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.
Original Issue Date: September ___, 2006
Original Conversion Price (subject to adjustment herein): $0.___
$___________
6% CONVERTIBLE DEBENTURE
DUE SEPTEMBER ___, 2009
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 September ___,
2009 (the "Debenture(s)").
FOR VALUE RECEIVED, the Company promises to pay to_____________________ or
its registered assigns (the "Holder"), the principal sum of $_______________ on
September ___, 2009 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).
"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 September ___, 2006, 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 in Cash or Kind. 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 September _______, 2007 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 or shares of Common Stock
at the Interest Conversion Rate, or a combination thereof; provided,
however, payment in shares of Common Stock may only occur if (i) the
Company shall have given the Holder notice in accordance with the notice
requirements set forth below and (ii) the Interest Conversion Rate is
equal to or exceeds $.07(1), subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of the
Subscription Agreement.
b) Company's Election to Pay Interest in Kind. Subject to the terms
and conditions herein, the decision whether to pay interest hereunder in
shares of Common Stock or cash shall be at the discretion of the Company.
Not less than 20 Trading Days prior to each Interest Payment Date, the
Company shall provide the Holder with written notice of its election to
pay interest hereunder either in cash or shares of Common Stock (the
Company may indicate in such notice that the election contained in such
notice shall continue for later periods until revised). Within 20 Trading
Days prior to an Interest Payment Date, the Company's election (whether
specific to an Interest Payment Date or continuous) shall be irrevocable
as to such Interest Payment Date. Subject to the aforementioned
conditions, failure to timely provide such written notice shall be deemed
an election by the Company to pay the interest on such Interest Payment
Date in cash.
c) 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. Payment of interest in shares of Common Stock shall otherwise
occur pursuant to Section 4(c)(ii) and only for purposes of the payment of
interest in shares, the Interest Payment Date shall be deemed the
Conversion Date. 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(c)(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"). Except as otherwise
provided herein, if at any time the Company pays interest partially in
cash and partially in shares of Common Stock, then such payment shall be
distributed ratably among the Holders based upon the principal amount of
Debentures held by each Holder.
d) 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.
e) 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.
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 $0.07 (subject to adjustment herein)(the
"Conversion Price").
c) 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.
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 (including, if so
timely elected by the Company, shares of Common Stock representing
the payment of accrued interest) and (B) a bank check in the amount
of accrued and unpaid interest (if the Company is required to pay
accrued interest in cash).
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 Xxxxxx'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.
v. Reservation of Shares Issuable Upon Conversion. The Company
covenants that it 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.
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.
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.
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 Xxxxxx. 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.
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;
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
Xxxxxx 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.
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 (000)000-0000, 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 Xxxxxx 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.
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.
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.
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:
