Exhibit 4.9
Note, Preferred Stock & Warrant Purchase Agreement
Dated As Of July 31, 1995
Regarding
Subordinated Notes Due October 1, 1996
And
Series B Cumulative Convertible Preferred Stock
Par Value $.00001 Per Share
And
Subordinated Notes Due July 30, 1996
Of
SA Holdings, Inc.
a Delaware corporation
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS. . . . . . 1
SECTION 2. THE CLOSING. . . . . . . . . . . . . . . . . . . . 2
SECTION 3. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 3
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 7
4.1. Corporate Existence and Power. . . . . . . . . . . 7
4.2. Authorization of Borrowing; No Conflict as to Law
or Agreements. . . . . . . . . . . . . . . . . . . 7
4.3. Legal Agreements.. . . . . . . . . . . . . . . . . 7
4.4. Capitalization.. . . . . . . . . . . . . . . . . . 7
SECTION 5. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . 8
SECTION 6. OPTIONAL PREPAYMENTS . . . . . . . . . . . . . . . 9
SECTION 7. AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . . . 9
7.1. Reservation of Shares. . . . . . . . . . . . . . . 9
7.2. Listing of Shares. . . . . . . . . . . . . . . . . 9
7.3. Securities Exchange Act Registration . . . . . . . 9
7.4. Private Placement Status . . . . . . . . . . . . . 10
7.5. Delivery of Information. . . . . . . . . . . . . . 10
SECTION 8. CONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . . 11
8.1. Security Agreements. . . . . . . . . . . . . . . . 11
8.2. Accuracy of Representations and Warranties . . . . 11
8.3. Proceedings. . . . . . . . . . . . . . . . . . . 11
8.4. Acquisition. . . . . . . . . . . . . . . . . . . 11
SECTION 9. SUBORDINATION. . . . . . . . . . . . . . . . . . . 11
SECTION 10. AMENDMENT; WAIVER; CONSENT. . . . . . . . . . . . 11
SECTION 11. EXCHANGE OF NOTES; ACCRUED INTEREST;
CANCELLATION OF SURRENDERED NOTES; REPLACEMENT . 12
SECTION 12. DEFAULTS. . . . . . . . . . . . . . . . . . . . . 14
SECTION 13. REMEDIES. . . . . . . . . . . . . . . . . . . . . 16
SECTION 14. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . 16
SECTION 15. REGISTRATION RIGHTS . . . . . . . . . . . . . . . 17
15.1. Intentionally Omitted. . . . . . . . . . . . . . 17
15.2. Piggyback Rights. . . . . . . . . . . . . . . . . 17
15.3. Expenses. . . . . . . . . . . . . . . . . . . . . 18
15.4. Procedures. . . . . . . . . . . . . . . . . . . . 18
15.5. Indemnification.. . . . . . . . . . . . . . . . . 20
15.6. Holdback. . . . . . . . . . . . . . . . . . . . . 21
SECTION 16. HOME OFFICE PAYMENTS. . . . . . . . . . . . . . . 21
SECTION 17. NOTICES . . . . . . . . . . . . . . . . . . . . . 21
SECTION 18. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 22
18.1. Entire Agreement. . . . . . . . . . . . . . . . . 22
18.2. Survival. . . . . . . . . . . . . . . . . . . . . 22
18.3. Counterparts. . . . . . . . . . . . . . . . . . . 22
18.4. Headings. . . . . . . . . . . . . . . . . . . . . 23
18.5. Binding Effect, Benefit and Assignment. . . . . . 23
18.6. Severability. . . . . . . . . . . . . . . . . . . 23
18.7. Governing Law.. . . . . . . . . . . . . . . . . . 23
18.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. . 24
18.9. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . 24
EXHIBITS
Exhibit A - Purchasers and Amounts Purchased
Exhibit B - Form of Bridge Note
Exhibit C - Form of Seller Note
Exhibit D - Certificate of Designation for Series B Preferred
Stock
Exhibit E - Form of Warrant
NOTE, PREFERRED STOCK & WARRANT PURCHASE AGREEMENT
dated as of July 31, 1995 by and between SA Holdings, Inc., a
Delaware corporation (the "Company"), and the Purchaser listed on
the signature page of this Agreement (the "Purchaser").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. SALE AND PURCHASE OF NOTES AND WARRANTS
(a) The Company agrees to sell to the Purchaser and,
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Company contained herein or
made pursuant hereto, the Purchaser agrees to purchase from the
Company on the Closing Date specified in Section 2 hereof, (i) a
Note or Notes in the aggregate principal amount set forth opposite
the Purchaser's name on Exhibit A hereto, (ii) a number of shares
of Series B Cumulative Convertible Preferred Stock set forth
opposite the Purchaser's name on Exhibit A and (iii) a Warrant for
the number of shares of the Company's common stock set forth
opposite the Purchaser's name on Exhibit A hereto. The aggregate
purchase price to be paid to the Company by the Purchaser for such
Notes, such Preferred Stock and such Warrants is 100% of the
principal amount of the Notes to be purchased by the Purchaser,
which amount will be allocated in accordance with Section 1(d)
hereof.
(b) As used herein, "Notes" means (i) the aggregate of
up to Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000)
principal amount of the Company's Subordinated Notes Due October 1,
1996 (the "Bridge Notes") and (ii) the aggregate of up to One
Million Five Hundred Thousand Dollars ($1,500,000) principal amount
of the Company's Subordinated Notes Due July 30, 1996 (the "Seller
Notes"), in each case, issued pursuant to the Purchase Agreements
(defined in Section l(d) hereof), together with all Notes issued in
exchange therefor or replacement thereof. Each Bridge Note will be
substantially in the form of the Bridge Note set forth as Exhibit
B hereto and each Seller Note will be substantially in the form of
the Seller Note set forth as Exhibit C hereto. Interest on the
Bridge Notes shall accrue from the Closing Date and shall be
payable in cash on October 31, 1995, January 31, 1996, April 30,
1996, July 31, 1996 and at maturity at the interest rate and in the
manner specified in the
form of Bridge Note attached hereto as Exhibit B. Interest on the
Seller Notes shall accrue from the Closing Date and shall be
payable in cash on January 31, 1996 and at maturity at the interest
rate and in the manner specified in the form of Seller Note
attached hereto as Exhibit C. All amounts due payable pursuant to
the Seller Notes and all other obligations of the Company
thereunder are subject to the setoff and reduction in accordance
with the provisions of the Stock Purchase Agreement.
(c) As used herein, "Series B Preferred Stock" means the
Series B Cumulative Convertible Preferred Stock, $.00001 par value
per share, of the Company, an aggregate of 125,000 shares of which
are being issued on the date hereof. Each share of the Series B
Preferred Stock is convertible into 8 shares of the Company's
Common Stock at $1.25 per share, such number and such price being
subject to adjustment as provided in the Certificate of
Designations for the Series B Preferred Stock, the form of which is
attached hereto as Exhibit D.
(d) As used herein, "Warrants" means the aggregate of
Common Stock Purchase Warrants evidenced by certificates
substantially in the form of Exhibit D hereto, together with all
Warrants issued in exchange therefor or replacement thereof. Such
Warrants in the aggregate initially entitle the holders thereof to
purchase 1,050,000 shares of the Company's common stock, $.0001 par
value per share, at a exercise price of $1.25 per share, such
number and such price being subject to adjustment as provided in
the form of Warrant attached hereto as Exhibit E. The purchase
price for shares of Common Stock under the Warrant may, at the
option of the holder of a Note or Notes, be payable by exchange of
all or a portion of the principal amount of a Note or Notes.
(e) The Notes, Series B Preferred Stock and Warrants are
being sold to the purchasers listed on Exhibit A hereto (the
"Purchasers") pursuant to this Agreement and other agreements dated
as of the date hereof (collectively, as from time to time assigned,
supplemented or amended or as the terms thereof may be waived, the
"Purchase Agreements"). All the Purchase Agreements are identical
except as to the identities of the respective Purchasers. The sale
of Notes, Series B Preferred Stock and Warrants to each Purchaser
under each Purchase Agreement is a separate sale, and no Purchaser
shall have any liability under any Purchase Agreement other than
the Purchase Agreement to which it is a party.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the
closing of the purchase and sale of the Notes, Series B Preferred
Stock and the Warrants to be purchased by the Purchaser (the
"Closing") will take place at the offices of Arter, Hadden, Xxxxxxx
& Xxxxxxxx, Dallas, Texas, on July 31, 1995 or such other time and
date as shall be mutually agreed to by the Company and the Selling
Shareholders for the closing of the acquisition of the stock of US
Communications, Inc., a Texas corporation ("USC"), provided that
the Closing shall occur no later than August 3, 1995. Such date
and time are referred to herein as the "Closing Date.
(b) Subject to the terms and conditions hereof, on the
Closing Date (i) the Company will deliver to the Purchaser (A) a
Note or Notes, substantially in the forms of Exhibits B and C
hereto, payable to the Purchaser (or its nominee as notified to the
Company), and dated the Closing Date, in the aggregate principal
amount set forth opposite the Purchaser's name on Exhibit A, (B) a
certificate registered in the name of the Purchaser (or its nominee
as notified to the Company), evidencing the number of shares of
Series B Preferred Stock set forth opposite the Purchaser's name on
Exhibit A, and (C) a Warrant or Warrants evidenced by certificates
substantially in the form of Exhibit E hereto and dated the Closing
Date, for the number of shares of the Company's Common Stock set
forth opposite the Purchaser's name on Exhibit A, and (ii) upon the
Purchaser's receipt thereof, the Purchaser will deliver to the
Company certificates representing shares of common stock, $10.00
par value par share, of USC (the "USC Common Stock"), having a
value equal to the purchase price for such Notes and Warrants. The
Notes, Series B Preferred Stock and Warrants are being issued as
partial consideration to the Purchaser in accordance with the Stock
Purchase Agreement.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement and the Notes and the
Warrants, the following definitions shall apply (such definitions
to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means (a) any director, officer or employee
of the Company, (b) any Person who, individually or with his
or her immediate family or any other Affiliate, directly or
indirectly, beneficially owns or holds 5% or more of the
voting interest in the Company, or (c) any corporation,
partnership or other Person in which any Person described
above owns a 5% or greater equity interest. Without limiting
the generality of the foregoing, Xxxx X. Xxxx, Xx. shall at
all times be deemed to be an Affiliate of the Company.
"Agreement" means this Agreement (together with exhibits
and schedules) as from time to time assigned, supplemented or
amended or as the terms hereof may be waived.
"Business Day" means any day, other than a Saturday,
Sunday or legal holiday, on which banks in the State of Texas
are open for business.
"Closing" has the meaning set forth in Section 2 hereof.
"Closing Date" has the meaning set forth in Section 2
hereof.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations and
interpretations thereunder.
"Commission" means the Securities and Exchange Commission
and any other similar or successor agency of the federal
government administering the Securities Act or the Securities
Exchange Act.
"Common Stock" means that class of stock or other
equivalent evidences of ownership of a corporation, the
holders of which are entitled to vote generally to elect the
Board of such corporation. "Common Stock" includes without
limitation the Common Stock, $.0001 par value per share, of
the Company.
"Company" means SA Holdings, Inc., a Delaware
corporation, its successors and assigns.
"Bridge Note" or "Bridge Notes" has the meaning set forth
in Section 1(b) hereof.
"Event of Default" has the meaning set forth in
Section 12(a) hereof.
"Loan Document" has the meaning provided in Section 4.1
hereof.
"Majority Noteholders" means the holder or holders, at
the time, of at least a majority of the aggregate principal
amount of the Notes then outstanding.
"Note" or "Notes" has the meaning set forth in Section
l(b) hereof.
"Outstanding" or "outstanding" means, when used with
reference to the Notes, Series B Preferred Stock or Warrants
as of a particular time, all Notes, shares of Series B
Preferred Stock or Warrants as the case may be, theretofore
duly issued except (i) Notes, shares of Series B Preferred
Stock or Warrants theretofore reported as lost, stolen,
mutilated or destroyed or surrendered for transfer, exchange
or replacement, in respect of which new or replacement Notes,
shares of Series B Preferred Stock or Warrants have been
issued by the Company, (ii) Notes theretofore paid in full,
(iii) shares of Series B Preferred Stock theretofore redeemed
or converted, (iv) Warrants theretofore fully exercised and
(v) Notes theretofore cancelled by the Company, whether upon
exercise of a Warrant in whole or in part or otherwise; except
that for the purpose of determining whether holders of the
requisite principal amount of Notes, shares of Series B
Preferred Stock or Warrants have made or concurred in any
declaration, waiver, consent, approval, notice, annulment of
acceleration or other communication under this Agreement or
under any Notes, shares of Series B Preferred Stock or
Warrants, any Notes, shares of Series B Preferred Stock or
Warrants registered in the name of, as well as Notes, shares
of Series B Preferred Stock or Warrants owned beneficially by,
the Company, any Subsidiary or any of their Affiliates (other
than one of the Purchasers) shall not be deemed to be
outstanding.
"Payment Default" has the meaning set forth in Section
9.3(b) hereof.
"Person" or "person" means an individual, corporation,
company, partnership, firm, association, joint venture, trust,
unincorporated organization, government, governmental body,
agency, political subdivision or other entity.
"Potential Default" means a condition or event which,
with notice or lapse of time or both, would constitute an
Event of Default.
"Preferred Stock" means any class of the capital stock of
a corporation (whether or not convertible into any other class
of such capital stock) which has any right, whether absolute
or contingent, to receive dividends or other distributions of
the assets of such corporation (including, without limitation,
amounts payable in the event of the voluntary or involuntary
liquidation, dissolution or winding-up of such corporation),
which right is superior to the rights of another class of the
capital stock of such corporation. "Preferred Stock" includes
without limitation (i) the Series A Cumulative Preferred
Stock, $.00001 par value per share, of the Company and (ii)
the Series B Cumulative Preferred Stock, $.00001 par value per
share, of the Company.
"Public Offering" means an underwritten public offering
of equity securities of the Company.
"Purchase Agreements" has the meaning set forth in
Section l(d) hereof.
"Purchaser" means the person who accepts and agrees to
the terms hereof as indicated by such person's signature (as
"the undersigned Purchaser") on the execution page of this
Agreement, together with successors and assigns.
"Purchasers" has the meaning set forth in Section l(d)
hereof, together with successors and assigns.
"Rule 144" means (i) Rule 144 under the Securities Act as
such Rule is in effect from time to time, and (ii) any
successor rule, regulation or law, as in effect from time to
time.
"Rule 144A" means (i) Rule 144A under the Securities Act
as such Rule is in effect from time to time and (ii) any
successor rule, regulation or law, as in effect from time to
time.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules, regulations and
interpretations thereunder.
"Security Agreements" means each of the Security
Agreements dated the date hereof between each of the Company
and the subsidiaries of the Company, and Xxxxxx Xxxxxxx, as
agent for the Purchaser and each of the other holders of the
Notes (as from time to time assigned, supplemented or amended
or as the terms thereof may be waived).
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, and the rules,
regulations and interpretations thereunder.
"Seller Note" or "Seller Notes" has the meaning set forth
in Section 1(b) hereof.
"Senior Credit Agreement" means the Term Credit Agreement
between the Company and NorWest Bank Minnesota, National
Association, dated as of the date hereof.
"Senior Indebtedness" means the principal of, premium, if
any, and interest on Indebtedness of the Company under the
Senior Credit Agreement, and any renewals, modifications,
refundings or extensions of any such Indebtedness.
"Senior Lender" means Norwest Bank Minnesota, National
Association, its successors and assigns.
"Share" or "Shares" means shares of the Company's Common
Stock, or other securities which can be obtained or have been
obtained by conversion of the Series B Preferred Stock and by
exercise in whole or in part of any Warrant or are obtained
upon an exchange of Shares pursuant to the terms of a Warrant
or are obtained upon an exchange of Shares pursuant to the
terms of the Company's articles of incorporation.
"Stock Purchase Agreement" means the Stock Purchase
Agreement by and among the Company, USC, Xxxx X. Xxxxxxx,
Xxxxxx Xxxxxxx, Xxxxxxxx Xxxx and NTS Communications, Inc.,
dated as of June 30, 1995, as amended.
"Subordination Agreement" means the Subordination
Agreement by the Purchasers and NorWest Bank of Minnesota,
National Association, dated as of the date hereof.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than
80% of the total voting power of shares of stock or other
equity interests entitled (without regard to the occurrence of
any contingency or any pledge of shares) to vote in the
election of directors, managers or trustees thereof is, at the
time as of which any determination is being made, owned or
controlled, directly or indirectly, by such Person or one or
more of its Subsidiaries, or both. The term "Subsidiary" or
"Subsidiaries" when used herein without reference to any
particular Person, means a Subsidiary or Subsidiaries of the
Company.
"USC" means US Communications, Inc., a Texas corporation.
"USC Common Stock" has the meaning set forth in
Section 2(b) hereof.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser as
follows:
4.1. Corporate Existence and Power.
The Company is a business corporation duly incorporated,
validly existing and in good standing under the laws of Delaware,
and is duly licensed or qualified to transact business in Texas and
Delaware. The Company has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its
obligations under, the Agreement, the Warrants and the Notes or any
documents required thereunder (hereinafter the "Loan Documents").
4.2. Authorization of Borrowing; No Conflict as to Law
or Agreements.
The execution, delivery and performance by the Company of
the Loan Documents have been duly authorized by all necessary
corporate action of the Company and do not and will not (i) require
any consent or approval of the shareholders of the Company, or any
authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation
or of any order, writ, injunction or decree presently in effect
having applicability to the Company or of its Articles of
Incorporation or Bylaws or (iii) result in a breach of or
constitute a default under any material indenture or loan or credit
agreement or any other agreement, lease or instrument to which the
Company is a party or by which it or its properties may be bound or
affected.
4.3. Legal Agreements.
The Loan Documents constitute the legal, valid and
binding obligations of the Company enforceable against the Company
in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
4.4. Capitalization.
The authorized capital stock of the Company consists of
(i) 50,000,000 shares of Common Stock, $.0001 par value per share,
and (ii) 12,500,000 shares of Convertible Preferred Stock, $.00001
par value per share, of which, after giving effect to the
Certificate of Designations, 166,667 shares have been designated as
Series A Convertible Preferred Stock and 125,000 shares have been
designated as Series B Convertible Preferred Stock. The shares of
the Company's Common Stock issuable upon conversion of the Series
B Preferred Stock and upon exercise or conversion of the Warrants
will, when issued, be duly authorized, validly issued, fully paid
and non-assessable.
SECTION 5. REPRESENTATIONS OF THE PURCHASER
(a) The Purchaser hereby makes the representations and
warranties to the Company contained in this Section 5(a), as of the
date hereof. The Purchaser has all requisite power, authority and
legal right to execute, deliver, enter into, consummate and perform
this Purchase Agreement. For purposes of the application of state
securities laws, each Purchaser represents that it is a resident of
the state set forth in the Purchaser's address on the signature
page of this Agreement. The Purchaser has duly executed and
delivered this Purchase Agreement, and this Purchase Agreement
constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its
terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of
creditors generally.
(b) The Purchaser hereby represents to the Company (as
of the date hereof and as of the Closing Date hereunder) that the
Purchaser is capable of evaluating the risk of its investment in
the Notes, the Series B Preferred Stock and the Warrants being
purchased by it and is able to bear the economic risk of such
investment, that (except as the Purchaser has otherwise advised the
Company and the Purchaser's counsel in writing) it is purchasing
the Notes, the Series B Preferred Stock and the Warrants to be
purchased by it for its own account, and that the Notes, the Series
B Preferred Stock and the Warrants are being purchased by the
Purchaser for investment and not with a present view to any
distribution thereof in violation of any applicable securities
laws. It is understood that the disposition of the Purchaser's
property shall at all times be within the Purchaser's control. If
the Purchaser should in the future decide to dispose of any of its
Notes, Series B Preferred Stock, Warrants or Shares, it is
understood that it may do so but only in compliance with the
Securities Act and applicable securities laws. The Purchaser
hereby represents to the Company (as of the date hereof and as of
the Closing Date hereunder) that the Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(c) The Purchaser has received and reviewed copies
of the Company's Forms 10-K (year ending 1994), 10-Q (quarter
ending March 31, 1994), 8-Ks filed in calendar year 1995 prior to
the date hereof, and a copy of the Confidential Information
Memorandum dated March 1995 prepared by Jesup & Xxxxxx Capital
Markets, Inc.
SECTION 6. OPTIONAL PREPAYMENTS
(a) Subject to the other provisions of this Section 6,
at any time, the Company may prepay in cash all or any part of the
principal amount of outstanding Notes. Any prepayment of Notes
under this Section 6 shall be at a price equal to (1) the aggregate
principal amount of the Notes to be prepaid, plus (2) all accrued
and unpaid interest on the principal amount of the Notes to be
prepaid.
(b) The right of the Company to prepay Notes pursuant to
this Section 6 shall be conditioned upon its giving notice of
prepayment to the holders of Notes not less than thirty (30) days
and not more than sixty (60) days prior to the date upon which the
prepayment is to be made specifying (i) the registered holder of
each Note to be prepaid, (ii) the aggregate principal amount being
prepaid, (iii) the date of such prepayment and (iv) the accrued and
unpaid interest (to but not including the date upon which the
prepayment is to be made).
SECTION 7. AFFIRMATIVE COVENANTS OF THE COMPANY
So long as the Notes shall remain unpaid, the Company
will comply with the following requirements, unless the Purchaser
shall otherwise consent in writing:
7.1. Reservation of Shares. There have been reserved,
and the Company shall at all times keep reserved, free from
preemptive rights, out of its authorized Common Stock, $.0001 par
value per share, a number of shares of Common Stock, $.0001 par
value per share, sufficient to provide for the conversion of the
Series B Preferred Stock and for the exercise of the Warrants.
7.2. Listing of Shares. If any shares of the Company's
Common Stock are listed on any national securities exchange (or on
the National Association of Securities Dealers, Inc., Automated
Quotation System or comparable system), then the Company will take
such action as may be necessary, from time to time, to list Shares,
as the case may be, on such exchange (or system as the case may
be).
7.3. Securities Exchange Act Registration. As soon as
the Company is either required to or does file a registration
statement with respect to the Company's Common Stock under Section
6 of the Securities Act or Section 12(b) or Section 12(g),
whichever is applicable, of the Securities Exchange Act, then,
thereafter:
(a) The Company will maintain effective a registration
statement (containing such information and documents as the
Commission shall specify and otherwise complying with the
Securities Exchange Act) under Section 12(b) or Section 12(g),
whichever is applicable, of the Securities Exchange Act, with
respect to the Company's Common Stock, as the case may be, and will
file on time such information, documents and reports as the
Commission may require or prescribe for companies whose stock has
been registered pursuant to such Section 12(b) or Section 12(g),
whichever is applicable.
(b) The Company will, upon the request of any holder of
Shares, make whatever other filings with the Commission, or
otherwise make generally available to the public such financial and
other information, as any such holder may deem reasonably necessary
or desirable in order to enable such holder to be permitted to sell
Shares pursuant to the provisions of Rule 144.
7.4. Private Placement Status. Neither the Company nor
any agent nor other Person acting on the Company's behalf will do
or cause to be done (or will omit to do or to cause to be done) any
act which act (or which omission) would result in bringing the
issuance or sale of the Notes, the Series B Preferred Stock or the
Warrants within the provisions of Section 5 of the Securities Act
or the filing, notification or reporting requirements of any state
securities law (other than in accordance with a registration and
qualification of Shares pursuant to Section 15 hereof).
7.5. Delivery of Information. If a holder of Shares
proposes to transfer any such Shares pursuant to Rule 144A, the
Company agrees to provide (upon the request of such holder or the
prospective transferee) to such holder and (if requested) to the
prospective transferee any information concerning the Company and
its Subsidiaries which is required to be delivered to any
transferee of such Shares pursuant to such Rule 144A.
7.6. Financial Reports. The Company will deliver to the
Purchaser:
(a) as soon as made available, copies of all Forms
00-X, 00-X, 0-X, financial statements, proxy statements, reports
which the Company has sent to its stockholders or filed with the
Commission or any national securities exchange; and
(b) copies of any notice sent to the Senior Lender
notifying the Senior Lender of the occurrence of a default or event
of default under the terms of the Senior Credit Agreement, together
with any supporting statements attached thereto and delivered to
the Senior Lender.
SECTION 8. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase the Notes, the
Series B Preferred Stock and the Warrants hereunder is subject to
satisfaction of the following conditions at the Closing (any of
which may be waived by the Purchaser):
8.1. Security Agreements. The Company and each of its
subsidiaries shall have entered into their respective Security
Agreements satisfactory in form and substance to the Purchaser.
8.2. Accuracy of Representations and Warranties. The
representations and warranties of the Company herein or in any
certificates or document delivered pursuant hereto shall be correct
and complete on and as of the Closing Date with the same effect as
though made on and as of the Closing Date (after giving effect to
the transactions contemplated by this Agreement).
8.3. Proceedings. All corporate and other proceedings
in connection with the transactions contemplated by the Purchase
Agreements, the Notes, the Series B Preferred Stock, the Warrants,
the Security Agreements, and all documents incident thereto, shall
be in form and substance satisfactory to the Purchaser and its
counsel, and the Purchaser shall have received all such originals
or certified or other copies of such documents as the Purchaser or
its counsel may reasonably request.
8.4. Acquisition. The Company and the Senior Lender
shall have executed and delivered the Senior Credit Agreement,
which shall be in full force and effect and the Company shall have
made a borrowing thereunder sufficient, together with proceeds from
the sale of Series A Preferred Stock, Series B Preferred Stock and
the Notes to close under the terms of the Acquisition Agreement.
SECTION 9. SUBORDINATION
All payments of principal and interest and any other
amounts due pursuant to the Notes shall be payable subject to the
terms and conditions of the Subordination Agreement.
SECTION 10. AMENDMENT; WAIVER; CONSENT
(a) This Agreement, the Notes, the Series B Preferred
Stock and the Warrants may be amended (or any provision hereof or
thereof waived) only with the written consent of the Majority
Noteholders; provided, however, that no such amendment or waiver
shall (i) extend the fixed maturity of any Note, reduce the rate or
change the time of payment of interest thereon, reduce the
principal amount thereof, reduce any premium thereon, change the
currency in which payments are to be made, hereof, change the
provisions of Section 6 hereof, without the consent each holder of
each Note so affected (and the consent of each holder of each Share
so affected in the case of a change to Section 6 hereof) or (ii)
modify the definition in Section 3 hereof of "Majority Noteholders"
or modify clause (i) of this proviso, without the consent of the
holders of all the Notes then outstanding (and the consent of the
holders of all then outstanding Shares with respect to the
parenthetical in clause (i) of this proviso) or (iii) increase the
percentage of the amount of the Notes, the holders of which may
declare the Notes to be due and payable under Section 13 hereof,
without the consent of the holders of all the Notes then
outstanding.
(b) The Company agrees that all holders of Notes, all of
the holders of the Series B Preferred Stock and all holders of
Warrants shall be notified by the Company in advance of any
proposed amendment or waiver, but failure to give such notice shall
not in any way affect the validity of any such amendment or waiver.
In addition, promptly after obtaining the written consent of the
holders herein provided, the Company shall transmit a copy of any
amendment or waiver which has been adopted to all holders of Notes,
all holders of Series B Preferred Stock and all holders of Warrants
then outstanding, but failure to transmit copies shall not in any
way affect the validity of any such amendment or waiver.
(c) The Company and each holder of a Note, Series B
Preferred Stock or Warrants then or thereafter outstanding shall be
bound by any amendment or waiver effected in accordance with the
provisions of this Section 10, whether or not any Note shall have
been marked to indicate such modification, but any Note issued
thereafter shall bear a notation as to any such modification (but
the failure to bear any such notation shall not affect the validity
of any such subsequently issued Note, which shall be enforceable in
accordance with its terms subject to all such modification).
(d) Any provision of this Agreement relating to the
consent, determination, decision or waiver of a holder or holders
of Notes, Series B Preferred Stock or Warrants or of the Majority
Noteholders, as the case may be, means such holder's or Majority
Noteholders', as the case may be, consent, determination, decision
or waiver, as the case may be, in such holder's or Majority
Noteholders', as the case may be, sole discretion.
SECTION 11. EXCHANGE OF NOTES; ACCRUED INTEREST;
CANCELLATION OF SURRENDERED NOTES; REPLACEMENT
(a) Subject to Section 14 hereof, at any time at the
request of any holder of one or more of the Notes made to the
Company at the Company's office, the Company at its expense will
issue and deliver (insured to such holder's reasonable
satisfaction) to or upon the order of the holder in exchange
therefor new Notes, in such denomination or denominations as such
holder may request (which must be in denominations of $500,000 or
any larger multiple of $500,000, plus one Note in a lesser
denomination, if required), in aggregate principal amount equal to
the unpaid principal amount of the Note or Notes surrendered and
substantially in the form thereof, dated as of the date to which
interest has been paid on the Note or Notes surrendered or; if no
interest has yet been so paid thereon, then dated the date of the
Note or Notes so surrendered) and payable to such person or persons
or order as may be designated by such holder. Any such new Note
shall bear any notation required by Section 10(c), hereof (but any
failure to bear any such notation shall not affect the validity or
enforceability of such Note).
(b) In the event that any Note is surrendered to the
Company upon the conversion of all or a portion of any Note, or
upon a prepayment under Section 6 hereof, the Company shall pay all
accrued and unpaid interest on such Note on such portion thereof
and thereupon interest shall cease to accrue upon that portion of
the principal amount of such Note which was used for conversion or
which was prepaid, and the right to receive, and any right or
obligation to make, any prepayment on such portion of the principal
amount pursuant to Section 6 hereof shall terminate all upon the
date of such conversion or prepayment and upon presentation and
surrender of such Note to the Company.
(c) Upon the conversion in whole or in part of any Note
or upon any prepayment under Section 6 hereof, if only a portion of
the principal amount of a Note is used in such conversion or is
prepaid, then such Note shall be surrendered to the Company and the
Company shall simultaneously execute and deliver to or on the order
of the holder thereof, at the expense of the Company, a new Note or
Notes in principal amount equal to the unused or unpaid portion of
such Note.
(d) All Notes or portions thereof which have been
converted, or which have been prepaid under Section 6 hereof, shall
be cancelled by the Company and no Notes shall be issued in lieu of
the principal amount so converted or prepaid.
(e) Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Note and, in
the case of any such loss, theft or destruction, upon delivery of
an indemnity agreement reasonably satisfactory to the Company (if
requested by the Company and unsecured in the case of the Purchaser
or an institutional holder), or in the case of any such mutilation,
upon surrender of such Note (which surrendered Note shall be
cancelled by the Company), the Company will issue and deliver
(insured to the holder's reasonable satisfaction) a new Note of
like tenor in lieu of such lost, stolen, destroyed or mutilated
Note as if the lost, stolen, destroyed or mutilated Note were then
surrendered for exchange.
SECTION 12. DEFAULTS
(a) Any of the following shall constitute an "Event of
Default":
(i) the Company defaults in the payment of (A) any
part of the principal of or premium, if any, on any Note, when
the same shall become due and payable, whether at maturity or
by acceleration or otherwise or (B) the interest on any Note,
when the same shall become due and payable, and such default
in the payment of interest shall have continued for five (5)
Business Days; or
(ii) the Company, or, with respect to the Security
Agreements, any of its subsidiaries, defaults in the
performance of any other agreement or covenant contained in
the Purchase Agreements, the Notes, the Certificate of
Designations for the Series B Preferred Stock, the Warrants or
any other agreement or covenant in favor of the holders of the
Notes, the Series B Preferred Stock or the Warrants in the
Security Agreements and such default or violation shall not
have been remedied within thirty (30) days after written
notice thereof shall have been given to the Company by any
holder or holders of the Notes (the Company to give forthwith
to all other holders of the Notes at the time outstanding
written notice of the receipt of such notice, specifying the
default referred to therein); or
(iii) any representation or warranty by the Company
or any of its subsidiaries herein or in their respective
Security Agreements or in any certificate delivered by the
Company pursuant hereto or pursuant to any other Purchase
Agreement proves to have been incorrect in any material
respect when made; or
(iv) with respect to any Indebtedness of the
Company or any Subsidiary in an aggregate principal amount of
at least One Million dollars ($1,000,000), such Indebtedness
shall become due and payable prior to its stated or scheduled
maturity as a result of acceleration or optional or mandatory
prepayment for any reason; or
(v) a final judgment or order which, either alone
or together with other final judgments or orders against the
Company and its Subsidiaries, exceeds an aggregate of Five
Hundred Thousand dollars ($500,000) is rendered by a court of
competent jurisdiction against the Company or any Subsidiary
and such judgment or order shall have continued undischarged
or unstayed for thirty (30) days after entry thereof,
(vi) the Company or any Subsidiary shall make an
assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts; or a receiver or
trustee is appointed for the Company or any Subsidiary or for
substantially all of its assets and, if appointed without its
consent, such appointment is not discharged or stayed within
thirty (30) days; or proceedings under any law relating to
bankruptcy, insolvency, or the reorganization or relief of
debtors are instituted by or against the Company or any
Subsidiary, and, if contested by it, are not dismissed or
stayed within thirty (30) days; or any writ of attachment or
execution or any similar process is issued or levied against
the Company or any Subsidiary or any significant part of its
property and in not released, stayed, bonded or vacated within
thirty (30) days after its issue or levy; or the Company or
any Subsidiary takes corporate action in furtherance of any of
the foregoing;
(b) If an Event of Default occurs pursuant to any of
clauses (i) through (v) of Section 12(a) hereof, then and in each
such event the Majority Noteholders may at any time (unless all
Events of Default shall theretofore have been waived or remedied)
at its or their option, by written notice or notices to the
Company, declare all the Notes to be due and payable. Upon any
such declaration or upon the occurrence of an Event of Default
pursuant to clause (vi) of Section 12(a) hereof (in which case no
declaration is required), all Notes shall forthwith immediately
mature and become due and payable, together with interest accrued
thereon all without presentment, demand, protest or notice, all of
which are hereby waived. However, if, at any time after the
principal of the Notes shall so become due and payable and prior to
the date of maturity stated in the Notes, all arrears of principal
and interest on the Notes (with interest at the rate specified in
the Notes on (any overdue principal and any overdue premium and, to
the extent legally enforceable, on an overdue interest) shall be
paid to the holders of Notes by or for the account of the Company,
then the Majority Noteholders, by written notice or notices to the
Company, may waive such Event of Default and its consequences and
rescind or annul such declaration, provided, that at the time of
such waiver, rescission or annulment (x) no judgment or decree
shall have been entered for the payment of any amounts due to any
holder of Notes under the Notes or the Purchase Agreements and (y)
all other Events of Default or Potential Defaults under the
Purchase Agreements shall have been waived pursuant to this Section
12(b) or cured. No waiver pursuant to the preceding sentence shall
extend to or affect any subsequent Event of Default or impair any
right or remedy resulting therefrom.
(c) If any holder of a Note shall give any notice or
take any other action with respect to a claimed Potential Default
or Event of Default, the Company, forthwith upon receipt of such
notice or obtaining knowledge of such other action, will give
written notice thereof to all other Holders of the Notes then
outstanding, describing such notice or other action and the nature
of the claimed Potential Default, or Event of Default.
SECTION 13. REMEDIES
Upon the occurrence of an Event of Default or at any time
thereafter until such Event of Default is cured to the written
satisfaction of the Purchaser, the Purchaser may exercise any or
all of the following rights and remedies:
(a) The Purchaser may, by notice to the Company, declare
the entire unpaid principal amount of the Notes, all interest
accrued and unpaid thereon, and all other amounts payable under
this agreement to be forthwith due and payable, whereupon the
Notes, all such accrued interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby
expressly waived by the Company.
(b) The Purchaser may, without notice to the Company and
without further action, apply any and all money owing by the
Purchaser to the Company to the Payment of the Notes, including
interest accrued thereon, and of all other sums then owing by the
Company hereunder.
(c) The Purchaser may exercise and enforce its rights
and remedies under the other Loan Documents.
(d) The Purchaser may exercise any other rights and
remedies available to it by law or agreement.
SECTION 14. RESTRICTIONS ON TRANSFER
(a) Each holder of a Note, Series B Preferred Stock or
Warrants by acceptance thereof agrees that it will not sell or
otherwise dispose of any Notes, Series B Preferred Stock, Warrants
or Shares unless (i) such Notes, Series B Preferred Stock, Warrants
or Shares have been registered under the Securities Act and, to the
extent required, under any applicable state securities laws, or
(ii) such Notes, Series B Preferred Stock, Warrants or Shares are
sold in accordance with the applicable requirements and limitations
of Rule 144 or Rule 144A and any applicable state securities laws
or (iii) the Company has been furnished with an opinion or opinions
from counsel to such holder (which counsel and opinion(s) shall be
reasonably satisfactory to the Company and which counsel may be
inside counsel. of such holder) to the effect that registration
under the Securities Act is not required for the transfer as
proposed (which opinion may be conditioned upon the transferee's
assuming the obligations of a holder of Notes, Series B Preferred
Stock, Warrants or Shares under this Section) or (iv) the Company
has been furnished with a letter from the Division of Corporate
Finance of the Commission to the effect that such Division would
not recommend any action to the Commission if such proposed
transfer were effected without a registration statement effective
under the Securities Act. The Company agrees that within five (5)
Business Days after receipt of any opinion referred to in (iii)
above, it will notify the holder supplying such opinion whether
such opinion is satisfactory to the Company's counsel.
(b) The Company may endorse on all Notes, Series B
Preferred Stock certificates, Warrant certificates and Share
certificates a legend stating or referring to the transfer
restrictions contained in paragraph (a) above; provided, that no
such legend shall be endorsed on any Notes, Series B Preferred
Stock certificates, or Share certificates which, when issued, are
no longer subject to the restrictions of this Section 14; provided,
further, that if a transfer is made pursuant to clause (i), (ii)
(other than pursuant to Rule 144A) or (iv) of paragraph (a) or if
an opinion of counsel provided pursuant to clause (iii) of
paragraph (a) concludes that the legend is no longer necessary, the
Company will deliver upon transfer Notes, Series B Preferred Stock
certificates, Warrant certificates or Share certificates, as the
case may be, without such legends.
SECTION 15. REGISTRATION RIGHTS
15.1. Intentionally Omitted.
15.2. Piggyback Rights.
(a) If the Company at any time proposes to file a
registration statement under the Securities Act for any sales of at
least 300,000 shares (as such number may be adjusted from time to
time hereafter as a result of a stock split, combination, etc.) of
the Company's Common Stock (or any warrants, units, convertibles,
rights or other securities related or linked to any shares of the
Company's Common Stock) on behalf of the Company or otherwise, the
Company shall give written notice of such registration no later
than thirty (30) days before its filing with the Commission to all
holders of Series B Preferred Stock, Warrants and Shares; provided,
that registrations relating solely to securities to be issued by
the Company in connection with any employee stock option or
employee stock purchase or savings plan on Form S-8 (or successor
forms) or on Form S-4 (or successor forms) under the Securities Act
shall not be subject to this Section 15.2. If holders of Series B
Preferred Stock, Warrants or Shares so request within thirty (30)
days, the Company shall include in any such registration the Shares
held or to be held after conversion of the Series B Preferred Stock
or exercise of Warrants by such holders and requested to be
included in such registration, subject to Section 15.2(b) hereof.
(b) The Company shall not be obligated to so include the
Shares to the extent any underwriter or underwriters of such
securities being otherwise registered by the Company determines in
good faith that the inclusion of such Shares would jeopardize the
successful sale of such other securities proposed to be sold by
such underwriter or underwriters, in which case holders of Series
B Preferred Stock, Warrants or Shares desiring to participate in
such registration shall be entitled to participate in any such
reduced number of Shares (if any) which may be included in such
registration (along with other holders of Common Stock exercising
piggyback rights with respect to such registration) in proportion
to the amount of shares of the Company's Common Stock held by such
holders (whether held directly or through the right to obtain
Shares upon conversion of Series B Preferred Stock or upon exercise
of Warrants held by such holders).
15.3. Expenses.
Subject to the limitations contained in this Section 15.3
and except as otherwise specifically provided in this Section 15,
the entire costs and expenses of registration and qualification
pursuant to Section 15.2 hereof shall be borne by the Company.
Such costs and expenses shall include, without limitation,
underwriting fees or commissions in connection with the
registration and qualification pursuant to Section 15.2 hereof
(other than with respect to the Shares to be sold by the holders of
Series B Preferred Stock, Warrants or Shares, as to which
underwriting discounts and commissions shall be paid by the selling
holders), the fees and expenses of counsel for the Company and of
its accountants, all other costs, fees and expenses of the Company
incident to the preparation, printing, registration and filing
under the Securities Act of the registration statement and all
amendments and supplements thereto, up to $20,000 of reasonable
fees and expenses of one counsel to the holders of Series B
Preferred Stock, Warrants or Shares relating to such registration
and qualification, the cost of furnishing copies of each
preliminary prospectus, each final prospectus and each amendment or
supplement thereto to underwriters, dealers and other purchasers of
the Shares and the costs and expenses (including reasonable fees
and disbursements of counsel) incurred in connection with the
qualification of the Shares under the Blue Sky laws of various
jurisdictions; provided, however, that if any jurisdiction in which
the Company shall qualify or register in connection with the
proposed sale of the Shares shall require that expenses incurred in
connection with the qualification or registration of such Shares in
that jurisdiction be borne in whole or in part by the holders
selling those Shares, then such expenses shall be payable by such
holders pro rata to the extent required by such jurisdiction and in
the event that any such holder is required by any such applicable
jurisdiction to bear such expense, the Company shall promptly
reimburse each such holder for the amount paid therefor.
15.4. Procedures.
(a) In the case of each registration or qualification
pursuant to Section 15.2, the Company will keep all holders of
Series B Preferred Stock, Warrants or Shares advised in writing as
to the initiation of proceedings for such registration and
qualification and as to the completion thereof, and will advise any
such holder, upon request, of the progress of such proceedings.
(b) At the Company's expense, the Company will keep each
registration and qualification under this Section 15 effective (and
in compliance with the Securities Act) by such action as may be
necessary or appropriate for a period of one hundred twenty (120)
days after the effective date of such registration statement,
including, without limitation, the filing of post-effective
amendments and supplements to any registration statement or
prospectus necessary to keep the registration statement current and
the further qualification under any applicable Blue Sky or other
state securities laws to permit such sale or distribution, all as
requested by such holder or holders.
(c) The Company will immediately notify each holder on
whose behalf Shares have been registered pursuant to this
Section 15, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such
registration-statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing.
(d) The Company will furnish to each holder on whose
behalf Shares have been registered pursuant to this Section 15 a
signed counterpart, addressed to such holder, of an opinion of
counsel for the Company, dated the effective date of such
registration statement.
(e) Without limiting any other provision hereof, in
connection with any registration of Shares under this Section 15,
the Company will use its reasonable best efforts to comply with the
Securities Act, the Securities Exchange Act and all applicable
rules and regulations of the Commission, and will make generally
available to its securities holders, as soon as reasonably
practicable, an earnings statement covering a period of at least
twelve (12) months, beginning with the first month of the first
fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
(f) In connection with any registration of Shares under
this Section 15, the Company will provide a transfer agent and
registrar for the Shares not later than the effective date of such
registration statement.
(g) The Company shall not be required to include any of
the holders' Shares in an underwritten offering of the Company's
securities unless such holders accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by
it, which terms shall include customary provisions with respect to
indemnification and contribution and customary representations and
warranties by the Company (which shall be made to and for the
benefit of the underwriters and the holders of Shares to be sold in
such offering).
(h) In connection with the preparation and filing of
each registration statement registering Shares under this
Section 15, the Company will give the holders of Series B Preferred
Stock, Warrants or Shares on whose behalf such Shares are to be so
registered and their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss
the business of the Company with its officers, its counsel and the
independent public accountants who have certified its financial
statements, as shall be reasonably necessary, in the reasonable
opinion of such holders or such underwriters or their counsel, in
order to conduct a reasonable and diligent investigation within the
meaning of the Securities Act.
15.5. Indemnification.
The Company will indemnify and hold harmless each holder
of Series B Preferred Stock, Warrants or Shares and any underwriter
(as defined in the Securities Act) for such holder and each person,
if any, who controls the holder or underwriter within the meaning
of the Securities Act against any losses, claims, damages or
liabilities, joint or several, and expenses (including reasonable
attorneys' fees and expenses and reasonable costs of investigation)
to which the holder or underwriter or such controlling person may
be subject, under the Securities Act or otherwise, insofar as any
thereof arise out of or are based upon (a) any untrue statement or
alleged untrue statement of a material fact contained in (i) any
registration statement under which such Shares were registered
under the Securities Act pursuant to Section 15.2 hereof, any
prospectus or preliminary prospectus contained therein, or any
amendment or supplement thereto, or (ii) any other document
incident to the registration of the Shares under the Securities Act
or the qualification of the Shares under any state securities laws
applicable to the Company, or (b) the omission or alleged omission
to state in any item referred to in the preceding clause (a) a
material fact required to be stated therein or necessary to make
the statements therein not misleading or (c) any violation or
alleged violation by the Company of the Securities Act, the
Securities Exchange Act or any other federal or state securities
law, rule or regulation applicable to the Company and relating to
action or inaction by the Company in connection with any such
registration or qualification, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based
upon any untrue statement or alleged untrue statement or omission
or alleged omission based upon information furnished to the Company
in writing by such holder or by any underwriter for such holder
expressly for use therein (with respect to which information such
holder or underwriter shall so indemnify and hold harmless the
Company, any underwriter for the Company and each person, if any,
who controls the Company or such underwriter within the meaning of
the Securities Act).
15.6. Holdback.
Except for transfers made in transactions exempt from the
registration requirements under the Securities Act pursuant to
Section 4(2) thereof or pursuant to Rule 144A, the Company and each
holder of Series B Preferred Stock, Warrants or Shares agrees not
to offer, sell, contract to sell or otherwise dispose of any of
their respective shares of the Company's Common Stock within seven
(7) days before or one hundred eighty (180) days after the date of
any final prospectus relating to any underwritten public offering
of the Company's Common Stock on behalf of the Company or
otherwise, in each case except pursuant to such prospectus or with
the written consent of underwriters for such offering.
SECTION 16. HOME OFFICE PAYMENTS
As long as the Purchaser or any payee named in the Notes
delivered to the Purchaser on the Closing Date, or any
institutional holder which is a direct or indirect transferee from
the Purchaser or such payee, shall be the holder of any Note or
Series B Preferred Stock, the Company will make payments (whether
at maturity, upon mandatory or optional prepayment, or otherwise)
of principal and interest on the Note and cash payments of
dividends on the Series B Preferred Stock, (i) by check payable to
the order of the holder of any such Note or Series B Preferred
Stock, duly mailed or delivered to the Purchaser at its address
specified in Exhibit A, or at such other address as the Purchaser
or such other holder may designate in writing, or (ii) if requested
by the Purchaser or such other holder, by wire transfer to the
Purchaser's or such other holder's (or its nominees) account at any
bank or trust company in the United States of America,
notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. IF THE PURCHASER HAS PROVIDED AN
ADDRESS ON EXHIBIT A HERETO FOR PAYMENTS BY WIRE TRANSFER, THEN THE
PURCHASER SHALL BE DEEMED TO HAVE REQUESTED WIRE TRANSFER PAYMENTS
UNDER THE PRECEDING CLAUSE (ii). All such payments shall be made
in federal or other immediately available funds.
SECTION 17. NOTICES
Unless otherwise expressly specified or permitted by the
terms hereof, all notices, requests, elections, demands, consents
and other communications hereunder or with respect to any Note
shall be in writing and shall be delivered by hand or shall be sent
by telecopy (and if sent by telecopy, shall be confirmed by
registered mail, return receipt requested, or by overnight mail or
courier, postage and delivery charges prepaid), to the following
addresses:
(a) if to the Purchaser, at the Purchaser's address as
set forth in Exhibit A hereto, or at such other address as may be
furnished to the Company by the Purchaser in writing; or
(b) if to any other holder of a Note, share of Series B
Preferred Stock or Warrant, at such address as the payee or
registered holder thereof shall have designated to the Company in
writing; or
(c) if to the Company, 0000 Xxxxxx X, Xxxxx 000, Xxxxx,
Xxxxx 00000-0000, attention: Chief Executive Officer, or at such
other address as may be furnished in writing by the Company to the
Purchaser and to the other holders of Notes, Series B Preferred
Stock or Warrants.
Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such
notice is delivered or, if sent by telecopier, when received.
Addresses may be changed upon notice of such change given as
provided in this Section 18.
SECTION 18. MISCELLANEOUS
18.1. Entire Agreement.
The Purchase Agreements and, upon the closing hereunder,
the Notes and Warrants issued hereunder, the Certificate of
Designations for the Series B Preferred Stock, together with the
Security Agreements and any further agreements entered into by the
Purchaser and the Company and, with respect to the Security
Agreements, its subsidiaries at the closing hereunder, contain the
entire agreement among the Purchaser and the Company and its
subsidiaries, and supersede any prior oral or written agreements,
commitments, terms or understandings, regarding the subject matter
hereof.
18.2. Survival.
All agreements, representations and warranties contained
in this Agreement, the Notes, the Certificate of Designations for
the Series B Preferred Stock, the Warrants, the Security Agreements
or any document or certificate delivered pursuant hereto or thereto
shall survive, and shall continue in effect following, the
execution and delivery of the Purchase Agreements, the closings
hereunder and thereunder, any investigation at any time made by the
Purchaser or on its behalf or by any other Person, the issuance,
sale and delivery of the Notes, the Series B Preferred Stock and
the Warrants, any disposition thereof and any payment or
cancellation of the Notes.
18.3. Counterparts.
This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together
constitute one and the same instrument, and all signatures need not
appear on any one counterpart.
18.4. Headings.
The headings and captions in this Agreement and the table
of contents are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions
hereof.
18.5. Binding Effect, Benefit and Assignment.
(a) The terms of this Agreement shall be binding upon,
and inure to the benefit of, the parties and their respective
successors and permitted assigns whether so expressed or not.
(b) The Company may not assign any of its obligations,
duties or rights under this Agreement, or under the Notes or
Warrants issued hereunder, except with the Purchaser's consent.
(c) In addition to any assignment by operation of law,
the Purchaser may assign, in whole or in part, any or all of its
rights (and/or obligations) under this Agreement or under the
Notes, under the Certificate of Designations for the Series B
Preferred Stock, under the Warrants to any permitted transferee of
any or all of its Notes, Series B Preferred Stock, Warrants or
Shares, and (unless such assignment expressly provides otherwise)
any such assignment shall not diminish the rights the Purchaser
would otherwise have under this Agreement or with respect to any
remaining Notes, Series B Preferred Stock Warrants or Shares held
by the Purchaser or with respect to any indemnity or reimbursement
rights (or with respect to any other provisions which expressly
provide that they survive any termination of this Agreement).
18.6. Severability.
Any provision hereof or of the Notes, Series B Preferred
Stock or Warrants which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which may render any
provision hereof prohibited or unenforceable in any respect.
18.7. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any
conflict of laws rules which might result in the application of the
laws of any other jurisdiction).
18.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
EACH PARTY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF TEXAS IN CONNECTION WITH ANY
CONTROVERSY RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
WAIVES ANY ARGUMENT THAT VENUE IN ANY SUCH FORUM IS NOT CONVENIENT,
AND AGREES THAT ANY LITIGATION INITIATED BY ANY OF THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
VENUED IN EITHER THE DISTRICT COURT OF DALLAS COUNTY, TEXAS, OR THE
XXXXXX XXXXXX XXXXXXXX XXXXX, XXXXXXXX XXXXXXXX XX XXXXX.
18.9. WAIVER OF JURY TRIAL. THE COMPANY AND THE
PURCHASER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
SA HOLDINGS, INC.
By:________________________________
Name:
Title:
Address in Accepted and agreed to as of the date
State of first above written by the undersigned
Residence: Purchaser:
[ ]
By:________________________________
Name:
Title:
Exhibit A
Shares of
Amount Amount Series B Number of
of of Preferred Shares in
Purchaser Bridge Note Seller Note Stock Warrant
--------- ----------- ----------- --------- ---------
Xxxxxx Xxxxxxx $1,100,000 $600,000 50,000 420,000
Xxxx X. Xxxxxxx $1,100,000 $600,000 50,000 420,000
Xxxxxxxx Xxxx $550,000 $300,000 25,000 210,000
Exhibit B
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY APPLICABLE LAW OR REGULATION OF ANY STATE
AND IS NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN
SECTION 14 OF THE PURCHASE AGREEMENT REFERRED TO HEREIN.
SA HOLDINGS, INC.
Subordinated Note
Due October 1, 1996
Dated July 31, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, the undersigned, SA HOLDINGS, INC.,
a Delaware corporation (herein, together with any successor,
referred to as the "Company"), hereby promises to pay to Xxxxxx
Xxxxxxx or registered assigns, the principal sum of One Million One
Hundred Thousand Dollars ($1,100,000) on October 1, 1996, with
interest (computed on the basis of the actual number of days
elapsed over a 360-day year) on the unpaid balance of such
principal sum from the date hereof at eleven percent (11%) per
annum (the "Interest Rate") payable in arrears, commencing on the
date hereof and thereafter in arrears on October 31, 1995, January
31, 1996, April 30, 1996, July 31, 1996 and at maturity, commencing
on July 31, 1995, until the entire principal amount hereof shall
have become due and payable.
If any payment of interest due hereunder becomes due and
payable on a day which is not a Business Day (as defined in the
Purchase Agreement referred to below), the due date thereof shall
be the next preceding day which is a Business Day, and the interest
payable on such next preceding Business Day shall be the interest
which would otherwise have been payable on the due date which was
not a Business Day.
Payments of principal and interest shall be made in
lawful money of the United States of America, at the principal
office of the Company at 0000 Xxxxxx X, Xxxxx 000, Xxxxx, Xxxxx
00000-0000, or at such other place as the Purchaser shall have
designated for such purpose to the Company in writing, may be paid
by check
mailed, or shall be made by wire transfer, to the Purchaser, all as
provided in the Purchase Agreement referred to below, to the
address or account designated by the holder hereof for such
purpose.
This Note is one of a duly authorized issue of Notes
issued pursuant to Note & Warrant Purchase Agreements dated as of
July 31, 1995 between the Company and the Purchaser named in each
such Note & Warrant Purchase Agreement. Such Note & Warrant
Purchase Agreement under which this Note has been issued is herein
referred to as the "Purchase Agreement".
This Note is entitled to the benefits of the security
interests created by the Security Agreements among Xxxxxx Xxxxxxx,
as agent for the Purchasers, the Company and the subsidiaries of
the Company.
This Note is subject to the provisions of and is entitled
to the benefits of the Purchase Agreement. The Purchase Agreement
provides, inter alia, for prepayments of principal upon the terms
set forth therein. Each holder of this Note, by accepting the
same, agrees to and shall be bound by the provisions of the
Purchase Agreement.
This Note is transferable only upon the terms and
conditions specified in the Purchase Agreement.
In case an Event of Default (as defined in the Purchase
Agreement) shall occur and be continuing, the principal of this
Note may be declared due and payable in the manner and with the
effect provided in the Purchase Agreement.
From and after the occurrence of an Event of Default, the
Company shall pay all costs of collection and reasonable attorney's
fees incurred by the Purchaser in connection with the collection of
amounts due hereunder.
No reference herein to the Purchase Agreement and no
provision hereof or thereof shall alter or impair the obligations
of the Company, which is absolute and unconditional, to pay the
principal hereof and interest hereon at the respective times and
places specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of New York (other than any conflict of laws rules which might
result in the application of the laws of any other jurisdiction).
Subject to the provisions of Section 14 of the Purchase
Agreement, the Company may treat the person in whose name this Note
is registered as the owner and holder of this Note for the purpose
of receiving payment of principal of, premium, if any, and interest
on this Note and for all other purposes whatsoever, and the Company
shall not be affected by any notice to the contrary (except that
the Companies shall comply with the provisions of Section 14 of the
Purchase Agreement regarding the issuance of a new Note or Notes to
permitted transferees).
IN WITNESS WHEREOF, SA Holdings, Inc. has caused this
Note to be dated and to be executed and issued on its behalf by its
duly authorized officer.
SA HOLDINGS, INC.
By_________________________
Name:
Title:
Exhibit C
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY APPLICABLE LAW OR REGULATION OF ANY STATE
AND IS NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN
SECTION 14 OF THE PURCHASE AGREEMENT REFERRED TO HEREIN.
SA HOLDINGS, INC.
Subordinated Note
Due July 30, 1996
Dated July 31, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, the undersigned, SA HOLDINGS, INC.,
a Delaware corporation (herein, together with any successor,
referred to as the "Company"), hereby promises to pay to Xxxxxx
Xxxxxxx or registered assigns, the principal sum of Six Hundred
Thousand Dollars ($600,000) on July 30, 1996, with interest
(computed on the basis of the actual number of days elapsed over a
360-day year) on the unpaid balance of such principal sum from the
date hereof at eleven percent (11%) per annum (the "Interest Rate")
payable in arrears, commencing on the date hereof and thereafter at
maturity, commencing on July 31, 1995, until the entire principal
amount hereof shall have become due and payable. The Company shall
pay the principal amount in equal installments of $300,000 and
accrued and unpaid interest on January 31, 1996 and at maturity.
If any payment of interest due hereunder becomes due and
payable on a day which is not a Business Day (as defined in the
Purchase Agreement referred to below), the due date thereof shall
be the next preceding day which is a Business Day, and the interest
payable on such next preceding Business Day shall be the interest
which would otherwise have been payable on the due date which was
not a Business Day.
This Note, and the obligations of the Company hereunder,
are subject to setoff and reduction in accordance with the
provisions of that certain Stock Purchase Agreement by and among
the Company,
U.S. Communications, Inc., Xxxx X. Xxxxxxx, Xxxxxx Xxxxxxx,
Xxxxxxxx Xxxx and NTS Communications, Inc. dated as of June 30,
1995, as amended.
Payments of principal and interest shall be made in
lawful money of the United States of America, at the principal
office of the Company at 0000 Xxxxxx X, Xxxxx 000, Xxxxx, Xxxxx
00000-0000, or at such other place as the Purchaser shall have
designated for such purpose to the Company in writing, may be paid
by check mailed, or shall be made by wire transfer, to the
Purchaser, all as provided in the Purchase Agreement referred to
below, to the address or account designated by the holder hereof
for such purpose.
This Note is one of a duly authorized issue of Notes
issued pursuant to Note & Warrant Purchase Agreements dated as of
July 31, 1995 between the Company and the Purchaser named in each
such Note & Warrant Purchase Agreement. Such Note & Warrant
Purchase Agreement under which this Note has been issued is herein
referred to as the "Purchase Agreement".
This Note is entitled to the benefits of the security
interests created by the Security Agreements among Xxxxxx Xxxxxxx,
as agent for the Purchasers, the Company and the subsidiaries of
the Company.
This Note is subject to the provisions of and is entitled
to the benefits of the Purchase Agreement. The Purchase Agreement
provides, inter alia, for prepayments of principal upon the terms
set forth therein. Each holder of this Note, by accepting the
same, agrees to and shall be bound by the provisions of the
Purchase Agreement.
This Note is transferable only upon the terms and
conditions specified in the Purchase Agreement.
In case an Event of Default (as defined in the Purchase
Agreement) shall occur and be continuing, the principal of this
Note may be declared due and payable in the manner and with the
effect provided in the Purchase Agreement.
From and after the occurrence of an Event of Default, the
Company shall pay all costs of collection and reasonable attorney's
fees incurred by the Purchaser in connection with the collection of
amounts due hereunder.
No reference herein to the Purchase Agreement and no
provision hereof or thereof shall alter or impair the obligations
of the Company, which is absolute and unconditional, to pay the
principal hereof and interest hereon at the respective times and
places specified herein and in the Purchase Agreement.
This Note is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State
of New York (other than any conflict of laws rules which might
result in the application of the laws of any other jurisdiction).
Subject to the provisions of Section 14 of the Purchase
Agreement, the Company may treat the person in whose name this Note
is registered as the owner and holder of this Note for the purpose
of receiving payment of principal of, premium, if any, and interest
on this Note and for all other purposes whatsoever, and the Company
shall not be affected by any notice to the contrary (except that
the Companies shall comply with the provisions of Section 14 of the
Purchase Agreement regarding the issuance of a new Note or Notes to
permitted transferees).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, SA Holdings, Inc. has caused this
Note to be dated and to be executed and issued on its behalf by its
duly authorized officer.
SA HOLDINGS, INC.
By________________________
Name:
Title:
Exhibit D
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
($.00001 PAR VALUE PER SHARE)
of
SA HOLDINGS, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
I, Xxxx X. Xxxx, Xx., Chief Executive Officer of SA
Holdings, Inc. (hereinafter called the "Corporation"), a
corporation organized and existing under and by virtue of the
provisions of the General Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: The Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), of the Corporation authorizes the
issuance of 12,500,000 shares of preferred stock, $.00001 par value
per share ("Preferred Stock"), in one or more series, and further
authorizes the Board of Directors of the Corporation to provide by
resolution for the issuance of shares of Preferred Stock in one or
more series not exceeding the aggregate number of shares of
Preferred Stock authorized by the Certificate of Incorporation and
to determine with respect to each such series, the voting powers,
if any (which voting powers if granted may be full or limited),
designations, preferences, the relative, participating, optional
and other rights, and the qualifications, limitations and
restrictions appertaining thereto.
SECOND: A resolution providing for and in connection
with the issuance of the Preferred Stock was duly adopted by the
Board of Directors of the Corporation pursuant to authority
conferred on the Board of Directors by the provisions of the
Certificate of Incorporation as aforesaid, which resolution
provides as follows:
RESOLVED: that the Board of Directors, pursuant to
authority vested in it by the provisions of the Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), of
SA Holdings, Inc. (the "Corporation"), hereby authorizes the
issuance of a series of convertible preferred stock ("Convertible
Preferred Stock") of the Corporation and hereby establishes the
powers, designations, preferences, the relative, participating,
optional and other rights, and the qualifications, limitations and
restrictions appertaining thereto in addition to those set forth in
such Certificate of Incorporation (or otherwise provided by law) as
follows (the following, referred to hereinafter as "this
resolution" or "this Certificate of Designations", is to be filed
as part of a Certificate of Designations under Section 151(g) of
the General Corporation Law of the State of Delaware):
1. General.
(a) Designation and Number. The designation of
Convertible Preferred Stock created by this resolution shall be
Series B Cumulative Convertible Preferred Stock, $.00001 par value
per share, of the Corporation (hereinafter referred to as the
"Series B Preferred Stock"), and the number of shares of Series B
Preferred Stock which the Corporation shall be authorized to issue
shall be 250,000 shares.
(b) Priority. The Series B Preferred Stock shall rank
prior to the Common Stock (as hereinafter defined), and to all
other capital stock of the Corporation (now or hereafter authorized
or issued), other than the Series A Cumulative Convertible
Preferred Stock of the Corporation (the "Series A Preferred Stock")
with which it shall rank pari passu, in each case as to dividends
or upon liquidation, dissolution or winding up.
2. Certain Definitions.
(a) For purposes of this Certificate of Designations,
the following terms shall have the meanings indicated:
(i) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions
in the State of Texas are authorized or obligated by law
or executive order to close.
(ii) "Commission" means the Securities and Exchange
Commission and any other similar or successor agency of
the federal government administering the Securities Act
or the Securities Exchange Act.
(iii) "Common Shares" has the meaning set forth in
Section 7(a) hereof.
(iv) "Common Stock" means the Corporation's Common
Stock, as presently authorized by the Certificate of
Incorporation and as such Common Stock may hereafter be
changed or for which such Common Stock may be exchanged
after giving effect to the terms of such change or
exchange (by way of reorganization, recapitalization,
merger, consolidation or otherwise).
(v) The phrase "current conversion price" has the
meaning set forth in Section 7(h) hereof.
(vi) "Event of Default" means (A) the failure by the
Corporation to redeem shares of Series B Preferred Stock
in accordance with the provisions of Section 6(a) or 6(b)
hereof for any reason, and such failure in such
redemption of such shares shall have continued for one
hundred eighty (180) days or (B) the equivalent of one
year's dividend payments on all outstanding shares of
Series B Preferred Stock shall be accrued and unpaid, if
funds are legally available for the payment therefor, and
such failure has continued for sixty (60) days.
(vii) "full cumulative dividends" means as of any
date the amount of accumulated, accrued and unpaid
dividends payable on shares of Series B Preferred Stock
as provided by Section 4 hereof, whether or not earned or
declared and whether or not there shall be funds legally
available for the payment thereof.
(viii) "Junior Preferred Stock" means capital stock
(other than Common Stock) of the Corporation ranking
junior to the Series B Preferred Stock as to dividends
and upon liquidation, dissolution or winding up.
(ix) "Person" or "person" means an individual,
corporation, partnership, firm, association, joint
venture, trust, unincorporated organization, government,
governmental body, agency, political subdivision or other
entity.
(x) "Preferred Liquidation Value", has the meaning
set forth in Section 5(a) hereof.
(xi) "Purchase Agreements" means the separate Share
Purchase Agreements dated as of July 31, 1995 between the
Corporation and each of the original holders of shares of
Series B Preferred Stock (as from time to time assigned,
supplemented or amended or as the terms thereof may be
waived, each in accordance with its terms).
(xii) "Qualified Level of Public Trading" shall
exist if, and only if, on the date of notice of the
Corporation's election of its right to redeem the shares
of Series B Preferred Stock pursuant to Section 6(b)
hereof, (a) Common Shares are listed or admitted to
trading on a national securities exchange or are traded
on the National Association of Securities Dealers Inc.,
Automated Quotation System Xxxxx 0, Xxxxxxxx Xxxxxx
System ("National Market System") or in the over-the-
counter market, and (b) either (i) the last reported sale
price regular way for Common Shares on the principal
national securities exchange on which Common Shares are
listed or admitted to trading or, if Common Shares are
not listed or admitted to trading on any national
securities exchange, on the National Market System, or
(ii) if Common Shares are listed or admitted to trading
on neither any national securities exchange nor on the
National Market System, the average of the highest
reported bid and lowest reported asked prices as
furnished by the National Association of Securities
Dealers Inc., Automated Quotation System Level I, or
comparable system, shall (in the case of (i) or (ii))
have equalled or exceeded an amount per share equal to at
least 250% of the then current conversion price for at
least twenty (20) consecutive trading days.
(xiii) "Senior Credit Agreement" means the Term
Credit Agreement between the Corporation and NorWest Bank
Minnesota, National Association, dated as of July 31,
1995.
(xiv) "Subsidiary" means any corporation,
association or other entity of which more than 80% of the
total voting power of shares of stock or other equity
interests entitled (without regard to the occurrence of
any contingency or any pledge of shares) to vote in the
election of directors, managers or trustees thereof is,
at the time as of which any determination is being made,
owned or controlled, directly or indirectly, by the
Corporation or one or more of its Subsidiaries, or both.
The words "hereof", "herein" and "hereunder" and
other words of similar import refer to this Certificate of
Designations as a whole and not to any particular Section or other
subdivision.
(c) References herein to the Certificate of
Incorporation include such Certificate as amended by this
Certificate of Designations.
3. Voting Rights.
(a) Generally No Voting Rights. Except as otherwise
provided specifically herein or by law, each share of Series B
Preferred Stock shall have no voting rights. To the extent holders
of shares of Series B Preferred Stock have the right to vote, each
holder of shares of Series B Preferred Stock shall be entitled to
that number of votes for each share of Series B Preferred Stock
held by such holder equal to the number of Common Shares obtainable
upon conversion of such share of Series B Preferred Stock pursuant
to Section 7 hereof at the current conversion price on the record
date for the vote which is being taken or, if no such record date
is established, at the date such vote is taken or any written
consent of stockholder is solicited.
(b) Consent Required. So long as any shares of the
Series B Preferred Stock remain outstanding, unless the vote or
consent of the holders of a greater number of shares shall then be
required by law, the affirmative vote or consent of the holders of
at least fifty-one percent (51%) of all of the shares of Series B
Preferred Stock at the time outstanding, voting separately as a
class, given in person or by proxy either in writing (as may be
permitted by law and the Certificate of Incorporation and By-laws
of the Corporation) or at any special or annual meeting, shall be
necessary to permit, effect or validate the taking of any of the
following actions by the Corporation:
(i) create, authorize or issue any class or series
of capital stock ranking prior to the Series B Preferred
Stock as to dividends or upon liquidation, dissolution or
winding up;
(ii) amend the Certificate of Incorporation of the
Corporation, or in any other manner alter or change the
powers, rights, privileges or preferences of the Series
B Preferred Stock, if such amendment or action would
adversely affect the powers, rights, privileges or
preferences of the holders of the Series B Preferred
Stock; except that the Corporation may amend the
Certificate of Incorporation and/or the By-laws of the
Corporation to increase the amount of shares of Common
Stock or amend the terms of any Common Stock, or to
create, authorize or issue shares of Junior Preferred
Stock; or
(iii) amend this Certificate of Designations.
(c) Additional Voting Rights. (i) So long as
there are at least 100,000 shares of Series B Preferred Stock then
outstanding (subject to adjustment after the date hereof for stock
splits, combinations, etc.), upon the occurrence of an Event of
Default, the holders of the Series B Preferred Stock shall be
entitled to elect (as provided below) a number of directors to the
Board of Directors of the Corporation equal to the number obtained
by (x) multiplying the (A) a fraction, the numerator of which is
the number of shares of Common Stock obtainable upon conversion of
all of the shares of Series B Preferred Stock then outstanding and
the denominator of which is the total number of shares of Common
Stock (on a fully-diluted basis) then outstanding, by (B) the
number of directors on the Board of Directors of the Corporation
and then (y) rounding such number down to the nearest whole number
(except for any number below the number 1, such number shall be
rounded upwards to 1 and not downward to zero). The size of the
Board of Directors of the Corporation shall be increased by such
number as may be necessary to allow for directors elected by the
holders of the Series B Preferred Stock. During the period
(hereinafter in this Section 3(c) called the "Class Voting Period")
commencing upon the occurrence of such Event of Default and ending
at such time upon which no Event of Default shall continue, the
holders of at least fifty-one percent (51%) of the then outstanding
shares of Series B Preferred Stock, by the affirmative vote in
person or by proxy at a special meeting of stockholders called for
such purpose (or at any adjournment thereof) by holders of at least
25% of the then outstanding shares of Series B Preferred Stock or
at any annual meeting of stockholders, or by written consent
delivered to the Secretary of the Corporation, with the holders of
such Series b Preferred Stock voting as a class and with each such
share of Series B Preferred Stock having one vote, shall be
entitled, as a class, to the exclusion of the holders of all other
classes or series of capital stock of the Corporation, to elect
such directors.
(ii) At any time when such voting right under this
Section 3(c) shall have vested in the holders of shares of
Series B Preferred Stock entitled to vote thereon, and if such
right shall not already have been initially exercised, an
officer of the Corporation shall, upon the written request of
at least 25% of the holders of record of shares of the Series
B Preferred Stock then outstanding, addressed to the Treasurer
(or similar officer) of the Corporation, call a special
meeting of holders of shares of the Series B Preferred Stock.
Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders
at the place for holding annual meetings of stockholders of
the Corporation or, if none, at a place designated by the
Treasurer (or similar officer) of the Corporation. If such
meeting shall not be called by the proper officers of the
Corporation within 30 days after the personal service of such
written request upon the Treasurer (or similar officer) of the
Corporation, or within 30 days after mailing the same within
the United States, by registered mail, addressed to the
Treasurer (or similar Officer) of the Corporation at its
principal office (such mailing to be evidenced by the registry
receipt issued by the postal authorities), then the holders of
record of at least 25% of the shares of Series B Preferred
Stock then outstanding may designate in writing any person to
call such meeting at the expense of the Corporation, and such
meeting may be called by such person so designated upon the
notice required for annual meetings of stockholders and shall
be held at the same place as is elsewhere provided in this
paragraph or, if none, at a place designated by the person
selected to call the meeting. Any holder of shares of Series
B Preferred Stock then outstanding that would be entitled to
vote at such meeting shall have access to the stock books of
the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this
paragraph.
(iii) Any director who shall have been elected by the
holders of Series B Preferred Stock pursuant to this Section
3(c) may be removed at any time during a Class Voting Period,
by the vote of the holders of at least fifty-one percent (51%)
of all of the then outstanding shares of Series B Preferred
Stock, voting as a separate class in person or by proxy at a
special meeting of stockholders called for such purpose by
holders of at least 25% of the outstanding shares of Series B
Preferred Stock. Any director who shall have been elected by
the holders of Series B Preferred Stock may not be removed at
any time during a Class Voting Period without the consent of
the holders of at least fifty-one percent (51%) of all of the
outstanding shares of Series B Preferred Stock. Any vacancy
created by the removal, death or resignation of a director
elected by the holders of Series B Preferred Stock may be
filled during such Class Voting Period by the holders of at
least fifty-one percent (51%) of all of the outstanding shares
of Series B Preferred Stock by vote in person or by proxy at
a special meeting of stockholders of the Corporation called
for such purpose by holders of at least 25% of the outstanding
shares of Series B Preferred Stock.
(iv) During the Class Voting Period, other than to
increase the size of the Board of Directors in accordance with
clause (i) of this Section 3(c), the size of the Board of
Directors of the Corporation shall not otherwise be changed
without the vote of the holders of at least fifty-one percent
(51%) of all of the then outstanding shares of Series B
Preferred Stock, voting as a separate class.
(v) At the end of the Class Voting Period, the holders
of Series B Preferred Stock shall be automatically divested of
all voting power vested in them under this Section 3(c) except
as herein or by law expressly provided, subject always to the
subsequent vesting hereunder of such voting power in the
holders of Series B Preferred Stock upon the occurrence of any
subsequent Event of Default. The term of any director elected
pursuant to the provisions of this Section 3(c) shall in all
events expire at the end of the Class Voting Period and the
size of the Board shall be reduced accordingly.
4. Dividend Rights.
(a) General Dividend Obligations. The Corporation shall
pay, when and as declared by the Corporation's Board of Directors,
to the holders of the Series B Preferred Stock, out of the assets
of the Corporation legally available therefor, stock dividends,
payable in shares of Series B Preferred Stock (or at the election
of the Corporation, in cash) (provided that upon liquidation or
redemption, accrued and unpaid dividends will be paid in cash), at
the times, in the amounts and with such priorities as are provided
for in this Section 4. Notwithstanding the foregoing, without the
consent of a majority in interest of the lenders under the Senior
Credit Agreement, no dividends may be paid in cash to holders of
the Series A Preferred Stock so long as indebtedness is outstanding
and unpaid under the Senior Credit Agreement.
(b) Accrual of Dividends. Dividends on each share of
Series B Preferred Stock shall accrue cumulatively on a daily basis
from and including the date of issuance of such share. The date on
which the Corporation shall initially issue any share of Series B
Preferred Stock shall be deemed to be its "date of issuance"
regardless of the number of times transfer of such share of
Series B Preferred Stock shall be made on the stock records
maintained by or for the corporation and regardless of the number
of certificates which may be issued to evidence such share of
Series B Preferred Stock (whether by reason of transfer of such
share of Series B Preferred Stock or for any other reason).
(c) Dividend Rates. Dividends shall accrue cumulatively
on each share of Series B Preferred Stock from the date of issuance
at a rate per annum equal to $0.80 per share of Series B Preferred
Stock calculated on the basis of the actual number of days elapsed
in a year. Dividends paid in shares of Series B Preferred Stock
shall be paid assuming each share of Series B Preferred Stock used
to so pay has a value of $10.00.
(d) Payment Dates. Full cumulative dividends on the
Series B Preferred Stock shall be payable annually, on the last day
of July in each year (each, a "Dividend Payment Date"). The first
Dividend Payment Date shall be July 31, 1996. If any Dividend
Payment Date shall be on a day other than a Business Day, then the
Dividend Payment Date shall be on the next succeeding Business Day.
An amount equal to the full cumulative dividends shall also be
payable (in cash), in satisfaction of such dividend obligation,
upon liquidation as provided under Section 5 hereof, and upon
redemption as provided under Section 6 hereof.
(e) Amounts Payable. The amount of dividends payable on
Series B Preferred Stock on each Dividend Payment Date shall be the
full cumulative dividends which are unpaid through and including
such Dividend Payment Date. Dividends which are not paid for any
reason whatsoever on a Dividend Payment Date shall cumulate until
paid and shall be payable on the next Dividend Payment Date on
which payment can lawfully be made (or upon liquidation or
redemption as provided herein). Holders of shares of Series B
Preferred Stock called for redemption on a redemption date falling
between the close of business on a dividend payment record date and
the opening of business on the corresponding Dividend Payment Date
shall, in lieu of receiving such dividend payment on the Dividend
Payment Date fixed therefor, receive an amount equal to such
dividend payment (consisting of all accumulated and unpaid
dividends through and including the redemption date) on the date
fixed for redemption. If for whatever reason all payments have not
been made with respect to any share of Series B Preferred Stock as
required by Section 5 on a distribution date or all payments have
not been made with respect to any share of Series B Preferred Stock
as required by Section 6 on a redemption date (other than because
of a failure by the holder thereof to tender such shares for
payment on such date), then, notwithstanding any other provision
hereof, dividends shall continue to accumulate on such outstanding
shares until paid. Dividends paid by payment-in-kind shall not be
paid in fractional shares (all such fractional shares being rounded
down to the nearest whole number of shares); such dividends so
rounded down shall be deemed paid in full).
(f) Priority. So long as any shares of the Series B
Preferred Stock are outstanding if an Event of Default has occurred
and is continuing or if an Event of Default (as defined in the
Senior Credit Agreement) has occurred and is continuing, (A) no
dividends shall be declared or paid or set apart for payment and no
other distribution shall be declared or made or set apart for
payment, in each case upon the Common Stock (other than dividends
paid in shares of Common Stock made to the holders of Common
Stock), the Series A Preferred Stock (other than dividends paid in
shares of Series A Preferred Stock made to the holders of Series A
Preferred Stock) or any Junior Preferred Stock, and (B) no capital
stock of the Company (other than the Series B Preferred Stock)
shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any
shares of any such stock) by the Corporation.
5. Liquidation Rights.
(a) Priority. (i) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of
the Corporation (whether from capital or surplus) shall be made to
or set apart for the holders of Common Stock or any other shares of
Junior Preferred Stock of the Corporation, the holders of the
shares of Series B Preferred Stock shall be entitled to receive
from the assets of the Corporation, whether represented by capital,
surplus, reserves or earnings, payment in cash of an amount (the
"Preferred Liquidation Value") equal to the greater of (i) $10.00
per share plus the value of accrued and unpaid dividends per share
through the date thereof or (ii) the amount per share of Series B
Preferred Stock that would have been payable had each such share
been converted to Common Shares immediately prior to such event of
liquidation,
dissolution or winding-up pursuant to Section 7 hereof. If the
assets distributable upon such liquidation, dissolution or winding-
up of the Corporation, whether voluntary or involuntary, shall be
insufficient to permit payment to the holders of the shares of
Series B Preferred Stock of the full preferential amounts as set
forth in this Section 5(a), then such assets shall be distributed
ratably among the shares of Series B Preferred Stock.
(ii) If, in the event of any liquidation, dissolution or
winding up of the Corporation, the Preferred Liquidation Value of
the Series B Preferred Stock and the Preferred Liquidation Value of
the Series A Preferred Stock are not paid in full, the respective
holders of the Series B Preferred Stock and of the Series A
Preferred Stock shall share ratably in any distribution of assets
in proportion to the full Preferred Liquidation Value to which each
such series of Preferred Stock is entitled.
(b) Junior Stock. After payment shall have been made in
full to the holders of Series B Preferred Stock as provided in this
Section 5 upon any liquidation, dissolution or winding up of the
Corporation, the Common Stock and any other series or class or
classes of stock of the Corporation shall, subject to the
respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or
distributed upon such liquidation, dissolution or winding up, and
the holders of Series B Preferred Stock shall not be entitled to
share therein.
(c) Notice of Liquidation. Written notice of any
liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when and the place or places where the
amounts distributable in such circumstances shall be payable, shall
be given (not less than thirty (30) days prior to any payment date
stated therein), to the holders of record of the Series B Preferred
Stock at their respective addresses as the same shall appear on the
stock register of the Corporation.
(d) Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property or assets of the Corporation nor the consolidation, merger
or other business combination of the Corporation with or into one
or more corporations shall be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary, of the
Corporation.
6. Redemption.
(a) Special Optional Redemption. On or after July 31,
1997 (but not before), if there has been a Qualified Level of
Public Trading as of the date of the notice provided for below, at
the option of the Corporation, the Corporation may redeem all or
part of the shares of Series B Preferred Stock then outstanding at
a cash price per share equal to the sum of $10.00 plus the value of
accrued and unpaid dividends on such share through the date set for
redemption.
Notwithstanding the foregoing, without the consent of a
majority in interest of the lenders under the Senior Credit
Agreement, the Corporation may not redeem all or any part of the
shares of Series B Preferred Stock pursuant to the preceding
sentence so long as indebtedness is outstanding and unpaid under
the Senior Credit Agreement.
Such option under this Section 6(b) shall be exercised by
written notice to the holders of Series B Preferred Stock given at
any time not less than thirty (30) days and not more than sixty
(60) days prior to the date of such redemption.
(b) Partial Redemption. In any such optional redemption
by the Corporation, if all shares of Series B Preferred Stock are
not being redeemed, then the number of shares of Series B Preferred
Stock to be redeemed shall be allocated among all shares of Series
B Preferred Stock so that the shares of Series B Preferred Stock
are redeemed from such holders in proportion to the respective
number of shares of Series B Preferred Stock held by each such
holder (or in such other proportion as agreed by all such holders
who accept the Corporation's offer).
7. Conversion.
(a) General. Each holder of a share of Series B
Preferred Stock shall have the right, at the option of such holder,
at any time to convert, upon the terms and provisions of this
Section 7, one or more shares of Series B Preferred Stock into
fully paid and nonassessable shares of Common Stock of the
Corporation or any capital stock or other securities into which
such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof (such
shares, the "Common Shares"). Such conversion of shares of Series
B Preferred Stock to Common Shares shall be made at a conversion
rate of one share of Series B Preferred Stock for a number of
Common Shares equal to (x) $10.00 per share plus the value of
accrued and unpaid dividends per share divided by (y) the then
current conversion price, as further described below. Every share
of Series B Preferred Stock shall continue to be convertible, in
whole or in part, even though the Corporation or a holder may have
given notice of redemption with respect to such share of Series B
Preferred Stock or any part thereof pursuant to Section 6 hereof,
so long as such share of Series B Preferred Stock and the holder's
election to convert shall have been delivered to the Corporation
pursuant to Section 7(c) hereof prior to the date fixed for such
redemption. The Common Shares issuable upon conversion of the
shares of Series B Preferred Stock, when such Common Shares shall
be issued in accordance with the terms hereof, are hereby declared
to be and shall be duly authorized, validly issued, fully paid and
nonassessable Common Shares held by the holders thereof.
(b) Reference to "Conversion". For convenience, the
conversion pursuant to this Section 7 of all or a part of the
shares of Series B Preferred Stock into Common Shares is herein
sometimes referred to as the "conversion" of the shares of Series
B Preferred Stock.
(c) Surrender, Election and Payment. Each share of
Series B Preferred Stock may be converted by the holder thereof, in
whole, or in part, during normal business hours on any Business Day
by surrender of the share of Series B Preferred Stock, accompanied
by written evidence of the holder's election to convert the
preferred share of Series B Preferred Stock or portion thereof, to
the Corporation at its office designated pursuant to Section 9
hereof (or, if such conversion is in connection with an
underwritten public offering of Common Shares, at the location at
which the underwriting agreement requires that such Common Shares
(or shares of Series B Preferred Stock) be delivered). Payment of
the conversion price for the Common Shares specified in such
election shall be made by applying an aggregate number of shares of
Series B Preferred Stock equal to the number obtained by dividing
(x) the number of Common Shares specified in such election by (y)
the amount obtained by dividing (A) $10.00 by (B) the then current
conversion price. Such holder shall thereupon be entitled to
receive the number of Common Shares specified in such election
(plus cash in lieu of any fractional share as provided in Section
7(j) hereof).
(d) Effective Date. Each conversion of a share of
Series B Preferred Stock pursuant to Section 7(c) hereof shall be
deemed to have been effected immediately prior to the close of
business on the Business Day on which such share of Series B
Preferred Stock shall have been surrendered to the Corporation as
provided in Section 7(c) hereof (except that if such conversion is
in connection with an underwritten public offering of Common
Shares, then such conversion shall be deemed to have been effected
upon such surrender), and such conversion shall be at the current
conversion price in effect at such time. On each such day that the
conversion of a share of Series B Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for Common Shares are issuable upon
such conversion, as provided in Section 7(e) hereof, shall be
deemed to have become the holder or holders of record of such
Common Shares.
(e) Share Certificates. As promptly as practicable
after the conversion of a share of Series B Preferred Stock, in
whole or in part, and in any event within five (5) Business Days
thereafter (unless such conversion is in connection with an
underwritten public offering of Common Shares, in which event
concurrently with such conversion), the Corporation at its expense
(including the payment by it of any applicable issue, stamp or
other taxes, other than any income taxes) will cause to be issued
in the name of and delivered to the holder thereof or as such
holder may direct, a certificate or certificates for the number of
Common Shares to which such holder shall be entitled upon such
conversion on the effective date of such conversion plus cash in
lieu of any fractional shares as provided in Section 7(j) hereof.
(f) Acknowledgment of Obligation. The Corporation will,
at the time of or at any time after each conversion of a share of
Series B Preferred Stock, upon the request of the holder thereof or
of any Common Shares issued upon such conversion, acknowledge in
writing its continuing obligation to afford to such holder all
rights, if any, to which such holder shall continue to be entitled;
provided, that if any such holder shall fail to make any such
request, the failure shall not affect the continuing obligations of
the Corporation to afford such rights to such holder.
(g) Payment of Dividends. Within five (5) Business Days
after receipt of any share of Series B Preferred Stock and an
election to convert all or a portion of such share of Series B
Preferred Stock under Section 7(c) hereof, the Corporation will
pay, out of funds legally available therefor, to the holder of such
share of Series B Preferred Stock in shares of Series B Preferred
Stock or, at the option of the Company, in cash, an amount equal to
full cumulative dividends accrued to the effective date of
conversion of such shares of Series B Preferred Stock.
(h) Current Conversion Price. The term "conversion
price" shall mean initially $1.25 per Common Share, subject to
adjustment. The term "current conversion price" as used herein
shall mean the conversion price, as the same may be adjusted from
time to time as hereinafter provided, in effect at any given time.
In determining the current conversion price, the result shall be
expressed to the nearest $0.01, but any such lesser amount shall be
carried forward and shall be considered at the time of (and
together with) the next subsequent adjustment which, together with
any adjustments to be carried forward, shall amount to $0.01 per
Common Share or more.
(i) Reservation of Shares of Common Stock. The
Corporation shall at all times reserve and keep available out of
authorized but unissued the maximum number of shares of Common
Stock into which all shares of Series B Preferred Stock from time
to time outstanding are convertible, but shares of Common Stock
held in the treasury of the Corporation may, in its discretion, be
delivered upon any conversion of shares of Series B Preferred
Stock.
(j) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series B Preferred Stock,
but, in lieu of any fraction of a Common Share which would
otherwise be issuable in respect of the aggregate number of shares
of Series B Preferred Stock surrendered by the holder thereof for
conversion, the holder shall have the right to receive an amount in
cash equal to the same fraction of the current Market Price (as
defined below) on the effective date of the conversion of such
shares of Series B Preferred Stock. Dividends payable pursuant to
Section 7(g) above upon conversion of shares of Series B Preferred
Stock which are paid by payment-in-kind shall be paid with cash in
lieu of fractional shares to the extent of any fractional shares.
8. Adjustment to Conversion Price.
The conversion price shall be adjusted, from time
to time, as follows:
(a) Adjustments for Stock Dividends, Recapitalizations,
Etc. In case the Corporation shall, after August 1, 1995, (w) pay
a stock dividend or make a distribution (on or in respect of its
Common Stock) in shares of its Common Stock (except there shall be
no adjustment with respect to the payment by the Company of a stock
dividend to holders of its Common Stock of the shares of Strategic
Abstract & Title Corporation, a Texas corporation), (x) subdivide
the outstanding shares of its Common Stock, (y) combine the
outstanding shares of its Common Stock into a smaller number of
shares, or (z) issue by reclassification of shares of its Common
Stock, any shares of capital stock of the Corporation, then, in any
such case, the current conversion price in effect immediately prior
to such action shall be adjusted to a price such that if the holder
of a share of Series B Preferred Stock were to convert such share
of Series B Preferred Stock in full immediately after such action,
such holder would be entitled to receive the number of shares of
capital stock of the Corporation which such holder would have owned
immediately following such action had such share of Series B
Preferred Stock been converted immediately prior thereto (with any
record date requirement being deemed to have been satisfied), and,
in any such case, such conversion price shall thereafter be subject
to further adjustments under this Section 8. An adjustment made
pursuant to this subsection (a) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or reclassification.
(b) Consolidation or Merger. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale of
all or substantially all of the Corporation's assets to another
Person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock is referred to herein as
an "Organic Change." Prior to the consummation of any Organic
Change, the Corporation shall make appropriate provision (in form
and substance reasonably satisfactory to holders of Series B
Preferred Stock representing a majority of the Series B Preferred
Stock then outstanding) to insure that each of the holders of the
Series B Preferred Stock shall thereafter have the right to acquire
and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series B Preferred
Stock, such shares of stock, securities or assets as may be
issuable or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore acquirable and
receivable upon conversion of such holder's Series B Preferred
Stock had such Organic Change not taken place.
In any such case, the Corporation shall make appropriate
provision (in form and substance reasonably satisfactory to the
holders of Series B Preferred Stock representing a majority of the
Series B Preferred Stock then outstanding) with respect to such
holders' rights and interest to insure that the provisions hereof
shall thereafter be applicable to the Series B Preferred Stock
(including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than
the Corporation, an immediate adjustment of the conversion price to
reflect the value for the Series B Preferred Stock reflected by the
terms of such consolidation, merger or sale, if the value so
reflected would cause an increase to the conversion price in effect
immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Corporation) resulting from such
consolidation or merger or the Corporation purchasing such assets
assumes by written instrument (which may be the agreement of
consolidation, merger or sale), in form and substance reasonably
satisfactory to the holders of Series B Preferred Stock
representing a majority of the Series B Preferred Stock then
outstanding, the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(c) Notices. In case at any time
(i) the Corporation shall take any action which would
require an adjustment in the current conversion price pursuant
to Section 8(a); or
(ii) there shall be any reorganization, reclassification
or change of the Corporation's Common Stock (other than a
change in par value or from par value to no par value or from
no par value to par value), or any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or any sale,
transfer or lease of all or substantially all of the assets of
the Corporation; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation;
then, in any one or more of such cases, the Corporation shall give
written notice to the holders of the shares of Series B Preferred
Stock, not less than ten (10) days before any record date or other
date set for definitive action, of the date on which such action,
distribution, reorganization, reclassification, change, sale,
transfer, lease, consolidation, merger, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of any such
action (to the extent such effect may be known at the date of such
notice) on the current conversion price and the kind and amount of
the shares and other securities and property deliverable upon
conversion of the shares of Series B Preferred Stock. Such notice
shall also specify any date as of which the holders of the Common
Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon any such
reorganization, reclassification, change, sale, transfer, lease,
consolidation, merger, dissolution, liquidation or winding-up, as
the case may be.
9. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands,
consents and other communications hereunder shall be in writing and
shall be delivered by hand or shall be sent by telex or telecopy
(confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), to the following addresses:
(a) if to the holder of a share of Series B Preferred
Stock, at the holder's address as set forth in the stock register
of the Corporation, or at such other address as may have been
furnished to the Corporation by the holder in writing; or
(b) if to the Corporation, at SA Holdings, Inc., 0000
Xxxxxx X, Xxxxx 000, Xxxxx, XX 00000-0000 or at such other address
as may have been furnished in writing by the Corporation to the
holders of the shares of Series B Preferred Stock.
Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such
notice is delivered or, if sent by telex or telecopier, when
received, unless otherwise expressly specified or permitted by the
terms hereof.
IN WITNESS WHEREOF, SA Holdings, Inc. caused this
Certificate of Designations to be signed by its Chief Executive
Officer this 31st day of July, 1995.
SA HOLDINGS, INC.
By_________________________
Xxxx X. Xxxx, Xx.
Chief Executive Officer
Exhibit E
THIS WARRANT CERTIFICATE (AND THE COMMON STOCK OR OTHER SECURITIES
ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE LAW OR REGULATION OF
ANY STATE AND ARE NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS
SPECIFIED IN SECTION 14 OF THE PURCHASE AGREEMENT REFERRED TO
HEREIN.
SA HOLDINGS, INC.
Common Stock Purchase Warrant Certificate
Dated July 31, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, the undersigned, SA Holdings, Inc.,
a Delaware corporation (herein referred to as the "Company"),
hereby certifies and agrees that Xxxxxx Xxxxxxx, or its registered
assigns, is entitled to purchase from the Company up to an
aggregate of 420,000 duly authorized, validly issued, fully paid
and non-assessable shares of the Company's Common Stock, or any
stock into which such Common Stock shall have been changed or
converted or any stock or other securities resulting from a
reclassification thereof (the "Shares") at a purchase price per
Share of $1.25 at any time and from time to time from the date
hereof until the Expiration Date (as hereinafter defined). The
foregoing agreement and rights are all subject to the terms,
conditions and adjustments (in both the number of Shares and the
purchase price per Share) set forth below in this Warrant
Certificate.
This Warrant Certificate is one of the Common Stock
Purchase Warrant Certificates (the "Warrants", which term includes
all Warrants issued in substitution therefor) originally issued in
connection with the issue and sale by the Company on the date
hereof of (i) $2,750,000 aggregate principal amount of its
Subordinated Notes due October 1, 1996 and (ii) $1,500,000
aggregate principal amount of its Subordinated Notes due July 30,
1996 (together with all notes issued in substitution or replacement
therefor, the "Notes"). The Warrants and the Notes have been
issued pursuant to separate Note, Preferred Stock & Warrant
Purchase Agreements dated as of July 31, 1995 (collectively, the
"Purchase Agreement") between the Company and the purchasers named
therein (each, a "Purchaser"). The Warrants originally so issued
evidence rights to purchase an aggregate of 1,050,000 Shares at an
exercise price of $1.25 per share, subject to adjustment as
provided herein. This Warrant is subject to the provisions, and is
entitled to the benefits, of the Purchase Agreement.
Section 1. Exercise of Warrant.
1.1. Surrender, Subscription and Payment. This Warrant
may be exercised by the holder hereof, in whole or in part, at any
time from the date hereof until the close of business on the
Expiration Date, during normal business hours on any Business Day
(as defined in the Purchase Agreement), by surrender of this
Warrant, together with the form of subscription attached as Annex
A hereto (or a reasonable facsimile thereof) duly executed by such
holder in substantially such form, to the Company at its office
designated pursuant to Section 17 of the Purchase Agreement (or, if
such exercise is in connection with an underwritten public offering
of Shares subject to this Warrant or of securities into which
Shares subject to this Warrant may be converted, at the location at
which the underwriting agreement requires that such Shares be
delivered). Payment of the exercise price for the Shares specified
in such subscription shall be made, at the option of the holder,
(a) by applying a principal amount of Notes, in the manner provided
in Section 1.6 hereof, (b) by certified or official bank check (or
wire transfer) payable to the order of the Company in federal or
other immediately available funds, in the case of either (a) or
(b), in an amount equal to (i) the number of Shares specified in
such form of subscription, multiplied by (ii) the then current
exercise price (as hereinafter defined), or (c) by conversion of
this Warrant, or any portion hereof, in the manner provided in
Section 1.7 hereof. Such holder shall thereupon be entitled to
receive the number of Shares specified in such form of subscription
(plus cash in lieu of any fractional share as provided in Section
1.4 hereof).
1.2. Effective Date. Each exercise of this Warrant
pursuant to Section 1.1 hereof shall be deemed to have been
effected immediately prior to the close of business on the Business
Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1 hereof (except that if such
exercise is in connection with an underwritten public offering of
Shares subject to this Warrant or of securities into which Shares
subject to this Warrant may be converted, then such exercise shall
be deemed to have been effected upon such surrender of this
Warrant), and such exercise shall be at the current exercise price
in effect at such time. On each such day that an exercise of this
Warrant is deemed effected, the person or persons in whose name or
names any certificate or certificates for Shares are issuable upon
such exercise, as provided in Section 1.4 hereof, shall be deemed
to have become the holder or holders of record thereof.
1.3. Expiration Date. This Warrant will expire, and
thereafter will not be exercisable, at the close of business on
July 31, 2000 (the "Expiration Date").
1.4. Share Certificates, Cash for Fractional Shares and
Reissuance of Warrants. As promptly as practicable after the
exercise of this Warrant, in whole or in part, and in any event
within five (5) Business Days thereafter (unless such exercise is
in connection with a public offering of Shares subject to this
Warrant or of securities into which Shares subject to this Warrant
may be converted, in which event concurrently with such exercise),
the Company at its expense (including the payment by it of any
applicable issue, stamp or other taxes other than any income taxes)
will cause to be issued in the name of and delivered to the holder
hereof or, subject to Section 14 of the Purchase Agreement, as such
holder may direct:
(i) a certificate or certificates for the number of
Shares to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per Share (determined in
accordance with Section 1.7(b) hereof) on the effective date
of such exercise; and
(ii) in case such exercise is in part only, a new
Warrant or Warrants of like tenor, calling in the aggregate on
the face or faces thereof for the number of Shares (without
giving effect to any adjustment therein) equal to the number
of such Shares called for on the face of this Warrant minus
the number of Shares which could have been obtained upon such
exercise for the exercise price paid if the current exercise
price had been $1.25 per Share.
1.5. Acknowledgment of Obligation. The Company will, at
the time of or at any time after each exercise of this Warrant,
upon the request of the holder hereof or of any Shares issued upon
such exercise, acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without limitation,
any rights to registration of any such Shares pursuant to the
Purchase Agreement) to which such holder shall continue to be
entitled under this Warrant, the Purchase Agreement, and the Notes;
provided, that if any such holder shall fail to make any such
request, the failure shall not affect the continuing obligation of
the Company to afford such rights to such holder.
1.6. Payment by Application of the Notes.
(a) The holder of this Warrant shall have the option,
but not the obligation, upon any exercise of this Warrant, to apply
to the payment required by Section 1.1 hereof all or any part of
the principal amount then unpaid of any one or more Notes at the
time held by such holder. The Company will accept the amount of
principal, if such election is selected, specified in such form of
subscription in satisfaction of the exercise price for such Shares
to be purchased. Within five (5) Business Days after receipt of
any such notice, the Company will pay to the holder of Notes
submitting such subscription, in the manner provided in such Notes
and the Purchase Agreement, any unpaid interest accrued to the date
of exercise of this Warrant on the principal amount so specified in
such form of subscription. In the event that less than the entire
unpaid principal amount of any Note is applied to the payment
required by Section 1.1 hereof, such Note shall be surrendered
together with the form of subscription and cancelled in accordance
with Section 12 of the Purchase Agreement, and the Company will
promptly issue a new Note representing the remaining unpaid
principal balance. In the event that the entire unpaid principal
amount of any Note is applied to the payment required by Section
1.1 hereof, such Note shall be surrendered together with the form
of subscription and cancelled in accordance with the provisions of
Section 12 of the Purchase Agreement.
(b) The holder of this Warrant shall have the right to
apply all or any portion of the principal amount of a Note to
exercise all or any portion of this Warrant (i) whether or not
payment on the Notes is prohibited by the subordination provisions
of the Purchase Agreement and (ii) even though the Company or such
holder may have given notice of prepayment with respect to all or
any portion of the principal amount of such Note pursuant to
Section 6 of the Purchase Agreement, so long as the subscription
form with respect to such principal amount of such Note shall,
together with this Warrant, have been delivered to the Company in
accordance with Section 1.1 hereof prior to the date fixed for such
prepayment.
1.7. Conversion of Warrant. (a) In addition to and
without limiting the rights of the holder under the terms of this
Warrant, the holder of this Warrant shall have the option, but not
the obligation, to convert this Warrant, or any portion hereof (the
"Conversion Right"), into Shares as provided in this Section 1.7 at
any time on or prior to the Expiration Date. Upon exercise of the
Conversion Right with respect to a particular number of shares
subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder
of any exercise price or any cash or other consideration) that
number of Shares equal to the quotient obtained by dividing (i) the
value of this Warrant (or the specified portion hereof) on the
effective date of the exercise of the Conversion Right, as provided
in Section 1.2 hereof (the "Conversion Date"), which value shall be
determined by subtracting (x) the aggregate exercise price of the
Converted Warrant Shares immediately prior to the exercise of the
Conversion Right from (y) the aggregate Market Price of such
Converted Warrant Shares on the Conversion Date by (ii) the Market
Price of one Share on the Conversion Date.
(b) Determination of Market Price. For purposes of this
Warrant, "Market Price" of the Company's Shares shall mean:
(i) if traded on a stock exchange, the Market Price of
the Company's Shares shall be deemed to be the average of the daily
closing selling prices of the Shares on the stock exchange
reasonably determined by the Company's Board of Directors to be the
primary market for the Shares over the ten (10) trading day period
ending on the date prior to the effective date of the exercise or
conversion of this Warrant, as such prices are officially quoted in
the composite tape of transactions on such exchange;
(ii) if traded over-the-counter, the Market Price of
the Shares shall be deemed to be the average of the daily closing
selling prices (or, if such information is not available, the
average of the daily closing bid and asked prices) of the Shares
over the ten (10) trading day period ending on the date prior to
the effective date of the exercise or conversion of this Warrant,
as such prices are reported by the National Association of
Securities Dealers through its NASDAQ system or any successor
system; and
(iii) if there is no public market for the Shares, then
the Market Price shall be determined by mutual agreement of the
holder of the Warrant and the Company, and if the holder and the
Company are unable to so agree within twenty (20) days after the
event giving rise to the need to determine the Market Price, by an
investment banker of national reputation selected by mutual
agreement of the Company and the holder of the Warrant.
Section 2. Exercise Price and Adjustments.
2.1. Current Exercise Price. The term "exercise price",
shall mean initially $1.25 per Share, subject to adjustment. For
purposes of this Section 2.1, the exercise price of $1.25 shall be
deemed to have become effective at the close of business on the
date hereof but shall be subject to adjustment as set forth in
Sections 2.2 and 2.3 hereof. The term "current exercise price" as
used herein shall mean the exercise price, as the same may be
adjusted from time to time as hereinafter provided, in effect at
any given time. In determining the current exercise price, the
result shall be expressed to the nearest $0.01, but any such lesser
amount shall be carried forward and shall be considered at the time
of and together with the next subsequent adjustment which, together
with any adjustments to be carried forward, shall amount to $0.01
per Share or more.
2.2. Adjustment of Exercise Price. The exercise price
shall be subject to adjustment, from time to time in the event the
Company should at any time or from time to time after the date
hereof (w) pay a stock dividend or make a distribution (or in
respect of its Common Stock) in shares of its Common Stock (except
there shall be no adjustment with respect to the payment by the
Company of a stock dividend to holders of its Common Stock of the
shares of Strategic Abstract & Title Corporation, a Texas
corporation), (x) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock (y) combine its
outstanding shares of Common Stock into a smaller number of shares
of Common Stock, or (z) issue by reclassification of shares of its
Common Stock, any shares of capital stock of the Company, then (i)
the number of Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be
adjusted to equal the number of Shares which a record holder of the
same number of Shares for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the
exercise price shall be adjusted to equal (x) the exercise price
multiplied by the number of Shares for which this Warrant is
exercisable immediately prior to such adjustment divided by (y) the
number of Shares for which this Warrant is exercisable immediately
after such adjustment.
2.3. Recapitalization, Consolidation or Merger or Sale
of Assets. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Corporation's assets to another Person or other transaction which
is effected in such a way that holders of Common Stock are entitled
to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the Corporation shall make
appropriate provision (in form and substance reasonably
satisfactory to holders of Warrants representing a majority of the
Shares then outstanding) to insure that each of the holders of the
Warrants shall thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore acquirable and receivable upon the
exercise of such holder's Warrants, such shares of stock,
securities or assets as may be issuable or payable with respect to
or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such
holder's Warrants had such Organic Change not taken place.
In any such case, the Corporation shall make appropriate
provision (in form and substance reasonably satisfactory to the
holders of Warrants representing a majority of the Warrants then
outstanding) with respect to such holders' rights and interest to
insure that the provisions hereof shall thereafter be applicable to
the Warrants (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing entity
is other than the Corporation, an immediate adjustment of the
exercise price to reflect the value for the Warrants reflected by
the terms of such consolidation, merger or sale, if the value so
reflected would cause an increase to the exercise price in effect
immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Corporation) resulting from such
consolidation or merger or the Corporation purchasing such assets
assumes by written instrument (which may be the agreement of
consolidation, merger or sale), in form and substance reasonably
satisfactory to the holders of Warrants representing a majority of
the shares then outstanding, the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to
acquire.
Section 3. Notice to Holders of Warrants.
In case at any time
(i) the Company shall take any action which would
require an adjustment in the current exercise price pursuant
to Section 2.2 or 2.3; or
there shall be any capital reorganization or
reclassification of the Company's Common Stock (other than a
change in par value or from par value to no par value or from
no par value to par value of the Company's Common Stock), or
any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is
required, or any sale, transfer or lease of all or
substantially all of the assets of the Company; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give
written notice to the holders of the Warrants, not less than twenty
(20) days before any record date or other date set for definitive
action, of the date on which such action, reorganization,
reclassification, consolidation, merger, sale, transfer, lease,
dissolution, liquidation or winding-up shall take place, as the
case may be. Such notice shall also set forth such facts as shall
indicate the effect of any such action (to the extent such effect
may be known at the date of such notice) on the current exercise
price and the kind and amount of the shares and other securities
and property deliverable upon exercise of the Warrants. Such
notice shall also specify any date as of which the holders of
record of the Company's Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable
upon any such reorganization, reclassification, consolidation,
merger, sale, transfer, lease, dissolution, liquidation or winding-
up, as the case may be.
Section 4. Adjustments to Number of Shares Issuable
Hereunder. The number of Shares called for on the face of this
Warrant is the number of Shares which can be purchased under this
Warrant on the date of original issuance of this Warrant at an
exercise price of $1.25 per Share (subject to reduction from time
to time pursuant to clause (ii) of Section 1.4 hereof). Without
limiting any other provision of this Warrant, notwithstanding the
number of Shares so called for on the face of this Warrant, the
aggregate number of Shares that can be acquired upon an exercise of
this Warrant in whole or in part shall be adjusted from time to
time pursuant to Section 2 hereof.
Section 5. Specific Performance. The Company agrees and
stipulates that the remedies at law of a holder of this Warrant in
the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by
a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms
hereof or otherwise.
Section 6. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as conferring
upon the holder hereof any rights as a stockholder of the Company
(prior to exercise of all or a portion of this Warrant) or as
imposing any liabilities on such holder to purchase any securities
or any liabilities as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors or
stockholders of the Company or otherwise.
Section 7. Ownership; Transfer. The Company may treat
the person in whose name this Warrant is registered as the owner
and holder of this Warrant for all purposes, and the Company shall
not be affected by any notice to the contrary (except that the
Company shall comply with the provisions of Section 14 of the
Purchase Agreement regarding the issuance of a new Warrant or
Warrants to permitted transferees). This Warrant is transferable
only upon the conditions, and subject to the restrictions,
specified in Section 14 of the Purchase Agreement.
Section 8. Headings. The headings and captions in this
Warrant are for convenience of reference only and shall not define,
limit or otherwise affect any of the terms or provisions hereof.
Section 9. Governing Law. This Warrant shall be
governed by, and construed in accordance with, the laws of the
State of New York (other than any conflict of laws rule which might
result in the application of the laws of any other jurisdiction).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, SA HOLDINGS, INC. has caused this
Warrant to be executed and issued on its behalf by its officer
thereunto duly authorized as of the date first above written.
SA HOLDINGS, INC.
By
Name:
Title:
[Signature page to Common Stock Warrant Certificate]
ANNEX A
FORM OF SUBSCRIPTION
(To be executed only upon exercise or conversion
of the Warrant in whole or in part)
To SA Holdings, Inc.:
The undersigned registered holder of the accompanying
Warrant hereby exercises such Warrant or portion thereof for, and
purchases thereunder, __________(Fn1) Shares (as defined in such
Warrant) and herewith [makes payment therefor by application
pursuant to Section 1.6 of such Warrant of $__________ aggregate
principal amount of Notes (as defined in such Warrant)] [or]
[makes payment therefor of $ _________] [or] [makes payment
therefor by conversion of ___ Shares represented by such Warrant
pursuant to Section 1.7 of such Warrant]. The undersigned
requests that the certificates for such Shares be issued in the
name of, and delivered to, _________________________ whose
address is __________________________.
Dated: _______________________
_____________________________
(Name must conform to name of
holder as specified on the
face of the Warrant)
By __________________________
Name:
Title:
Address of holder:
______________________________
______________________________
______________________________
_______________________________
(Fn1) [Insert the number of Shares as to which this Warrant is
being exercised. In the case of a partial exercise, a new
Warrant or Warrants will be issued and delivered, representing
the unexercised portion of this Warrant, to the holder
surrendering the same.]
