6% CONVERTIBLE DEBENTURE DUE MARCH 31, 2008
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
Original
Issue Date: March 31, 2005
Original
Conversion Price (subject to adjustment herein): $0.10
$
______________
6%
CONVERTIBLE DEBENTURE
DUE
MARCH 31, 2008
THIS
DEBENTURE is one of a series of duly authorized and issued 6% Convertible
Debentures of Preferred Voice, Inc., a Delaware corporation, having a principal
place of business at 6500 Greenville, Suite 570, Dallas, Texas 75206 (the
“Company”),
designated as its 6% Convertible Debenture, due March 31, 2008 (the
“Debenture(s)”).
FOR VALUE
RECEIVED, the Company promises to pay to__________________. or its registered
assigns (the “Holder”), the
principal sum of $
___________ on March
31, 2008 or such earlier date as the Debentures are required or permitted to be
repaid as provided hereunder (the “Maturity
Date”), and
to pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture in accordance with the provisions hereof.
This Debenture is subject to the following additional provisions:
Section
1. Definitions. For the
purposes hereof, in addition to the terms defined elsewhere in this Debenture:
(a) capitalized terms not otherwise defined herein have the meanings given to
such terms in the Subscription Agreement, and (b) the following terms shall have
the following meanings:
“Alternate
Consideration” shall
have the meaning set forth in Section 5(d).
“Business
Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions in the State
of Texas are authorized or required by law or other government action to
close.
“Closing
Price” means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the closing bid price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg Financial L.P. (based on a Business Day from
9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is
not then listed or quoted on a Trading Market and if prices for the Common Stock
are then reported in the “Pink Sheets” published by the Pink Sheets, LLC (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or
(c) in all other cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by the Holders and
reasonably acceptable to the Company.
“Common
Stock” means
the common stock, no par value per share, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or
changed.
“Conversion
Date” shall
have the meaning set forth in Section 4(a).
“Conversion
Price” shall
have the meaning set forth in Section 4(b).
“Conversion
Shares” means
the shares of Common Stock issuable upon conversion of Debentures.
“Debenture
Register” shall
have the meaning set forth in Section 2(b).
“Demand
Registration Statement” means a
registration statement meeting the requirements set forth in the Subscription
Agreement, covering among other things the resale of the Conversion Shares and
naming the Holder as a “selling stockholder” thereunder.
“Event
of Default” shall
have the meaning set forth in Section 6.
“Exchange
Act” means
the Securities Exchange Act of 1934, as amended.
“Fundamental
Transaction” shall
have the meaning set forth in Section 5(d).
“Interest
Payment Date” shall
have the meaning set forth in Section 2(a).
“Late
Fees” shall
have the meaning set forth in Section 2(c).
2
“New
York Courts” shall
have the meaning set forth in Section 7(d).
“Notice
of Conversion” shall
have the meaning set forth in Section 4(a).
“Original
Issue Date” shall
mean the date of the first issuance of the Debentures regardless of the number
of transfers of any Debenture and regardless of the number of instruments which
may be issued to evidence such Debenture.
“Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Subscription
Agreement” means
the Subscription Agreement, dated as of March 31, 2005, to which the Company and
the original Holder are parties, as amended, modified or supplemented from time
to time in accordance with its terms.
“Securities
Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shareholder
Approval” shall
mean such approvals as may be required by applicable rules and regulations from
the shareholders of the Company.
“Trading
Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.
“Transaction
Documents” shall
mean the Subscription Agreement, the Debentures, the Warrants and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
Section
2. Interest.
| a) |
Payment
of Interest.
The Company shall pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 6%
per annum, payable annually, in arrears, beginning on March 31, 2006 and
on each Conversion Date (as to that principal amount then being converted)
and on the Maturity Date (except that, if any such date is not a Business
Day, then such payment shall be due on the next succeeding Business Day)
(each such date, an “Interest
Payment Date”),
in cash. |
| b) |
Interest
Calculations.
Interest shall be calculated on the basis of a 360-day year and shall
accrue daily commencing on the Original Issue Date until payment in full
of the principal sum, together with all accrued and unpaid interest and
other amounts which may become due hereunder, has been made. Interest
shall cease to accrue with respect to any principal amount converted,
provided that the Company in fact delivers the Conversion Shares within
the time period required by Section 4(d)(ii). Interest hereunder will be
paid to the Person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of Debentures
(the “Debenture
Register”).
|
3
| c) |
Late
Fee.
All overdue accrued and unpaid interest to be paid hereunder shall entail
a late fee at the rate of 15% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (“Late
Fees”)
which will accrue daily, from the date such interest is due hereunder
through and including the date of payment. |
| d) |
Prepayment.
Except as otherwise set forth in this Debenture, the Company may prepay
any portion of the principal amount of this Debenture with ten days
written notice to the Holder. |
Section
3. Registration
of Transfers and Exchanges.
a) Different
Denominations. This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer or
exchange.
b) Investment
Representations. This
Debenture has been issued subject to certain investment representations of the
original Holder set forth in the Subscription Agreement and may be transferred
or exchanged only in compliance with the Subscription Agreement and applicable
federal and state securities laws and regulations.
c) Reliance
on Debenture Register. Prior
to due presentment to the Company for transfer of this Debenture, the Company
and any agent of the Company may treat the Person in whose name this Debenture
is duly registered on the Debenture Register as the owner hereof for the purpose
of receiving payment as herein provided and for all other purposes, whether or
not this Debenture is overdue, and neither the Company nor any such agent shall
be affected by notice to the contrary.
Section
4. Conversion.
a)
Conversion Options.
i. By the
Holder. At any
time after the Original Issue Date until this Debenture is no longer
outstanding, this Debenture shall be convertible into shares of Common Stock at
the option of the Holder, in whole or in part at any time and from time to time
(subject to the limitations on conversion set forth in Section 4(c)
hereof). The Holder shall effect conversions by delivering to the Company the
form of Notice of Conversion attached hereto as Annex
A (a
“Notice
of Conversion”),
specifying therein the principal amount of Debentures to be converted and the
date on which such conversion is to be effected (a “Conversion
Date”). If no
Conversion Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion is provided hereunder. To
effect conversions hereunder, the Holder shall not be required to physically
surrender Debentures to the Company unless the entire principal amount of this
Debenture has been converted plus all accrued and unpaid interest thereon has
been paid. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture in an amount equal to the
applicable conversion. The Holder and the Company shall maintain records showing
the principal amount converted and the date of such conversions. The Company
shall deliver any objection to any Notice of Conversion within 1 Business Day of
receipt of such notice. In the event of any dispute or discrepancy, the records
of the Holder shall be controlling and determinative in the absence of manifest
error. The Holder and any assignee, by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Debenture, the unpaid and unconverted principal
amount of this Debenture may be less than the amount stated on the face
hereof.
4
ii. By the
Company. Upon the
execution of a Fundamental Transaction as described in Section 5(d) of this
Debenture, the Company may force conversion of the Debenture. The Company shall
effect conversion by delivering to the Holder written notice of the Fundamental
Transaction, specifying therein the then outstanding amount of the Debenture to
be converted and the Conversion Date. Upon delivery of the Conversion Shares,
the Holder shall return the Debenture marked “Paid in Full”.
b) Conversion
Price. The
conversion price in effect on any Conversion Date shall be equal to $0.10
(subject
to adjustment herein)(the “Conversion
Price”).
c) ▇▇▇▇▇▇’s
Restriction on Conversion. The
Company shall not effect any conversion of this Debenture, and the Holder shall
not have the right to convert any portion of this Debenture, pursuant to Section
4(a) or otherwise until such time as the Company receives Shareholder Approval
for increase in its authorized shares equal to or above 65,000,000
shares.
| d) |
Mechanics
of Conversion. |
i. Conversion
Shares Issuable Upon Conversion of Principal Amount. The
number of shares of Common Stock issuable upon a conversion hereunder shall be
determined by the quotient obtained by dividing (x) the outstanding principal
amount of this Debenture to be converted by (y) the Conversion
Price.
5
ii. Delivery
of Certificate Upon Conversion. Not
later than five Business Days after any Conversion Date, the Company will
deliver to the Holder (A) a certificate or certificates representing the
Conversion Shares which shall have a restrictive legends and trading
restrictions (unless the Demand Registration Statement has been filed)
representing the number of shares of Common Stock being acquired upon the
conversion of Debentures and (B) a bank check in the amount of accrued and
unpaid interest.
iii. Failure
to Deliver Certificates. If in
the case of any Notice of Conversion such certificate or certificates are not
delivered to or as directed by the applicable Holder by the fifth Business Day
after a Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before the Holder’s receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the principal amount of
Debentures tendered for conversion.
iv. Obligation
Absolute; Partial Liquidated Damages. If the
Company fails for any reason to deliver to the Holder such certificate or
certificates pursuant to Section 4(d)(ii) by the fifth Business Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $2,000 of principal amount being
converted, $10 per Business Day (increasing to $20 per Business Day after 5
Business Days after such damages begin to accrue) for each Business Day after
such fifth Business Day until such certificates are delivered; provided,
however, the
Company shall use best efforts to remedy or overcome such failures as promptly
as possible. The Company’s obligations to issue and deliver the Conversion
Shares upon conversion of this Debenture in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Conversion Shares; provided,
however, such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event a Holder of this Debenture
shall elect to convert any or all of the outstanding principal amount hereof,
the Company may not refuse conversion based on any claim that the Holder or any
one associated or affiliated with the Holder of has been engaged in any
violation of law, agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining conversion of all or part of
this Debenture shall have been sought and obtained and the Company posts a
surety bond for the benefit of the Holder in the amount of 150% of the principal
amount of this Debenture outstanding, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such Holder to the
extent it obtains judgment. In the absence of an injunction precluding the same,
the Company shall issue Conversion Shares or, if applicable, cash, upon a
properly noticed conversion. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 8
herein for the Company’s failure to deliver Conversion Shares within the period
specified herein and such Holder shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights
shall not prohibit the Holders from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
6
v. Reservation
of Shares Issuable Upon Conversion. The
Company covenants that after Shareholder Approval for increase in authorized
shares as described in 4(c) the Company will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Debentures as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than such number of shares of the
Common Stock as shall (subject to any additional requirements of the Company as
to reservation of such shares set forth in the Subscription Agreement) be
issuable (taking into account the adjustments and restrictions of Section 5 upon
the conversion of the outstanding principal amount of the Debentures. The
Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and, if the Demand Registration Statement is then effective under
the Securities Act, registered for public sale in accordance with such Demand
Registration Statement.
vi. Fractional
Shares. Upon a
conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the Closing Price at such time. If the Company elects not, or is
unable, to make such a cash payment, the Holder shall be entitled to receive, in
lieu of the final fraction of a share, one whole share of Common
Stock.
vii. Transfer
Taxes. The
issuance of certificates for shares of the Common Stock on conversion of the
Debentures shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Debentures so converted and the Company shall
not be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
7
Section
5. Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the
Company, at any time while the Debentures are outstanding: (A) shall pay a stock
dividend or otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Debenture), (B)
subdivide outstanding shares of Common Stock into a larger number of shares, (C)
combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (D) issue by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then the
Conversion Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
b) Most
Favored Nation Provision. All other
provisions hereof notwithstanding, if at any time immediately following the date
hereof until the Maturity Date, the Company issues (enters into a binding
contract to issue) any shares (the “Additional Shares”) of the Company’s Common
Stock or Common Stock equivalents including indebtedness convertible into Common
Stock or preferred stock convertible into Common Stock or warrants exercisable
for Common Stock (the “Common Stock Equivalents”), to any third party (a “Third
Party”) for a price per share (the “Third Party Price Per Share”), which in the
case of Common Stock Equivalents shall be the applicable conversion ratio or
exercise price, that is less than the Conversion Price per share designated in
Section 4(b) (as adjusted for stock splits, stock dividends, recapitalizations
and other adjustments to the Company’s Common Stock as a whole) then, promptly
after issuance of the Additional Shares or Common Stock Equivalents, the Company
shall issue to the Holder (without payment of additional consideration by the
Holder) that number of additional shares of the Company’s Common Stock equal to
the difference between (a) the total consideration paid by the Holder pursuant
hereto divided by the Third Party Price Per Share and (b) the number of shares
issued to the Holder pursuant hereto if the Holder has already converted the
Debenture into Common Stock or shall adjust the Conversion Price per share
designated in Section 4(b) to equal the Third Party Price Per Share. This
provision shall not apply to issuances pursuant to currently outstanding
options, rights and/or warrants. The delivery to the Holder of the additional
shares of Common Stock shall be not later than the closing date of the
transaction giving rise to the requirement to issue additional shares of Common
Stock.
8
c) Pro
Rata Distributions. If the
Company, at any time while Debentures are outstanding, shall distribute to all
holders of Common Stock (and not to Holders) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price shall be determined by multiplying such
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Closing Price determined as of
the record date mentioned above, and of which the numerator shall be such
Closing Price on such record date less the then fair market value at such record
date of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
d) Fundamental
Transaction. If, at
any time while this Debenture is outstanding, (A) the Company effects any merger
or consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property
(in any such case, a “Fundamental
Transaction”), then
upon any subsequent conversion of this Debenture, the Holder shall have the
right to receive, for each Conversion Share that would have been issuable upon
such conversion absent such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive upon the
occurrence of such Fundamental Transaction if it had been, immediately prior to
such Fundamental Transaction, the holder of one share of Common Stock (the
“Alternate
Consideration”). For
purposes of any such conversion, the determination of the Conversion Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of this Debenture following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new debenture consistent with the foregoing
provisions and evidencing the Holder’s right to convert such debenture into
Alternate Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(c) and insuring that this Debenture (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
9
e) Calculations. All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares of Common
Stock outstanding at any given time shall not includes shares of Common Stock
owned or held by or for the account of the Company, and the description of any
such shares of Common Stock shall be considered on issue or sale of Common
Stock. For purposes of this Section 5, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
f) Notice
to Holders.
i. Adjustment
to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any of this Section 5, the
Company shall promptly mail to each Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice
to Allow Conversion by ▇▇▇▇▇▇. If (A)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash dividend on or
a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Debentures, and shall cause to be mailed to
the Holders at their last addresses as they shall appear upon the stock
books of the
Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
10
Section
6. Events
of Default.
a) “Event
of Default”,
wherever used herein, means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i. any
default in the payment of (A) the principal amount of any Debenture, or (B)
interest (including Late Fees) on, or liquidated damages in respect of, any
Debenture, in each case free of any claim of subordination, as and when the same
shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise) which default, solely in the case of an
interest payment or other default under clause (B) above, is not cured, within
10
calendar days after notice of such default sent by the Holder or by any other
Holder;
ii. the
Company shall materially fail to observe or perform any other covenant or
agreement contained in this Debenture (other than a breach addressed separately
under this Section 6(a) as an Event of Default) which failure is not cured, if
possible to cure, within 10
business
days after notice of such default sent by the Holder or by any other
Holder;
iii. any
representation or warranty made herein, in any
other Transaction Documents, in any written statement pursuant hereto or
thereto, or in any other report, financial statement or certificate made or
delivered to the Holder or any other holder of Debentures shall be
untrue or incorrect in any material respect as of the date when made or deemed
made;
iv. (i) the
Company shall commence, or there shall be commenced against the Company, a case
under any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Company commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or (ii) there is
commenced against the Company any such bankruptcy, insolvency or other
proceeding which remains undismissed for a period of 60 days; or (iii) the
Company is adjudicated by a court of competent jurisdiction insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (iv) the Company suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or (v) the Company
makes a general assignment for the benefit of creditors; or (vi) the Company
shall fail to pay, or shall state that it is unable to pay, or shall be unable
to pay, its debts generally as they become due; or (vii) the Company shall call
a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (viii) the Company shall by any act or failure to
act expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or (ix) any corporate or other action is taken by the Company for the
purpose of effecting any of the foregoing;
11
v. the
Company shall default in any of its obligations under any mortgage, credit
agreement or other facility, indenture agreement, factoring agreement or other
instrument under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Company in an amount exceeding $150,000,
whether such indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
vi. the
Common Stock shall not be eligible for quotation on or quoted for trading on a
Trading Market and shall not again be eligible for and quoted or listed for
trading thereon within five Business Days;
vii. the
Company shall fail for any reason to deliver certificates to a Holder prior to
the tenth Business Day after a Conversion Date pursuant to and in accordance
with Section 4(d) or the Company shall provide notice to the Holder, including
by way of public announcement, at any time, of its intention not to comply with
requests for conversions of any Debentures in accordance with the terms
hereof.
b) Remedies
Upon Event of Default. If any
Event of Default occurs, the full principal amount of this Debenture, together
with interest and other amounts owing in respect thereof, to the date of
acceleration shall become, at the Holder’s election delivered at any time within
30 days of written notice by the Company or public disclosure by the Company of
the occurrence of such an Event of Default, immediately due and payable in cash.
Commencing 5 days after the occurrence of any Event of Default that results in
the eventual acceleration of this Debenture, the interest rate on this Debenture
shall accrue at the rate of 15% per annum, or such lower maximum amount of
interest permitted to be charged under applicable law. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by ▇▇▇▇▇▇ at any time prior to payment hereunder and the
Holder shall have all rights as a Debenture holder until such time, if any, as
the full payment under this Section shall have been received by it. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
12
Section
7. Miscellaneous.
a) Notices. Any and
all notices or other communications or deliveries to be provided by the Holders
hereunder, including, without limitation, any Notice of Conversion, shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service, addressed to the Company, at the address set forth
above, facsimile number (▇▇▇)▇▇▇-▇▇▇▇,
Attn: Chief Financial Officer or such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile telephone number or address of such ▇▇▇▇▇▇ appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (Dallas, Tx time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (Dallas, Tx
time) on any date and earlier than 11:59 p.m. (Dallas, Tx time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
b) Absolute
Obligation. Except
as expressly provided herein, no provision of this Debenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, interest and liquidated damages (if any) on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct debt obligation of the Company. This
Debenture ranks pari passu with all
other Debentures now or hereafter issued under the terms set forth
herein.
c) Lost
or Mutilated Debenture. If this
Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
destroyed Debenture, a new Debenture for the principal amount of this Debenture
so mutilated, lost, stolen or destroyed but only upon receipt of evidence of
such loss, theft or destruction of such Debenture, and of the ownership hereof,
and indemnity, if requested, all reasonably satisfactory to the
Company.
13
d) Governing
Law. All
questions concerning the construction, validity, enforcement and interpretation
of this Debenture shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in City of New York, Borough of Manhattan (the “ New
York Courts”). Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Debenture and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
e) Waiver. Any
waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
f) Severability. If any
provision of this Debenture is invalid, illegal or unenforceable, the balance of
this Debenture shall remain in effect, and if any provision is inapplicable to
any person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder violates applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum permitted rate of interest. The Company covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
this Debenture as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
indenture, and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impeded the execution
of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.
14
g) Next
Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day.
h) Headings. The
headings contained herein are for convenience only, do not constitute a part of
this Debenture and shall not be deemed to limit or affect any of the provisions
hereof.
*********************
15
IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a
duly authorized officer as of the date first above indicated.
|
PREFERRED
VOICE, INC.
| |
|
By:__________________________________________
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
Chief Executive Officer |
ANNEX
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert principal under the 6% Secured Convertible
Debenture of Preferred Voice, Inc., a Delaware corporation (the “Company”), due
on March __, 2008, into shares of common stock, no par value per share (the
“Common
Stock”), of
the Company according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
The
undersigned agrees to comply with the prospectus delivery requirements under the
applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.
Conversion
calculations:
Date to
Effect Conversion:
Principal
Amount of Debentures to be Converted:
Number of
shares of Common Stock to be issued:
Signature:
Name:
Address:
- 17
-
Schedule
1
CONVERSION
SCHEDULE
The 6%
Secured Convertible Debentures due on March 31, 2008, in the aggregate principal
amount of $
issued
by Preferred Voice, Inc., a Delaware corporation. This Conversion Schedule
reflects conversions made under Section 4 of the above referenced
Debenture.
Dated:
|
Date
of Conversion
(or
for first entry, Original Issue Date) |
Amount
of Conversion |
Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount) |
Company
Attest |
|
|
|||
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