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senior subordinated notes with $2,450,000 of senior subordinated
notes, TEI and QCI replaced $9 million of subordinated notes with
$9 million of subordinated notes, and Sterling issued $181,452 of
1-year promissory notes. Sterling also on that date had issued
840,055 shares of class A common stock and 1,209,945 shares of
class B common stock for an aggregate amount of $200,000 and had
redeemed 550 shares of series S convertible preferred stock
(series S preferred stock) and 1,500 shares of series T
convertible preferred stock (series T preferred stock) at stated
liquidation values totaling $102,500. We believe that a
hypothetical buyer would have concluded on the applicable
valuation date that Sterling was mindful of its contractual
obligations both as to debt and as to equity and that Sterling
would go to great lengths not to breach its contractual
obligations, including its obligation to redeem its series A
preferred stock timely.
The decedent’s shares of series A preferred stock also were
part of Sterling’s senior class of stock. Sterling had issued
3,000 shares of that stock to the decedent and his former wife in
March 1989 in acquisition of TEI. The 3,000 shares were the only
shares of series A preferred stock issued by Sterling, and
holders of those share were generally entitled to more rights
than holders of Sterling’s other stock. As of the applicable
valuation date, Sterling’s other outstanding preferred shares
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