EXHIBIT 10.5
These Warrants have not been registered under the Securities
Act of 1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred/telecom, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 62 600,000 Warrants
PREFERRED/TELECOM, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Bisbro Investments Company, Ltd. (the "Initial Warrant Holder")
or registered assigns is the owner of the number of warrants specified above,
each of which entitles the holder thereof to purchase, at any time on or before
the Expiration Date hereinafter provided, one fully paid and non-assessable
share of Common Stock, $0.001 par value per share, of Preferred/telecom, Inc., a
Delaware corporation (the "Company"), at a purchase price of $.50 per share of
Common Stock payable in lawful money of the United States of America, in cash,
by official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $.50 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased pursuant to the Warrants shall be called "Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
November 12, 1999, or if such date shall in the State of Texas be a holiday or
a day on which banks are
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authorized to close, then 5:00 p.m. Dallas time the next following day which in
the State of Texas is not a holiday or a day on which banks are authorized to
close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferees and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The provisions of this Section 4 will apply to the Warrants, the
Warrant Shares and 600,000 shares of Common Stock of the Company, being issued
to the Initial Warrant Holder this date, which together will be referred to as
the "Securities", and "Holder" shall mean a holder of Securities.
4.2 The Securities will not be registered under the Securities Act or
any state securities law and shall not be transferable unless registered or an
exemption from registration is available. A legend to the foregoing effect will
be placed on any certificate representing the Securities.
4.3 If, at any time within three (3) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
related solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Securities, it shall each
such time give written notice to the Holder of the Securities of the Company's
intention to register such securities, and, upon the written request, given
within fifteen (15) days after receipt of any such notice, of the Holder, to
register any of the Securities, the Company shall cause the Securities so
requested by the Holder, to be registered under the Securities Act, all to the
extent requisite to permit the sale or other disposition by the Holder of the
Securities so registered; provided, however, that the Securities as to which
registration had been requested need not be included in such registration if in
the
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opinion of counsel for the Company and counsel for the Holder the proposed
transfer by the Holder may be effected without registration under the Securities
Act and any certificate evidencing the Securities need not bear any restrictive
legend. In the event that any registration pursuant to this Section 4.3 shall
be, in whole or in part, an underwritten offering of securities of the Company,
then (i) any request pursuant to this Section 4.3 to register Securities may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such registration, and (ii) if the
managing underwriter of such offering determines that the number of shares to be
offered by all selling shareholders must be reduced, then the Company shall have
the right to reduce the number of shares registered on behalf of the Holder,
provided that the number of shares to be registered on behalf of the Holder
shall not be reduced to such an extent that the ratio of the shares which the
Holder is permitted to register to the total number of shares the Holder owns is
less than that ratio for any other selling shareholder.
4.4 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Securities, the Company
shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to such
shares and use its best efforts to cause such registration statement to become
and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least nine months and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Securities covered by such
registration statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with the
requirements of the Securities Act, and such other documents as the Holder may
reasonably request in order to facilitate the public sale or other disposition
of the Securities;
(d) use its best efforts to register or qualify the Securities
covered by such registration statement under such securities or blue sky laws of
such jurisdiction as the Holder shall reasonably request and where registration
or qualification not involve unreasonable expense or delay and provided,
however, that the Company will not have to register or qualify in any state in
which solely because of such registration or qualification it would have to
qualify to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the Holder to
consummate the public sale or other disposition of the Securities in such
jurisdictions; and
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(e) notify the Holder, at any time when a prospectus relating
to the Securities is required to be delivered under the Securities Act within
the appropriate period mentioned in clause (b) of this Section 4.4, 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 a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Holder prepare and
furnish to the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing.
If the Holder exercises its rights to have the Securities registered,
it is understood that the Holder shall furnish to the Company such information
regarding the Securities held by it and the intended method of disposition
thereof as the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
4.5 In the event of any registration of any Securities under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
on an untrue statement or alleged untrue statement of a material fact contained
in any registration statement under which the Securities were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document incident to
registration or qualification of any Securities pursuant to paragraph 4.4(d)
above, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or any violation by the Company of
the Securities Act or state securities or blue sky laws applicable to the
Company and relating to action or inaction required of the Company in connection
with such registration or registration or qualification under such state
securities or blue sky laws; and shall reimburse the Holder and such
underwriter, broker or other person acting on behalf of the Holder and each such
controlling person for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation thereof. The indemnity agreement set forth in this Section 4.5,
insofar as it relates
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to any such omission, alleged omission, untrue statement or alleged untrue
statement made in a preliminary prospectus but eliminated or remedied in the
final prospectus, shall not inure to the benefit of any of the beneficiaries
named in this Section 4.5 whose responsibility it was to send, furnish or give a
copy of the final prospectus to a person asserting a claim for which
indemnification is sought (the "Claimant") unless a copy of the final prospectus
was so sent, furnished or given to the Claimant at or prior to the time such
action is required by the Act.
Before Securities held or purchasable by the Holder shall be included
in any registration pursuant to this Warrant Certificate, the Holder and any
underwriter acting on its behalf shall have agreed to indemnity and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws, rules and
regulations in connection with the offer and sale or any statement or omission
from such registration statement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company in an instrument duly executed by the Holder or such
underwriter specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the proceeding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be usable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be usable upon exercise of
the Warrants shall be duly and validly issued and fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issue thereof.
6. Loss or Mutilation
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Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation or any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares usable upon exercise of the Warrants shall however be shares
of Common Stock of the Company, par value $0.001 per share, as constituted at
the date hereof, except as otherwise provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the
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provisions of this Article 7 shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares or other property thereafter
purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the warrants, but in lieu thereof the Company shall purchase any
such fractional interest calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a change in par value, or a
change f rom par value to no par value, or a change f rom no
par value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good
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will as an entirety, or the liquidation, dissolution or
winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days, prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the _____ day of _______, 1996.
PREFERRED/TELECOM, INC.
By:
Chairman of the Board
Attest:
Secretary
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