(b) all securities previously authenticated and
delivered (other than destroyed, lost or stolen Securities
which have been replaced or paid or Securities for whose
payment money or securities have theretofore been held in
trust and thereafter repaid to the Company, as provided in
Section 9.03) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it
hereunder.
However, the obligations in Sections 2.03, 2.04, 2.05,
2.06, 2.07, 5.01, 8.07, 8.08, 9.03, 9.04 and 9.05 and in Article
11 shall survive until the Securities are no longer outstanding.
Thereafter the obligations in Sections 8.07, 9.03 and 9.04 shall
survive.
After a termination of the Company's obligations in
accordance with this Section, the Trustee upon receipt of an
Officers' Certificate and Opinion of Counsel shall acknowledge in
writing the discharge of the Company's obligations under this
Indenture except for those surviving obligations specified above.
In order to have money available on a payment date to
pay principal of and premium, if any, or interest on the
Securities, the U.S. Government Obligations shall be payable as
to principal or interest on or before such payment date in such
amounts as will provide the necessary money.
"U.S. Government Obligations" means direct obligations
of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
SECTION 9.02 Application of Trust Money. The Trustee
shall hold in trust money or U.S. Government Obligations
<PAGE>
deposited with it pursuant to Section 9.01. It shall apply the
deposited money and the money from U.S. Government Obligations
through the Paying Agent and in accordance with this Indenture to
the payment of principal of and premium, if any, and interest on
the Securities.
SECTION 9.03 Repayment to Company. The Trustee and
the Paying Agent shall promptly pay to the Company upon request
any excess money or securities held by them at any time.
Subject to the requirements of applicable law, the
Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or
premium, if any, or interest that remains unclaimed for two
years; provided, however, that before making any such repayment,
the Trustee or such Paying Agent shall, if the Company so
requests and at the expense of the Company, cause to be published
once a week for two successive weeks, in each case on any day of
the week, in an authorized newspaper in the Borough of Manhattan,
The City of New York, or mail to each such Holder, a notice (in
such form as may be deemed appropriate by such Trustee or Paying
Agent) that said monies remain unclaimed and that, after a date
named therein, which shall not be less than 30 days from the date
of such publication or mailing, any unclaimed balance of said
monies then remaining will be returned to the Company. After
payment to the Company, Securityholders entitled to the money
must look to the Company for payment as general creditors unless
an applicable abandoned property law designates another Person.
SECTION 9.04 Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee and each
Securityholder against any tax, fee or other charge imposed on or
assessed against deposited U.S. Government Obligations or the
principal and interest received on such obligations.
SECTION 9.05 Reinstatement. If the Trustee is unable
to apply any money or United States Government Obligations in
accordance with Section 9.01 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such
application, then, and only then, the Company's obligations under
this Indenture and the Securities shall be revived and reinstated
as though no deposit had occurred pursuant to Section 9.01 until
such time as the Trustee is permitted to apply all such money or
United States Government Obligations in accordance with Section
9.01; provided, however, that if the Company has made any payment
of interest on or principal of any Securities because of the
reinstatement of its obligations, the Company shall be subrogated
<PAGE>
to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations
held by the Trustee.
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01 Without Consent of Holders. The Company
and the Trustee may amend or supplement this Indenture or the
Securities without the consent of any Securityholder:
(1) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the
benefit of the Holders of the Securities or to surrender any
right or power herein conferred upon the Company; or
(3) to add to or change any provisions of this
Indenture to such extent as shall be necessary to permit or
facilitate the issuance of Securities in bearer form,
registrable or not registrable as to principal, and with or
without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities; or
(5) to cure any ambiguity or defect in and to correct
or supplement any provision in this Indenture or any
Security that may be inconsistent with any other provision
in this Indenture or in the Security, or to make any other
provisions with respect to matters or questions arising
under this Indenture; provided, however, that any such
action pursuant to this clause (5) shall not adversely
affect the interests of the Holders of Securities in any
material respect; or
(6) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to
effect qualification of this Indenture under the TIA and to
add to this Indenture such other provisions as may be
expressly permitted by the TIA.
<PAGE>
SECTION 10.02 With Consent of Holders. The Company
and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities, and the
Holders of a majority in aggregate principal amount of the
Securities may waive compliance by the Company with any provision
of this Indenture or the Securities. However, without the
consent of each Securityholder affected, an amendment, supplement
or waiver under this Section may not:
(1) change the stated maturity date of the principal
of, or interest on, any Security or adversely affect the
right of a Holder to convert any Security;
(2) reduce the principal amount of, or premium, if
any, or interest on, any Security;
(3) change the currency for payment of principal of,
or interest on, any Security;
(4) impair the right to institute suit for the
enforcement of any payment on or with respect to any
Security;
(5) reduce the amount of Securities whose Holders must
consent to an amendment or supplement of this Indenture or
the waiver of defaults or compliance hereunder;
(6) make any change in Section 7.04, 7.07 or this
Section 10.02 (second sentence); or
(7) amend, modify or change in any material respect
the obligation of the Company to offer to repurchase the
Securities in the event of a Fundamental Change or an
Incurrence Event or modify any of the provisions or
definitions with respect thereto after a Fundamental Change
or an Incurrence Event, as the case may be, has occurred.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof. The
Company may establish, by delivery of an Officers' Certificate to
the Trustee, a record date for determining Securityholders of
record entitled to give any consent or waiver.
After an amendment or supplement under this Section
becomes effective, the Company shall mail to Securityholders a
<PAGE>
notice briefly describing the amendment or supplement. Any
failure of the Company to mail each such notice, or any defect
therein, shall not, however, in any way impair or affect the
validity of any amendment or supplemental indenture.
SECTION 10.03 Compliance with Trust Indenture Act.
From the date on which this Indenture is qualified under the TIA,
every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect; provided,
however, that in no event shall this Section 10.03 be deemed by
itself to require that this Indenture or the Trustee be qualified
under the TIA or constitute an admission or acknowledgment by any
party hereto that any such qualification is required prior to the
time this Indenture and the Trustee are required by the TIA to be
so qualified.
SECTION 10.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent
by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is
not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to such Security or portion of a
Security if a Trust Officer of the Trustee receives the notice of
revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or
waiver. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every
Securityholder. Notwithstanding the foregoing, if a record date
has been established for the purpose of determining
Securityholders entitled to consent, such written notice of
revocation must be signed by the Securityholder of record as of
the record date or his duly appointed proxy.
SECTION 10.05 Notation on or Exchange of Securities.
The Trustee may place an appropriate notation relating to an
amendment, supplement or waiver on any Security thereafter
authenticated. The Company in exchange for all Securities may
issue, and the Trustee shall authenticate, new Securities that
reflect the amendment, supplement or waiver. Failure to make
such notation or issue such new Securities shall have no effect
on such amendment, supplement or waiver.
SECTION 10.06 Trustee to Sign Amendments, Etc. In
executing, or accepting the additional trusts created by, any
<PAGE>
supplemental indenture permitted by this Article or Section 11.18
or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject
to Section 8.01) shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate stating that the
execution of such supplemental indenture is authorized or
permitted by this Indenture.
The Trustee shall sign any amendment or supplement
authorized pursuant to this Article if the amendment or
supplement does not adversely affect the rights of the Trustee.
If the amendment or supplement does adversely affect the
Trustee's rights, the Trustee may, but need not, sign it.
ARTICLE 11.
CONVERSION
SECTION 11.01 Conversion Privilege. A Holder of a
Security may convert it into fully paid and non-assessable shares
of Common Stock at any time during the period, and subject to the
terms, stated herein and in paragraph 8 of the Securities. The
number of shares issuable upon conversion of a Security is
determined by dividing the principal amount to be converted by
the conversion price in effect on the conversion date, and
rounding the result to the nearest 1/l00th of a share.
The initial conversion price is stated in paragraph 8
of the Securities. The conversion price is subject to adjustment
as provided in this Article 11.
A Holder may convert a portion of a Security if the
portion is $1,000 or a whole multiple of $1,000. Provisions of
this Indenture that apply to conversion of all of a Security also
apply to conversion of a portion of it.
"Common Stock" means shares of the common stock, par
value $0.0001, of the Company as it exists at the date of this
Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption
by the Company.
SECTION 11.02 Conversion Procedure. To convert a
Security a Holder must satisfy the requirements set forth in
paragraph 8 of the Securities. The date on which the Holder
<PAGE>
satisfies all those requirements in respect of a Security is the
conversion date of that Security. As soon as is reasonably
practical on or after the conversion date, the Company shall
deliver through the Conversion Agent a certificate for the number
of full shares of Common Stock issuable upon the conversion of
that Security and a check for any fractional share. The Person
in whose name the certificate is registered shall be treated as a
shareholder of record on and after the conversion date.
No payment will be made for accrued interest on a
converted Security (other than the payment of interest to the
Holder of a Security at the close of business on a record date
pursuant to Section 2.04(b) hereof) unless at the time of
conversion such Security has been called for redemption pursuant
to Section 3.03 hereof, in which case the Holder of such Security
shall be entitled to interest accrued thereon to the date of
conversion. Upon conversion, no payment or adjustment will be
made for dividends or distributions on any Common Stock issued
upon conversion of any Security.
If a Holder converts more than one Security at the same
time, the number of full shares issuable upon the conversion
shall be based on the total principal amount of the Securities
converted.
Upon surrender of a Security that is converted in part,
the Company shall execute and the Trustee shall authenticate for
the Holder a new Security equal in principal amount to the
unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is
a Legal Holiday in a place where a Conversion Agent is located,
the Security may be surrendered to that Conversion Agent on the
next succeeding business day that is not a Legal Holiday with the
same force and effect as if surrendered on such last day.
Upon receiving notice of the conversion of an interest
in a Global Security, the Trustee or the Securities Custodian, at
the direction of the Trustee, shall make a notation on such
Global Security as to the reduction in the principal amount
represented thereby, subject to the terms of the standing
agreements with and procedures of the Depository.
SECTION 11.03 Fractional Shares. The Company will not
issue a fractional share of Common Stock upon conversion of a
Security. Instead the Company will deliver to the converting
Securityholder its check for the current market value of the
fractional share. The current market value of a fraction of a
<PAGE>
share is determined by multiplying the current market price of a
full share by the fraction, and rounding the result to the
nearest cent.
For purposes of this Section, the current market price
of a share of Common Stock is the Quoted Price of the Common
Stock on the last Trading Day prior to the conversion date.
SECTION 11.04 Taxes on Conversion. If a Holder of a
Security converts it, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion. However, the Holder shall
pay any such tax which is due because the shares are issued in a
name other than such Holder's.
SECTION 11.05 Company to Provide Stock. The Company
shall reserve at all times and keep available, free from
preemptive rights, out of its authorized but unissued Common
Stock, enough shares of Common Stock to permit the conversion of
the Securities.
All shares of Common Stock which may be issued upon
conversion of the Securities shall be fully paid and
nonassessable.
The Company shall endeavor to comply with all
applicable securities laws regulating the offer and delivery of
shares of Common Stock upon conversion of Securities and shall
endeavor to list such shares on each national securities exchange
on which the Common Stock is listed, or to have such shares
approved for quotation on the Nasdaq National Market or other
over-the-counter market on which the Common Stock is traded.
SECTION 11.06 Adjustment for Change in Capital Stock.
If the Company:
(1) issues any shares of its capital stock as a
dividend (or other distribution) on its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(3) combines its outstanding shares of Common Stock
into a smaller number of shares; or
(4) issues by reclassification of its Common Stock any
shares of its capital stock,
<PAGE>
then the conversion privilege and the conversion price in effect
immediately prior to such action shall be adjusted so that the
Holder of a Security thereafter converted will receive the number
of shares of capital stock of the Company which would have been
received (and if there is more than one class of such capital
stock, then shares of each class in the same proportions that
would have been received) upon consummation of such action by a
Holder of the number of shares of Common Stock into which such
Security might have been converted immediately prior to such
action.
The adjustment described in the preceding paragraph
shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
If after an adjustment a Holder of a Security may
receive shares of two or more classes of capital stock of the
Company upon conversion of such Security, the Company shall
determine the allocation of the adjusted conversion price between
or among those classes of capital stock. After such allocation,
the conversion privilege and the conversion price of each class
of capital stock shall thereafter be subject to adjustment on
terms comparable to those applicable to Common Stock in this
Article.
SECTION 11.07 Adjustment for Rights Issue. If the
Company distributes any rights or warrants to all holders of its
Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market
price per share (as defined in Section 11.11) on the Record Date
(as defined below), the conversion price shall be adjusted in
accordance with the formula:
0 + (N x P)
-----
AC = CC x M
-----------
0 + N
where:
AC = the adjusted conversion price.
CC = the current conversion price.
0 = the number of shares of Common Stock
outstanding on the Record Date.
<PAGE>
N = the number of additional shares of Common
Stock offered.
P = the offering price per share of the
additional shares.
M = the current market price per share of Common
Stock on the Record Date.
The adjustment shall become effective immediately after
the record date for the determination of shareholders entitled to
receive such rights or warrants (the "Record Date").
SECTION 11.08 Adjustment for Certain Distributions.
Subject to the last paragraph of this Section 11.08, if the
Company distributes to all holders of its Common Stock of cash,
debt securities (or other evidences of indebtedness) or other
assets (excluding dividends or distributions for which adjustment
is required to be made under Section 11.09), the conversion price
shall be reduced in accordance with the following formula:
AC = CC x M - P
-----
M
where:
AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of Common
Stock on the Record Date (as defined below).
P = the aggregate fair market value on the Record
Date (as determined in good faith by the
Board of Directors and set forth in a
certified resolution filed with the Trustee)
of the cash, debt securities (or other
evidences of indebtedness) or other assets
distributed applicable to one share of Common
Stock.
The adjustment shall become effective immediately after
the record date for the determination of shareholders entitled to
receive the distribution (the "Record Date").
No adjustment will be made with respect to this Section
11.08 if, in lieu of such adjustment, the holders of the
<PAGE>
Securities, upon conversion, will be entitled to receive, in
addition to the shares of Common Stock into which such Securities
are convertible, the kind and amount of debt securities (or other
evidences of indebtedness) or other assets comprising the
distribution that such holders would have received had they
converted their Securities immediately prior to the Record Date.
SECTION 11.09 Adjustment for All Cash Distribution.
Subject to the last two paragraphs of this Section 11.09, if the
Company shall pay or make a dividend or other distribution
consisting exclusively of cash to all holders of its Common
Stock, the conversion price shall be reduced in accordance with
the following formula:
AC = CC x M - C
-----
M
where:
AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of Common
Stock on the date fixed for payment of such
distribution.
C = the amount of cash so distributed and not
excluded (as provided below) applicable to
one share of Common Stock.
The adjustment shall become effective immediately prior
to the opening of business on the day following the date fixed
for payment of such distribution.
SECTION 11.10 Adjustment for Tender or Exchange Offer.
Subject to the last paragraph of this Section 11.10, in the event
that a tender or exchange offer (other than an odd-lot offer)
made by the Company or any subsidiary of the Company for all or a
portion of the Common Stock shall expire and such tender or
exchange offer (as amended upon the expiration thereof) shall
require the payment to stockholders of consideration per share of
Common Stock having a fair market value (as determined in good
faith by the Board of Directors and set forth in a certified
resolution filed with the Trustee) that, as of the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer, exceeds 105% of the current market
<PAGE>
price per share of Common Stock on the trading day next
succeeding the Expiration Time, the conversion price shall be
reduced in accordance with the following formula:
AC = CC x O x M
----------
P + (T x M)
where:
AC = the adjusted conversion price.
CC = the current conversion price.
O = the number of shares of Common Stock
outstanding (including any tendered or
exchanged shares) at the Expiration Time.
P = the fair market value of the aggregate
consideration payable to shareholders of
Common Stock based on the acceptance (up to
any maximum specified in the terms of the
tender or exchange offer) of all shares of
Common Stock validly tendered or exchanged
and not withdrawn as of the Expiration Time
(the shares of Common Stock so accepted, up
to any such maximum, being referred to as the
"Purchased Shares").
T = the number of shares of Common Stock
outstanding (less any Purchased Shares) on
the Expiration Time.
M = the current market price per share of Common
Stock on the trading day next succeeding the
Expiration Time.
The adjustment shall become effective immediately prior
to the opening of business on the day following the Expiration
Time.
In the event that the Company is permanently prevented
by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
if such tender or exchange offer had not been made.
SECTION 11.11 Current Market Price. For purposes of
Sections 11.07, 11.08, 11.09 and 11.10, the current market price
<PAGE>
per share of Common Stock on any date is the average of the
Quoted Prices of the Common Stock for five consecutive Trading
Days selected by the Company commencing not more than 20 Trading
Days before, and ending not later than, the earlier of the date
in question and the Trading Day before the "ex" date, if any,
with respect to the issuance or distribution requiring such
computation. The term "'ex' date," when used with respect to any
issuance or distribution, means the first Trading Day on which
the Common Stock trades regular way in the market from which the
Quoted Price is then to be determined without the right to
receive such issuance or distribution.
SECTION 11.12 When Adjustment May Be Deferred. No
adjustment in the conversion price need be made unless the
adjustment would require an increase or decrease of at least 1%
in the conversion price then in effect. Any adjustments which
are not made shall be carried forward and taken into account in
any subsequent adjustment.
All calculations under this Article shall be made to
the nearest cent or to the nearest 1/l00th of a share, as the
case may be.
SECTION 11.13 Stockholder Rights Plan. In the event
the Company implements a stockholder rights plan, such rights
plan shall provide that upon conversion of the Securities, the
Holders will receive, in addition to the Common Stock issuable
upon such conversion, the rights issued under such rights plan
(notwithstanding the occurrence of an event causing such rights
to separate from the Common Stock at or prior to the time of
conversion), provided, that such Holder would not be an
ineligible Person pursuant to such plan.
SECTION 11.14 When No Adjustment Required. No
adjustment need be made for (i) rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or
interest; (ii) a change in the par value (including a change to
no par value) of the Common Stock; (iii) the repurchase of shares
of Common Stock pursuant to the provisions of employee and
incentive stock option plans; (iv) the payment of in-kind
dividends to holders of the Company's Series A Preferred Stock
outstanding on the date of this Indenture; (v) the repurchase of
843,023 shares of Common Stock from the former shareholders of
U.S. Communications, Inc., as contemplated in the Offering
Memorandum dated August 5, 1996 pursuant to which the Securities
were offered (the "Offering Memorandum"); and (vi) the repurchase
of the Company's (a) 9% Convertible Subordinated Debentures due
March 18, 1997, (b) 9% Convertible Subordinated Debentures due
<PAGE>
March 7, 1997, (c) 9% Convertible Subordinated Debentures due
April 10, 1997, and (d) 9% Convertible Subordinated Debentures
due June 21, 1997, all as contemplated in the Offering
Memorandum.
To the extent the Securities become convertible into
cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.
Notwithstanding any provision to the contrary in this
Indenture, no adjustment shall be made in the conversion price
which would have the effect of reducing the conversion price
below the par value of the Common Stock.
SECTION 11.15 Notice of Adjustment. Whenever the
conversion price is adjusted, the Company shall promptly mail to
Securityholders a notice of the adjustment and file with the
Trustee a certificate from the Company's independent public
accountant briefly stating the facts requiring the adjustment and
the manner of computing it. In the absence of manifest error,
such certificate shall be presumptive evidence that the
adjustment is correct.
SECTION 11.16 Voluntary Reduction. The Company from
time to time may reduce the conversion price by any amount for
any period of time if the period is at least 20 days and if the
reduction is irrevocable during the period. Notwithstanding any
provision to the contrary in this Indenture, the reduction of the
conversion price pursuant to this Section 11.16 shall not require
the consent of the Trustee or any Securityholder.
Whenever the conversion price is reduced, the Company
shall mail to Securityholders and the Trustee a notice of the
reduction. The Company shall mail the notice at least 15 days
before the date the reduced conversion price takes effect. The
notice shall state the reduced conversion price and the period
during which it will be in effect.
A reduction of the conversion price does not change or
adjust the conversion price otherwise in effect for purposes of
Sections 11.06 through 11.10.
SECTION 11.17 Notice of Certain Transactions. If:
(1) the Company takes any action which would require
an adjustment in the conversion price pursuant to Sec-
tion 11.08 and if the Securityholders are, in lieu thereof,
participants therein;
<PAGE>
(2) the Company takes any action that would require a
supplemental indenture pursuant to Section 11.18; or
(3) there is a dissolution or liquidation of the
Company,
the Company shall mail to Securityholders and the Trustee a
notice stating the record date for any such distribution or the
effective date of any such subdivision, combination,
reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at
least 15 days before such date. Failure to mail the notice or
any defect in it shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section.
SECTION 11.18 Consolidation, Merger of the Company or
Transfer or Lease. If the Company is a party to a consolidation,
merger or transfer or lease of assets subject to Section 6.01 or
a merger which reclassifies or changes its outstanding Common
Stock, the Person formed by such consolidation or resulting from
such merger or which assumes or leases such assets shall enter
into a supplemental indenture.
The supplemental indenture shall provide that the
Holder of a Security may convert it into the kind and amount of
securities, cash or other assets receivable upon the
consolidation, merger, transfer or lease by a holder (other than
any party to such transaction or any of its affiliates) of the
number of shares of Common Stock into which such Security might
have been converted immediately before the effective date of such
transaction, assuming such holder of Common Stock failed to
exercise his rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such
consolidation, merger, transfer or lease (provided that, if the
kind or amount of securities, cash or other property receivable
upon such consolidation, merger, transfer or lease is not the
same for each share of Common Stock held immediately prior to
such consolidation, merger, transfer or lease by others than the
parties to such transaction or their affiliates and in respect of
which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section the
kind and amount of securities, cash and other property receivable
upon such consolidation, merger, transfer or lease by each non-
electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares).
The supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practical to the
adjustments provided for in this Article. If the issuer of
<PAGE>
securities deliverable upon conversion of Securities is an
affiliate of the surviving, transferee or lessee corporation,
that issuer shall join in the supplemental indenture. The
successor Company shall mail to each Securityholder a notice
briefly describing the supplemental indenture.
If this Section applies to a particular event, Section
11.06 shall not apply to such event.
SECTION 11.19 Company Determination Final. Subject to
compliance with the terms of this Indenture and of the
Securities, any determination which the Company or its Board of
Directors must make pursuant to Section 11.03, 11.06, 11.08,
11.10, 11.11 or 11.12 shall be conclusive.
SECTION 11.20 Trustee's Disclaimer. The Trustee has
no duty to determine when an adjustment under this Article should
be made, how it should be made or what it should be. The Trustee
has no duty to determine the market price or market value of any
fractional or other share. The Trustee has no duty to determine
whether any provisions of a supplemental indenture under Section
11.18 are correct. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon
conversion of the Securities. The Trustee shall not be
responsible for the Company's failure to comply with this
Article. The Trustee is conclusively authorized to rely on any
notice or certificate received pursuant to Section 11.15 hereof.
Each Conversion Agent other than the Company shall have the same
protection under this Section as the Trustee.
ARTICLE 12.
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDERS UPON AN INCURRENCE EVENT
SECTION 12.01 Repurchase upon an Incurrence Event.
The Company covenants and agrees that, in the event that (i) the
Company or any of its Subsidiaries incurs Indebtedness (other
than Additional Permitted Indebtedness or Indebtedness under the
Securities), (ii) the Pro Forma Interest Coverage of the Company
and its Subsidiaries on a consolidated basis, would be less than
2.0:1 and (iii) the average closing sale price of the Common
Stock is less than $2.00, adjusted for splits, combinations,
reclassifications or similar events, for the twenty Trading Days
prior to the incurrence of such Indebtedness (the occurrence of
all of (i), (ii) and (iii), an "Incurrence Event"), each Holder
will have the right, at such Holder's option, to require the
Company to repurchase all, or any portion that is an integral
<PAGE>
multiple of $1,000, of such Holder's Securities on the Incurrence
Repurchase Date (as defined in Section 12.03 below) selected as
provided below at a repurchase price which is equal to 100% of
the principal amount of such Securities plus accrued interest to
the Incurrence Repurchase Date.
The Company shall comply with the requirements of
Rule 13e-4 and Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the
repurchase of Securities pursuant to this Article 12. To the
extent the provisions of any securities laws or regulations
conflict with the provisions under this Article 12, the Company
shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under
this Article 12 by virtue thereof.
SECTION 12.02 Notices, Etc. Unless the Company shall
have theretofore called for redemption all the outstanding
Securities, on or before the 30th day after the occurrence of an
Incurrence Event, the Company shall deliver to the Trustee and
mail to each Holder at such Holder's address appearing in the
Securities register a written notice (the "Company Incurrence
Notice") describing the occurrence of the Incurrence Event and of
the repurchase right set forth herein arising as a result
thereof, as well as stating the final date by which the
Securities must be surrendered for repurchase, the conversion
price then in effect, the Incurrence Repurchase Date, the
repurchase price and the procedure which the Holder must follow
to elect repurchase. If requested by the Company upon ten days'
prior written notice (or such shorter notice as shall be
satisfactory to the Trustee), the Trustee shall, in the name of
the Company and at its expense, mail the Company Incurrence
Notice to each Holder. The Company shall also cause a copy of
such notice of the repurchase right to be sent at least once to
the Dow Jones News Service or similar business service in the
United States. The Trustee shall not be deemed to have knowledge
of the occurrence of an Incurrence Event until it receives
written notice thereof from the Company.
No failure of the Company to give the foregoing notices
or defect therein shall limit any Holder's right to exercise a
repurchase right or affect the validity of the proceedings for
the repurchase of Securities.
SECTION 12.03 Exercising Repurchase Right. (a) To
elect repurchase of any Securities or portion thereof, the Holder
will be required to surrender, on or before the Final Incurrence
<PAGE>
Surrender Date (as defined below), at any place where principal
is payable, such Security duly endorsed or assigned to the
Company or in blank, together with written notice of the Holder's
election to have the Company repurchase all or any $1,000 portion
of such Security specified in such notice. Election of
repurchase by a Holder shall be irrevocable. "Final Incurrence
Surrender Date" shall mean the date which is, subject to any
contrary requirements of applicable law, 60 days after the date
of mailing of the Company Incurrence Notice. "Incurrence
Repurchase Date" shall mean the date selected by the Company for
the repurchase of the Securities that is not less than 10 and not
more than 30 days after the Final Incurrence Surrender Date.
(b) In the event a repurchase right shall be exercised
in accordance with the terms hereof, the Company shall pay or
cause to be paid the repurchase price in cash to the Holder on
the Incurrence Repurchase Date; provided, however, that
installments of interest that mature on or prior to the
Incurrence Repurchase Date shall be payable in cash to the
Holders of such Securities, registered as such at the close of
business on the relevant record date specified in the Securities
according to the terms and provisions of Article 2. No later
than 2:00 p.m., New York, New York time, on the Incurrence
Repurchase Date, the Company shall deposit with the Trustee in
immediately available funds an amount equal to the aggregate
repurchase price of all Securities or portions thereof accepted
for payment.
(c) If any Security surrendered for repurchase shall
not be so paid on the Incurrence Repurchase Date, the principal
amount which is payable at maturity shall, until the repurchase
price (as calculated at the date of payment) is paid, continue to
bear interest from the Incurrence Repurchase Date at the rate
borne by the Security and each such Security shall continue to
remain convertible into Common Stock until said repurchase price
shall have been paid to the Holder or duly provided for by
deposit with the Paying Agent in immediately available funds
without restriction.
(d) Any Security which is to be repurchased only in
part shall be surrendered to the Trustee (with, if the Company or
the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal
<PAGE>
amount equal to and in exchange for the unrepurchased portion of
the principal of the Security so surrendered.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the required provision shall control;
provided, however, that in no event shall this Section 13.01 be
deemed by itself to require that this Indenture or the Trustee be
qualified under the TIA or constitute an admission or
acknowledgment by any party hereto that any such qualification is
required prior to the time this Indenture and the Trustee are
required by the TIA to be so qualified.
SECTION 13.02 Notices. Any notice or communication to
the Company or the Trustee by the other shall be duly given if in
writing and delivered in Person or mailed by first class mail or
nationally recognized overnight courier addressed as follows:
If to the Company: SA Telecommunications, Inc.
1600 Promenade Center, 15th Floor
Richardson, Texas 75080
Attention: Vice President and
General Counsel,
with a copy to: the Chief Financial Officer
If to the Trustee: United States Trust Company of New York
114 W. 47th Street, 15th Floor
New York, NY 10036
Attention: Corporate Trust
Administration
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication to a Securityholder shall
be mailed by first-class mail to his address as shown on the
register kept by the Registrar. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders. If
the Company mails a notice or communication to Securityholders,
<PAGE>
it shall mail a copy to the Trustee and each Agent at the same
time.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it, provided that notice to
the Trustee shall be sufficiently given only when received.
SECTION 13.03 Communications by Holders with Other
Holders. Securityholders may communicate pursuant to TIA
Section 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
SECTION 13.04 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent have been
complied with.
SECTION 13.05 Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
(other than pursuant to Section 5.03) shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such Person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
<PAGE>
(4) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been complied
with.
SECTION 13.06 Rules by Trustee and Agents. The
Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Paying Agent, New York
Presenting Agent or Conversion Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 13.07 Legal Holidays. A "Legal Holiday" is a
Saturday, Sunday or a day on which banking institutions in New
York, New York are not required to be open. If a payment date is
a Legal Holiday at a place of payment, payment may be made at
such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 13.08 Governing Law. The laws of the State of
New York shall govern this Indenture and the Securities without
regard to principles of conflicts of law.
SECTION 13.09 No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation.
Each Securityholder by accepting a Security waives and releases
all such liability.
SECTION 13.10 Successors. All agreements of the
Company in this Indenture and the Securities shall bind its
successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 13.11 Counterpart Originals. The parties may
sign any number of copies of this Indenture. Each signed copy
shall be an original, but all of them together represent the same
agreement.
SECTION 13.12 Severability. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any
party hereto.
SECTION 13.13 No Adverse Interpretation of Other
Agreements. This Indenture may not be used to interpret another
<PAGE>
indenture, loan or debt agreement of the Company or a Subsidiary.
Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
ARTICLE 14.
CORPORATE OBLIGATION ONLY
SECTION 14.01 Indenture and Securities Solely
Corporate Obligations. No recourse under or upon any obligation,
covenant or agreement contained in this Indenture, any indenture
supplement, or in any Security, because of any indebtedness
evidenced thereby, shall be had against any incorporator, or
against any past, present or future stockholder, employee,
officer or director, as such, of the Company or of any successor
corporation, either directly or through the Company or any
successor corporation, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise,
all such liability, whether at common law, in equity, by any
constitution, statute or otherwise, of incorporators,
stockholders, employees, officers or directors being expressly
waived and released by the acceptance of the Securities by the
Holders thereof and as part of the consideration of the issuance
of the Securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written
above.
SA TELECOMMUNICATIONS, INC.
By: /s/ J. David Darnell
--------------------------------
Name: J. David Darnell
Title: Vice President-Finance
and Chief Financial Officer
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ United States Trust Company of
New York
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A - FORM OF SECURITY
(Face of Security)
No.
$__________
SA TELECOMMUNICATIONS, INC.
10 % Convertible
Note Due August 15, 2006
SA Telecommunications, Inc., a
Delaware corporation, promises to pay to
_______________________________________ or registered assigns,
the principal sum of _______________ Dollars on August 15, 2006.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1, and August 1
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
SA TELECOMMUNICATIONS, INC.
By____________________________
By____________________________
Authenticated:
Dated:
United States Trust Company of New York,
as Trustee
By ____________________
Authorized Signer
<PAGE>
(Reverse of Security)
SA TELECOMMUNICATIONS, INC.
10% Convertible Note
Due August 15, 2006
1. INTEREST.
SA TELECOMMUNICATIONS, INC. (the "Company"), a Delaware
corporation, promises to pay interest on the principal amount of
this Security at the rate of 10% per annum. The Company will pay
interest semi-annually on February 15 and August 15 each year,
commencing on February 15, 1996 to holders of Securities at the
close of business on the relevant record dates specified above.
Interest on the Securities will accrue from the most recent date
to which interest has been paid or, if no interest has been paid,
from August 12, 1996. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered holders of
Securities at the close of business on the February 1 or August 1
next preceding the interest payment date (including Securities
that are cancelled after the record date and on or before the
interest payment date). Holders must surrender Securities to a
Paying Agent to collect principal and any premium payments. The
Company will pay principal, premium, if any, and interest in
money of the United States that at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT, REGISTRAR, CONVERSION AGENT.
Initially, United States Trust Company of New York (the
"Trustee") will act as Paying Agent. Registrar and Conversion
Agent. The Company may change any Paying Agent, Registrar,
Conversion Agent or co-registrar by giving written notice to the
Trustee. The Company may act as Paying Agent, Registrar,
Conversion Agent or co-registrar.
4. INDENTURE.
The Company issued this Security as one of a duly
authorized issue of Notes of the Company designated as its 10%
<PAGE>
Convertible Notes due August 15, 2006 (the "Securities") under an
Indenture dated as of August 12, 1996 (the "Indenture"), between
the Company and the Trustee. The terms of the Securities include
those stated in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture for
a statement of such terms. Terms used herein that are defined in
the Indenture shall have the respective meanings assigned thereto
in the Indenture. Each holder, by accepting a Security, agrees
to be bound by all of the terms and provisions of the Indenture,
as the same may be amended from time to time. The Securities are
general unsecured obligations of the Company limited to
$25,000,000 in aggregate principal amount ($28,750,000 if the
Over-Allotment Option is exercised in full).
5. OPTIONAL REDEMPTION.
On and after August 15, 1999, the Company may redeem
all the Securities at any time or some of them from time to time
at the following redemption prices (expressed in percentages of
principal amount), plus accrued interest to, but not including,
the redemption date, if redeemed during the 12-month period
beginning August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999. . . . . . . . . . . . . . . 107%
2000. . . . . . . . . . . . . . . 105.6
2001. . . . . . . . . . . . . . . 104.2
2002. . . . . . . . . . . . . . . 102.8
2003. . . . . . . . . . . . . . . 101.4
2004 and thereafter . . . . . . . 100.0
</TABLE>
No sinking fund is provided for the Securities.
6. REPURCHASE AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE.
If a Fundamental Change (as defined below) occurs, each
holder of Securities shall have the right, at the holder's
option, to require the Company to repurchase all of such holder's
Securities, or any portion thereof that is an integral multiple
of $1,000, on the date (the "Repurchase Date") selected by the
Company that is not less than 10 nor more than 30 days after the
Final Surrender Date (as defined below), at a price equal to the
principal amount thereof, plus accrued interest to the Repurchase
Date (the "Repurchase Price").
Within 30 days after the occurrence of a Fundamental
Change, the Company is obligated to mail to all holders of record
<PAGE>
of the Securities a notice (the "Company Notice") describing,
among other things, the occurrence of such Fundamental Change and
of the repurchase right arising as a result thereof. The Company
must deliver a copy of the Company Notice to the Trustee and
cause a copy of such notice to be sent at least once to the Dow
Jones News Service or similar business service in the United
States. To exercise the repurchase right, a holder of Securities
must surrender, on or before the date which is 60 days after the
date of mailing of the Company Notice (the "Final Surrender
Date") the Securities with respect to which the right is being
exercised, duly endorsed or assigned to the Company or in blank.
The term "Fundamental Change" shall mean any of the
following:
(i) a "Person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended), other than a Permitted Holder,
becoming the "beneficial owner" (as defined in Rule l3d-3
under such Act) of Voting Shares (as defined) of the Company
entitled to exercise more than 50% of the total voting power
of all outstanding Voting Shares of the Company (including
any Voting Shares that are not then outstanding of which
such Person or group is deemed the beneficial owner) for
purposes of Rule 13d-3; or
(ii) a change in the Board of Directors of the Company
in which the individuals who constituted the Board of
Directors of the Company at the beginning of the two-year
period immediately preceding such change (together with any
other director whose election by the Board of Directors of
the Company or whose nomination for election by the
shareholders of the Company was approved by a vote of at
least a majority of the directors then in office who either
were directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of
the directors then in office; or
(iii) any consolidation of the Company with, or merger
of the Company into, any other Person, any merger of another
Person into the Company, or any sale or transfer of all or
substantially all of the assets of the Company to another
Person in a single transaction or series of related
transactions (other than (x) a merger which does not result
in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock, (y) a
merger which is effected solely to change the jurisdiction
<PAGE>
of incorporation of the Company or (z) any consolidation
with or merger of the Company into a wholly owned subsidiary
of the Company, or any sale or transfer by the Company of
all or substantially all of its assets to one or more of its
wholly owned subsidiaries, in any one transaction or a
series of transactions, provided, in any such case, that the
resulting corporation or each such subsidiary assumes or
guarantees the Company's obligations under the Securities);
provided, however, that a Fundamental Change shall not occur
with respect to any such transaction if either (i) the last
sale price of the Common Stock for any five Trading Days
during the ten Trading Days immediately preceding the public
announcement by the Company of such transaction is at least
equal to 105% of the conversion price in effect on such
Trading Day, (ii) the consideration in such transaction to
the holders of Common Stock consists of cash, securities
that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on the Nasdaq
National Market System, or a combination of cash and such
securities, and the aggregate fair market value of such
consideration (which, in the case of such securities, shall
be equal to the average of the last sale prices of such
securities during the ten consecutive Trading Days
commencing with the sixth Trading Day following consummation
of the transaction) is at least 105% of the conversion price
in effect on the date immediately preceding the closing date
of such transaction, or (iii) in the case of a merger or
consolidation the stockholders of the Company immediately
prior to the date of such transaction continue to
beneficially own a majority of the Voting Shares of the
surviving entity.
"Permitted Holder" means Jack W. Matz, Jr. or his
Affiliates.
"Voting Shares" is defined to mean all outstanding
shares of any class or classes (however designated) of capital
stock entitled to vote generally in the election of members of
the Board of Directors.
7. NOTICE OF REDEMPTION.
Notice of redemption pursuant to paragraph 5 must be
mailed at least 30 days but not more than 60 days before the
redemption date to the registered address of each holder of
Securities to be redeemed at his registered address. Securities
in denominations larger than $1,000 may be redeemed in part, but
only in integral multiples of $1,000. On and after the
<PAGE>
redemption date, interest shall cease to accrue on Securities or
any portion of them called for redemption; provided that funds in
the requisite amount are paid or made available for payment on
that date.
8. CONVERSION.
Subject to the provisions of this paragraph 8, a holder
of a Security may convert such Security into Common Stock of the
Company. The holder may convert such Security at any time after
the Initial Conversion Date through the close of business on
August 15, 2006. If the Security is called for redemption, the
holder may convert such Security at any time before the close of
business on the tenth calendar day immediately preceding the
redemption date, or if such day is not a Business Day, then the
close of business on the next succeeding day which is a business
day. The initial conversion price is $2.55 per share, subject to
adjustment in certain events. The number of shares issuable upon
conversion of a Security is determined by dividing the principal
amount to be converted by the conversion price in effect on the
conversion date. Upon conversion, no payment for accrued
interest on a converted Security (other than the payment of
interest to the Holder of a Security at the close of business on
a record date pursuant to paragraph 2 hereof) unless at the time
of conversion such Security has been called for redemption, in
which case the holder of such Security shall be entitled to
interest accrued thereon to the date of conversion. Upon
conversion, no payment or adjustment will be made for dividends
or distributions on the Common Stock will be made. The Company
will deliver a check for any fractional share issuable upon
conversion.
The Initial Conversion Date will be the earliest to
occur of (i) December 10, 1996 and (ii) a Fundamental Change.
To convert a Security, a holder must (1) complete and
sign the conversion notice on the back of the Security,
(2) surrender the Security to a Conversion Agent, (3) furnish the
appropriate endorsements and transfer documents if required by
the Registrar or Conversion Agent, and (4) pay any transfer or
similar tax if required. A holder may convert a portion of a
Security if the portion is $1,000 or an integral multiple of
$1,000.
The conversion price will be adjusted for the issuance
of capital stock of the Company as a dividend or distribution on
its Common Stock; subdivisions, combinations or certain
reclassifications of Common Stock; distributions to all holders
<PAGE>
of Common Stock of rights or warrants to purchase Common Stock at
less than the current market price at the time; distributions to
such holders of Common Stock of cash, debt securities (including
other evidences of indebtedness) or other assets of the Company;
certain dividends or other distributions consisting exclusively
of cash to all holders of Common Stock; or for payments to
holders of Common Stock pursuant to certain tender or exchange
offers. No adjustment in the conversion price will be required
unless such adjustment would require a change of at least 1% in
the conversion price then in effect; provided that any adjustment
that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment.
However, no adjustment need be made if Securityholders are
entitled to participate in the above transactions or in certain
other cases. The Company from time to time may voluntarily
reduce the conversion price for a period of at least 20 days.
If the Company is a party to a consolidation or merger,
or a transfer or lease of all or substantially all of its assets,
the right to convert a Security into Common Stock may be changed
into a right to convert it into securities, cash or other assets
of the Company or another Person.
9. REPURCHASE AT OPTION OF HOLDER UPON AN INCURRENCE EVENT
In the event that (i) the Company or any of its
Subsidiaries incurs Indebtedness (other than Additional Permitted
Indebtedness or Indebtedness under the Securities), (ii) the Pro
Forma Interest Coverage of the Company and its Subsidiaries on a
consolidated basis, would be less than 2.0:1 and (iii) the
average closing sale price of the Common Stock is less than
$2.00, adjusted for splits, combinations, reclassifications or
similar events, for the twenty Trading Days prior to the
incurrence of such Indebtedness (the occurrence of all of (i),
(ii) and (iii), an "Incurrence Event"), each holder of Securities
shall have the right, at the holder's option, to require the
Company to repurchase all of such holder's Securities, or any
portion thereof that is an integral multiple of $1,000, on the
date (the "Incurrence Repurchase Date") selected by the Company
that is not less than 10 nor more than 30 days after the Final
Incurrence Surrender Date (as defined below), at a price equal to
the principal amount thereof, plus accrued interest to the
Incurrence Repurchase Date.
Within 30 days after the occurrence of an Incurrence
Event, the Company is obligated to mail to all holders of record
of the Securities a notice (the "Company Incurrence Notice")
describing, among other things, the occurrence of such Incurrence
<PAGE>
Event and of the repurchase right arising as a result thereof.
The Company must deliver a copy of the Company Incurrence Notice
to the Trustee and cause a copy of such notice to be sent at
least once to the Dow Jones News Service or similar business
service in the United States. To exercise the repurchase right,
a holder of Securities must surrender, on or before the date
which is 60 days after the date of mailing of the Company Notice
(the "Final Incurrence Surrender Date") the Securities with
respect to which the right is being exercised, duly endorsed or
assigned to the Company or in blank.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
This Security represents such of the outstanding
Securities as shall be specified herein or endorsed hereon in
accordance with the Indenture. The aggregate amount of
outstanding Securities represented hereby may from time to time
be reduced or increased to reflect exchanges. The Securities are
in registered form without coupons in denominations of $1,000 and
whole multiples of $1,000. The transfer of Securities may be
registered and Securities may be exchanged as provided in the
Indenture. The Registrar may require a holder, among other
things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or
register the transfer of any Security or portion of a Security
selected for redemption. Also, it need not exchange or register
the transfer of any Securities for a period of 15 days before a
selection of Securities to be redeemed.
11. AMENDMENT, SUPPLEMENT, WAIVER.
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented, with the consent of
the Company and the holders of a majority in aggregate principal
amount of the Securities, and any existing default may be waived
with the consent of the holders of a majority in aggregate
principal amount of the Securities. Without the consent of any
Securityholder, the Indenture or the Securities may be amended,
inter alia, to cure any ambiguity, defect or inconsistency, to
provide for assumption of Company obligations to Securityholders
in the case of a merger or acquisition, or to make any change
that does not adversely affect the interests of any Security-
holder in any material respect.
<PAGE>
12. DEFAULTS AND REMEDIES.
An Event of Default is default in the payment of
interest on the Securities continued for 30 days; default in
payment of principal of or premium, if any, on the Securities
when due and payable; default in payment of the Repurchase Price
to be paid upon a redemption at the option of the Holder pursuant
to paragraph 6; failure by the Company for 60 days after notice
to it to comply with any of its other agreements in the
Indenture; acceleration of payments with respect to indebtedness
of the Company in excess of $10,000,000; and certain events of
bankruptcy, insolvency or reorganization. If an Event of Default
occurs and is continuing, the Trustee or the holders of at least
25% in aggregate principal amount of the Securities may declare
the principal of, and accrued interest on, all the Securities to
be due and payable immediately. Securityholders may not enforce
the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to
certain limitations, Holders of a majority in aggregate principal
amount of the Securities may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Security-
holders notice of any continuing default (except a default in
payment of principal or premium, if any, or interest) if it
determines that withholding notice is in their interests. The
Company must furnish an annual compliance certificate to the
Trustee.
13. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or
any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if it were
not Trustee.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or shareholder, as such,
of the Company shall not have any liability for any obligations
of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations
or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
<PAGE>
15. AUTHENTICATION.
This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent on
the face hereof.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. GOVERNING LAW.
The laws of the State of New York shall govern the
Indenture and the Securities.
18. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes as a
convenience to the Holders of the Notes. No representation is
made as to the accuracy of such numbers as printed on the Notes
and reliance may be placed only on the other identification
numbers printed hereon.
19. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement dated
August 12, 1996 between the Company and the Initial Purchasers on
behalf of Holders of the Securities, the Company will be
obligated to effect a shelf registration for the Securities for
Holders of Securities on or prior to December 10, 1996. The
Holders of the Securities shall be entitled to receive certain
additional interest payments in the event the Company fails to
file or to cause to become effective such registration, all
pursuant to and in accordance with the terms of the Registration
Rights Agreement. Additional interest which may be payable
pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated
interest. The provisions of the Registration Rights Agreement
relating to such additional interest are incorporated herein by
reference and made a part hereof as if set forth herein in full.
The Company shall notify the Trustee in writing of the amount of
any additional interest payable pursuant to the Registration
<PAGE>
Rights Agreement. Unless the Trustee receives such written
notice, the Trustee is conclusively entitled to assume that no
such additional interest is payable.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON
WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE.
REQUESTS MAY BE MADE TO: SA TELECOMMUNICATIONS, INC.,
1600 PROMENADE CENTER, 15TH FLOOR, TEXAS 75080, ATTENTION:
INVESTOR RELATIONS.
=======================================
<PAGE>
=======================================
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
________________________________________________________________
________________________________________________________________
(Insert assignee's social security or tax identification number)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________
agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
Date: _______________ Your signature: ________________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guaranteed: __________________________________________
In connection with any transfer of this Security
occurring prior to the date which is the earlier of (i) the date
of the declaration by the SEC of the effectiveness of a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Security
(which effectiveness shall not have been suspended or terminated
at the date of the transfer) and (ii) August 12, 1999, the
undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the
transfer and that this Security is being transferred:
<PAGE>
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee);
or
(4) __ outside the United states to a "foreign Person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) __ pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under
the Securities Act; or
(7) __ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in
the name of any Person other than the registered Holder thereof;
provided that if box (3), (4), (5) or (7) is checked, the Company
or the Trustee may require, prior to registering any such
transfer of the Securities, in its sole discretion, such legal
opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or
the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or
Registrar shall not be obligated to register this Security in the
name of any Person other than the Holder hereof unless and until
the conditions to any such transfer of registration set forth
herein and in Section 2.15 of the Indenture shall have been
satisfied.
Dated: ____________ Signed: ______________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee: ____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is
aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ___________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
CONVERSION NOTICE
The undersigned owner of this Security hereby
irrevocably exercises the option to convert this Security, or the
portion hereof (which is $1,000 or an integral multiple thereof)
below designated, into shares of Common Stock in accordance with
the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares and any
Securities representing any unconverted principal amount hereof,
be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares are to be
issued in the name of a Person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect
thereto.
To convert this Security into Common Stock of the
Company, check the box:
[ ]
To convert only part of this Security, state the amount
(must be $1,000 or any whole multiple thereof):
$________________________
If you want the stock certificate made out in another
Person's name, fill in the form below:
_________________________________________________________________
_________________________________________________________________
(Insert other Person's social security or tax identification
number)
_________________________________________________________________
(Print or type other Person's name, address and zip code)
Date: _______________ Your signature: ________________________
(Sign exactly as your
name appears on the
other side of this
Security)
Signature Guaranteed: __________________________________________
<PAGE>
In connection with any transfer of the Common Stock occurring
prior to the date which is the earlier of (i) the date of the
declaration by the SEC of the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act") covering resales of this Security (which
effectiveness shall not have been suspended or terminated at the
date of the transfer) and (ii) August 12, 1999, the undersigned
confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that the
Common Stock is being transferred:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) __ to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee);
or
(4) __ outside the United states to a "foreign Person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) __ pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under
the Securities Act; or
(7) __ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the registrar for the Common
Stock will refuse to register the Common Stock in the name of any
Person other than the registered Holder hereof; provided that if
box (3), (4), (5) or (7) is checked, the Company or the Common
Stock transfer agent may require, prior to registering any such
transfer of the Common Stock, in its sole discretion, such legal
opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the registrar
for the Common Stock or the Company has reasonably requested to
<PAGE>
confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Common
Stock transfer agent shall not be obligated to register Common
Stock in the name of any Person other than the Holder hereof
unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.15 of the
Indenture shall have been satisfied.
Dated: _________________ Signed: ______________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee: ____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is
purchasing Common Stock issuable upon conversion of this Security
for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
Dated: _______________________ _______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by
the Company pursuant to Article 4 of the Indenture, check the
box: [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Article 4 of the Indenture,
state the amount: $_______________
Date: _______________ Your signature: _________________________
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranteed: __________________________________________
<PAGE>
Exhibit B
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 W. 47th Street
15th Floor
New York, NY 10036
Re: SA Telecommunications, Inc. 10%
Convertible Notes due 2006
Ladies and Gentlemen:
In connection with our proposed purchase of 10%
Convertible Notes due 2006 (the "Notes") of SA
Telecommunications, Inc., a Delaware corporation (the "Company"),
we confirm that:
1. We have received a copy of the Offering Memorandum
(the "Offering Memorandum"), dated August 5, 1996 relating to the
Notes and such other information as we deem necessary in order to
make our investment decision. We acknowledge that we have read
and agreed to the matters stated on pages (A-1) and (A-2) of the
Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the
restrictions on duplication and circulation of the Offering
Memorandum.
2. We understand that any subsequent transfer of the
Notes or shares of common stock, par value $.0001 per share, into
which the Notes are convertible (the "Shares") is subject to
certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Offering Memorandum)
and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or the Shares except in
compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act") and all
applicable State securities laws.
3. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the
Notes or Shares may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes or
Shares, we will do so only (i) to the Company or any of its
subsidiaries, (ii) inside the United States in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities
<PAGE>
Act), (iii) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee (as defined in the Indenture
relating to the Notes) or the transfer agent, a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Notes and the Shares,
(iv) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (v) pursuant to the
exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further
agree to provide to any Person purchasing any of the Notes or the
Shares from us a notice advising such purchaser that resales of
the Notes or the Shares are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf
of, and will not transfer the Notes to, any pension or welfare
plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974), except as permitted in the section enti-
tled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any
Notes or Shares, we will be required to furnish to the Trustee or
the transfer agent, as the case may be, and the Company such
certification, legal opinions and other information as the
Trustee or the transfer agent, as the case may be, and the
Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand
that the Notes purchased by us will bear a legend to the
foregoing effect.
6. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters
covered hereby.
Very truly yours,
By:_____________________________________
Name:
Title:
<PAGE>
Exhibit C
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
UNITED STATES TRUST COMPANY OF NEW YORK
114 W. 47th Street 15th Floor,
New York, NY 10036
Re: SA Telecommunications, Inc. (the "Company")
10% Convertible Notes due 2006 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $___________
aggregate principal amount of the Notes, we confirm that such
sale has been effected pursuant to and in accordance with Regu-
lation S under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a Person in
the United States;
(2) either (a) at the time the buy offer was origi-
nated, the transferee was outside the United States or we
and any Person acting on our behalf reasonably believed that
the transferee was outside the United States, or (b) the
transaction was executed in, on or through the facilities of
a designated off-shore securities market and neither we nor
any Person acting on our behalf knows that the transaction
has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act;
and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes and the shares of
common stock, par value $.0001 per share into which the
Notes are convertible.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or
<PAGE>
a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:________________________________
Authorized Signature
SA TELECOMMUNICATIONS, INC.
$25,000,000 Principal Amount
10% Convertible Notes Due 2006
PURCHASE AGREEMENT
August 5, 1996
FURMAN SELZ LLC
RAUSCHER PIERCE REFSNES, INC.
c/o Furman Selz LLC
230 Park Avenue
New York, New York 10169
Ladies and Gentlemen:
SA Telecommunications, Inc., a Delaware corporation
(the "Company"), hereby confirms its agreement with you (the
"Initial Purchasers"), as set forth below.
1. The Securities. Subject to the terms and
conditions herein contained, the Company proposes to issue and
sell to the Initial Purchasers $25,000,000 aggregate principal
amount of its 10% Convertible Notes Due 2006 (the "Firm
Securities") and also proposes to issue and sell to the Initial
Purchasers up to an additional $3,750,000 aggregate principal
amount of its 10% Convertible Notes Due 2006 (the "Optional
Securities," and together with the Firm Securities, the
"Securities"). The Securities are to be issued under an
indenture (the "Indenture") to be dated as of August 12, 1996
by and between the Company and United States Trust Company of
New York, as Trustee (the "Trustee"). The Securities will be
convertible at the holder's option into shares of the Company's
common stock, par value $0.0001 per share (the "Common Stock"),
at a conversion price of $2.55 per share, subject to adjustment
in certain circumstances.
The Securities will be offered and sold to the
Initial Purchasers without being registered under the
Securities Act of 1933, as amended (the "Act"), in reliance on
exemptions therefrom.
<PAGE>
In connection with the sale of the Securities, the
Company has prepared a preliminary offering memorandum dated
July 18, 1996 (the "Preliminary Memorandum"), and a final
offering memorandum dated August 5, 1996 (the "Final
Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum")
setting forth or including a description of the terms of the
Securities, the terms of the offering of the Securities, a
description of the Company and any material developments
relating to the Company occurring after the date of the most
recent historical financial statements included therein. Any
reference herein to the Preliminary Memorandum and the Final
Memorandum shall be deemed to include all amendments and
supplements thereto and any documents filed under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission (the
"Commission") thereunder (collectively, the "Exchange Act")
which are incorporated by reference therein. As used herein,
the term "Incorporated Documents" means the documents which at
the time are incorporated by reference in the Preliminary
Memorandum, the Final Memorandum or any amendment or supplement
thereto. The Company hereby confirms that it has authorized
the use of the Preliminary Memorandum and the Final Memorandum
in connection with the offering and resale of the Securities by
the Initial Purchasers.
The Initial Purchasers and their direct and indirect
transferees of the Securities will be entitled to the benefits
of the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company has agreed, among
other things, to file a registration statement (the
"Registration Statement") with the Commission registering the
Securities and the shares of Common Stock issuable upon
conversion of the Securities under the Act.
2. Representations and Warranties. The Company
represents and warrants to and agrees with each of the Initial
Purchasers that:
(a) Neither the Preliminary Memorandum as of the
date thereof nor the Final Memorandum as of the date
thereof and at all times subsequent thereto up to the
Closing Date (as defined in Section 3 below) contained or
contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to
make the statements therein, in the light of the
circumstances
<PAGE>
under which they were made, not misleading, except that the
representations and warranties set forth in this Section 2(a)
do not apply to statements or omissions made in reliance upon
and in conformity with information relating to either of the
Initial Purchasers furnished to the Company in writing by the
Initial Purchasers expressly for use in the Preliminary
Memorandum or the Final Memorandum.
(b) The Incorporated Documents heretofore filed were
filed in a timely manner and, when they were filed (or, if
any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material
respects to the requirements of the Exchange Act and did
not contain an untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in the light of the circumstances under which
they were made, not misleading; and any further
Incorporated Documents will, when so filed, be filed in a
timely manner and conform in all material respects to the
requirements of the Exchange Act and will not contain an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
not misleading.
(c) As of the Closing Date, the Company will have
the authorized, issued and outstanding capitalization set
forth in the Final Memorandum, except for changes due to
the normal exercise or termination of outstanding stock
options and exercise of the Company's right to purchase
Common Stock from participants under its stock option
plans and related agreements; all of the outstanding
shares of capital stock of the Company and each of Long
Distance Network, Inc., North American Telecommunications
Corporation and U.S. Communications, Inc. (the
"Subsidiaries") have been, and as of the Closing Date will
be, duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any
preemptive or similar rights; all of the outstanding
shares of capital stock of the Subsidiaries are owned,
directly or indirectly, by the Company, free and clear of
all liens, encumbrances and claims or restrictions on
transferability (other than those imposed by the Act and
the securities or "Blue Sky" laws of certain
jurisdictions) or voting, other than the security
interests in favor of Norwest Bank Minnesota, National
Association; except as set forth in Schedule 2 attached
hereto, there are no (i) options, warrants or other rights
to purchase, (ii) agreements or
<PAGE>
other obligations to issue or (iii) other rights to convert
any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Company or any
of the Subsidiaries outstanding. Except for the Subsidiaries
or as disclosed in the Final Memorandum, the Company does not
own, directly or indirectly, any shares of capital stock or
any other equity or long-term debt securities or have any
equity interest in any corporation, partnership, joint venture
or other entity.
(d) The shares of Common Stock issuable upon
conversion of the Securities have been duly authorized for
issuance upon conversion of the Securities and duly
reserved for such issuance and, when issued upon such
conversion in accordance with the terms of the Indenture,
will have been validly issued and will be fully paid and
nonassessable, and the issuance of such shares of Common
Stock is not subject to any preemptive or similar rights;
(e) Each of the Company and the Subsidiaries is duly
incorporated, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation
and has all requisite corporate power and corporate
authority to own its properties and conduct its business
as now conducted and as described in the Final Memorandum;
each of the Company and the Subsidiaries is duly qualified
to do business as a foreign corporation in good standing
in all other jurisdictions where the ownership or leasing
of its properties or the conduct of its business requires
such qualification, except where the failure to be so
qualified would not, individually or in the aggregate,
have a material adverse effect on the business, financial
condition, prospects as described in the Final Memorandum
or results of operations of the Company and the
Subsidiaries, taken as a whole (any such event, a
"Material Adverse Effect").
(f) The Company has all requisite corporate power
and corporate authority to execute, deliver and perform
its obligations under the Securities. The Securities,
when issued, will be in the form contemplated by the
Indenture. The Securities have been duly and validly
authorized by the Company and, when executed by the
Company and authenticated by the Trustee in accordance
with the provisions of the Indenture and when issued and
delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will constitute
<PAGE>
valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture, and
enforceable against the Company in accordance with their
terms, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of equity
and the discretion of the court before which any
proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy
considerations.
(g) The Company has all requisite corporate power
and authority to execute, deliver and perform its
obligations under the Indenture. The Indenture meets the
requirements for qualification under the Trust Indenture
Act of 1939, as amended (the "TIA"). The Indenture has
been duly and validly authorized by the Company and, when
executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee),
will constitute a valid and legally binding agreement of
the Company, enforceable against the Company in accordance
with its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(h) The Company has all requisite corporate power
and authority to execute, deliver and perform its
obligations under the Registration Rights Agreement. The
Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered
by the Company, will constitute a valid and legally
binding agreement of the Company enforceable against the
Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be
brought and (B) any rights to
<PAGE>
indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(i) The Company has all requisite corporate power
and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized
by the Company. This Agreement has been duly executed and
delivered by the Company.
(j) Assuming the accuracy of the Initial Purchasers'
representations in Section 8, no consent, approval,
authorization or order of any court or governmental agency
or body, or third party is required for the issuance and
sale by the Company of the Securities to the Initial
Purchasers, the issuance of shares of Common Stock upon
conversion of the Securities or the consummation by the
Company of the other transactions contemplated hereby,
except such as have been obtained and such as may be
required under state securities or "Blue Sky" laws in
connection with the purchase and resale of the Securities
by the Initial Purchasers. None of the Company or the
Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws (or similar organizational
document), (ii) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to
any of them or any of their respective properties or
assets, except for any such breach or violation which
would not, individually or in the aggregate, have a
Material Adverse Effect, or (iii) in breach of or default
under (nor has any event occurred which, with notice or
passage of time or both, would constitute a default under)
or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument to which any of
them is a party or to which any of them or their
respective properties or assets is subject (collectively,
"Contracts"), except for any such breach, default,
violation or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(k) The execution, delivery and performance by the
Company of this Agreement, the Indenture and the
<PAGE>
Registration Rights Agreement and the consummation by the
Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and
sale of the Securities to the Initial Purchasers and the
issuance of shares of Common Stock upon conversion of the
Securities) will not conflict with or constitute or result
in a breach of or a default under (or an event which with
notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict,
breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws
(or similar organizational document) of the Company or any
of the Subsidiaries, or (iii) (assuming compliance with
all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof)
any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries or
any of their respective properties or assets, except for
any such conflict, breach or violation which would not,
individually or in the aggregate, have a Material Adverse
Effect.
(l) The audited consolidated financial statements of
the Company and the Subsidiaries included in the Final
Memorandum present fairly in all material respects the
financial position, results of operations and cash flows
of the Company and the Subsidiaries at the dates and for
the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated
therein. The summary and selected financial and
statistical data in the Final Memorandum present fairly in
all material respects the information shown therein and
have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except
as otherwise stated therein. Price Waterhouse LLP (the
"Independent Accountants") is an independent public
accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(m) The pro forma financial statements (including
the notes thereto) and the other pro forma financial
information included in the Final Memorandum (i) comply as
to form in all material respects with the applicable
<PAGE>
requirements of Regulation S-X promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (ii) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro
forma financial statements, and (iii) have been properly
computed on the bases described therein; the assumptions
used in the preparation of the pro forma financial data
and other pro forma financial information included in the
Final Memorandum are reasonable and the adjustments used
therein are appropriate to give effect to the transactions
or circumstances referred to therein.
(n) Except as set forth in the Final Memorandum,
there is not pending or, to the knowledge of the Company,
threatened any action, suit, proceeding, inquiry or
investigation to which the Company or any of the
Subsidiaries is a party, or to which the property or
assets of the Company or any of the Subsidiaries are
subject, before or brought by any court, arbitrator or
governmental agency or body which, if determined adversely
to the Company or any of the Subsidiaries, would,
individually or in the aggregate, have a Material Adverse
Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or
sale of the Securities to be sold hereunder or the
consummation of the other transactions described in the
Final Memorandum.
(o) Each of the Company and the Subsidiaries
possesses all licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-
regulatory organizations and all courts and other
tribunals, presently required or necessary to own or
lease, as the case may be, and to operate its respective
properties and to carry on its respective businesses as
now conducted as set forth in the Final Memorandum
("Permits"), except where the failure to obtain such
Permits would not, individually or in the aggregate, have
a Material Adverse Effect; each of the Company and the
Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits except where the
failure to perform such obligations would not,
individually or in the aggregate, have a Material Adverse
Effect; no event has occurred which allows, or after
notice or lapse of time would allow, revocation or
termination thereof or results in any other material
impairment of the rights of the holder of
<PAGE>
any such Permit except where such revocation or modification
would not, individually or in the aggregate, have a Material
Adverse Effect; and none of the Company or the Subsidiaries
has received any notice of any proceeding relating to
revocation or modification of any such Permit, except as
described in the Final Memorandum or except where such
revocation or modification would not, individually or in
the aggregate, have a Material Adverse Effect.
(p) Since the date of the most recent financial
statements appearing in the Final Memorandum, except as
described in the Final Memorandum, (i) none of the Company
or the Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into or
agreed to enter into any transactions or contracts
(written or oral) not in the ordinary course of business
which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to
the business, financial condition, prospects as described
in the Final Memorandum or results of operations of the
Companies and its Subsidiaries, taken as a whole,
(ii) none of the Company or the Subsidiaries has purchased
any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind
on its capital stock (other than with respect to any of
such Subsidiaries, the purchase of, or dividend or
distribution on, capital stock owned by the Company and
other than (a) the repurchase of shares of Common Stock
pursuant to the provisions of employee and incentive stock
option plans and the related agreements thereunder and
(b) the payment of in-kind dividends to holders of the
Company's Series A Preferred Stock) and (iii) there shall
not have been any change in the capital stock or long-term
indebtedness of the Company or the Subsidiaries.
(q) Each of the Company and the Subsidiaries has
filed all necessary federal, state and foreign income and
franchise tax returns, except where the failure to so file
such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes
shown as due thereon; and other than tax deficiencies
which the Company or any Subsidiary is contesting in good
faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency
that has been asserted against the Company or any of the
Subsidiaries that would have, individually or in the
aggregate, a Material Adverse Effect.
<PAGE>
(r) The statistical and market-related data included
in the Final Memorandum are based on or derived from
sources which the Company and the Subsidiaries believe to
be reliable and accurate.
(s) None of the Company, the Subsidiaries or any
agent acting on their behalf has taken or will take any
action that might cause this Agreement or the sale of the
Securities to violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System, in each case
as in effect, or as the same may hereafter be in effect,
on the Closing Date.
(t) Each of the Company and the Subsidiaries has
good and marketable title to all real property and good
title to all personal property described in the Final
Memorandum as being owned by it and good and marketable
title to a leasehold estate in the real and personal
property described in the Final Memorandum as being leased
by it free and clear of all liens, charges, encumbrances
or restrictions (other than the security interests in
favor of Norwest Bank Minnesota, National Association and
liens entered into in the ordinary course of business),
except as described in the Final Memorandum or to the
extent the failure to have such title or the existence of
such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, have a Material
Adverse Effect. All leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or
by which any of them is bound are valid and enforceable
against the Company or such Subsidiary, and, to the
knowledge of the Company, are valid and enforceable
against the other party or parties thereto and are in full
force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse
Effect and except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding
therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks,
service marks, trade names, copyrights and know-how
necessary to conduct
<PAGE>
the businesses now operated by them
as described in the Final Memorandum, and none of the
Company or the Subsidiaries has received any notice of
infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of
others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained,
would have a Material Adverse Effect.
(u) There are no legal or governmental proceedings
involving or affecting the Company or any Subsidiary or
any of their respective properties or assets which would
be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum,
nor are there any material contracts or other documents
which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final
Memorandum.
(v) Except as would not, individually or in the
aggregate, have a Material Adverse Effect (A) each of the
Company and the Subsidiaries is in compliance with and not
subject to liability under applicable Environmental Laws
(as defined below), (B) each of the Company and the
Subsidiaries has made all filings and provided all notices
required under any applicable Environmental Law, and has
and is in compliance with all Permits required under any
applicable Environmental Laws and each of them is in full
force and effect, (C) there is no civil, criminal or
administrative action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or
demand letter or request for information pending or, to
the knowledge of the Company or any of the Subsidiaries,
threatened against the Company or any of the Subsidiaries
under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the
Company or any of the Subsidiaries, (E) none of the
Company or the Subsidiaries has received notice that it
has been identified as a potentially responsible party
under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state law, (F) no property
or facility of the Company or any of the Subsidiaries is
(i) listed or proposed for listing on the National
Priorities List under CERCLA or is
<PAGE>
(ii) listed in the Comprehensive Environmental Response,
Compensation and Liability Information System List
promulgated pursuant to CERCLA, or on any comparable list
maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws"
means the common law and all applicable federal, state and
local laws or regulations, codes, orders, decrees,
judgments or injunctions issued, promulgated, approved or
entered thereunder, relating to pollution or protection of
public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emis-
sions, discharges, releases or threatened releases of
hazardous materials into the environment (including,
without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of
hazardous materials, and (iii) underground and above
ground storage tanks and related piping, and emissions,
discharges, releases or threatened releases therefrom.
(w) There is no strike, labor dispute, slowdown or
work stoppage with the employees of the Company or any of
the Subsidiaries which is pending or, to the knowledge of
the Company or any of the Subsidiaries, threatened.
(x) Each of the Company and the Subsidiaries has in
effect, with financially sound and reputable insurers,
insurance with respect to its business and properties and
the business and properties of its Subsidiaries against
loss or damage of the kind customarily insured against by
corporations of established reputation engaged in the same
or similar businesses and similarly situated, of such type
and in such amounts as are customarily carried under
similar circumstances by such other corporations.
(y) None of the Company or the Subsidiaries has any
liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability
with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the
Company or any of the Subsidiaries makes or ever has made
a contribution and in which any employee of the Company or
of any Subsidiary is or has ever been a participant. With
respect to such plans, the Company and each Subsidiary is
<PAGE>
in compliance in all material respects with all applicable
provisions of ERISA.
(z) The Company and the Subsidiaries, taken as a
whole, (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in
accordance with management's authorization,
(B) transactions are recorded as necessary to permit
preparation of the Company's financial statements and to
maintain accountability for its assets, (C) access to
assets is permitted only in accordance with management's
authorization and (D) the reported accountability for
assets is compared with existing assets at reasonable
intervals.
(aa) None of the Company or the Subsidiaries will be
an "investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms
are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(ab) The Securities, the shares of Common Stock
issuable upon conversion of the Securities, the Indenture
and the Registration Rights Agreement will conform in all
material respects to the descriptions thereof in the Final
Memorandum.
(ac) Except as described in the Final Memorandum, no
holder of securities of the Company or any Subsidiary will
be entitled to have such securities registered under the
Registration Statement required to be filed by the Company
pursuant to the Registration Rights Agreement other than
as expressly permitted thereby.
(ad) Immediately after the consummation of the
transactions contemplated by this Agreement, the fair
value and present fair saleable value of the assets of the
Company (on a consolidated basis) will exceed the sum of
its stated liabilities and identified contingent
liabilities; the Company (on a consolidated basis) is not,
nor will the Company (on a consolidated basis) be, after
giving effect to the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby, (a) left with unreasonably small
capital with which to carry on its business as it is
proposed to be conducted, (b) unable to pay any liability
on a claim as it becomes due or (c) otherwise insolvent.
For
<PAGE>
the purposes of this paragraph, "fair value" means the
amount at which an entity's aggregate assets would change
hands between a willing buyer and a willing seller, each
having reasonable knowledge of the relevant facts, with
neither being under any compulsion to act, with equity to
both, and "present fair saleable value" means the amount
that may be realized if an entity's aggregate assets are
sold with reasonable promptness in an arm's-length
transaction under present conditions for the sale of
ongoing comparable business enterprises.
(ae) None of the Company, the Subsidiaries or any of
their respective Affiliates (as defined in Rule 501(b) of
Regulation D under the Act) has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any "security" (as
defined in the Act) which is or could be integrated with
the sale of the Securities in a manner that would require
the registration under the Act of the Securities or
(ii) engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation
D under the Act) in connection with the offering of the
Securities or in any manner involving a public offering
within the meaning of Section 4(2) of the Act. Assuming
the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof, it is not
necessary in connection with the offer, sale and delivery
of the Securities to the Initial Purchasers in the manner
contemplated by this Agreement to register any of the
Securities under the Act or to qualify the Indenture under
the TIA.
(af) No securities of the Company or any Subsidiary
are of the same class (within the meaning of Rule 144A
under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer
quotation system.
(ag) None of the Company or the Subsidiaries has
taken, nor will any of them take, directly or indirectly,
any action designed to, or that might be reasonably
expected to, cause or result in stabilization or
manipulation of the price of the Securities.
Any certificate signed by any officer of the Company
or any Subsidiary and delivered to either Initial Purchaser
<PAGE>
shall be deemed a joint and several representation and warranty
by the Company to each Initial Purchaser as to the matters
covered thereby.
3. Purchase, Sale and Delivery of the Securities.
On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and
conditions herein set forth, the Company agrees to issue and
sell to the Initial Purchasers, and the Initial Purchasers,
acting severally and not jointly, agree to purchase the Firm
Securities in the respective amounts set forth on Schedule 1
hereto from the Company at 95% of their principal amount. One
or more certificates in definitive form for the Firm Securities
that the Initial Purchasers have agreed to purchase hereunder,
and in such denomination or denominations and registered in
such name or names as the Initial Purchasers request upon
notice to the Company, shall be delivered by or on behalf of
the Company to the Initial Purchasers, against payment by or on
behalf of the Initial Purchasers of the purchase price therefor
by wire transfer (same day funds) to such account or accounts
as the Company shall specify prior to the Closing Date, or by
such means as the parties hereto shall agree prior to the
Closing Date. Such delivery of and payment for the Firm
Securities shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New
York time, on August 12, 1996, or at such other place, time or
date as the Initial Purchasers, on the one hand, and the
Company, on the other hand, may agree upon, such time and date
of delivery against payment being herein referred to as the
"First Closing Date."
In addition, upon written notice from the Initial
Purchasers given to the Company from time to time not more than
30 days subsequent to the date of the Final Memorandum, the
Initial Purchasers may purchase all or less than all of the
Optional Securities at the purchase price per principal amount
of Firm Securities (including any accrued interest thereon to
the related Optional Closing Date) to be paid for the Firm
Securities. The Company agrees to sell to the Initial
Purchasers the principal amount of Optional Securities
specified in such notice and the Initial Purchasers, acting
severally and not jointly, agree to purchase such Optional
Securities. Such Optional Securities may be purchased by the
Initial Purchasers only for the purpose of covering
over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered
unless the Firm Securities previously have been, or
simultaneously are, sold and
<PAGE>
delivered. The right to purchase the Optional Securities or any
portion thereof may be exercised from time to time, within 30 days
subsequent to the date of the Final Memorandum, and to the extent
not previously exercised may be surrendered and terminated at any
time upon notice by the Initial Purchasers to the Company.
If any Optional Securities are to be purchased, the
principal amount of Optional Securities to be purchased by each
Initial Purchaser shall be the principal amount of Optional
Securities which bears the same ratio to the aggregate
principal amount of Optional Securities being purchased as the
principal amount of Firm Securities set forth opposite the name
of such Initial Purchaser in Schedule I hereto bears to the
aggregate principal amount of Firm Securities being purchased,
subject, however, to such adjustments to eliminate any
fractional interests as the Initial Purchasers in their sole
discretion shall make.
Each time for the delivery of and payment for the
Optional Securities, being herein referred to as an "Optional
Closing Date," which may be the First Closing Date (the First
Closing Date and each Optional Closing Date, if any, being
sometimes referred to as a "Closing Date"), shall be determined
by the Initial Purchasers but shall be not later than five full
business days after written notice of election to purchase
Optional Securities is given. One or more certificates in
definitive form for the Optional Securities, in such
denomination or denominations and registered in such name or
names as the Initial Purchasers request upon notice to the
Company, shall be delivered by or on behalf of the Company to
the Initial Purchasers, against payment by or on behalf of the
Initial Purchasers of the purchase price therefor by wire
transfer (same day funds) to such account or accounts as the
Company shall specify prior to the Optional Closing Date, or by
such means as the parties hereto shall agree prior to the
Optional Closing Date. Such delivery of and payment for the
Optional Securities shall be made at the offices of Cahill
Gordon & Reindel on the Optional Closing Date.
4. Offering by the Initial Purchasers. The Initial
Purchasers propose to make an offering of the Securities at the
price and upon the terms set forth in the Final Memorandum, as
soon as practicable after this Agreement is entered into and as
in the judgment of the Initial Purchasers is advisable.
<PAGE>
5. Covenants of the Company. The Company covenants
and agrees with each of the Initial Purchasers that:
(a) The Company will not amend or supplement the
Final Memorandum or any amendment or supplement thereto of
which the Initial Purchasers shall not previously have
been advised and furnished a copy for a reasonable period
of time prior to the proposed amendment or supplement and
as to which the Initial Purchasers shall not have given
their consent, which consent shall not be unreasonably
withheld. The Company will promptly, upon the reasonable
request of the Initial Purchasers or counsel for the
Initial Purchasers, make any amendments or supplements to
the Preliminary Memorandum or the Final Memorandum that
may be necessary or advisable in connection with the
resale of the Securities by the Initial Purchasers. The
Final Memorandum will reflect the terms of the Securities
as described in the Preliminary Memorandum as amended to
reflect the terms set forth on the term sheet on Schedule
3.
(b) The Company will cooperate with the Initial
Purchasers in arranging for the qualification of the
Securities and the shares of Common Stock issuable upon
conversion of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as
the Initial Purchasers may designate and will continue
such qualifications in effect for as long as may be
necessary to complete the resale of the Securities;
provided, however, that in connection therewith, the
Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation
in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the
distribution by the Initial Purchasers of the Securities,
any event occurs or information becomes known as a result
of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a
material fact, or omit to state a material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading,
or if for any other reason it is necessary at any time to
amend or supplement the Final Memorandum to comply with
applicable law, the Company will promptly notify the Initial
<PAGE>
Purchasers thereof and will prepare, at the
expense of the Company, an amendment or supplement to the
Final Memorandum that corrects such statement or omission
or effects such compliance.
(d) The Company will, without charge, provide to the
Initial Purchasers and to counsel for the Initial
Purchasers as many copies of the Preliminary Memorandum
and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the
sale of the Securities as set forth under "Use of
Proceeds" in the Final Memorandum.
(f) Without the prior written consent of Furman Selz
LLC, acting on behalf of the Initial Purchasers, prior to
the expiration of 90 days after the date of the Final
Memorandum the Company will not offer, sell, contract to
sell, pledge or otherwise dispose of any Common Stock (or
any securities convertible into or exercisable or
exchangeable for Common Stock) or grant any options or
warrants to purchase Common Stock, except for (i) the sale
of the Securities to the Initial Purchasers pursuant to
this Agreement and issuances of Common Stock upon
conversion of Securities, (ii) grants of options to
employees or directors pursuant to the terms of a plan in
effect on the date hereof, (iii) issuances of Common Stock
upon exercise of options and warrants outstanding at the
date hereof or issued in accordance with the foregoing
clause (ii), (iv) the consummation of a reverse stock
split in accordance with the terms contemplated by the
Final Memorandum, (v) the issuance of Common Stock or the
grant of options or warrants to purchase Common Stock in
connection with joint ventures with, or acquisitions of,
businesses in the telecommunications industry, (vi) the
payment of in-kind dividends to holders of the Company's
Series A Preferred Stock outstanding, (vii) the issuance
of Common Stock in connection with the redemption or
conversion of the Company's (A) 9% Convertible
Subordinated Debentures due March 18, 1997, (B) 9%
Convertible Subordinated Debentures due March 7, 1997,
(C) 9% Convertible Subordinated Debentures due April 10,
1997, and (D) 9% Convertible Subordinated Debentures due
June 21, 1997 and (viii) the issuance of Common Stock to
holders of the Company's 9% Convertible Subordinated
Debentures due March 18, 1997 in the event the Company
fails to register such debentures by July 31,
<PAGE>
1996. The Company has caused or will cause each of its
current directors and executive officers to furnish a letter
or letters, in form and substance satisfactory to the Initial
Purchasers, pursuant to which each such person shall agree
not to offer, sell, contract to sell, pledge or otherwise
dispose of any Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) for
a period of 90 days (120 days in the case of Jack W. Matz,
Jr. and Paul R. Miller) after the date of the Final
Memorandum without the prior written consent of Furman
Selz LLC, acting on behalf of the Initial Purchasers.
(g) For so long as any of the Securities remain
outstanding, the Company will furnish to the Initial
Purchasers copies of all reports and other communications
(financial or otherwise) furnished by the Company to the
Trustee or to the holders of the Securities and, as soon
as available, copies of any reports or financial
statements furnished to or filed by the Company with the
Commission or any national securities exchange on which
any class of securities of the Company may be listed.
(h) Prior to the Closing Date, the Company will
furnish to the Initial Purchasers, as soon as they have
been prepared if prepared prior to the Closing Date, a
copy of any unaudited interim financial statements of the
Company for any period subsequent to the period covered by
the most recent financial statements appearing in the
Final Memorandum.
(i) None of the Company or any of its Affiliates
will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any "security" (as
defined in the Act) which could be integrated with the
sale of the Securities in a manner which would require the
registration under the Act of the Securities.
(j) The Company will not, and will not permit any of
the Subsidiaries to, engage in any form of general
solicitation or general advertising (as those terms are
used in Regulation D under the Act) in connection with the
offering of the Securities or in any manner involving a
public offering within the meaning of Section 4(2) of the
Act.
(k) For so long as any of the Securities remain
outstanding, the Company will make available at its expense,
<PAGE>
upon request, to any holder of such Securities
and any prospective purchasers thereof the information
specified in Rule 144A(d)(4) under the Act, unless the
Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(l) The Company will use its commercially reasonable
efforts to (i) permit the Securities to be designated
PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the
Private Offerings, Resales and Trading through Automated
Linkages market (the "Portal Market") and (ii) permit the
Securities to be eligible for clearance and settlement
through The Depository Trust Company.
(m) The Company will undertake whatever filings or
other steps are necessary to list the shares of Common
Stock issuable upon conversion of the Securities on the
Nasdaq SmallCap Market.
6. Expenses. The Company agrees to pay all costs
and expenses incident to the performance of its obligations
under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs
and expenses incident to (i) the printing, word processing or
other production of documents with respect to the transactions
contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum, and any "Blue
Sky" memoranda, (ii) all arrangements relating to the delivery
to the Initial Purchasers of copies of the foregoing documents,
(iii) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the
Company, (iv) preparation (including printing), issuance and
delivery to the Initial Purchasers of the Securities, (v) the
qualification of the Securities and the shares of Common Stock
issuable upon conversion of the Securities under state
securities and "Blue Sky" laws, including filing fees and
reasonable fees and disbursements of one counsel for the
Initial Purchasers relating thereto, (vi) expenses in
connection with any meetings with prospective investors in the
Securities, (vii) fees and expenses of the Trustee including
fees and expenses of counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation
of the Securities on the Portal Market and (ix) all expenses
and listing fees incurred in connection with the application
for quotation of the shares of Common Stock issuable upon
conversion of the Securities on the Nasdaq SmallCap Market. If
the sale of the Securities provided for
<PAGE>
herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated or because of
any failure, refusal or inability on the part of the Company to
perform all obligations and satisfy all conditions on their
part to be performed or satisfied hereunder (other than solely
by reason of a default by the Initial Purchasers of their
obligations hereunder after all conditions hereunder have been
satisfied in accordance herewith), the Company agrees to
promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including fees, disbursements and
charges of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, in an amount up to $50,000) that shall have been
incurred by the Initial Purchasers in connection with the
proposed purchase and sale of the Securities.
7. Conditions of the Initial Purchasers'
Obligations. The obligation of the Initial Purchasers to
purchase and pay for the Firm Securities on the First Closing
Date and the Optional Securities to be purchased on each
Optional Closing Date shall, in their sole discretion, be
subject to the satisfaction or waiver of the following
conditions on or prior to the applicable Closing Date:
(a) On such Closing Date, the Initial Purchasers
shall have received the opinion, dated as of such Closing
Date and addressed to the Initial Purchasers, of Arter &
Hadden, counsel for the Company, in form and substance
reasonably satisfactory to counsel for the Initial
Purchasers, to the effect that:
(i) Each of the Company and the Subsidiaries is
incorporated, validly existing and in good standing
under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power
and corporate authority to own its properties and to
conduct its business as described in the Final
Memorandum. Each of the Company and the Subsidiaries
is duly qualified to do business as a foreign
corporation in good standing in all other
jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires
such qualification, except where the failure to be so
qualified would not, individually or in the
aggregate, have a Material Adverse Effect.
<PAGE>
(ii) The Company has the authorized, issued and
outstanding capitalization set forth in the Final
Memorandum as of the date set forth therein; all of
the outstanding shares of capital stock of the
Company and the Subsidiaries have been duly
authorized and validly issued and were not issued in
violation of any preemptive or similar rights; all of
the outstanding shares of capital stock of the
Subsidiaries are owned, directly or indirectly, of
record by the Company, free and clear of all
perfected security interests other than the security
interests in favor of Norwest Bank Minnesota,
National Association, and, to the knowledge of such
counsel, free and clear of all other liens,
encumbrances and claims or restrictions on
transferability (other than those imposed by the Act
and the securities or "Blue Sky" laws of certain
jurisdictions) or voting.
(iii) To the knowledge of such counsel, except as
set forth in Schedule 2 hereof or in the Final
Memorandum (A) no options, warrants or other rights
to purchase from the Company or any Subsidiary shares
of capital stock or ownership interests in the
Company or any Subsidiary are outstanding and (B) no
agreements or other obligations to issue, or other
rights to convert, any obligation into, or exchange
any securities for, shares of capital stock or
ownership interests in the Company or any Subsidiary
are outstanding. To the knowledge of such counsel,
except as set forth in the Final Memorandum, no
holder of securities of the Company or any Subsidiary
is entitled to have such securities registered under
a registration statement filed by the Company
pursuant to the Registration Rights Agreement.
(iv) The Company has all requisite corporate
power and corporate authority to execute, deliver and
perform each of its obligations under the Indenture
and the Securities; the Indenture has been duly and
validly authorized by the Company and, when duly
executed and delivered by the Company (assuming the
due authorization, execution and delivery thereof by
the Trustee), will constitute the valid and legally
binding agreement of the Company, enforceable against
the Company in accordance with its terms, except that
(A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization,
<PAGE>
moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to
creditors' rights generally, (ii) general principles
of equity and the discretion of the court before
which any proceeding therefor may be brought and
(B) any rights to indemnity or contribution
thereunder may be limited by federal and state
securities laws and public policy considerations.
(v) The Securities are in the form contemplated
by the Indenture. The Securities have each been duly
and validly authorized by the Company and, when duly
executed and delivered by the Company and paid for by
the Initial Purchasers in accordance with the terms
of this Agreement (assuming the due authorization,
execution and delivery of the Indenture by the
Trustee and due authentication and delivery of the
Securities by the Trustee in accordance with the
Indenture), will constitute the valid and legally
binding obligations of the Company, entitled to the
benefits of the Indenture, and enforceable against
the Company in accordance with their terms, except
that (A) the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion
of the court before which any proceeding therefor may
be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal and
state securities laws and public policy
considerations.
(vi) The Securities delivered on such Closing
Date are convertible into the shares of Common Stock
of the Company in accordance with the terms of the
Indenture; the shares of Common Stock issuable upon
conversion of such Securities in accordance with the
terms of the Indenture have been duly authorized and
reserved for issuance upon such conversion and, when
issued in accordance with the terms of the Indenture
upon such conversion, will be validly issued, fully
paid and nonassessable.
(vii) The stockholders of the Company have no
preemptive or similar rights with respect to the
Securities or the shares of Common Stock issuable
upon conversion of the Securities.
<PAGE>
(viii) The Company has all requisite corporate
power and corporate authority to execute, deliver and
perform its obligations under the Registration Rights
Agreement; the Registration Rights Agreement has been
duly and validly authorized by the Company and, when
duly executed and delivered by the Company (assuming
due authorization, execution and delivery thereof by
the Initial Purchasers), will constitute the valid
and legally binding agreement of the Company,
enforceable against the Company in accordance with
its terms, except that (A) the enforcement thereof
may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and
the discretion of the court before which any
proceeding therefor may be brought and (B) any rights
to indemnity or contribution thereunder may be
limited by federal and state securities laws and
public policy considerations.
(ix) Each of the Company and the Subsidiaries
has all requisite corporate power and corporate
authority to execute, deliver and perform its
obligations under this Agreement and to consummate
the transactions contemplated hereby; this Agreement
and the consummation by the Company of the
transactions contemplated hereby have been duly and
validly authorized by the Company and each
Subsidiary. This Agreement has been duly executed
and delivered by the Company and each Subsidiary.
(x) The Indenture, the Securities, the
authorized capital stock of the Company, including
the shares of Common Stock issuable upon conversion
of the Securities, and the Registration Rights
Agreement conform in all material respects to the
descriptions thereof contained in the Final
Memorandum.
(xi) The Statements contained in the Offering
Memorandum under "Business -- Government Regulation,"
insofar as it relates to legal matters, are accurate
and correct in all material respects.
(xii) Except as set forth in the Final
Memorandum, to the knowledge of such counsel, no
legal or governmental proceedings are pending or
threatened to
<PAGE>
which any of the Company or the
Subsidiaries is a party or to which the property or
assets of the Company or any Subsidiary is subject
which, if determined adversely to the Company or the
Subsidiaries, would result, individually or in the
aggregate, in a Material Adverse Effect, or which
seeks to restrain, enjoin, prevent the consummation
of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder, the issuance of
shares of Common Stock upon conversion of the
Securities or the consummation of the other
transactions described in the Final Memorandum under
the caption "Use of Proceeds."
(xiii) None of the Company or the Subsidiaries is
(i) in violation of its certificate of incorporation
or bylaws (or similar organizational document),
(ii) to the knowledge such counsel, in breach or
violation of any statute, judgment, decree, order,
rule or regulation applicable to any of them or any
of their respective properties or assets, except for
any such breach or violation which would not,
individually or in the aggregate, have a Material
Adverse Effect, or (iii) in breach or default under
(nor has any event occurred which, with notice or
passage of time or both, would constitute a default
under) or in violation of any of the terms or
provisions of any material Contract known to such
counsel (including in any event any of the foregoing
which have been filed by the Company with the
Commission during the two year period preceding the
date of such opinion), except for any such breach,
default, violation or event which would not,
individually or in the aggregate, have a Material
Adverse Effect.
(xiv) The execution, delivery and performance of
this Agreement, the Indenture, the Registration
Rights Agreement and the consummation of the
transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale
of the Securities to the Initial Purchasers and the
issuance of shares of Common Stock upon conversion of
the Securities) will not constitute or result in a
breach or a default under (or an event which with
notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms
or provisions of any material Contract known to such
counsel (including in any event any of the foregoing
which
<PAGE>
have been filed by the Company with the
Commission during the two year period preceding the
date of such opinion), except for any such breach,
violation, default or event which would not,
individually or in the aggregate, have a Material
Adverse Effect, (ii) the certificate of incorporation
or bylaws (or similar organizational document) of the
Company or any of the Subsidiaries, or (iii) assuming
compliance with all applicable state securities or
"Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial
Purchasers in Section 8 hereof, any statute,
judgment, decree, order, rule or regulation known to
such counsel to be applicable to the Company or any
of the Subsidiaries or any of their respective
properties or assets, except for any such breach or
violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xv) Assuming the accuracy of the
representations and warranties of the Initial
Purchasers in Section 8 hereof no consent, approval,
authorization or order of any governmental authority
is required for the issuance and sale by the Company
of the Securities to the Initial Purchasers (except
as may be required by virtue of the status of the
Initial Purchasers), the issuance of shares of Common
Stock upon conversion of the Securities or the
consummation by the Company of the other transactions
contemplated hereby, except such as may be required
under Blue Sky laws, as to which such counsel need
express no opinion, and those which have previously
been obtained.
(xvi) To the knowledge of such counsel, there are
no legal or governmental proceedings involving or
affecting the Company or the Subsidiaries or any of
their respective properties or assets which would be
required to be described in a prospectus pursuant to
the Act that are not described in the Final
Memorandum, nor, to the knowledge of such counsel,
are there any material contracts or other documents
which would be required to be described in a
prospectus pursuant to the Act that are not described
in the Final Memorandum.
(xvii) None of the Company or the Subsidiaries is,
or immediately after the sale of the Securities to be
<PAGE>
sold hereunder and the application of the proceeds
from such sale (as described in the Final Memorandum
under the caption "Use of Proceeds") will be, an
"investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(xviii) No registration under the Act of the
Securities is required in connection with the sale of
the Securities to the Initial Purchasers as
contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale
of the Securities by the Initial Purchasers in
accordance with Section 8 of this Agreement, and
prior to the effectiveness of the Registration
Statement, the Indenture is not required to be
qualified under the TIA, in each case assuming
(i) (A) that the purchasers who buy such Securities
in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A
promulgated under the Act ("QIBs") or accredited
investors as defined in Rule 501(a) (1), (2), (3) or
(7) promulgated under the Act ("Accredited
Investors") or (B) that the offer or sale of the
Securities is made in an offshore transaction as
defined in Regulation S, (ii) the accuracy of the
Initial Purchasers' representations in Section 8 and
those of the Company contained in this Agreement
regarding the absence of a general solicitation in
connection with the sale of such Securities to the
Initial Purchasers and the initial resale thereof and
(iii) the due performance by the Initial Purchasers
of the agreements set forth in Section 8 hereof.
(xix) No securities of the Company or any
Subsidiary are of the same class (within the meaning
of Rule 144A under the Act) as the Securities and
listed on a national securities exchange registered
under Section 6 of the Exchange Act, or quoted in a
U.S. automated inter-dealer quotation system.
(xx) Neither the consummation of the
transactions contemplated by this Agreement nor the
sale, issuance, execution or delivery of the
Securities will violate Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
<PAGE>
In rendering such opinion, Arter & Hadden may rely
upon such certificates and other documents and information
as it may request to pass upon such matters.
At the time the foregoing opinion is delivered, Arter
& Hadden shall additionally state that although it has
made certain inquiries and investigations in connection
with the preparation of the Final Memorandum, such counsel
did not independently verify the accuracy or completeness
of the statements made in the Final Memorandum and the
limitations inherent in the role of outside counsel are
such that such counsel cannot and does not assume
responsibility for or pass on the accuracy and
completeness of such statements, except insofar as such
statements relate to such counsel and except for the
matters set forth in Subsection 7(a)(x) above, that
subject to the foregoing, such counsel can state that its
work in connection with this matter did not disclose any
information that caused such counsel to believe that the
Final Memorandum, as of its date or as of the Closing
Date, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading (other than financial statements and other
information of a statistical, accounting or financial
nature which are or should be contained therein). The
opinion of Arter & Hadden described in this Section shall
be rendered to the Initial Purchasers at the request of
the Company and shall so state therein.
(b) On the Closing Date, the Initial Purchasers
shall have received the opinion, in form and substance
satisfactory to the Initial Purchasers, dated as of the
Closing Date and addressed to the Initial Purchasers, of
Cahill Gordon & Reindel, counsel for the Initial
Purchasers, with respect to certain legal matters relating
to this Agreement and such other related matters as the
Initial Purchasers may reasonably require. In rendering
such opinion, Cahill Gordon & Reindel shall have received
and may rely upon such certificates and other documents
and information as it may reasonably request to pass upon
such matters.
(c) The Initial Purchasers shall have received from
the Independent Accountants a comfort letter or letters
dated the date hereof in the form attached hereto as
<PAGE>
Exhibit A, and the Closing Date, and the substance of each
of which shall be satisfactory to counsel for the Initial
Purchasers.
(d) The representations and warranties of the
Company contained in this Agreement shall be true and
correct on and as of the date hereof and on and as of the
Closing Date as if made on and as of the Closing Date; the
statements of the Company's officers made pursuant to any
certificate delivered in accordance with the provisions
hereof shall be true and correct on and as of the date
made and on and as of the Closing Date; the Company shall
have performed all covenants and agreements and satisfied
all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial
statements in such Final Memorandum, there shall have been
no event or development, and no information shall have
become known, that, individually or in the aggregate, has
or would be reasonably likely to have a Material Adverse
Effect.
(e) The sale of the Securities hereunder shall not
be enjoined (temporarily or permanently) on the Closing
Date.
(f) Subsequent to the date of the most recent
financial statements in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date
hereof), none of the Company or any of the Subsidiaries
shall have sustained any loss or interference with respect
to its business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or
work stoppage or from any legal or governmental
proceeding, order or decree, which loss or interference,
individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect.
(g) The Initial Purchasers shall have received a
certificate of the Company, dated the Closing Date, signed
on behalf of the Company by its Chairman of the Board,
President or any Vice President and the Chief Financial
Officer, to the effect that:
<PAGE>
(i) The representations and warranties of the
Company contained in this Agreement are true and
correct on and as of the date hereof and on and as of
the Closing Date, and the Company has performed all
covenants and agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at
or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof
or since the date of the most recent financial
statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date
hereof), except as described in the Final Memorandum
no event or development has occurred, and no
information has become known, that, individually or
in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has
not been enjoined (temporarily or permanently).
(h) On the Closing Date, the Initial Purchasers
shall have received the Registration Rights Agreement
executed by the Company and such agreement shall be in
full force and effect at all times from and after the
Closing Date.
On or before the Closing Date, the Initial Purchasers
and counsel for the Initial Purchasers shall have received such
further documents, opinions, certificates, letters and
schedules or instruments relating to the business, corporate,
legal and financial affairs of the Company and the Subsidiaries
as they shall have heretofore reasonably requested from the
Company.
All such documents, opinions, certificates, letters,
schedules or instruments delivered pursuant to this Agreement
will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Initial
Purchasers and counsel for the Initial Purchasers. The Company
shall furnish to the Initial Purchasers such conformed copies
of such documents, opinions, certificates, letters, schedules
and instruments in such quantities as the Initial Purchasers
shall reasonably request.
8. Offering of Securities; Restrictions on
Transfer. Each of the Initial Purchasers represents and
warrants
<PAGE>
(as to itself only) that it is a QIB. Each of the
Initial Purchasers agrees with the Company (as to itself only)
that (i) it has not and will not solicit offers for, or offer
or sell, the Securities by any form of general solicitation or
general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act; and (ii) it has
and will solicit offers for the Securities only from, and will
offer the Securities only to (A) in the case of offers inside
the United States, (x) persons whom the Initial Purchasers
reasonably believe to be QIBs or, if any such person is buying
for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has
represented to the Initial Purchasers that each such account is
a QIB, to whom notice has been given that such sale or delivery
is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by the Initial
Purchasers to be Accredited Investors that, prior to their
purchase of the Securities, deliver to the Initial Purchasers a
letter containing the representations and agreements set forth
in Annex A to the Final Memorandum and (B) in the case of
offers outside the United States, to persons other than U.S.
persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting
on a discretionary basis for foreign beneficial owners (other
than an estate or trust)); provided, however, that, in the case
of this clause (B), in purchasing such Securities such persons
are deemed to have represented and agreed as provided under the
caption "Transfer Restrictions" contained in the Final
Memorandum (or, if the Final Memorandum is not in existence, in
the most recent Memorandum).
9. Indemnification and Contribution. (a) The
Company and the Subsidiaries, jointly and severally, agrees to
indemnify and hold harmless the Initial Purchasers, and each
person, if any, who controls any Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act, against any losses, claims, damages or liabilities to
which any Initial Purchaser or such controlling person may
become subject under the Act, the Exchange Act or otherwise,
insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of any material fact contained in any Memorandum or any
amendment or supplement thereto; or
<PAGE>
(ii) the omission or alleged omission to state, in
any Memorandum or any amendment or supplement thereto, a
material fact required to be stated therein or necessary
to make the statements therein not misleading,
and will reimburse, as incurred, the Initial Purchasers and
each such controlling person for any legal or other reasonable
expenses incurred by the Initial Purchasers or such controlling
person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action; provided, however,
neither the Company nor any Subsidiary will be liable in any
such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission
made in any Memorandum or any amendment or supplement thereto
in reliance upon and in conformity with written information
concerning the Initial Purchasers furnished to the Company by
the Initial Purchasers specifically for use therein. This
indemnity agreement will be in addition to any liability that
the Company may otherwise have to the indemnified parties.
Neither the Company nor any Subsidiary shall be liable under
this Section 9 for any settlement of any claim or action
effected without its prior written consent, which shall not be
unreasonably withheld.
(b) The Initial Purchasers agree to indemnify and
hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against
any losses, claims, damages or liabilities to which the Company
or any such director, officer or controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact
contained in any Memorandum or any amendment or supplement
thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated in any Memorandum
or any amendment or supplement thereto, or necessary to make
the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written
information concerning such Initial Purchaser, furnished to the
Company by the Initial Purchasers specifically for use therein;
and subject to the limitation set forth immediately preceding
<PAGE>
this clause, will reimburse, as incurred, any legal or other
expenses incurred by the Company or any such director, officer
or controlling person in connection with investigating or
defending against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in
addition to any liability that the Initial Purchasers may
otherwise have to the indemnified parties. The Initial
Purchasers shall not be liable under this Section 9 for any
settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld. The Company
shall not, without the prior written consent of the Initial
Purchasers, effect any settlement or compromise of any pending
or threatened proceeding in respect of which any Initial
Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, unless
such settlement (A) includes an unconditional written release
of the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers, from all liability on
claims that are the subject matter of such proceeding and (B)
does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any Initial
Purchaser.
(c) Promptly after receipt by an indemnified party
under this Section 9 of notice of the commencement of any
action for which such indemnified party is entitled to
indemnification or contribution under this Section 9, such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 9,
notify the indemnifying party of the commencement thereof in
writing; but the omission to so notify the indemnifying party
(i) will not relieve it from any liability under paragraph (a)
or (b) above or (d) below unless and to the extent such failure
results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above or (d) below. In case
any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if (i) the use of
counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of
interest, (ii) the
<PAGE>
defendants in any such action include both
the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it and/or other
indemnified parties that are different from or additional to
those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after receipt by the
indemnifying party of notice of the institution of such action,
then, in each such case, the indemnifying party shall not have
the right to direct the defense of such action on behalf of
such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9
for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party
in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with
such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the
Initial Purchasers in the case of paragraph (a) of this Section
9 or the Company in the case of paragraph (b) of this
Section 9, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying
party has authorized in writing the employment of counsel for
the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable
for the costs and expenses of any settlement of such action
effected by such indemnified party without the prior written
consent of the indemnifying party (which consent shall not be
unreasonably withheld), unless such indemnified party waived in
writing its rights under this Section 9, in which case the
indemnified party may effect such a settlement without such
consent.
<PAGE>
(d) In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this
Section 9 is unavailable to, or insufficient to hold harmless,
an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law,
not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by
the Company on the one hand and any Initial Purchaser on the
other shall be deemed to be in the same proportion as the total
proceeds from the offering (before deducting expenses but after
deducting the Initial Purchasers' discounts and commissions)
received by the Company bear to the total discounts and
commissions received by such Initial Purchaser. The relative
fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on
the one hand, or such Initial Purchaser on the other, the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company
and the Initial Purchasers agree that it would not be equitable
if the amount of such contribution were determined by pro rata
or per capita allocation or by any other method of allocation
that does not take into account the equitable considerations
referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no
Initial Purchaser shall be obligated to make contributions
hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of
any damages that such Initial Purchaser has otherwise been
required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a
<PAGE>
material fact, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to
contribution as the Initial Purchasers, and each director of
the Company, each officer of the Company and each person, if
any, who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, shall have the
same rights to contribution as the Company.
10. Survival Clause. The respective
representations, warranties, agreements, covenants, indemnities
and other statements of the Company, its officers and the
Initial Purchasers set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by
or on behalf of the Company, any of its officers or directors,
the Initial Purchasers or any controlling person referred to in
Section 9 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 6, 9 and 15 hereof
shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be
terminated in the sole discretion of the Initial Purchasers by
notice to the Company given prior to the Closing Date in the
event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing Date:
(i) any of the Company or the Subsidiaries shall
have sustained any loss or interference with respect to
its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or
work stoppage or any legal or governmental proceeding,
which loss or interference, in the sole judgment of the
Initial Purchasers, has had or has a Material Adverse
Effect, or there shall have been, in the sole judgment of
the Initial Purchasers, any event or development that,
individually or in the aggregate, has or could be
reasonably likely to have a Material Adverse Effect
(including
<PAGE>
without limitation a change in control of the
Company or the Subsidiaries), except in each case as
described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities of the Company or in
securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ National Market
shall have been suspended or minimum or maximum prices
shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been declared by
New York or United States authorities; or
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and
any foreign power, or (B) an outbreak or escalation of any
other insurrection or armed conflict involving the United
States or any other national or international calamity or
emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A),
(B) or (C) above and in the sole judgment of the Initial
Purchasers, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the
Securities as contemplated by the Final Memorandum.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other
party except as provided in Section 10 hereof.
12. Information Supplied by the Initial Purchasers.
The statements set forth in the last paragraph on the front
cover page, in the second and third sentences of the third
paragraph and the fifth paragraph under the heading "Private
Placement" in the Final Memorandum (to the extent such
statements relate to the Initial Purchasers) constitute the
only information furnished by the Initial Purchasers to the
Company for the purposes of Sections 2(a) and 9 hereof.
13. Notices. All communications hereunder shall be
in writing and, if sent to the Initial Purchasers, shall be
mailed or delivered to (i) Furman Selz LLC, 230 Park Avenue,
New York, New York 10169, Attention: Stuart B. Katz; if sent
to the Company, shall be mailed or delivered to the Company at
1600 Promenade Center, Richardson, Texas 75080, Attention:
Lynn H. Johnson, Esq., Vice President and General Counsel; with
<PAGE>
a copy to Arter & Hadden, 1717 Main Street, Suite 4100, Dallas,
Texas 75201, Attention: Mark S. Solomon, Esq.
All such notices and communications shall be deemed
to have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; and one business day after
being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchasers, the
Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein
contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no
other person except that (i) the indemnities of the Company
contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial
Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and (ii) the indemnities of the
Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Company,
its officers and any person or persons who control the Company
within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act. No purchaser of Securities from the Initial
Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION
OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH
HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO
ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
<PAGE>
If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof in the
space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between the Company and
the Initial Purchasers.
Very truly yours,
SA TELECOMMUNICATIONS, INC.
By: /s/ Jack W. Matz, Jr.
--------------------------
Name: Jack W. Matz, Jr.
Title: Chief Executive
Officer
LONG DISTANCE NETWORK, INC.
By: /s/ J. David Darnell
--------------------------
Name: J. David Darnell
Title: Vice President -
Finance
NORTH AMERICAN TELECOMMUNICATIONS
CORPORATION
By: /s/ J. David Darnell
--------------------------
Name: J. David Darnell
Title: Vice President -
Finance
U.S. COMMUNICATIONS, INC.
By: /s/ J. David Darnell
--------------------------
Name: J. David Darnell
Title: Vice President -
Finance
<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
FURMAN SELZ LLC
By: /s/ Furman Selz LLC
--------------------------
Name:
Title:
RAUSCHER PIERCE REFSNES, INC.
By: /s/ Rauscher Pierce Refsnes, Inc.
---------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Principal
Amount of
Initial Purchaser Securities
- ----------------- ----------
<S> <C>
Furman Selz LLC........................... $12,500,000
Rauscher Pierce Refsnes, Inc.............. 12,500,000
___________
Total............................... $25,000,000
</TABLE>
<PAGE>
SCHEDULE 2
Options and Warrants Outstanding
<PAGE>
Exhibit 10.2
=================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 12, 1996
By and Among
SA TELECOMMUNICATIONS, INC.
and
FURMAN SELZ LLC
and
RAUSCHER PIERCE REFSNES, INC.
as Initial Purchasers
===================================================================
$25,000,000*
10% CONVERTIBLE NOTES DUE 2006
_________________________
* $28,750,000 if the Over-allotment Option is exercised in
full.
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions...............................................1
2. Shelf Registration........................................4
3. Additional Interest.......................................5
4. Registration Procedures...................................7
5. Registration Expenses....................................15
6. Indemnification..........................................16
7. Rule 144 and 144A........................................21
8. Underwritten Registrations...............................21
9. Miscellaneous............................................21
(a) No Inconsistent Agreements.........................21
(b) Adjustments Affecting Registrable
Notes............................................22
(c) Amendments and Waivers.............................22
(d) Notices............................................22
(e) Successors and Assigns.............................24
(f) Counterparts.......................................24
(g) Headings...........................................24
(h) Governing Law......................................24
(i) Severability.......................................24
(j) Securities Held by the Company or
its Affiliates...................................24
(k) Third Party Beneficiaries..........................25
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this
"Agreement"), dated as of August 12, 1996, is being entered
into by and among SA Telecommunications Inc., a Delaware
corporation (the "Company"), and Furman Selz LLC and Rauscher
Pierce Refsnes, Inc. (the "Initial Purchasers").
This Agreement is being entered into in connection
with the Purchase Agreement, dated August 5, 1996, between the
Company and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial
Purchasers of $25,000,000 aggregate principal amount of the
Company's 10% Convertible Notes due 2006 ($28,750,000 aggregate
principal amount if the Initial Purchasers' over-allotment
option is exercised in full)(the "Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set
forth in this Agreement for the benefit of the Initial
Purchasers and their direct and indirect transferees. The
execution and delivery of this Agreement is a condition to the
obligation of the Initial Purchasers to purchase the Notes
under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall
have the following meanings:
Additional Interest: See Section 3(a) hereof.
Advice: See the last paragraph of Section 4 hereof.
Agreement: See the first introductory paragraph
hereto.
Closing Date: The Closing Date as defined in the
Purchase Agreement.
Common Stock: The common stock, par value $0.0001
per share, of the Company.
Company: See the first introductory paragraph
hereto.
Effectiveness Date: The 180th day after the Issue
Date.
<PAGE>
Effectiveness Period: See Section 2(a) hereof.
Event Date: See Section 3(b) hereof.
Exchange Act: The Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC
promulgated thereunder.
Filing Date: The 120th day after the Issue Date.
Holder: Any holder of a Registrable Security.
Indemnified Person: See Section 6(c) hereof.
Indemnifying Person: See Section 6(c) hereof.
Indenture: The Indenture, dated as of August 12,
1996 between the Company and the United States Trust Company of
New York, as trustee, pursuant to which the Notes are being
issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: See the first introductory
paragraph hereto.
Inspectors: See Section 4(o) hereof.
Issue Date: The date on which the original Notes
were sold to the Initial Purchasers pursuant to the Purchase
Agreement.
NASD: See Section 4(r) hereof.
Notes: See the second introductory paragraph hereto.
Offering Memorandum: The Offering Memorandum dated
August 5, 1996 pursuant to which the Notes are being offered
and sold by the Initial Purchasers.
Participant: See Section 6(a) hereof.
Person: An individual, trustee, corporation,
partnership, limited liability company, joint stock company,
trust, unincorporated association, union, business association,
firm or other legal entity.
<PAGE>
Prospectus: The prospectus included in any
Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that includes
any information previously omitted from a prospectus filed as
part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, and all other
amendments and supplements to the Prospectus, with respect to
the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
Purchase Agreement: See the second introductory
paragraph hereto.
Records: See Section 4(o) hereof.
Registrable Securities: Each Note and share of
Common Stock of the Company issuable upon conversion of a Note,
until each such Note or share (i) has been effectively
registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement covering it or
(ii) is distributed to the public pursuant to Rule 144.
Registration Statement: Any registration statement
of the Company that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits,
and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any
similar rule (other than Rule 144A) or regulation hereafter
adopted by the SEC providing for offers and sales of securities
made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such
securities being free of the registration and prospectus
delivery requirements of the Securities Act.
Rule 144A: Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time,
or any similar rule (other than Rule 144) or regulation
hereafter adopted by the SEC.
<PAGE>
Rule 415: Rule 415 promulgated under the Securities
Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
Shelf Registration: See Section 2(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture.
Underwritten registration or underwritten offering:
A registration in which securities of the Company are sold to
an underwriter for reoffering to the public.
2. Shelf Registration
(a) Shelf Registration. The Company agrees to file
with the SEC no later than the Filing Date a Registration
Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities
(the "Shelf Registration"). The Shelf Registration shall be on
Form S-2 or another appropriate form permitting registration of
such Registrable Securities for resale by Holders in the manner
or manners designated by them (including, without limitation,
one or more underwritten offerings). The Company shall not
permit any securities other than the Registrable Securities to
be included in the Shelf Registration, except as required
pursuant to "piggy-back" registration rights granted by the
Company and existing on the date of the Offering Memorandum as
described therein.
The Company shall use its commercially reasonable
efforts to cause the Shelf Registration to be declared
effective under the Securities Act on or prior to the
Effectiveness Date and to keep the Shelf Registration
continuously effective under the Securities Act until the date
which is three years from the Issue Date, subject to extension
pursuant to the last paragraph of Section 4 hereof (the
"Effectiveness Period"), or such shorter period ending when all
Registrable Securities covered by the Shelf Registration have
been sold in the manner set forth and as contemplated in the
Shelf Registration.
<PAGE>
(b) Withdrawal of Stop Orders. If the Shelf
Registration ceases to be effective for any reason at any time
during the Effectiveness Period (other than because of the sale
of all of the securities registered thereunder), the Company
shall use its commercially reasonable efforts to obtain the
prompt withdrawal of any order suspending the effectiveness
thereof.
(c) Supplements and Amendments. The Company shall
promptly supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable
to the registration form used for such Shelf Registration, if
required by the Securities Act, or if reasonably requested by
the Holders of a majority in aggregate principal amount of the
Registrable Securities covered by such Registration Statement
or by any underwriter of such Registrable Securities.
(d) Calculation of Principal Amount. Unless the
context otherwise requires, whenever it is necessary pursuant
to the terms of this Agreement to determine the Holders of a
majority in principal amount of the Registrable Securities
covered by a Registration Statement, shares of Common Stock
issued upon conversion of Notes which constitute Registrable
Securities shall be treated as if such conversions had not
taken place in making such calculation and the holders of such
shares shall be treated as owning the principal amount of Notes
so calculated.
3. Additional Interest
(a) The Company and the Initial Purchasers agree
that the Holders of Registrable Securities will suffer damages
if the Company fails to fulfill its obligations under Section 2
hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the
Company agrees to pay, as liquidated damages, additional
interest on the Registrable Securities ("Additional Interest")
under the circumstances and to the extent set forth below:
(i) if the Shelf Registration has not been
filed on or prior to the Filing Date, then,
commencing on the 121st day after the Issue Date,
Additional Interest shall accrue on the
Registrable Securities over and above the stated
interest at a rate of 0.25% per annum for the
first 90 days immediately following the Filing
Date, such Additional Interest rate increasing by
an additional
<PAGE>
0.25% per annum at the beginning of each subsequent 90-day
period;
(ii) if the Shelf Registration is not
declared effective by the SEC on or prior to the
Effectiveness Date, then, commencing on the 181st
day after the Issue Date, Additional Interest
shall accrue on the Registrable Securities
included or which should have been included in
such Registration Statement over and above the
stated interest at a rate of 0.25% per annum for
the first 90 days immediately following the
Effectiveness Date, such Additional Interest rate
increasing by an additional 0.25% per annum at the
beginning of each subsequent 90-day period; and
(iii) if the Shelf Registration has been
declared effective and such Shelf Registration
ceases to be effective at any time during the
Effectiveness Period, then Additional Interest
shall accrue over and above any interest otherwise
payable on such Registrable Securities at a rate
of 0.25% per annum on the day such Shelf
Registration ceases to be effective, such
Additional Interest rate increasing by an
additional 0.25% per annum at the beginning of
each such subsequent 90-day period;
provided, however, that the Additional Interest rate on any
Registrable Security may not exceed at any one time in the
aggregate 1.0% per annum; and provided, further, that (1) upon
the filing of the Shelf Registration (in the case of clause (i)
of this Section 3(a)), (2) upon the effectiveness of the Shelf
Registration (in the case of clause (ii) of this Section 3(a)),
or (3) upon the effectiveness of the Shelf Registration which
had ceased to remain effective (in the case of (iii)(C) of this
Section 3(a)), Additional Interest on the Registrable
Securities as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within
three business day after each and every date on which an event
occurs in respect of which Additional Interest is required to
be paid (an "Event Date"). Any amounts of Additional Interest
due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this
Section 3 will be payable to the Holders of Registrable
Securities in cash semi-annually on each February 15 and
August 15
<PAGE>
(to the holders of record on the February 1 and
August 1 immediately preceding such dates), commencing with the
first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest
rate by (i) the principal amount of the Notes held by a Holder,
in the case of Registrable Securities which are Notes, or
(ii) the per share conversion price at which a Note was
converted in the case of Registrable Securities which are
shares of Common Stock, multiplied by a fraction, the numerator
of which is the number of days such Additional Interest rate
was applicable during such period (determined on the basis of a
360-day year comprised of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
4. Registration Procedures
In connection with the filing of any Registration
Statement pursuant to Section 2 hereof, the Company shall
effect such registration(s) to permit the sale of the
securities covered thereby in accordance with the intended
method or methods of disposition thereof, and pursuant thereto
and in connection with any Registration Statement filed by the
Company hereunder, the Company shall:
(a) Prepare and file with the SEC on or prior to the
Filing Date a Registration Statement as prescribed by Section 2
hereof, and use its commercially reasonable efforts to cause
such Registration Statement to become effective and remain
effective as provided herein; provided, however, that, before
filing any Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall, if
requested, furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their
counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (in each case at
least five business days prior to such filing). The Company
shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the
Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in
aggregate principal amount of the Registrable Securities
covered by such Registration Statement, their counsel, or the
managing underwriters, if any, shall reasonably object.
<PAGE>
(b) Prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as
may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period; cause the
related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented
to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act
applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so amended
or in such Prospectus as so supplemented.
(c) Notify the selling Holders of Registrable
Securities, their counsel and the managing underwriters, if
any, promptly (but in any event within two business days), and
confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written
statement that any Holder may, upon request, obtain, at the
sole expense of the Company, one conformed copy of such
Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or
deemed to be incorporated by reference and exhibits), (ii) of
the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (iii) if
at any time the representations and warranties of the Company
contained in any agreement (including any underwriting
agreement), contemplated by Section 4(n) hereof cease to be
true and correct in any material respect, (iv) of the receipt
by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
of a Registration Statement or any of the Registrable
Securities in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any condition or any
information becoming known (including pending corporate
developments, acquisitions or public filings) that requires the
making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and
<PAGE>
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, (vi) of the determination by
the Company that a post-effective amendment to a Registration
Statement would be appropriate.
(d) Use its commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness
of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, and, if
any such order is issued, to use its commercially reasonable
efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If reasonably requested by the managing
underwriter or underwriters (if any), or the Holders of a
majority in aggregate principal amount of the Registrable
Securities being sold in connection with an underwritten
offering, (i) promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, or counsel
for any of them reasonably request to be included therein,
(ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) Furnish to each selling Holder of Registrable
Securities who so requests and to counsel and each managing
underwriter, if any, at the sole expense of the Company, one
conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including
financial statements and schedules.
(g) Deliver to each selling Holder of Registrable
Securities, their respective counsel, and the underwriters, if
any, at the sole expense of the Company, as many copies of the
Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this
<PAGE>
Section 4, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of
the selling Holders of Registrable Securities, and the
underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable
Securities covered by, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable
Securities, use its commercially reasonable efforts to register
or qualify such Registrable Securities (and to cooperate with
selling Holders of Registrable Securities, the managing
underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such
Registrable Securities) for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States
as any selling Holder or the managing underwriter or
underwriters reasonably request in writing; provided, however,
that where Registrable Securities are offered other than
through an underwritten offering, the Company agrees to cause
its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant
to this Section 4(h); keep each such registration or
qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company
shall not be required to (A) qualify generally to do business
in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process
in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(i) Cooperate with the selling Holders of
Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or
Holders may reasonably request.
<PAGE>
(j) Use its commercially reasonable efforts to cause
the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
enable the Holders thereof or the underwriter or underwriters,
if any, to dispose of such Registrable Securities, except as
may be required solely as a consequence of the nature of a
selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) Upon the occurrence of any event contemplated by
paragraph 4(c)(v) or 4(c)(vi) hereof, as promptly as
practicable prepare and (subject to Section 4(a) hereof) file
with the SEC, at the sole expense of the Company, a supplement
or post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference,
or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being
sold thereunder Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not
contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading.
(l) [intentionally omitted]
(m) Prior to the effective date of the Registration
Statement provide a CUSIP number for all Registrable
Securities.
(n) In connection with any underwritten offering of
Registrable Securities, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities
similar to the Notes or equity Securities similar to the Common
Stock, as the case may be, and take all such other actions as
are reasonably requested by the managing underwriter or
underwriters in order to facilitate the registration or the
disposition of such Registrable Securities and, in such
connection, (i) make such representations and warranties to,
and covenants with, the underwriters with respect to the
business of the Company and its subsidiaries and the
Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein,
in each case, as are customarily made by issuers to
underwriters in underwritten offerings
<PAGE>
of debt securities similar to the Notes or equity securities
similar to the Common Stock, as the case may be, and confirm the
same in writing if and when requested; (ii) obtain the written
opinion of counsel to the Company and written updates thereof in
form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the underwriters covering
the matters customarily covered in opinions provided in
underwritten offerings of debt similar to the Notes or equity
securities similar to the Common Stock, as the case may be, and
such other customary matters as may be reasonably requested by
the managing underwriter or underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter
or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for
which financial statements and financial data are, or are
required to be, included or incorporated by reference in the
Registration Statement), addressed to each of the underwriters,
such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of debt similar to the
Notes or equity securities similar to the Common Stock, as the
case may be, and such other customary matters as reasonably
requested by the managing underwriter or underwriters; and
(iv) if an underwriting agreement is entered into, the same
shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 hereof (or such
other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the
managing underwriter or underwriters or agents and the Company)
with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required
thereunder.
(o) During the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities
being sold, any underwriter participating in any such
disposition of Registrable Securities, if any, and any
attorney, accountant or other agent retained by any such
selling Holder or underwriter (collectively, the "Inspectors"),
at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate
documents and instruments of the Company and its subsidiaries
(collectively,
<PAGE>
the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all
information reasonably requested by any such Inspector in
connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and any
Records which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of
such Records is necessary to avoid or correct a misstatement or
omission of a material fact in such Registration Statement,
(ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction,
(iii) disclosure of such information is, in the opinion of
counsel for any Inspector, necessary or advisable in connection
with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector
and arising out of, based upon, relating to, or involving this
Agreement, or any transactions contemplated hereby or arising
hereunder, or (iv) the information in such Records has been
made generally available to the public. Each selling Holder of
such Registrable Securities will be required to agree that
information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the
Company unless and until such information is generally
available to the public. Each selling Holder of such
Registrable Securities will be required to further agree that
it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the
Company and allow the Company to undertake appropriate action
to prevent disclosure of the Records deemed confidential at the
Company's sole expense.
(p) Cause the Indenture to be qualified under the
TIA not later than the effective date of the Registration
Statement; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders, to effect
such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its commercially reasonable
efforts to cause such trustee to execute, all documents as may
be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations
of the SEC and make generally available to its securityholders
<PAGE>
earnings statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45
days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Cooperate with each seller of Registrable
Securities covered by the Registration Statement and each
underwriter, if any, participating in the disposition of such
Registrable Securities and their respective counsel in
connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(s) Use its commercially reasonable efforts to take
all other steps necessary or advisable to effect the
registration of the Registrable Securities covered by the
Registration Statement contemplated hereby.
The Company may require each seller of Registrable
Securities as to which any registration is being effected to
furnish to the Company such information regarding such seller
and the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable
Securities of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such
request. Each seller as to which any Shelf Registration is
being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the
information previously furnished to the Company by such seller
not materially misleading.
Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon actual
receipt of any notice from the Company of the happening of any
event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith
discontinue disposition of such Registrable Securities covered
by such Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated
<PAGE>
by Section 4(k) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies
of any amendments or supplements thereto. In the event the
Company shall give any such notice, the Effectiveness Period
shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities
covered by the Registration Statement shall have received (x)
the copies of the supplemented or amended Prospectus
contemplated by Section 4(k) hereof or (y) the Advice.
5. Registration Expenses
(a) All fees and expenses incident to the
performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not the Shelf
Registration is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required
to be made with the NASD in connection with an underwritten
offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of one counsel in connection
with Blue Sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as provided
in Section 4(h) hereof)), (ii) printing expenses, including,
without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the
printing of prospectuses is reasonably requested by the
managing underwriter or underwriters, if any, or by the Holders
of a majority in aggregate principal amount of the Registrable
Securities included in the Registration Statement,
(iii) messenger, telephone and delivery expenses,
(iv) reasonable fees and disbursements of counsel for the
Company and reasonable fees and disbursements of special
counsel for the sellers of Registrable Securities (subject to
the provisions of Section 5(b) hereof), (v) fees and
disbursements of all independent certified public accountants
referred to in Section 4(n)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance),
(vi) rating agency fees, if any, and any fees associated with
making the Registrable Securities eligible for trading through
The Depository Trust Company, (vii) Securities Act liability
insurance, if the Company desires such insurance, (viii) fees
<PAGE>
and expenses of all other Persons retained by the Company,
(ix) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees
of the Company performing legal or accounting duties), (x) the
expense of any annual audit, (xi) the fees and expenses
incurred in connection with the listing of the securities to be
registered on any securities exchange, if applicable, and
(xii) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any
other documents necessary in order to comply with this
Agreement.
(b) The Company shall (i) reimburse the Holders of
the Registrable Securities being registered in a Shelf
Registration for the reasonable fees and disbursements, not to
exceed $25,000, of not more than one counsel (in addition to
appropriate local counsel) chosen by the Holders of a majority
in aggregate principal amount of the Registrable Securities to
be included in such Registration Statement and (ii) reimburse
out-of-pocket expenses (other than legal expenses) of Holders
of Registrable Securities incurred in connection with the
registration and sale of the Registrable Securities pursuant to
a Shelf Registration; provided, however, that the Company shall
not be required to reimburse Holders for any underwriting
discounts or commissions, and any transfer fees or taxes.
6. Indemnification
(a) The Company agrees to indemnify and hold
harmless each Holder of Registrable Securities offered pursuant
to the Registration Statement, the affiliates, directors,
officers, agents, representatives and employees of each Holder
or its affiliates, and each other Person, if any, who controls
any such Person or its affiliates within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all
losses, claims, damages and liabilities (including, without
limitation, the reasonable legal fees and other expenses
actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or
based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement
pursuant to which the offering of such Registrable Securities
is registered (or any amendment thereto) or related Prospectus
(or any amendments or supplements thereto) or any related
preliminary prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a
material fact required to be stated
<PAGE>
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
provided, however, that the Company will not be required to
indemnify a Participant if (i) such losses, claims, damages or
liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant
furnished to the Company in writing by or on behalf of such
Participant expressly for use therein or (ii) if such
Participant sold to the person asserting the claim the
Registrable Securities which are the subject of such claim and
such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement
thereto and the Prospectus does not contain any other untrue
statement or omission or alleged untrue statement or omission
of a material fact that was the subject matter of the related
proceeding and it is established by the Company in the related
proceeding that such Participant failed to deliver or provide a
copy of the Prospectus (as amended or supplemented) to such
Person with or prior to the confirmation of the sale of such
Registrable Securities sold to such Person if required by
applicable law, unless such failure to deliver or provide a
copy of the Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 4 of this
Agreement.
(b) Each Participant agrees, severally and not
jointly, to indemnify and hold harmless the Company, its
affiliates, directors, officers, agents, representatives and
employees, and each other Person, if any, who controls the
Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a
"Company Participant") to the same extent as the foregoing
indemnity from the Company to each Participant, but only
(i) with reference to information relating to such Participant
furnished to the Company in writing by or on behalf of such
Participant expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto, or any
preliminary prospectus or (ii) with respect to any untrue
statement or representation made by such Participant in writing
to the Company. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by
such Participant from sales of Registrable Securities giving
rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand
<PAGE>
shall be brought or asserted against any Person in respect of
which indemnity or contribution may be sought pursuant to
either of the two preceding paragraphs or the next succeeding
paragraph, such Person (the "Indemnified Person") shall
promptly notify the Person against whom such indemnity or
contribution may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred by such counsel
related to such proceeding; provided, however, that the failure
to so notify the Indemnifying Person shall not relieve it of
any obligation or liability which it may have hereunder or
otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any material
rights or defenses by the Indemnifying Person and the
Indemnifying Person was not otherwise aware of such action or
claim). In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person shall have failed within
a reasonable period of time to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded
parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that,
unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such
proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same
general allegations, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel)
for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred.
Any such separate firm for the Participants shall be designated
in writing by Participants who sold a majority in interest of
Notes and/or shares of Common Stock sold by all such
Participants and any such separate firm for the Company
Participants shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent,
but if settled with such consent or if there be a final non-
appealable judgment for
<PAGE>
the plaintiff for which the Indemnified Person is entitled to
indemnification pursuant to this Agreement, the Indemnifying Person
agrees to indemnify and hold harmless each Indemnified Person from
and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for reasonable fees and
expenses actually incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by
such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request prior to the date of
such settlement; provided, however, that the Indemnifying
Person shall not be liable for any settlement effected without
its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior
written consent of the Indemnified Person, effect any
settlement or compromise of any pending or threatened
proceeding in respect of which any Indemnified Person is or
could have been a party, and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement
(A) includes an unconditional written release of such
Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on
claims that are the subject matter of such proceeding and
(B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in the first
and second paragraphs of this Section 7 is for any reason
unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person
under such paragraphs, in lieu of indemnifying such Indemnified
Person thereunder and in order to provide for just and
equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by
the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of
the Registrable Securities or (ii) if the allocation provided by
<PAGE>
the foregoing clause (i) is not permitted by applicable law,
not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with
the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof). The relative fault of the
parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on
the one hand or such Participant or such other Indemnified
Person, as the case may be, on the other, the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and
equitable if contribution pursuant to this Section 6 were
determined by pro rata allocation (even if the Participants
were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the
equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages
and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other
expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 6, in no
event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such
Participant from sales of Registrable Securities exceeds the
amount of any damages that such Participant has otherwise been
required to pay or has paid by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements
contained in this Section 6 will be in addition to any
liability which the Indemnifying Persons may otherwise have to
the Indemnified Persons referred to above.
<PAGE>
7. Rule 144 and 144A
The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC
thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if
at any time the Company is not required to file such reports,
it will, upon the request of any Holder of Registrable
Securities, make publicly available annual reports and such
information, documents and other reports of the type specified
in Sections 13 and 15(d) of the Exchange Act. The Company
further covenants for so long as any Registrable Securities
remain outstanding, to make available to any Holder or
beneficial owner of Registrable Securities in connection with
any sale thereof and any prospective purchaser of such
Registrable Securities from such Holder or beneficial owner the
information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Registrable Securities
pursuant to Rule 144A.
8. Underwritten Registrations
If any of the Registrable Securities are to be sold
in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the
offering will be selected by the Holders of a majority in
aggregate principal amount of such Registrable Securities
included in such offering and reasonably acceptable to the
Company.
No Holder of Registrable Securities may participate
in any underwritten registation hereunder unless such Holder
(a) agrees to sell such Holder's Registrable Securities on the
basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other
documents required under the terms of such underwriting
arrangements.
9. Miscellaneous
(a) No Inconsistent Agreements. The Company has not
entered (except as described in the Offering Memorandum), as of
the date hereof, and the Company will not, after the date of
this Agreement, enter into any agreement with respect to any of
its securities that is inconsistent with the rights granted to
the Holders of Registrable Securities in this Agreement or
<PAGE>
otherwise conflicts with the provisions hereof. The Company
has not entered and the Company will not enter into any
agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect
to the Registration Statement, except as permitted pursuant to
Section 2(a) hereof.
(b) Adjustments Affecting Registrable Securities.
The Company will not, directly or indirectly, take any action
with respect to the Registrable Securities as a class that
would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities
in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent
of the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant
to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of
other Holders of Registrable Securities may be given by Holders
of at least a majority in aggregate principal amount of the
Registrable Securities being sold by such Holders pursuant to
such Registration Statement; provided, however, that the
provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications
(including without limitation any notices or other
communications to the Trustee) provided for or permitted
hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable
Securities, at the most current address of such Holder
set forth on the records of the registrar under the
Indenture, with a copy in like manner to the Initial
Purchasers as follows:
<PAGE>
Furman Selz LLC
230 Park Avenue
New York, New York 10169
Facsimile No.: (212) 808-2733
Attention: Stuart B. Katz
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: William B. Gannett, Esq.
2. if to the Initial Purchasers, at the
address specified in Section 9(d)(1);
3. if to the Company, as follows:
SA Telecommunications, Inc.
1600 Promenade Center
15th Floor
Richardson, Texas 75080
Facsimile No.: (214) 889-1543
Attention: Lynn H. Johnson, Esq.
Vice President and
General Counsel
with copies to:
Arter & Hadden
1717 Main Street
Suite 4100
Dallas, Texas 75201
Facsimile No.: (214) 741-7134
Attention: Mark S. Solomon, Esq.
All such notices and communications shall be deemed
to have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; one business day after being
timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other
communications shall be concurrently delivered by the Person
<PAGE>
giving the same to the Trustee at the address and in the manner
specified in such Indenture.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto; provided, however, that
this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent
such successor or assign holds Registrable Securities.
(f) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant
or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) Securities Held by the Company or its
Affiliates. Whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its
affiliates (as such term is defined in Rule 405 under the
Securities
<PAGE>
Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders of
Registrable Securities are intended third party beneficiaries
of this Agreement and this Agreement may be enforced by such
Persons.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
SA TELECOMMUNICATIONS INC.
By: /s/ J. David Darnell
---------------------------------
Name: J. David Darnell
Title: Vice President-Finance
and Chief Financial
Officer
FURMAN SELZ LLC
RAUSCHER PIERCE REFSNES, INC.
By Furman Selz LLC
By: /s/ Stuart B. Katz
---------------------------------
Name: Stuart B. Katz
Title: Senior Managing Director
<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 JUNE 30, 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> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,956,104
<SECURITIES> 0
<RECEIVABLES> 4,359,859
<ALLOWANCES> 629,025
<INVENTORY> 66,021
<CURRENT-ASSETS> 8,095,007
<PP&E> 6,759,870
<DEPRECIATION> 955,679
<TOTAL-ASSETS> 31,071,265
<CURRENT-LIABILITIES> 8,307,029
<BONDS> 0
1,169,881
0
<COMMON> 1,650
<OTHER-SE> 14,737,217
<TOTAL-LIABILITY-AND-EQUITY> 31,071,265
<SALES> 0
<TOTAL-REVENUES> 7,210,554
<CGS> 0
<TOTAL-COSTS> 3,994,445
<OTHER-EXPENSES> 2,784,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 348,593
<INCOME-PRETAX> 87,384
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,384
<DISCONTINUED> 0
<EXTRAORDINARY> 2,149,191
<CHANGES> 0
<NET-INCOME> 2,163,862
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
