<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
ISSUER TENDER OFFER STATEMENT
UNDER SECTION 14(d)(1) or Section 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF
1934
IP VOICE.COM, INC.
(NAME OF ISSUER)
IP VOICE.COM, INC.
(NAME OF PERSON(S) FILING STATEMENT)
PRIVATELY PLACED UNITS CONSISTING OF
NOTES, WARRANTS AND PREFERRED STOCK
(TITLE OF CLASS OF SECURITIES)
NONE
(CUSIP NUMBER OF CLASS OF SECURITIES)
Barbara S. Will
IPVoice.com, Inc.
5050 N. 19th Avenue, Suite 416/417
Phoenix, Arizona 85015
(602) 335-1231
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF
OF THE PERSON(S) FILING STATEMENT)
COPY TO:
I. Douglas Dunipace, Esq.
Jennings, Strouss & Salmon
2 North Central, Suite 1600
Phoenix, Arizona 85004
(602-262-5832)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
---------------------- ----------------------
<S> <C>
$2,804,484 $562
</TABLE>
* Assumes exchange of 46 Units valued at $61,054 per Unit.
** Calculated based on the transaction valuation multiplied by
one-fiftieth of one percent.
<PAGE> 2
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to
which the statement relates:
[ ] third-party tender offer subject to Rules 14d-1.
[x] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting
the results of the tender offer: [ ]
This filing relates to certain offers (the "Offers") to convert units
purchased by investors in a private placement ("Units") into common stock of IP
Voice.com, Inc. (the "Issuer") or to amend the Units. All information in the
Offering Circular dated April 19, 2000 attached hereto as Exhibit 12(a)-1
("Offering Circular") relating to the Offers is incorporated herein by reference
in answer to some or all of the items below.
ITEM 1. SUMMARY TERM SHEET.
See Offering Circular.
ITEM 2. SUBJECT COMPANY INFORMATION.
See Offering Circular.
ITEM 3. IDENTIFY AND BACKGROUNDS OF FILING PERSON.
(a) This statement is being filed by the Issuer subject company. The
names and mailing addresses of the directors and executive officers of the
Issuer, who are the persons specified in Instruction C to Schedule TO, are set
forth below:
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
---- ------- ------
<S> <C> <C>
James K. Howson 5050 N. 19th Avenue Chairman, Chief Executive Officer
Suite 416/417
Phoenix, Arizona 85015
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
---- ------- ------
<S> <C> <C>
Barbara S. Will 5050 N. 19th Avenue Director, President and Chief
Suite 416/417 Operating Officer
Phoenix, Arizona 85015
Anthony Welch 5050 N. 19th Avenue Director, Senior Vice President of
Suite 416/417 Research and Development
Phoenix, Arizona 85015
Russell Watson 5050 N. 19th Avenue Director
Suite 416/417
Phoenix, Arizona 85015
Julie J. Bahavar 5050 N. 19th Avenue Controller
Suite 416/417
Phoenix, Arizona 85015
Harry R. Bowman 5050 N. 19th Avenue Executive Vice President
Suite 416/417
Phoenix, Arizona 85015
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
See Offering Circular.
No securities are to be purchased pursuant to the Offers from any
officer, director or affiliate of the Issuer.
ITEM 5. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Except as disclosed in the Issuer's Form 10-KSB for the year ended
December 31, 1999, neither the Issuer nor, to the best of the Issuer's
knowledge, any of its directors or executive officers is party to any agreement,
arrangement or understanding, whether or not legally enforceable, with any other
person with respect to any securities of the Issuer.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) With respect to the primary purpose of the Offers, see the Offering
Circular.
(b) The Units or portions of Units acquired in the Offers will be
cancelled.
(c) Any current plans, proposals, or negotiations of the Issuer, and,
to the extent known to the Issuer, its executive officers and directors, with
respect to the following are described below:
3
<PAGE> 4
<TABLE>
<CAPTION>
ITEM PLANS, PROPOSALS, NEGOTIATIONS
---- ------------------------------
<S> <C>
(1) Any extraordinary transaction, From time to time, the Issuer
such as a merger, discusses with various persons
reorganization or liquidation, the possibility of an
involving the subject company acquisition of or by the
or any of its subsidiaries. Issuer. However, no such
transaction has been agreed to.
(2) Any purchase, sale or transfer None.
of a material amount of assets
of the subject company or any
of its subsidiaries.
(3) Any material change in the The Issuer is generally in
present dividend rate or discussions with various third
policy, or indebtedness or parties regarding possible
capitalization of the subject financing transactions that may
company. involve the issuance of debt,
common stock, convertible
preferred stock, or any
combination of the above. The
Issuer is currently in
negotiations with a capital
formation group regarding a
possible investment in the
Issuer in exchange for
convertible preferred stock and
warrants. Definitive documents
have not been executed and
there is no assurance that any
such investment will be made.
(4) Any change in the present board Mr. Howson is the acting
of directors or management of Chairman and Chief Executive
the subject company, including, Officer of the Issuer. The
but not limited to, any plans Issuer is seeking a permanent
or proposals to change the replacement for these
number or the term of directors positions.
or to fill any existing
vacancies on the board or to
change any material term of the
employment contract of any
executive officer.
(5) Any other material change in None.
the subject company's corporate
structure or business.
(6) Any class of equity securities None.
of the subject company to be
delisted from a national
securities exchange or cease to
be authorized to be quoted in
an automated quotations system
operated by a national
securities association.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
ITEM PLANS, PROPOSALS, NEGOTIATIONS
---- ------------------------------
<S> <C>
(7) Any class of equity securities None.
of the subject company becoming
eligible for termination of
registration under section
12(g)(4) of the Act (15 U.S.C.
78l).
(8) The suspension of the subject None.
company's obligation to file
reports under Section 15(d) of
the Act (15 U.S.C. 78o).
(9) The acquisition by any person The Issuer is generally in
of additional securities of the discussions with various third
subject company, or the parties regarding possible
disposition of securities of financing transactions that may
the subject company. involve the issuance of debt,
common stock, convertible
preferred stock, or any
combination of the above. The
Issuer is currently in
negotiations with a capital
formation group regarding a
possible investment in the
Issuer in exchange for
convertible preferred stock and
warrants. Definitive documents
have not been executed and
there is no assurance that any
such investment will be made.
(10) Any changes in the subject None.
company's charter, bylaws or
other governing instruments or
other actions that could impede
the acquisition of control of
the subject company.
</TABLE>
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
See Offering Circular.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) None of the Issuer, any executive officer or director of the
Issuer, or any associate or majority owned subsidiary of any such person
beneficially owns any of the Units.
(b) Neither the Issuer nor, to the best of the Issuer's knowledge, any
of its directors or executive officers, or any of the executive officers or
directors of any of its subsidiaries, or any associate or majority-owned
subsidiary of the Issuer, has engaged in any transaction involving the Units
during the period of 60 business days prior to the date hereof.
5
<PAGE> 6
ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.
(a) No persons or classes of persons have been directly or indirectly
employed, retained, or are to be compensated to make solicitations or
recommendations in connection with the transaction.
6
<PAGE> 7
ITEM 10. FINANCIAL STATEMENTS.
(a) The Consolidated Financial Statements included in the Company's
Form 10-KSB for the fiscal year ended December 31, 1999 are hereby incorporated
herein by reference. The remaining financial information required is contained
in the Offering Circular.
(b) See Offering Circular for the proforma financial information
required.
ITEM 11. ADDITIONAL INFORMATION.
(a) The following is provided to the extent material to a security
holder's decision whether to accept the Offers:
<TABLE>
<CAPTION>
ITEM RESPONSE
---- --------
<S> <C>
(1) Any present or proposed Such material agreements,
material agreement, arrangements, understandings
arrangement, understanding or and relationships are disclosed
relationship between the in the Issuer's Form 10-KSB for
offeror and any of its the year ended December 31,
executive officers, directors, 1999.
controlling persons or
subsidiaries.
(2) To the extent known by the None.
offeror after reasonable
investigation, the applicable
regulatory requirements which
must be complied with or
approvals which must be
obtained in connection with the
tender offer.
(3) The applicability of any None.
anti-trust laws.
(4) The applicability of margin See Offering Circular.
requirements under section 7 of
the Act (15 U.S.C. 78g) and the
applicable regulations.
(5) Any material pending legal None.
proceedings relating to the
tender offer, including the
name and location of the court
or agency in which the
proceedings are pending, the
date instituted, the principal
parties, and a brief summary of
the proceedings and the relief
sought.
</TABLE>
(b) Additional information with respect to the exchange offer and
related matters is included in the Offering Circular.
7
<PAGE> 8
ITEM 12. EXHIBITS.
12(a)-1 Offering Circular, dated April 20, 2000.
12(a)-2 Form of Amended Note.
12(a)-3 Form of Agency and Security Agreement.
12(a)-4 Form of Consent. (See Exhibit 12(a)-1)
12(a)-5 Form of Election to Convert Units into Common Stock. (See
Exhibit 12(a)-1)
12(a)-6 Form of Election to Amend Notes. (See Exhibit 12(a)-1)
12(a)-7 Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9. (See Exhibit 12(a)-1)
12(a)-8 Form of cover letter to unitholders.
(b) Not applicable.
(d) Not applicable.
(g) Not applicable.
(h) Not applicable.
8
<PAGE> 9
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: April 20, 2000.
IP VOICE.COM, INC., a Nevada corporation
By /s/ Barbara S. Will
______________________________________
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
12(a)-1 Offering Circular, dated April 20, 2000.
12(a)-2 Form of Amended Note.
12(a)-3 Form of Agency and Security Agreement.
12(a)-4 Form of Consent. (See Exhibit 12(a)-1)
12(a)-5 Form of Election to Convert Units into Common Stock. (See
Exhibit 12(a)-1)
12(a)-6 Form of Election to Amend Notes. (See Exhibit 12(a)-1)
12(a)-7 Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9. (See Exhibit 12(a)-1)
12(a)-8 Form of cover letter to unitholders.
(b) Not applicable.
(d) Not applicable.
(g) Not applicable.
(h) Not applicable.
</TABLE>
10
<PAGE> 1
EXHIBIT 12(A)-1
IPVOICE.COM, INC.
OFFERS WITH RESPECT TO UNITS SOLD
IN OUR FEBRUARY 1999 PRIVATE PLACEMENT
We are offering the following alternatives with respect to the units
you purchased in our private placement that began in February 1999. Each unit
consists of $24,900 in principal amount of notes, warrants to purchase 18,750
shares of our common stock, and 25 shares of our senior convertible preferred
stock.
- You may elect to convert all or any portion of the units that
you hold into shares of our common stock (see page 5 for
details regarding when the common stock becomes freely
tradable). We will convert each whole unit into 17,832 shares
of common stock and each partial unit into a pro rata number
of shares. If you have exercised any of the warrants that are
part of a unit, you can convert your notes, preferred stock
and remaining warrants into the number of shares calculated as
described under "The Offers - Offer to Convert Units into
Common Stock."
- If you do not want to convert your units at this time, you may
also choose to allow us to amend all or any part of your
existing notes to secure them with certain of our assets and
to make them convertible at your option into our common stock
at any time at a fixed rate, but only if you also agree to
give up your preferred stock relating to the amended notes and
accept future interest payments on the amended notes in either
cash or, at our option, shares of our common stock that may be
restricted as well as free trading. You would retain your
warrants.
- You also have the option to retain your units and not accept
either of our offers.
WHETHER OR NOT YOU ACCEPT ANY OF OUR OFFERS, WE ARE ASKING THAT YOU
CONSENT TO OUR MAKING THESE OFFERS BY EXECUTING THE ATTACHED CONSENT AND
RETURNING IT TO US.
THIS OFFER WILL TERMINATE ON MAY 19, 2000.
The choices we are offering involve risk. You should carefully review
the risk factors beginning on page 9 and the comparison of your existing
securities with the new or amended securities offered beginning on page 13
before you decide to accept any of these offers.
The date of this document is April 20, 2000.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE COMPANY..................................................................................................... 1
YOUR EXISTING SECURITIES........................................................................................ 1
SUMMARY......................................................................................................... 2
THE OFFERS...................................................................................................... 3
Offer to Convert Units into Common Stock............................................................... 3
Offer to Amend Your Notes to Make All or Any Portion of Them Convertible and Secured and to
Allow Us to Make Future Interest Payments in Restricted Common Stock.......................... 6
THE CONSENT..................................................................................................... 8
RISK FACTORS.................................................................................................... 9
Risks Relating to Conversion of Your Units into Common Stock........................................... 9
Risks Relating to Your Decision to Amend Your Notes.................................................... 11
BACKGROUND, PURPOSE AND EFFECTS OF THE OFFERS................................................................... 13
HOW TO ACCEPT THE OFFERS........................................................................................ 17
Expiration Time, Extensions, Termination and Amendments................................................ 17
How You Can Elect to Accept Any of Our Offers.......................................................... 17
Withdrawal Rights...................................................................................... 18
Acceptance of Elections................................................................................ 19
Payment of Expenses.................................................................................... 19
CAPITALIZATION.................................................................................................. 20
CERTAIN PRO FORMA FINANCIAL INFORMATION......................................................................... 20
DESCRIPTION OF CAPITAL STOCK.................................................................................... 21
AVAILABLE INFORMATION........................................................................................... 22
INCORPORATION BY REFERENCE...................................................................................... 22
</TABLE>
Exhibit A Form of Amended Promissory Note
Exhibit B Form of Agency and Security Agreement
i
<PAGE> 3
THE COMPANY
IPVoice.com, Inc. is incorporated in the state of Nevada and is traded
on the OTC Bulletin Board under the symbol IPVC. Since inception, we have been
engaged in the business of developing our Multicom Business Management Software
for use in Internet telephony applications (telephone, fax, data, images and
video over the Internet). Multicom is the business management system behind our
TrueConnect Gateway (a telephone switch) product for which patent and trademark
protection is being sought. This product provides a mechanism for bridging the
public telephone system with the Internet. IPVoice was founded on the premise
that traditional telephone systems wasted precious resources. Our Gateways allow
a packet of information (voice, video, e-mail, data, images etc.) to cross
multiple networks on its way to its final destination. Thus, instead of having
one dedicated circuit for a call, the entire network is shared. We continue to
research the availability of additional innovative products in the Internet
telephony and related industries for development, distribution or acquisition.
Our principal executive offices are located at 5050 N. 19th Avenue, Suite 416 /
417, Phoenix, Arizona 85015, Telephone No. 602-335-1231.
Included is a copy of our Form 10-KSB, which contains more detailed
disclosure about our operations, current status and plans, management, financial
condition, and the risks of investing in our securities.
YOUR EXISTING SECURITIES
From February 1999 through June 1999, we offered and issued 46 units in
a private placement. Each unit was sold for $25,000, and consists of the
following:
- A two year note in the principal amount of $24,900 with
interest payable quarterly in cash at 9% per annum, or at our
option in freely-trading stock (if available) calculated at
18% per annum based on the average closing price of the stock
for 7 trading days prior to the payment date. We may, at our
option, extend the notes for an additional one year term with
equal monthly amortization at the rate of 110% of principal
plus accrued interest at the note rate or for a total of two
additional years with equal monthly amortization at the rate
of 120% of principal plus accrued interest at the note rate.
If we want to extend the term of the notes, we will give you
notice of the extension at least 60 days prior to the original
maturity date of the notes. We can prepay the notes at any
time without penalty.
- A warrant for 18,750 shares of our common stock exercisable at
any time during the term of the note, including any extensions
thereof, at $.9875 per share. We agreed to provide piggyback
registration rights to holders of the warrants in the event we
file a registration statement before the notes are repaid.
- Twenty-five senior convertible preferred shares, without
dividends, with a conversion feature providing that in the
event of a default in payment on the notes that is not cured
within a reasonable time, all outstanding senior convertible
preferred shares will be converted into common stock in an
amount of shares which shall, immediately after issuance,
equal 51% of our issued and outstanding
<PAGE> 4
shares, warrants and options. If fewer than all of the
originally issued preferred shares are outstanding at the time
of conversion, the percentage of shares of common stock
issuable upon conversion is reduced proportionately. On
conversion, we will also promptly call a special stockholders
meeting in order to permit the holders of the common stock
into which the preferred shares were converted to elect a
majority of the board, if all of the originally issued
preferred shares are converted, or such lesser number of
additional directors as reflects such holders' percentage of
ownership of common stock, if fewer than all of the originally
issued preferred shares are converted. All preferred shares
are redeemable at no cost to us when the notes are fully paid.
- We also agreed that: From the time of the first closing to the
time the notes are repaid in full, the new investor group
will, through International Investment Partners ("IIP"),
propose candidates for two board positions which are
reasonably acceptable to the present board and which the
present board will then appoint. The three members of the
present control group will give IIP an undertaking that they
will, so long as the notes are not fully paid, remain the
holders of 60% of the voting equity securities and that they
will vote their shares for these two directors or their agreed
upon successors.
SUMMARY
The Offer
- You may convert all or part of your units
into our common stock on the basis of 17,832
shares of stock per unit. If you have
exercised any part of your warrants, we will
convert the remaining portion of your units
into a number of shares calculated as
described under "The Offers - Offer to
Convert Units into Common Stock."
-or-
- You can elect to relinquish your preferred
stock and allow us to amend all or any part
of your notes to:
- Secure them with our assets;
- Make them convertible into our common
stock on the basis of $7.00 principal
amount per share; and
- Allow us to pay interest with restricted
as well as free trading common stock.
-or-
- You can accept neither offer and retain your
units.
See "The Offers - Offer to Amend Your Notes to
Make All or Any Portion of Them Convertible and
Secured and to Allow Us to Make Future Interest
Payments in Restricted Common Stock."
2
<PAGE> 5
Purpose of Offers Delays in development of our technologies have
increased our need for funds. We hope to reduce
our cash outlays required to service your notes.
In addition, the existence of the preferred stock
is proving to be seriously detrimental to our
efforts to acquire additional financing. See
"Background, Purpose and Effects of the Offers."
Expiration Time 5:00 p.m. Phoenix, Arizona time, on May 19, 2000,
unless we extend the offers.
How to Accept the Offers See "How to Accept the Offers - How You Can Elect
to Accept Any of Our Offers" beginning on page 16
for the procedure for you to accept either of our
offers.
Withdrawal Rights You can withdraw your acceptance of either offer
prior to the expiration time. See "How to Accept
the Offers - Withdrawal Rights" for additional
information about your withdrawal rights.
Termination and Amendment We can terminate or amend the offers at any time.
Consent Whether or not you accept any of our offers, we
are asking that you execute the attached Consent
and return it to us. Although we do not require
your consent to make these offers, consent by a
majority of unit holders will allow our Arizona
unit holders to participate in the offer on the
basis of an exemption from the registration
requirements of the Arizona securities laws that
requires such consent. If we do not receive such
consent, our Arizona unit holders can still
participate in the offers, but only if they agree
to hold their new securities for investment. See
"The Offers - Offer to Convert Units into Common
Stock - Resale Restrictions."
THE OFFERS
OFFER TO CONVERT UNITS INTO COMMON STOCK
You can elect to convert your units into our common stock. We will
convert each full unit into 17,832 shares of stock. You can also choose to
convert only a portion of your units. If you want to convert only a part of your
units and you have not exercised any of your warrants, we will give you the
number of shares (rounded up to the nearest whole share) of our common stock
that bears the same relation to the number of shares you would receive if you
converted all of your units, as the principal amount of the notes you choose to
convert bears to the total principal amount of the notes you hold. For example,
if you have one unit and have not exercised any of your warrants, and you want
to convert half of your unit under this option, you could convert your half unit
into 8,916 shares. We would issue you a new note for the remaining principal
balance of $12,450 and you would retain half of your preferred stock and
warrants.
3
<PAGE> 6
If you have exercised any of your warrants, we will value your units
including your remaining warrants, under the formula described below and
determine from such calculation the total value of your units. We will determine
the number of shares into which you can convert your units by dividing that
value by the average market price determined as described below ($3.4240).
IF YOU WANT TO CONVERT A PORTION OF YOUR UNITS, YOU MUST SPECIFY A
FRACTION (OR PERCENTAGE) OF YOUR WHOLE UNITS TO BE CONVERTED (FOR EXAMPLE, HALF
OR 75%). YOU CANNOT DIVIDE YOUR UNITS BY ELECTING TO CONVERT THE NOTES AND
RETAIN THE WARRANTS, OR SIMILAR DIVISIONS.
How we determined the number of shares into which you can convert your
units. We determined the number of shares that we would exchange for a unit by
first determining the value for each whole unit ($61,054) and then dividing the
unit value by an average daily market price of our common stock ($3.4240) over a
six week period determined as described below.
We determined the value of each unit as follows:
<TABLE>
<S> <C>
Principal amount of notes........................................................................ $24,900
Value of preferred stock......................................................................... 100
Warrants - valued by taking the number of shares of common stock into which a
warrant can be exercised (18,750), times $1.9229, which amount was
calculated by taking the average daily market price of the common stock
($3.4240 - determined over a six week period as described below), times
a discount factor of .85 because the common stock received upon
exercise of the warrants will be restricted, minus the exercise price
of the warrants per share of common stock ($.9875)...................................... 36,054
Total value of a unit............................................................................ $61,054
=======
</TABLE>
If you have exercised all or any portion of your warrants, we would
calculate the remaining value of your units by:
- Multiplying the number of shares into which your remaining
warrants, if any, can be exercised by $1.9229 (see calculation
above);
- Adding that amount to $25,000, the value of your notes and
preferred stock; and
- Dividing the resulting unit value by the calculated average
daily market price of $3.4240.
We calculated the average value of our common stock by averaging the
daily market price of our common stock over the six week period from February
16, 2000 to March 29, 2000. The daily market price is the average of the high
and low prices for each day on the OTC bulletin board. On April 20, 2000, the
closing price of our common stock on the OTC bulletin board was $2.03125 per
share.
4
<PAGE> 7
We determined the value of a unit and the number of shares of common
stock into which you can convert your units without retaining any independent
financial advisor.
Resale limitations. We are offering to convert your units into common
stock pursuant to an exemption from registration under the Securities Act of
1933. Because we are not registering the common stock under the Securities Act
of 1933, you will have to sell your stock under Rule 144 of the Securities Act
of 1933. However, you will be able to count the time you or any other person who
is not one of our affiliates held your units to satisfy the holding period of
Rule 144 for the stock you receive on conversion.
Therefore, subject to any applicable restrictions under state
securities laws, after one year from the date your units were first purchased
from us or one of our affiliates, you will be able to sell the shares of stock
you receive on conversion of your units if you also satisfy the volume
limitations and the other conditions of the rule. Subject to any applicable
restrictions under state securities laws, after two years from the date the
units were purchased from us or one of our affiliates, you will be able to
freely resell those shares if you are not one of our affiliates and have not
been one of our affiliates for 90 days at that time.
Special rules may apply to unit holders who reside in Arizona. If we
obtain the consent of a majority of unit holders as requested herein, the resale
limitations for Arizona unit holders will be the same as described above. If
not, unit holders who reside in Arizona and who desire to participate in either
of the offers will be required to certify that they are accredited investors, as
defined in Rule 501 of Regulation D under the Securities Act of 1933, and to
agree that they are acquiring the common stock on conversion of their units for
investment and not for public distribution. Therefore, if Arizona residents
agree to convert their units, they will not be able to immediately freely resell
the common stock so acquired and may be required to hold the common stock for an
additional period of time consistent with such investment intent.
United States Federal income tax consequences if you convert your
units. The conversion of your units into our common stock will be treated as a
taxable exchange of the notes for a portion of the common stock and a nontaxable
exchange of the warrants and the preferred stock for the balance of the common
stock.
We have determined the value of each note to be $24,900. This is the
same amount as was allocated to the note upon your purchase of a unit and should
constitute your tax basis in each note assuming that you have held it since its
purchase. Assuming that the Internal Revenue Service agrees with this valuation
and the determination of your tax basis in the note, then gain or loss, if any,
will be recognized on the exchange of the note for common stock based upon the
difference between the fair market value of the stock received in the exchange
and your tax basis in the note. Your tax basis in the stock received in exchange
for the note will be equal to the stock's fair market value at the time of the
exchange.
You will recognize no taxable gain or loss on the exchange of the
warrants and the preferred stock for the common stock not allocated as being
exchanged for the note. Your tax basis in such stock will be equal to your tax
bases in the warrants and the preferred stock surrendered in the exchange.
5
<PAGE> 8
To the extent any portion of the common stock received by you in the
exchange is allocable to accrued but unpaid interest on the note, such amount
shall be taxed as ordinary income to you.
Should you convert only a portion of a unit into common stock, then
gain or loss on the portion converted will be determined in the same manner as
described above with respect to the conversion of an entire unit.
THIS DISCUSSION IS A SUMMARY ONLY. THE TAX CONSEQUENCES OF THE OFFERS
MAY VARY DEPENDING ON YOUR PARTICULAR SITUATION AND CIRCUMSTANCES. YOU SHOULD
CONSULT WITH YOUR TAX ADVISORS REGARDING THE CONSEQUENCES OF ACCEPTING EITHER OF
THE OFFERS TO YOU.
OFFER TO AMEND YOUR NOTES TO MAKE ALL OR ANY PORTION OF THEM CONVERTIBLE AND
SECURED AND TO ALLOW US TO MAKE FUTURE INTEREST PAYMENTS IN RESTRICTED COMMON
STOCK
If you decide not to convert all or any part of your units into our
common stock, you can still elect to allow us to amend all or any part of the
notes you retain to make them secured and convertible, and to allow us to pay
interest with restricted as well as free trading common stock if we so choose.
The form of amended note is attached hereto as Exhibit A. Under the existing
terms of the notes, we may already make interest payments in freely trading
stock. Whatever you decide will also bind future holders of your notes, which
may affect the market value of your notes.
You will have to give up your preferred stock. If you agree to this
option, we will amend all or any part of your existing notes to secure them and
make them convertible at your option into common stock. You must give up the
preferred stock you hold that relates to the amended notes. See "Risk Factors -
Risks Relating to Your Decision to Amend Your Notes" for a description of what
giving up your preferred stock will mean to you.
You will retain all of your warrants. If you agree to this option as to
all or any part of your notes, you will retain all of your warrants and they
will continue to be exercisable on the same terms as before.
How we would secure your notes. If you agree to this option, we will
secure your notes with substantially all of our assets now existing or that we
acquire in the future, up to 1.25 times the unpaid principal amount of the
outstanding notes to be secured. We can release our assets from time to time to
the extent the assets that continue to secure the notes are valued in excess of
this amount based upon the higher of (i) the book value of the remaining assets
or (ii) the fair market value appraisal of the remaining assets by an
independent appraiser. We can also release collateral securing the notes if we
determine in good faith that the items to be released are no longer used or
useful in the ordinary course of our business and are being sold or disposed of
in the ordinary course. Inventory will automatically be released as we sell it
in the ordinary course of our business. Because of how burdensome it would be if
each noteholder had to agree to each action relating to this security interest
and sign each financing statement, release or other ordinary course document
necessary to create and perfect the security interest in our assets, IIP has
agreed to act as agent for the noteholders who elect to have their notes
secured. As of December 31, 1999, our assets that secure your notes were valued
at $493,241 on our balance
6
<PAGE> 9
sheet. See the Form 10-KSB for a description of certain transactions effected
between IIP and us and of our stock that IIP holds.
Agency and Security Agreement. Each electing noteholder will have to
execute a copy of an Agency and Security Agreement in substantially the form
attached hereto as Exhibit B. This document will give IIP the power to act for
all secured noteholders in taking actions to perfect and enforce the security
interests granted. IIP will receive reimbursement for expenses and reasonable
compensation in such capacity.
How your new notes will be convertible at your option into common
stock. If you agree to this option, your new notes will be convertible into our
common stock at any time in whole or in part. On conversion, we will give you
one share of our common stock for each $7.00 principal amount of the notes that
you convert. We will not issue fractional shares on the conversion and will
round down the number of shares into which the notes are convertible to the
nearest whole share. For example, if you have purchased one unit, you currently
have a note with a principal amount of $24,900. If you accepted an amended note
with a principal amount of $24,900, you could convert it at any time into up to
3,557 shares of our common stock ($24,900 divided by $7.00).
How we will determine the number of shares of common stock we will give
you as interest on the notes. If we decide to make a particular interest payment
on the notes with restricted common stock or free trading common stock, we will
calculate the interest payable at 18% per annum and we would value the common
stock by averaging the high and low market prices for one share of our common
stock on the principal trading market for the common stock for the 7 trading
days immediately preceding the date the interest payment is due. We will pay you
only in whole shares of our common stock and will round any fraction up to the
next whole share. For example, if we owed you $1,000 of interest on a particular
interest payment date based on the 9% regular note rate, and the average trading
price calculated as described above is $4.00, we could choose to give you either
the $1,000 in cash or 500 shares of our restricted or free trading common stock
instead of cash.
Resale limitations. Your amended notes will have the same holding
period as your existing notes for purposes of Rule 144. Also, if you convert
your amended notes, you can count the time you held your existing notes to
satisfy the holding period of Rule 144 for the common stock you receive on
conversion. However, if we do not obtain consent to this offer of a majority of
the unit holders as we are requesting, Arizona residents who accept amended
notes will be required to hold the amended notes and any common stock into which
they are converted for a period consistent with investment intent.
United States Federal income tax consequences if you accept our offer
to amend your notes. The amendment of your note and relinquishment of related
preferred stock will be a taxable exchange for federal income tax purposes.
Therefore, you will recognize taxable gain or loss based upon the difference, if
any, between the fair market value of the convertible note received by you and
your tax bases in the note and preferred stock surrendered.
To the extent any portion of a convertible note received by you is
allocable to accrued but unpaid interest, then such amount will be taxed to you
as ordinary income.
7
<PAGE> 10
We have determined the value of each note that you now have to be
$24,900 and the value of the preferred stock associated with a unit to be $100.
These are the same amounts as were allocated to the note on your purchase of a
unit and should constitute your bases in each note and the preferred stock
assuming you have held them since their purchase. Assuming that the Internal
Revenue Service agrees with these valuations and the determination of your bases
in the note and the preferred stock, then gain or loss, if any, will be
recognized on the exchange of the note and the preferred stock for a secured
convertible note based upon the difference between the fair market value of the
secured convertible note received in the exchange and your tax bases in the note
and the preferred stock. Your tax basis in the secured convertible note received
in exchange will be equal to its fair market value at the time of the exchange.
Should you exchange only a portion of a note and the preferred stock
for a secured convertible note, then gain or loss on the portion exchanged will
be determined in the same manner as described above with respect to the exchange
of an entire note and all of the preferred stock.
THIS DISCUSSION IS A SUMMARY ONLY. THE TAX CONSEQUENCES OF THE OFFERS
MAY VARY DEPENDING ON YOUR PARTICULAR SITUATION AND CIRCUMSTANCES. YOU SHOULD
CONSULT WITH YOUR TAX ADVISORS REGARDING THE CONSEQUENCES OF ACCEPTING EITHER OF
THE OFFERS TO YOU.
THE CONSENT
Whether or not you accept any of our offers, we are asking that you
execute the attached Consent and return it to us. Although we do not require
your consent to make these offers, consent by a majority of unit holders will
allow our Arizona unit holders to participate in the offer on the basis of an
exemption from the registration requirements of the Arizona securities laws that
requires such consent. If we do not receive such consent and our Arizona unit
holders desire to participate in either of the offers, they will be required to
certify that they are accredited investors, as defined in Rule 501 of Regulation
D under the Securities Act of 1933, and to agree that they are acquiring the new
securities for investment and not for distribution to the public. This will
impact their ability to resell the securities.
8
<PAGE> 11
RISK FACTORS
RISKS RELATING TO CONVERSION OF YOUR UNITS INTO COMMON STOCK
The value of your units may be greater than the value of the common stock you
receive.
We have determined the conversion price for the units without retaining
any independent financial advisor to advise us or to opine that the terms of the
conversion are fair to you. Both the 15% discount factor that we are using to
discount the warrants and the time period over which we calculated the market
price for the common stock are arbitrary. Since March 29, 2000, the last day of
our six week calculation period, our stock price has declined. You could be
better off financially if you retain your units and exercise your warrants.
If you convert your units into common stock, you will be exchanging a senior
security for a junior security.
The notes that you now hold are senior in right of payment to our
common stock. This means that if we are in financial difficulties and declare
bankruptcy, all our debt, including the notes, and any liquidation preference on
our preferred stock would be paid in full before the common stockholders receive
any distribution at all. There is no restriction on how much debt we can incur
in the future and we can also issue additional preferred stock, so there may be
no assets to distribute to our common shareholders if we declare bankruptcy in
the future. In addition, the opinion of our auditors on our financial statements
for the year ended December 31, 1999 expressed substantial doubt about our
ability to continue as a going concern. See the Independent Auditor's Report in
our Form 10-KSB on page F-2 and note (4) to the Notes to Consolidated Financial
Statements on page F-9 of the Form 10-KSB.
If you convert all your units into common stock, you will give up the right to
participate in any conversion of the preferred stock relating to the notes into
common stock if we default on payment of any of the original notes that remain
outstanding, and your common stock could be significantly diluted.
If you convert all your units into our common stock, but other holders
of units retain any part of their existing units, the preferred stock that
remains outstanding as part of the existing units will automatically convert
into common stock if we default on payment of the existing notes and the default
is not cured within a reasonable time. The conversion rights of the preferred
stock are proportionate to the number of preferred shares outstanding from time
to time. For example, if all of the original preferred shares remain
outstanding, the preferred would convert into 51% of our common stock on a fully
diluted basis; if half of the original preferred shares are outstanding, the
preferred converts into 25.5% of our common stock on a fully diluted basis, and
so on. We have the right to prepay any notes that are not converted or amended
pursuant to this offer and thus cancel any related preferred stock, but we may
not be able to do so. If significant amounts of common stock are issued as a
result of conversion of the preferred, our existing holders of common stock
could be seriously diluted.
9
<PAGE> 12
If you convert your units into our common stock, we could issue future common
stock or preferred stock that could dilute your stock.
We have issued a number of shares of our common stock over the past
year and we are likely to issue or attempt to issue more common stock in the
future so that we can obtain operating funds and conserve our cash. Our
issuances of additional common stock can dilute your interest in the company and
the value of your common stock. As of December 31, 1999, we had 16,422,758
shares of our common stock outstanding. If all holders of units elect to convert
their units into our common stock, we would have an additional 820,272 shares of
our common stock outstanding. We are authorized to issue up to 50 million shares
of our common stock. Issuances of preferred stock could also decrease the value
of our common stock. We are authorized to issue up to 10 million shares of our
preferred stock in series from time to time, and to establish the preferences,
voting rights and other terms of the preferred.
The sale of the shares of common stock you receive if you convert your units
will be restricted.
You may not be able to immediately resell the shares you receive in the
offer. By the time you are able to sell the shares you receive, the price of our
common stock could have dropped significantly. Subject to any restrictions under
applicable state securities laws, including the restrictions we describe on page
5 for Arizona unit holders if we do not obtain the requested consents, after one
year from the date you or another person who was not one of our affiliates
purchased your units, you can sell the converted shares within the limitations
of Rule 144 under the Securities Act of 1933. One of these limitations is a
restriction on the volume of the shares you can sell. Because the volume of
trading in our shares is not great, the number of shares you can sell is
limited. You will not be able to freely resell those shares until two years from
the original purchase of your units from us or one of our affiliates, again
subject to state securities laws.
There may also be restrictions under state securities laws in certain
states on your ability to resell our common stock. Although we believe there are
applicable non-issuer sale exemptions in most states that would allow you to
resell our common stock, sales may not be allowable in a limited number of
states.
Even if the units are converted into common stock, we still may not have
sufficient funds to continue development of our business.
Conversion of the units into common stock should allow us to use monies
that we would have to pay for interest and principal on the notes to continue
development and operation of our business. Even if all the units are converted,
we will need additional funds to continue to develop and operate our business
and we may not be able to obtain these funds. If we cannot obtain the funds we
need to operate our business, and we declare bankruptcy, you could be better off
to have retained your units. See "If you convert your units into our common
stock, you will be exchanging a senior security for a junior security" above.
The conversion could be attacked as a preference or fraudulent conveyance.
If we voluntarily declare bankruptcy or have an involuntary bankruptcy
proceeding filed against us within 90 days after you convert your notes, a court
could determine that the
10
<PAGE> 13
conversion was a preference and invalidate the conversion. Also, our other
securityholders could try to attack the conversion as not being made for fair or
reasonably equivalent value.
The tax consequences of a conversion of your units could be unfavorable to you.
The conversion of your units into common stock could result in the
recognition by you of taxable gain if it is determined that the fair market
value of the stock received by you in the exchange is in excess of your tax
basis in the notes surrendered. In addition, our analysis of the conversion is
based upon your exchange of warrants and preferred stock for common stock
qualifying as a recapitalization for federal income tax purposes. If it is
determined that the exchange is not a recapitalization, then taxable gain or
loss would be recognized on such exchange based upon the difference, if any,
between the fair market value of the common stock received in the exchange and
your tax bases in the warrants and preferred stock surrendered. The tax
consequences of the offers may vary depending on your particular situation and
circumstances. You should consult with your tax advisors regarding the
consequences of accepting either of our offers.
RISKS RELATING TO YOUR DECISION TO AMEND YOUR NOTES
If you accept our offer to amend all your existing notes, you will give up your
right to participate in the conversion of the preferred stock into common stock
if we default on payment of the notes.
Noteholders who elect to accept the options that we are offering for
all of their existing notes and preferred stock will not retain the right to
acquire common stock on conversion of the preferred stock if we default on the
payment of the notes and the default is not cured within a reasonable time. The
conversion rights of the preferred stock are proportionate to the number of
preferred shares outstanding from time to time. We have the right to prepay any
notes that are not converted or amended pursuant to this offer and thus cancel
any related preferred stock, but we may not be able to do so.
You will not be able to immediately resell the common stock you receive instead
of cash if we pay interest on the notes in restricted common stock.
If we pay interest on the notes in restricted common stock your ability
to resell that stock will be limited. After one year from the date you receive
the stock, you can resell the stock under the restrictions of Rule 144 of the
Securities Act of 1933. You will not be able to freely resell the stock until
two years from the date you receive the stock if you are not then one of our
affiliates and have not been one of our affiliates for 90 days.
By the time you are able to resell the stock you receive in lieu of cash
interest payments on the notes, the price of the stock could have decreased
significantly.
If the price of our common stock decreases from the time you receive
interest on your notes in common stock to the time you are able to sell the
common stock, you could lose all or a portion of the value of the interest due
to you on the notes.
11
<PAGE> 14
You could lose the security that we grant you on the notes if we declare
bankruptcy and the security interest is deemed to be a preference.
If we voluntarily declare bankruptcy or have an involuntary bankruptcy
proceeding filed against us within 90 days after we secure your notes, a court
could determine that the grant of a security interest to you was a preference
and invalidate the security interest. If that were to happen, any other holders
of our debt securities that are properly secured by our assets would be paid out
of the proceeds of any sale of our assets prior to any payment on the notes.
Our other creditors could attempt to attack and invalidate the security we grant
to you as a fraudulent conveyance.
If we are deemed to be insolvent when we secure the notes or if your
election to allow us to pay interest on the notes with our restricted common
stock and your relinquishment of the preferred stock is not considered to be
fair or reasonably equivalent value for securing the notes and making them
convertible, our other creditors may be able to attack the security we grant to
you as a fraudulent conveyance. In that case, the security interest that we
grant you could be invalidated and you would not have a prior claim to our
assets that secure the notes.
The security interest in our assets we are granting to secure the amended notes
may not be sufficient to adequately protect you.
Although we are granting a security interest in substantially all of
our assets, the book value of the assets that secure the amended notes as of
December 31, 1999 was only $493,241, which is substantially less than the
approximately $1.15 million principal amount of the notes currently outstanding.
Although substantially all of our assets that we acquire in the future will also
secure the amended notes up to 1.25 times the principal amount of the
outstanding notes, there is no assurance that the value of the assets securing
the notes will ever be sufficient to fully protect the amended notes. We can
also release collateral securing the amended notes for, among other reasons, if
we determine to sell it in the ordinary course when it is no longer useful to
our business. Also, even though currently there are no liens on the assets
securing the notes that would be prior to the lien in favor of holders of the
amended notes, the Agency and Security Agreement allows certain other liens
placed on our assets in the future to be prior to your lien. We can also grant
subordinate liens on the assets to third party lenders. The terms of the Agency
and Security Agreement have not been reviewed or negotiated by any independent
person. We recommend that you have your attorney review that document and the
security interest granted before you accept our offer to amend your notes.
Amending your notes could have adverse tax consequences to you.
The exchange of your note and preferred stock for a convertible secured
note could result in recognition of taxable gain to you should the fair market
value of the convertible secured note received by you ultimately be determined
to be in excess of your tax bases in the note and the preferred stock
surrendered. In such an event, you will recognize taxable gain equal to such
excess. The tax consequences of the offers may vary depending on your particular
situation and circumstances. You should consult with your tax advisors regarding
the consequences of accepting either of our offers.
12
<PAGE> 15
For additional risks if you convert your amended note into our common
stock, see "Risks Relating to Conversion of Your Units into Common Stock" above.
For additional risks in investing in our securities, your should
carefully review our Form 10-KSB included with this Offering Circular, including
the financial statements contained therein, and the opinion of our auditors on
our financials, which expresses substantial doubt about our ability to continue
as a going concern, and the section entitled "Item 6. Plan of Operation"
beginning on page 40, which discusses our results of operation for the years
ended December 31, 1999 and 1998, our assets and liabilities as of December 31,
1999 and 1998, and our financial condition, liquidity and capital resources. For
a description of the status of our business development and technology, see the
section in the Form 10-KSB entitled "Business of Issuer" beginning on page 9.
For a description of certain legal matters in which we are involved, see "Item
3. Legal Proceedings" beginning on page 38. For a description of our recent
stock issuances and our major shareholders, see the sections in our Form 10-KSB
entitled "Business Development" beginning on page 1, "Certain Relationships and
Related Transactions" beginning on page 57, and "Security Ownership of Certain
Beneficial Owners and Management" beginning on page 54.
For a description of the trading prices of our common stock from the
third quarter of 1998 through the fourth quarter of 1999, see "Market for Common
Equity and Related Stockholder Matters" beginning on page 39. Our common stock
is traded in the OTC bulletin board under the symbol "IPVC." As of April 20,
2000, the closing price of the common stock on the OTC bulletin board was
$2.03125 per share.
We make forward looking statements in this Offering Circular and in our
other filings with the Securities and Exchange Commission. Our forward looking
statements may include estimates of the value of our common stock, projections
of revenues, income, earnings per share, loss, capital expenditures, plans for
future operations, financing needs or plans, our ability to service our debt
obligations, and plans relating to products or services, as well as assumptions
relating to these matters. The words "believe," "expect," "anticipate,"
"estimate," "project," and similar expressions identify forward looking
statements. Forward looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by, or underlying the forward looking statements. Statements in this Offering
Circular, including those contained in the section entitled "Risk Factors," and
in the section entitled "Background, Purpose and Effect of the Exchange Offer,"
describe factors, among others, that could contribute to or cause such
differences. We undertake no obligation to update any forward looking
statements.
BACKGROUND, PURPOSE AND EFFECTS OF THE OFFERS
IPVoice completed its private offering of the units on June 3, 1999. We
sold 46 units at $25,000 per unit. Since that time, we have encountered delays
in implementing our gateways and in moving our business from the development
stage into the production stage. These delays have increased our need for funds
necessary to complete the development of our technologies and to fund the
operation of our business. As a result, the cash outlays necessary to pay
interest and ultimately principal on the notes have become increasingly
burdensome. We are therefore seeking to convert your units into common stock to
alleviate these burdens and enable us to
13
<PAGE> 16
retain our cash.
In addition, the existence of the preferred stock allocated to the
units is severely limiting our ability to acquire additional financing. We
expected the net proceeds of the sale of the units would provide sufficient
working capital for us through the first quarter of 2000. Our ability to
continue as a going concern is dependent upon increasing sales and obtaining
additional capital and financing. We are seeking to raise additional capital
through private and/or public sales of securities in the future and have
retained the services of a registered broker/dealer. Under this engagement, we
are negotiating with an investment group introduced by the broker/dealer for an
investment of up to $5 million in two tranches of $2.5 million within the next
twelve (12) months. There can be no guarantee that we and the investment group
will come to agreeable terms. This investment group has indicated orally that it
is unwilling to make the investment unless we reacquire at least 50% of the
preferred stock as a result of our offers to you. We have not executed
definitive documents with this investment group and there is no assurance that
it will invest in us even if we can reacquire 50% of the preferred stock. In
addition, it is possible that this investment group or others would invest in us
even if the preferred remains outstanding.
The following comparison shows you some of the major differences
between retaining your units, converting your units into common stock, and
accepting our offer of amended notes:
Retaining Your Existing Securities
- Your notes represent debt, which is a right to receive the
principal amount of the notes plus accrued interest, with a
claim to our assets senior to that of holders of our equity
securities. Since the notes are not secured, any secured debt
that we issue will have a prior claim to the assets that
secure the debt. Debt has no right to share in capital
appreciation of the company.
- Your warrants allow you to purchase 18,750 shares of our
common stock at $.9875 per share. The closing price of our
common stock on the OTC bulletin board on April 20, 2000 was
$2.03125. Your warrants are, therefore, in the money. However,
you will not be able to immediately resell the stock you
acquire on exercise of your warrants. See below.
- Your preferred stock does not provide for dividends or any
liquidation preference in our assets. However, if we default
in paying the notes, and the default is not cured within a
reasonable time, the preferred stock will convert into shares
of our common stock. See "Your Existing Securities" beginning
on page 1.
- The notes are entitled to interest at 9% per year, payable
quarterly. Principal on the notes is payable on June 3, 2001.
We can extend the notes for additional one to two year terms.
If we do this, we will pay amortized principal payments on a
monthly basis. We can pay interest in cash or freely trading
shares of our common stock.
- We also agreed as follows: From the time of the first closing
to the time the notes are repaid in full, the new investor
group will, through International Investment Partners, propose
candidates for two board positions which are reasonably
acceptable to the present board and which the present board
will then appoint. The three members of the present control
group will give International Investment Partners an
undertaking that they will, so long as the notes are not fully
paid,
14
<PAGE> 17
remain the holders of 60% of the voting equity securities and
that they will vote their shares for these two directors or
their agreed upon successors.
- There is no established trading market for the units or the
notes, warrants or preferred stock.
- The units were sold pursuant to the private placement
exemption from the registration requirements of federal and
state securities laws. This means that the resale of the units
is restricted. There is currently no market for the units.
However, if a market were to develop, subject to applicable
state securities laws, you would be able to resell your units
after one year from the date your units were purchased from us
or one of our affiliates. Subject to any applicable state
securities laws, any resale prior to two years from that date
would be subject to the limitations of Rule 144 of the
Securities Act of 1933. Once you exercise your warrants, a one
year holding period will begin before you can resell the stock
you acquire subject to Rule 144, and two years must pass from
the date you exercise the warrants before you can freely
resell the stock you receive on exercise of the warrants.
Converting Your Units to Common Stock
- Common stock represents equity in our company. Holders of
common stock have a pro rata claim to our assets after payment
of all debt obligations and the satisfaction of the
liquidation preference on any shares of preferred stock we
issue. Common stock is junior in right of payment to all of
our other securities, but has the right to share in capital
appreciation of the company.
- No interest is payable on our common stock. We may declare
dividends on our common stock, although we do not intend to do
so in the foreseeable future.
- Common stock has voting rights for our directors and on all
matters submitted to stockholders.
- Our common stock is not listed on any securities exchange or
other trading market, but it is traded on the OTC bulletin
board. Although the market is thin, the common stock is more
liquid than the market for the units. We have filed a Form
10SB that enabled us to become a reporting company under SEC
rules. This may increase the liquidity of our common stock.
- You will be able to "tack" the required holding period of the
common stock you receive under Rule 144 to the period you or
any of our non-affiliates held the units. This means that if
you purchased your units from us in February 1999 or from any
other person who was not one of our affiliates who purchased
in February 1999, you will be deemed to have held the stock
you receive for the units for one year in February 2000 and
can sell that stock on the OTC bulletin board, subject to the
limitations of Rule 144 and any applicable state securities
laws.
15
<PAGE> 18
Accepting Amended Notes
- If you accept our offer of amended notes, you will have a
right to the assets that secure the notes senior to the claims
of other holders of our debt securities in those assets. Debt
has no right to share in capital appreciation of the company.
- You would retain your warrants. See "Retaining Your Units"
above.
- You would have to give up your preferred stock relating to the
portion of the notes to be amended, and, unless you retain a
portion of your existing notes and the related preferred, the
right to have the preferred convert into common stock if we
default on payment on any notes that remain outstanding and
the default is not cured within a reasonable time.
- The amended notes would have the same payment terms as the
existing notes, except that we could pay interest in either
cash or common stock that is restricted as well as free
trading.
- The amended notes would continue to be able to propose
candidates for our board of directors as if they had not been
amended.
- There will still be no established trading market for the
amended notes.
- The amended notes will carry over the holding period of the
existing notes and preferred stock under Rule 144. If you
convert the amended notes into common stock, the common stock
will also carry over the original holding period of your
existing notes under Rule 144.
The table above does not take into account all the factors that may
impact a comparison of the units to the common stock into which you may convert
the units or the amended notes. It also does not describe the tax consequences
of converting the units or accepting the amended notes. For a more complete
description of the units and the common stock, see "Your Existing Securities"
above and "Description of Capital Stock" below. For a description of the tax
consequences of the elections you can make pursuant to these offers, see "The
Offers" above.
Marginability
The notes, but not the warrants, preferred stock or our common stock,
are a margin security under Regulation T which governs the extension of credit
by broker-dealers. Neither the units (or any securities constituting the units)
nor our common stock is a margin stock for purposes of Regulation U which
governs the extension of credit by other lenders.
Under Regulation T, the required margin for the notes will likely be
the margin required by the creditor in good faith or the percentage set by the
regulatory authority where the trade occurs, whichever is greater. Under
Regulation U, the maximum loan value of non-margin stock and other collateral is
their good faith loan value.
16
<PAGE> 19
You should consult with your brokers concerning the marginability of
the units and common stock and the required margin.
HOW TO ACCEPT THE OFFERS
EXPIRATION TIME, EXTENSIONS, TERMINATION AND AMENDMENTS
Our offers will terminate at 5:00 p.m., Phoenix, Arizona time, on May
19, 2000, unless we extend the offers. When we use the term "expiration time,"
we mean 5:00 p.m. Phoenix, Arizona time, on May 19, 2000 or the latest date and
time to which the offers may be extended. If we extend the offers, we will
notify you as soon as we can of the extension.
We will have the right to terminate the offers at any time or to amend
the offers. We will notify you as soon as we can if we terminate or amend the
offer. If we terminate the offer, we will promptly return to you any units you
have tendered for conversion. If we amend the offer, you will have the right to
withdraw any units you have tendered for conversion or any election you have
made.
HOW YOU CAN ELECT TO ACCEPT ANY OF OUR OFFERS
If you wish to elect to have your units converted into common stock,
you must:
- Complete and sign the green form (attached hereto) entitled
"Election to Convert Units into Common Stock" and indicate on
that form what portion of your units you want to convert.
- Complete and sign the blue Substitute Form W-9 attached
hereto.
- Transmit these form and the certificates representing your
units to us for receipt prior to the expiration time at the
following address:
IPVoice.com, Inc.
Attention: Barbara Will
505 North 19th Avenue
Suite 416/471
Phoenix, AZ 85015
If you wish us to amend your notes, you must:
- Complete and sign the pink form (attached hereto) entitled
"Election to Amend Notes."
- Complete and sign the white signature page of the Agency and
Security Agreement.
- Complete and sign the blue Substitute Form W-9 attached
hereto.
- Transmit these forms and the certificates representing your
notes and preferred stock to us for receipt prior to the
expiration time at our address listed above.
17
<PAGE> 20
For your convenience, we are also enclosing a self addressed, stamped
envelope that you can use to return your election to us. You must take the risk
that your forms and certificates may get lost before they are delivered to us.
If you want to mail these forms to us, we recommend that you use registered mail
with return receipt requested.
If you have any questions about how to make an election or fill out the
various election forms, you may call or write to Barbara Will at (602) 335-1231
or at the address stated above.
If any election that you make is defective or incomplete, we may try to
contact you to determine your intent, but we will not be obligated to contact
you. If your elections are defective or incomplete, we may treat your elections
as never having been made. We will have the right to determine all questions
about the validity and completeness of your elections.
IF YOU DO NOT WANT TO ACCEPT ANY OF OUR OFFERS, YOU DO NOT NEED TO DO ANYTHING.
YOU WILL RETAIN YOUR UNITS AND ALL THE RIGHTS THAT YOU HAVE NOW. HOWEVER, EVEN
IF YOU DO NOT WANT TO ACCEPT OUR OFFERS, WE ARE ASKING THAT YOU STILL RETURN THE
ATTACHED CONSENT SO THAT OUR ARIZONA HOLDERS WILL NOT BE DISADVANTAGED. SEE
"CONSENT" ON PAGE 8.
WITHDRAWAL RIGHTS
If you have made an election and sent us your election forms and/or
certificates, and then change your mind, you may withdraw or change your
election to accept any of the offers at any time prior to the expiration time.
In addition, if we have not previously accepted your elections as provided in
this offering circular, you can withdraw your election after 5:00 p.m. Phoenix,
Arizona time, on May 19, 2000. If you want to withdraw or change your election,
you must notify us in writing of your withdrawal or change and we must receive
your withdrawal or change before the expiration time. You must include the
following information in any notice of a withdrawal or change:
- Your full name, which must correspond to the name in which
your units are registered.
- The certificate numbers of the units you hold.
- The election or elections you desire to withdraw and/or any
changes you desire to make in your elections.
If you are changing your elections, we may ask you to fill out a new
election form to properly reflect your changed elections. If any withdrawal or
change that you attempt to make is defective or incomplete, we may try to
contact you to determine your intent, but we will not be obligated to contact
you. If your withdrawal or change is defective or incomplete, we may treat it as
never having been made. We will have the right to determine all questions about
the validity and completeness of your withdrawals and changes.
18
<PAGE> 21
ACCEPTANCE OF ELECTIONS
Subject to our right to extend, terminate, or amend the offer, we will
review your elections and accept all elections that are properly made as soon as
we can after the expiration time.
PAYMENT OF EXPENSES
We are paying all expenses of the offers. The offers are being made in
reliance on the exemption from registration of Section 3(a)(9) of the Securities
Act of 1933. Therefore, we will not pay any commission or other fees to any
broker, dealer, salesman, or other person for soliciting your acceptance of our
offers. However, our regular employees may solicit your acceptance and will
answer your questions about the offers. We will not pay these employees extra
compensation for performing these services.
19
<PAGE> 22
CAPITALIZATION
The following table sets forth our capitalization at December 31, 1999
and pro forma to give effect to the conversion of the units assuming all units
are converted.
<TABLE>
<CAPTION>
Actual Pro forma
------ ---------
(Audited) (Unaudited)
<S> <C> <C>
Debt:
Two year unsecured notes,
Interest payable quarterly at
9% per annum, due June 2001 $1,145,400 $ 0
---------- ----------
Total Debt $1,145,400 $ 0
---------- ----------
Stockholders' Equity (Deficiency):
Senior convertible preferred stock,
$0.001 par value, 1,150 and 0 shares
outstanding, respectively $ 1 $ 0
Common Stock, $0.001 par value,
16,422,758 and 17,243,030 shares
outstanding, respectively 16,423 17,243
Additional paid in capital 1,570,240 2,714,821
Deficit accumulated during the
development stage (2,504,500) (2,504,500)
Total Stockholders' Equity (Deficiency) $ (917,836) $ 227,564
---------- ----------
Total Capitalization $2,732,064 $2,732,064
========== ==========
</TABLE>
CERTAIN PRO FORMA FINANCIAL INFORMATION
The following table shows the pro forma effects the offer would have
had on the financial condition and results of operations of the Company for the
years ended December 31, 1999 and 1998, assuming all of the units had been
exchanged on the first day of the respective periods. The pro forma information
assumes that 820,272 shares valued at $3.4240 per share were exchanged for
$1,145,400 of notes, 862,500 warrants to purchase the Company's common stock,
and 1.150 shares of preferred stock.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
<S> <C> <C> <C> <C>
Sales $ 321,279 $ 321,279 $ 41,254 $ 41,254
Gross Profit 15,845 15,845 41,254 41254
Operating Expenses 1,897,084 1,897,084 548,939 548,939
Operating Loss (1,881,239) (1,881,239) (507,685) (507,685)
Interest Expense (64,387) 0 0 0
Interest Income 20,324 20,324 0 0
Net Loss (1,973,834) (1,909,447) (507,685) (507,685)
Loss per Share (.128) (.119) (.04) (.04)
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
ACTUAL PRO FORMA ACTUAL PRO FORMA
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding 15,413,751 16,234,023 11,620,451 12,440,723
Cash 123,797 123,797 908 908
Inventory 7,586 7,586 152,980 152,980
Total Assets 633,903 633,903 191,513 191,513
Current Liabilities 406,339 406,339 307,129 307,129
Long Term Debt 1,145,400 0 0 0
Preferred Stock 4,600 0 0 0
Common Stock 1,582,064 2,732,064 415,050 1,565,050
Total Stockholder's Equity (Deficit) (917,836) 227,564 (115,616) 1,029,784
Common Shares Outstanding 16,422,758 17,243,030 12,578,999 13,399,271
Book Value per Share $ (.056) .013 (.009) .077
</TABLE>
Our ratio of earnings to fixed charges is negative both on an actual and pro
forma basis.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common
stock, $.001 par value per share and 10,000,000 shares of preferred stock, $.001
par value per share. As of December 31, 1999, we had 16,422,758 shares of our
common stock and 1,150 shares of our preferred stock outstanding.
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share on all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and are issued as fully paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted; which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting at which a quorum
is present will be able to elect the entire board of directors if they so choose
and, in such event, the holders of the remaining shares of common stock will not
be able to elect any directors. In the event of liquidation of the company, each
shareholder is entitled to receive a proportionate share of our assets available
for distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any, to be distributed to
holders of the preferred shares.
Holders of shares of common stock are entitled to share pro rata in
dividends and distribution with respect to the common stock when, as and if
declared by the board of directors out of funds legally available therefor,
after requirements with respect to preferential dividends on, and other matters
relating to, the preferred shares, if any, have been met. We have not paid any
dividends on our common stock and intend to retain earnings, if any, to finance
the development and expansion of our business. Future dividend policy is subject
to the discretion of the board of directors and will depend upon a number of
factors, including future earnings, capital requirements and our financial
condition.
21
<PAGE> 24
For a description of the preferred stock that we have outstanding, see
"Your Existing Securities" beginning on page 1.
AVAILABLE INFORMATION
We are subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and we file reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information filed electronically by us with the
Commission which can be accessed over the Internet at http:\\www.sec.gov.
INCORPORATION BY REFERENCE
The following documents filed with the Commission are incorporated by
reference into this Offering Circular:
- Our Form 10SB12G filed on November 3, 1999; and
- Our Form 10-KSB for the year ended December 31, 1999.
If any statement contained in any of the foregoing documents is
modified or superseded by a statement in this Offering Circular or in any
document subsequently filed and incorporated by reference herein, the statement
in any such foregoing document will be deemed for the purposes of this Offering
Circular to have been modified or superseded by such statement in this Offering
Circular or subsequently filed document, and the statement in any such foregoing
document is incorporated by reference herein only as modified or to the extent
it is not superseded. All documents subsequently filed by us during the period
of the Offers pursuant to Sections 13, 14 or 15(d) of the Exchange Act shall be
deemed to be incorporated by reference in and made a part of this Offering
Circular from the date of filing such documents.
22
<PAGE> 25
IPVoice.com, Inc.
CONSENT
I am the registered holder of units issued by IPVoice.com, Inc., and
hereby consent to the offers being made by IPVoice as contained in the offering
document dated April 20, 2000. This consent does not constitute my acceptance of
any of such offers.
Date:__________________________________________________
Signature(s):__________________________________________
Sign exactly as your name appears on the
face of the Notes
<PAGE> 26
IPVoice.com, Inc.
ELECTION TO CONVERT UNITS INTO COMMON STOCK
I am the registered holder of the units listed below and hereby elect to convert
the units listed below into common stock of IPVoice.com, Inc. pursuant to the
offering document dated April 20, 2000:
<TABLE>
<CAPTION>
CERTIFICATE NUMBERS
- --------------------------------------------------------------------------------
Notes Warrants Preferred Stock
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
If you have exercised any portion of your warrants, please indicate the
number of warrants you have remaining:_________________.
Date:__________________________________________________
Signature(s):__________________________________________
Sign exactly as your name appears on the
face of the Notes, Warrants, and Preferred
Stock.
<PAGE> 27
IPVoice.com, Inc.
ELECTION TO AMEND NOTES
I am the registered holder of the notes and preferred stock listed below and I
have not elected to have my units converted into common stock of IPVoice.com,
Inc. I hereby elect to allow you to amend the notes and to relinquish the
preferred stock listed below pursuant to the offering document dated April 20,
2000. I agree that IPVoice.com, Inc. may elect to pay future interest on my
notes in shares of restricted common stock at its election. I agree to be bound
by the terms of that certain Agency and Security Agreement between IPVoice.com,
Inc., International Investment Partners, Ltd., as Agent, and certain holders of
the notes referred to therein. I am including herewith a copy of the signature
page to the Agency and Security Agreement executed by me.
<TABLE>
<CAPTION>
CERTIFICATE NUMBERS
- --------------------------------------------------------------------------------
Notes Preferred Stock
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Date: _________________________
Signature(s): _________________________________________________________________
Sign exactly as your name appears on the face of the Notes
<PAGE> 28
SUBSTITUTE FORM W-9
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
(PLEASE READ GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 ("GUIDELINES") BEFORE COMPLETING THIS FORM)
AFTER COMPLETING THE FORM, RETURN TO EXCHANGE AGENT
- --------------------------------------------------------------------------------
Name (If joint names, list first and circle name of the person or entity whose
number you enter in Part I below.)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City, State, and ZIP Code
- --------------------------------------------------------------------------------
PART I Taxpayer Identification Number
- --------------------------------------------------------------------------------
Enter your taxpayer identification number in the appropriate box. For
individuals, this is your social security number. However, if you are a resident
alien OR a sole proprietor, see Guidelines. For other entities, it is your
employer identification number. If you do not have a number, see Guidelines.
SOCIAL SECURITY NUMBER
----------------------------------------
or
EMPLOYER IDENTIFICATION NUMBER
----------------------------------------
NOTE: If the account is in more than one name, see Guidelines for instructions
on whose number to enter.
- --------------------------------------------------------------------------------
PART II For Payees Exempt From Backup Withholding (See Guidelines)
- --------------------------------------------------------------------------------
PART III CERTIFICATION
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest or dividends on your tax return.
- --------------------------------------------------------------------------------
Sign here
- --------------------------------------------------------------------------------
<PAGE> 29
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------------------- ------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE NAME AND THE SOCIAL FOR THIS TYPE OF ACCOUNT: GIVE NAME AND THE
SECURITY NUMBER OF -- EMPLOYER IDENTIFICATION
NUMBER OF --
- --------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. Sole proprietorship The owner (3)
2. Two or more individuals The actual owner of the 7. A valid trust, estate Legal entity (4)
(joint account) account or, if combined or pension trust
funds, the first
individual on the
account (1)
3. Custodian account of a The minor (2) 8. Corporate The corporation
minor (Uniform
Transfers to Minors Act)
4. a. The usual revocable The grantor-trustee (1) 9. Partnership The partnership
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner (1) 10. Association, club or The organization
account that is not other tax-exempt
a legal or valid organization
trust under state
law
5. Sole proprietorship The owner (3) 11. A broker or The broker or nominee
registered nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) You must show your individual name, but may also enter your business or
"doing business as" name. You may use your Social Security Number or your
Employer Identification Number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 30
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
HOW TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER
If you do not have a taxpayer identification number, apply for one immediately.
To apply for a Social Security Number, obtain Form SS-5 from your local Social
Security office. Obtain Form SS-4 to apply for an employer identification
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding include the following:
- An organization exempt from tax under section 501(a), any IRA, or a
custodial account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
- The United States or any of its agencies or instrumentalities.
- A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
- A foreign government or any of its political subdivisions, agencies,
or instrumentalities.
- An international organization or any of its agencies or
instrumentalities.
Payees that may be exempt from backup withholding include the following:
- A corporation.
- A foreign central bank of issue.
- A dealer in securities or commodities required to register in the
United States, the District of Columbia, or a possession of the United
States.
- A futures commission merchant registered with the Commodity Futures
Trading Commission.
- A real estate investment trust.
- An entity registered at all times during the tax year under the
Investment Company Act of 1940.
- A common trust fund operated by a bank under section 584(a).
- A financial institution.
- A middleman known in the investment community as a nominee or
custodian.
- A trust exempt from tax under section 664 or described in section
4947.
Exempt payees described above should still complete the substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. EXEMPT PAYEES
SHOULD FURNISH THEIR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT' IN PART II
OF THE FORM, SIGN AND DATE THE FORM, AND RETURN IT TO THE EXCHANGE AGENT.
NONRESIDENT ALIEN AND FOREIGN CORPORATIONS. -- If you are a nonresident alien or
a foreign entity not subject to withholding, furnish the Exchange Agent a
complete IRS Form W-8, "Certificate of Foreign Status."
PRIVACY ACT NOTICE. -- Section 6109 of the Internal Revenue Code requires most
recipients of dividends, interest, or other payments to give taxpayer
identification numbers to payers who must report the payments to the IRS. The
IRS uses the numbers for identification purposes and to help verify the accuracy
of your tax return. Payers must be given the numbers whether or not recipients
are required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit 12(a)-2
This Amended Promissory Note, and the securities issuable upon the conversion of
this Amended Promissory Note, have not been registered under the Securities Act
of 1933, as amended (the "Act") or applicable state law and may not be sold,
transferred or otherwise disposed of unless registered under the Act and any
applicable state act or unless the Company receives an opinion from counsel for
the holder and is satisfied that this Amended Promissory Note and the underlying
securities may be transferred without registration under the Act.
AMENDED PROMISSORY NOTE
$_____________ AS OF ___________ __, 2000
PHOENIX, ARIZONA
FOR VALUE RECEIVED, IPVoice.com, Inc., a Nevada corporation (the "Company"),
hereby promises to pay to the order of ____________________, or any subsequent
holder of this Amended Promissory Note (the "Payee"), at [address], on or before
two (2) years from the date hereof or at such other place as may be designated
by the Payee from time to time by notice to the Company, the principal sum of
[principal amount], together with simple interest from the date hereof (the
"Issuance Date"), payable quarterly, on the unpaid principal amount at an annual
rate equal to nine percent (9 %) per annum, or at the option of the Company in
its free trading or restricted common stock calculated at a rate equal to
eighteen percent (18%) per annum and based on the average of the high and low
market prices for one share of stock for the seven (7) trading days immediately
preceding the interest payment date; provided however, the Amended Promissory
Note may at the option of the Company, be extended for an additional one year
term with equal monthly amortization at the rate of 110% of principal plus
accrued interest at the Amended Promissory Note rate; or, the Company may at its
option extend the term of the Amended Promissory Note for a total of two (2)
additional years with equal monthly amortization at the rate of 120% of
principal plus accrued interest at the Amended Promissory Note rate, such option
to extend the Amended Promissory Note to be exercised by the Company in writing
to the Payee at least 60 days prior to its original maturity date.
1. CONVERSION. Payee may elect to convert, at any time in whole or in
part, the principal amount due under the Amended Promissory Note into one share
of our restricted common stock for every seven dollars ($7.00) in principal
amount of the Amended Promissory Note that Payee converts, by delivering to the
Company notice in the form attached hereto as Exhibit A along with this Amended
Promissory Note.
2. SECURITY. This Amended Promissory Note will be secured to the
extent described in that certain Agency and Security Agreement between Company,
Payee and Collateral Agent dated _________ ___, 2000.
3. NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and personally addressed or sent by telecopier or
by registered or certified
<PAGE> 2
mail, return receipt requested, postage pre-paid, addressed or telecopied as
follows or to such other address or telecopier number of which notice has been
given pursuant hereto:
If to the Company: IPVoice.com, Inc.
505 North 19th Avenue, Suite 416/417
Phoenix, AZ 85015
Phone: 602-335-1231
Fax: 602-335-1577
Attention: Barbara S. Will
Copy to: Jennings, Strouss & Salmon
2 North Central, Suite 1600
Phoenix, AZ 85004
Phone: 602-262-5832
Fax: 602-253-3255
Attention: I. Douglas Dunipace, Esq.
to such Payee at the address set forth on the records of the Company. In
addition, copies of all such notices or other communications shall be
concurrently delivered by the person giving the same to each person who has been
identified to the Company by such Payee as a person who is to receive copies of
such notices.
4. GOVERNING LAW. This Amended Promissory Note shall be governed by,
and construed and interpreted in accordance with, the laws of the State of
Nevada, without giving effect to conflict of law principles.
5. SUCCESSORS AND ASSIGNS. This Amended Promissory Note shall be
binding upon and inure to the benefit of the Company and the holder hereof and
their respective successors and permitted assigns; provided, however, that the
Company may not transfer or assign any of its rights or obligations hereunder
without the prior written consent of the holder hereof.
IN WITNESS WHEREOF, the Company has caused this Amended Promissory Note
to be executed by its duly authorized officers as of the date first set forth
above.
IPVOICE.COM, INC.
By:
------------------------------
Barbara S. Will, President
2
<PAGE> 3
EXHIBIT A
---------
CONVERSION NOTICE
To: IPVOICE.COM, INC.
Pursuant to the terms of the Amended Promissory Note, dated as of
_______, 2000, between IPVoice.com, Inc. the Payee, Payee does hereby give
notice of intention to convert the Amended Promissory Note or that portion of
the Amended Promissory Note described below into the number of shares of common
stock of IPVoice.com, Inc. calculated as described in the Amended Promissory
Note.
- ----------------------------------------------------------------------------
AMENDED PROMISSORY NOTE PRINCIPAL AMOUNT TO BE
TOTAL PRINCIPAL AMOUNT CONVERTED
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
The undersigned requests that certificates for such shares be delivered
to and, if the Payee is not converting the entire amount of the Amended
Promissory Note, that a new Amended Promissory Note for the remaining principal
amount due under the previous Amended Promissory Note, plus accrued and unpaid
interest, be executed and delivered to, the undersigned at the address stated
below:
Address:
------------------------------------------------
------------------------------------------------
------------------------------------------------
Dated: Signature:
-------------------, -------- ------------------------
Name:
------------------------------
The signature on this Conversion
Notice must correspond exactly to
the name(s) in which the Amended
Promissory Note is recorded in all
particulars
3
<PAGE> 1
Exhibit 12(a)-3
AGENCY AND SECURITY AGREEMENT
BY AND BETWEEN
IPVOICE.COM, INC.
AND
CERTAIN NOTEHOLDERS
AND
INTERNATIONAL INVESTMENT PARTNERS, LTD.,
AS COLLATERAL AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 SECURITY AGREEMENT AND COLLATERAL.......................................................... 1
1.1 Grant of Security Interest..................................................................... 1
1.2 Obligations Secured............................................................................ 2
1.3 Release and Addition of Collateral............................................................. 2
1.4 Termination.................................................................................... 3
1.5 Representations and Warranties of the Company.................................................. 3
1.6 Covenants of the Company....................................................................... 4
1.7 Powers of Collateral Agent..................................................................... 5
1.8 Payment of Premiums, Taxes, Charges, Liens and Assessments..................................... 5
1.9 Events of Default.............................................................................. 6
1.10 Remedies....................................................................................... 6
1.11 Disposition of Collateral and Proceeds......................................................... 6
ARTICLE 2 THE COLLATERAL AGENT....................................................................... 7
2.1 Appointment.................................................................................... 7
2.2 Authorization and Action....................................................................... 7
2.3 Collateral Agent's Reliance, Etc............................................................... 7
2.4 International Investment Partners, Ltd. and its Affiliates..................................... 7
2.5 Noteholder Credit Decision..................................................................... 8
2.6 Indemnification................................................................................ 8
2.7 Successor Collateral Agents.................................................................... 8
ARTICLE 3 MISCELLANEOUS.............................................................................. 9
3.1 Costs, Expenses and Attorneys' Fees............................................................ 9
3.2 Statute of Limitations......................................................................... 9
3.3 Miscellaneous.................................................................................. 9
3.4 Notices........................................................................................ 9
3.5 Governing Law; Successors and Assigns......................................................... 10
3.6 Severability of Provisions.................................................................... 10
3.7 Location of Principal Office................................................................. 10
3.8 Counterparts.................................................................................. 10
</TABLE>
-i-
<PAGE> 3
AGENCY AND SECURITY AGREEMENT
This Agency and Security Agreement (the "AGREEMENT") is made and
entered into this __________ day of ___________, 2000, by and among IPVoice.com,
Inc., a Nevada corporation (the "COMPANY"), the holders of promissory notes
issued by the Company listed on the signature pages hereof and their permitted
assignees and transferees (the "NOTEHOLDERS"), and International Investment
Partners, Ltd., a Delaware corporation as collateral agent (the "COLLATERAL
AGENT").
BACKGROUND OF AGREEMENT
A. The Company has issued $__________ in aggregate principal
amount of its Amended Promissory Notes (the "PROMISSORY NOTES") to the
Noteholders pursuant to the Offer dated ___________, 2000.
B. The Company desires to secure the Promissory Notes with its
assets as described herein.
C. The Noteholders desire to appoint the Collateral Agent to
assist the Noteholders with respect to their rights pursuant to this agreement.
D. The Collateral Agent agrees to accept the Noteholders'
appointment as the collateral agent, to assist the Noteholders with respect to
their rights under this Agreement, all as set forth herein.
NOW THEREFORE, the parties hereto, in consideration of the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
agree as follows:
ARTICLE 1
SECURITY AGREEMENT AND COLLATERAL
1.1 Grant of Security Interest. The Company hereby grants and
transfers to the Collateral Agent, for the ratable benefit of the Collateral
Agent and the Noteholders, a security interest in all of the now existing and
subsequently acquired assets of the Company (but not including assets leased by
the Company) described as follows (collectively, the "COLLATERAL"):
(a) all accounts, deposit accounts, accounts receivable, contract
rights, chattel paper, instruments, documents, general intangibles (except
trademarks and copyrights) and other rights to payment of every kind now
existing or at any time hereafter arising except any receivables from
governmental agencies or instrumentalities or as otherwise prohibited by law;
(b) all inventory, goods held for sale or lease or to be
furnished under contracts for service, or goods so leased or furnished, raw
materials, component parts, work in process and other materials used or consumed
in the Company's business, now or at any time hereafter owned or acquired by the
Company, wherever located, and all products thereof, whether in the possession
of the Company, any warehousemen, any bailee or any other person and whether
located at the Company's places of business or elsewhere;
<PAGE> 4
(c) all warehouse receipts, bills of sale, bills of lading and
other documents of every kind (whether or not negotiable) in which the Company
now has or at any time hereafter acquires any interest, and all additions and
accessions thereto, whether in the possession or custody of the Company, any
bailee or any other person for any purpose;
(d) all money and property heretofore, now or hereafter delivered
to or deposited with any lender or otherwise coming into the possession, custody
or control of any lender (or any agent or bailee of any of them) in any manner
or for any purpose whatsoever during the existence of this Agreement and whether
held in a general or special account or deposit for safekeeping or otherwise;
(e) all right, title and interest of the Company under licenses,
guaranties, warranties, management agreements, marketing or sales agreements,
escrow contracts, indemnity agreements, insurance policies, service agreements,
maintenance agreements and other similar contracts of every kind in which the
Company now has or at any time hereafter shall have an interest;
(f) all of the Company's goods, tools, machinery, furnishings,
furniture and other equipment and fixtures of every kind now existing or
hereafter acquired, and improvements, replacements, accessions and additions
thereto, whether located on any property owned or leased by the Company or
elsewhere, including without limitation, any of the foregoing now or at any time
hereafter located at or installed on the land or in the improvements at any of
the real property owned or leased by the Company, and all such goods after they
have been severed and removed from any of said real property;
(g) all of the Company's motor vehicles, trailers, mobile homes,
boats, other rolling stock and related equipment of every kind now existing or
hereafter acquired and all additions and accessories thereto, whether located on
any property owned or leased by the Company or elsewhere; and
(h) all of the Company's software;
together with whatever is receivable or received when any of the foregoing or
the proceeds thereof are sold, leased, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary, including
without limitation, all rights to payment, including returned premiums, with
respect to any insurance relating to any of the foregoing, and all rights to
payment with respect to any cause of action affecting or relating to any of the
foregoing (collectively, "PROCEEDS").
1.2 Obligations Secured. The obligations secured hereby (the "SECURED
OBLIGATIONS") are the payment and performance of: (a) all obligations of the
Company to the Noteholders pursuant to the Promissory Notes; and (b) all
obligations of the Company and rights of the Noteholders under this Agreement.
1.3 Release and Addition of Collateral. The Company may obtain the
release of any of the Collateral and related Proceeds from time to time if:
2
<PAGE> 5
(a) The Company shall determine in good faith that the item or
items to be released are no longer used or useful in the ordinary course of the
Company's business and are being sold or disposed of in the ordinary course of
business; or
(b) The value of the remaining Collateral following such release
is in excess of 1.25 times the aggregate principal amount of the Promissory
Notes then outstanding plus accrued interest thereon (the "VALUE RATIO"). The
value of the Collateral remaining following any such release shall be the higher
of either: (i) the book value of the Collateral or (ii) the fair market value
thereof established by the appraisal of an independent appraiser acceptable to
the Collateral Agent; and
(c) Inventory shall automatically be released from time to time
when sold in the ordinary course of business of the Company.
1.4 Termination. This Agreement will terminate upon the performance
by the Company of all the Secured Obligations.
1.5 Representations and Warranties of the Company. The Company
represents and warrants to the Collateral Agent and the Noteholders as of the
date of this Agreement that: (a) the Company is the owner and has possession or
control of the Collateral and Proceeds; (b) the Company has the right to grant a
security interest in the Collateral and Proceeds and no consents or approvals of
any other person is required for the grant of this security interest or have
been obtained; (c) all Collateral and Proceeds are genuine, free from liens,
adverse claims, setoffs, default, prepayment, defenses and conditions precedent
of any kind or character, except for the security interests granted pursuant to
this Agreement; (d) all statements contained herein are true and complete in all
material respects; (e) no financing statement covering any of the Collateral or
Proceeds, and naming any secured party other than the Collateral Agent and the
Noteholders, is on file in any public office; (f) the security interest granted
in this Agreement (i) is legal, valid, binding, and enforceable, (ii) is a
perfected security interest in all Collateral, and (iii) is a first priority
security interest in all Collateral subject only to Permitted Liens. For
purposes of this Agreement, "Permitted Liens" means:
(i) liens for taxes, assessments or other
governmental charges or levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with generally accepted accounting
principles shall have been made;
(ii) liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business;
(iii) liens incurred in the ordinary course of
business in connection with worker's compensation, unemployment insurance or
other forms of governmental insurance or benefits or other similar statutory
obligations;
(iv) liens to secure obligations on surety or
appeal bonds;
(v) rights of setoff and banker's liens with
respect to funds on deposit in a financial institution in the ordinary course of
business;
3
<PAGE> 6
(vi) minor defects of title that are not, in the
aggregate, material to the use of such property;
(vii) purchase money security interests and leases
in favor of third party vendors;
(viii) other liens on property at the time
acquired by the Company; and
(ix) liens in favor of third party lenders which
are subordinated to the liens in favor of the Noteholders.
1.6 Covenants of the Company.
(a) The Company agrees: (i) to pay all Secured Obligations when
due; (ii) to indemnify the Collateral Agent and Noteholders against all losses,
claims, demands, liabilities and expenses of every kind caused by property
subject hereto; (iii) to pay all costs and expenses, including reasonable
attorneys' fees, incurred by the Collateral Agent and Noteholders in the
perfection, preservation, realization, enforcement and exercise of their rights,
powers and remedies hereunder; (iv) to permit the Collateral Agent and
Noteholders to exercise their powers; (v) to execute, deliver and file such
documents as are necessary or appropriate to create, perfect and continue the
security interests contemplated hereby; and (vi) not to change its chief place
of business or the places where the Company keeps any of its Collateral or the
Company's records concerning the Collateral and Proceeds without first giving
the Collateral Agent and Noteholders written notice of the address to which the
Company is moving same.
(b) The Company agrees with regard to the Collateral and
Proceeds: (i) where applicable, to insure the Collateral, with the Collateral
Agent on behalf of the Noteholders as loss payee or additional insured, in form
and amounts, under agreements, against risks and liabilities, and with insurance
companies satisfactory to the Collateral Agent; (ii) to operate the Collateral
in accordance with all applicable statutes, rules and regulations relating to
the use and control thereof, and not to use any Collateral for any unlawful
purpose or in any way that would void any insurance required to be carried in
connection therewith; (iii) not to remove the Collateral from the Company's
premises without the Collateral Agent's prior written consent and upon such
terms and conditions as the Collateral Agent may require, except (A) for
deliveries to buyers in the ordinary course of the Company's business and (B)
Collateral which consists of mobile goods as defined in the Arizona Uniform
Commercial Code, in which case the Company agrees not to remove or permit the
removal of such Collateral from its state of domicile for a period in excess of
thirty (30) calendar days; (iv) to pay when due all license fees, registration
fees and other charges in connection with any Collateral; (v) not to permit any
lien on the Collateral or Proceeds, except (A) liens in favor of the Collateral
Agent and Noteholders and (B) other Permitted Liens, as defined below in this
Section 1.6; (vi) not to sell, hypothecate or otherwise dispose of any of the
Collateral or Proceeds, or any interest therein, except in compliance with this
Agreement; (vii) to permit the Collateral Agent and Noteholders to inspect the
Collateral at any reasonable time during normal business hours with advance
notice; (viii) to keep, in accordance with generally accepted accounting
principles, complete and accurate records regarding all Collateral and Proceeds,
and to permit the Collateral Agent and Noteholders to inspect the same and make
copies thereof at any reasonable time during normal
4
<PAGE> 7
business hours with advance notice; (ix) not to commingle Collateral or
Proceeds, or collections thereunder, with other property; (x) from time to time,
when requested by the Collateral Agent or any Noteholder, to prepare and deliver
to the Collateral Agent and Noteholders a schedule of all Collateral and
Proceeds subject to this Agreement; and (xi) to provide any service and do any
other acts which may be necessary to maintain, preserve and protect all
Collateral, and as appropriate and applicable, to keep the Collateral in good
and saleable condition and repair, to deal with the Collateral in accordance
with the standards and practices adhered to generally by users and manufacturers
of like property, and to keep all Collateral and Proceeds free and clear of all
defenses, rights of offset and counterclaims, except for Permitted Liens.
1.7 Powers of Collateral Agent. The Company appoints the Collateral
Agent its true attorney in fact to perform any of the following powers, which
are coupled with an interest, and are irrevocable until termination of this
Agreement: (a) to perform any obligation of the Company hereunder in the
Company's name or otherwise; (b) to give notice of the Collateral Agent and
Noteholders' rights in the Collateral and Proceeds, to enforce the same and make
extension agreements with respect thereto; (c) to release persons liable on
Collateral or Proceeds and to give receipts and acquittances and compromise
disputes in connection therewith; (d) to release security; (e) to resort to
security in any order; (f) to prepare, execute, file, record or deliver notes,
assignments, schedules, designation statements, financing statements,
continuation statements, termination statements, statements of assignment,
applications for registration or like papers to perfect, preserve or release the
Collateral Agent and Noteholders' interest in the Collateral and Proceeds; (g)
to take cash, instruments for the payment of money and other property to which
the Collateral Agent and Noteholders' are entitled; (h) to verify facts
concerning the Collateral and Proceeds; (i) to endorse, collect, deliver and
receive payment under instruments for the payment of money; (j) to prepare,
adjust, execute, deliver and receive payment under insurance claims, and to
collect and receive payment of and endorse any instrument in payment of loss or
returned premiums or any other insurance refund or return, and to apply such
amounts received by the Collateral Agent and Noteholders toward repayment of the
Secured Obligations or, where appropriate, replacement of Inventory; (k) to
exercise all rights, powers and remedies which the Company would have, but for
this Agreement, with respect to all Collateral and Proceeds subject hereto; (l)
to enter onto the Company's premises in inspecting the Collateral; and (m) to
preserve or release the interest evidenced by chattel paper to which the
Collateral Agent and Noteholders are entitled hereunder and to endorse and
deliver evidences of title incidental thereto; and (n) to do all acts and things
and execute all documents in the name of the Company or otherwise, deemed by the
Collateral Agent as necessary, proper and convenient in connection with the
preservation, perfection or enforcement of its rights and the rights of the
Noteholders hereunder.
1.8 Payment of Premiums, Taxes, Charges, Liens and Assessments. The
Company agrees to pay, prior to delinquency, all insurance premiums, taxes,
charges, liens and assessments against the Collateral and Proceeds, and upon the
failure of the Company to do so, the Collateral Agent, at its option, may pay
any of them and shall be the sole judge of the legality or validity thereof and
the amount necessary to discharge the same. Any such payments made by the
Collateral Agent shall be obligations of the Company, due and payable
immediately upon demand, together with interest at a rate determined in
accordance with the provisions of Section 12 hereof, and shall be secured by the
Collateral and Proceeds, subject to all terms and conditions of this Agreement.
5
<PAGE> 8
1.9 Events of Default. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" under this Agreement: (a) any default in the
payment or performance of any Secured Obligation or any defined event of default
under the Promissory Notes; (b) any representation or warranty made by the
Company herein shall prove to be incorrect, false or misleading in any material
respect when made; and (c) the Company shall fail to observe or perform any
obligation or agreement contained herein after notice and an opportunity to cure
the same for 30 days after notice.
1.10 Remedies. Upon the occurrence of any Event of Default which has
not been satisfactorily cured within the appropriate cure period, the Collateral
Agent shall have the right to declare immediately due and payable all or any
Secured Obligations. The Collateral Agent shall have all other rights, powers,
privileges and remedies granted to a secured party upon default under the
Arizona Uniform Commercial Code or otherwise provided by law, including without
limitation, the right to sell the Collateral and Proceeds and to contact all
persons obligated to the Company on any Collateral or Proceeds and to instruct
such persons to deliver all Collateral and/or Proceeds directly to the
Collateral Agent. All rights, powers, privileges and remedies of the Collateral
Agent shall be cumulative. No delay, failure or discontinuance of the Collateral
Agent in exercising any right, power, privilege or remedy hereunder shall affect
or operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Any waiver, permit,
consent or approval of any kind by the Collateral Agent of any default
hereunder, or any such waiver of any provisions or conditions hereof, must be in
writing and shall be effective only to the extent set forth in writing. It is
agreed that public or private sales, for cash or on credit, to a wholesaler or
retailer or investor, or user of property of the types subject to this
Agreement, or public auction, are all commercially reasonable since differences
in the sales prices generally realized in the different kinds of sales are
ordinarily offset by the differences in the costs and credit risks of such
sales. While an Event of Default exists: (a) the Company will deliver to the
Collateral Agent from time to time, as requested by the Collateral Agent,
current lists of all Collateral and Proceeds; (b) the Company will not dispose
of any of the Collateral or Proceeds except on terms approved by the Collateral
Agent; (c) at the Collateral Agent's request, the Company will assemble and
deliver all Collateral and Proceeds, and books and records pertaining thereto,
to the Collateral Agent at a reasonably convenient place designated by the
Collateral Agent; and (d) the Collateral Agent may, at reasonable times and upon
reasonable notice to the Company, enter onto the Company's premises and take
possession of the Collateral. With respect to any sale by the Collateral Agent
of any Collateral subject to this Agreement, the Company hereby expressly grants
to the Collateral Agent the right to sell such Collateral using any or all of
the Company's trademarks, trade names, trade name rights and/or proprietary
labels or marks.
1.11 Disposition of Collateral and Proceeds. Any proceeds of any
disposition of the Collateral or Proceeds, or any part thereof, may be applied
by the Collateral Agent to the payment of expenses incurred by the Collateral
Agent in connection with the foregoing, including reasonable attorneys' fees,
and the balance of such proceeds shall be applied by the Collateral Agent toward
the payment of the Secured Obligations in such order of application as the
Collateral Agent may from time to time elect.
6
<PAGE> 9
ARTICLE 2
THE COLLATERAL AGENT
2.1 Appointment. The Noteholders hereby confirm the appointment of
International Investment Partners, Ltd. as Collateral Agent. The Collateral
Agent hereby confirms its acceptance of such appointment.
2.2 Authorization and Action. The Noteholders hereby authorize the
Collateral Agent to take such action as agent on their behalf and to exercise
such powers under this Agreement and the Promissory Notes as are delegated to
the Collateral Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto. The Collateral Agent may but,
notwithstanding anything to the contrary herein, shall not be required to
exercise any discretion or take any action under this Agreement except upon the
instructions of Noteholders contemplated below, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Noteholders holding a majority of the
aggregate principal amount of the Promissory Notes then outstanding (other than
Promissory Notes held by the Company or any of its officers, directors, or
subsidiaries), and such instructions shall be binding upon the Noteholders, and
the Collateral Agent shall not be liable to the Company or the Noteholders for
any action taken or omitted at the direction of the Noteholders; provided
however, that the Collateral Agent shall not be required to take any action that
exposes the Collateral Agent, in its sole judgment, to personal liability or
that is contrary to this Agreement or applicable law. The Collateral Agent
agrees to give to the Noteholders prompt notice of each notice given to it by
the Company pursuant to Sections 1.3 and 1.5 of this Agreement.
2.3 Collateral Agent's Reliance, Etc. Neither the Collateral Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Collateral Agent: (i) may treat each Noteholder as the holder of the debt
resulting from the Promissory Notes until the Collateral Agent receives notice
of an assignment by such Noteholder; (ii) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to the Noteholders and shall not be responsible to
the Noteholders for any statements, warranties or representations made by any
person other than the Collateral Agent in or in connection with this Agreement;
(iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
Promissory Notes or any other instrument or document furnished pursuant hereto
or thereto; and (vi) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopy, cable or telex) believed by it to
be genuine and signed or sent by the proper party or parties.
2.4 International Investment Partners, Ltd. and its Affiliates.
International Investment Partners, Ltd. and its affiliates may own securities of
the Company and engage in any kind of business with the Company or any
subsidiaries and any person who may do business with or own
7
<PAGE> 10
securities of the Company, all as if International Investment Partners, Ltd. was
not the Collateral Agent and without any duty to account therefor to the
Noteholders.
2.5 Noteholder Credit Decision. Each Noteholder acknowledges that it
has, independently and without reliance upon the Collateral Agent or any other
Noteholder and based on the documents and information as it has deemed
appropriate, made its own decision to enter into this Agreement. Each Noteholder
also acknowledges that it will, independently and without reliance upon the
Collateral Agent or any other Noteholder and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
2.6 Indemnification. The Company agrees to indemnify the Collateral
Agent from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Collateral Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Collateral Agent under the this
Agreement; provided however, that the Company shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Collateral
Agent's gross negligence or willful misconduct. Each Noteholder severally agrees
to indemnify the Collateral Agent (to the extent not promptly reimbursed by the
Company) from and against such Noteholder's ratable share of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Collateral Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Collateral Agent under this Agreement; provided however, that no Noteholder
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Collateral Agent's gross negligence or willful misconduct.
Without limitation of the foregoing, each Noteholder agrees to reimburse the
Collateral Agent promptly upon demand for its ratable share of any costs and
expenses payable by the Company under Section 1.8 to the extent that the
Collateral Agent is not promptly reimbursed for such costs and expenses by the
Company.
2.7 Successor Collateral Agents. The Collateral Agent may resign at
any time by giving written notice thereof to the Noteholders and the Company and
may be removed at any time with or without cause by the Noteholders holding at
least 51% of the principal amount of the Promissory Notes then outstanding. Upon
any such resignation or removal, the Noteholders holding at least 51% of the
principal amount of the Promissory Notes then outstanding shall have the right
to appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been so appointed by the Noteholders, and shall have accepted such
appointment, within 30 days after the retiring Collateral Agent's giving of
notice of resignation or the Noteholders' removal of the retiring Collateral
Agent, then the retiring Collateral Agent may, on behalf of the Noteholders,
appoint a successor Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Noteholders may request, in order to continue the
perfection of the security interests granted or purported to be granted
hereunder, such successor Collateral Agent shall succeed to and become vested
with all the rights, powers,
8
<PAGE> 11
discretion, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Collateral Agent's resignation or
removal hereunder as Collateral Agent, the provisions of this Article 2 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Collateral Agent under this Agreement.
ARTICLE 3
MISCELLANEOUS
3.1 Costs, Expenses and Attorneys' Fees. The Company shall pay to the
Collateral Agent immediately upon demand reasonable fees for time expended and
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees incurred by the Collateral Agent in
exercising any right, power, privilege or remedy conferred by this Agreement or
in the enforcement thereof, including any of the foregoing incurred in
connection with any bankruptcy proceeding relating to the Company or the
valuation of the Collateral and/or Proceeds, including without limitation, the
seeking of relief from or modification of the automatic stay or the negotiation
and drafting of a cash collateral order. All of the foregoing shall be paid by
the Company with interest at a rate per annum equal to ten percent (10%).
3.2 Statute of Limitations. Until all Secured Obligations shall have
been paid in full, the power of sale and all other rights, powers, privileges
and remedies granted to the Collateral Agent hereunder shall continue to exist
and may be exercised by the Collateral Agent at any time and from time to time
irrespective of the fact that the Secured Obligations or any part thereof may
have become barred by any statute of limitations, or that the liability of the
Company may have ceased, unless such liability shall have ceased due to the
payment in full of all Secured Obligations.
3.3 Miscellaneous. Presentment, protest, notice of protest, notice of
dishonor and notice of nonpayment are waived with respect to any Proceeds to
which the Collateral Agent is entitled hereunder; any right to direct the
application of payments or security for any of the Secured Obligations, or
indebtedness of customers of the Company, and any right to require proceedings
against others or to require exhaustion of security are waived; and consent to
extensions, forbearances or alterations of the terms of any of the Secured
Obligations, the release or substitution of security, and the release of
guarantors is given with respect to Proceeds subject to this Agreement; provided
however, that in each instance the Collateral Agent believes in good faith that
the action in question is commercially reasonable in that it does not
unreasonably increase the risk of nonpayment of the Secured Obligations to which
the action applies. Until all Secured Obligations shall have been paid in full,
the Company shall not have any right of subrogation or contribution, and the
Company hereby waives any benefit of or any right to participate in any of the
Collateral or Proceeds or any other security now or hereafter held by the
Collateral Agent.
3.4 Notices. All notices and other communications hereunder shall be
in writing and shall be sufficiently given if made by hand delivery, by
telecopier, or by registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
9
<PAGE> 12
If to Collateral Agent
or the Noteholders: International Investment Partners, Ltd.
80 Abbeyville Road
Lancaster, PA 17603
FAX: (717) 892-6853
Attn: Jeremy P. Feakins
If to the Company: IPVoice.com, Inc.
5050 No. 19th Avenue, Suite 416/417
Phoenix, Arizona 85015
FAX: (602) 335-1577
Attn: Barbara Will
All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three business days
after being deposited in the mail, postage prepaid, if delivered by mail; and
when receipt is acknowledged, if telecopied.
3.5 Governing Law; Successors and Assigns. This Agreement shall be
governed by and construed in accordance with the laws of the State of Arizona,
and shall be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties.
3.6 Severability of Provisions. If any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.
3.7 Location of Principal Office. The Company warrants that its chief
executive office is located at 5050 No. 19th Avenue, Suite 416/417, Phoenix,
Arizona 85015.
3.8 Counterparts. This Agreement may be executed in any number of
counterparts but shall constitute one and the same agreement.
The Company warrants that any Collateral consisting of goods (except
goods in transit) is located or domiciled at its chief executive offices.
10
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto executed this Agency and
Security Agreement as of the date first above written.
IPVOICE.COM, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
INTERNATIONAL INVESTMENT
PARTNERS, LTD., as Collateral Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NOTEHOLDERS
Name:
---------------------------------
By:
-----------------------------------
Its:
----------------------------------
Address:
------------------------------
------------------------------
------------------------------
Contact Person:
-----------------------
Telephone:
----------------------------
Facsimile:
----------------------------
Principal Amount
of Promissory Notes:
------------------
Certificate Nos.:
---------------------
11
<PAGE> 14
NOTEHOLDERS
Name:
---------------------------------
By:
-----------------------------------
Its:
----------------------------------
Address:
------------------------------
------------------------------
------------------------------
Contact Person:
-----------------------
Telephone:
----------------------------
Facsimile:
----------------------------
Principal Amount
of Promissory Notes:
------------------
Certificate Nos.:
---------------------
NOTEHOLDERS
Name:
---------------------------------
By:
-----------------------------------
Its:
----------------------------------
Address:
------------------------------
------------------------------
------------------------------
Contact Person:
-----------------------
Telephone:
----------------------------
Facsimile:
----------------------------
Principal Amount
of Promissory Notes:
------------------
Certificate Nos.:
---------------------
12
<PAGE> 1
Exhibit 12(a)-8
[IPVoice.com, Inc. Letterhead]
Dear IPVoice Investor:
- -
The Board of Directors and Senior Management of IPVoice.com, Inc. are pleased to
inform you of an Offering that we believe is beneficial both to the company and
to its investors.
Please review carefully the enclosed documents that explain this Offering, and
be sure to consult your advisors so you are sure to understand it. You should
come to your own independent view of this Offering. In this letter, we would
like to express our view to you.
1. THE REASON FOR THE OFFERING
In our February 1999 Private Offering, you purchased one or more Units that each
contained a Note, a Warrant for shares of common stock, and Convertible
Preferred shares.
The Convertible Preferred shares convert into common stock in the event of a
non-cured default in payment of the note. If that were to happen, the conversion
could result in the Unitholders having control of the Company.
This conversion feature is the reason for this Offering. The conversion feature
has impaired our ability to secure further funding. We are negotiating with an
investment group for an investment of up to $5 million within the next twelve
months. This investment group has indicated that it is unwilling to make the
investment unless we reacquire at least 50% of the preferred stock as a result
of our offers to you.
Many of you have been with us from the beginning and have seen us through the
final development stages of our product and network. We are now operational.
With Denver, New York, LA and London up now and Miami, Dallas, Chicago, Atlanta
and Phoenix to follow over the next two months, we will begin aggressively
marketing our product and service.
MultiCom, which is the backbone of our system, is still the only product of its
type in the industry and we feel it will set a new standard for managing voice
over the Internet.
<PAGE> 2
The Company appreciates that you have supported it as an investor. This
Offering, the Company believes, is beneficial both to its investors and the
Company.
2. DESCRIPTION OF THE OFFERING
The Offering is in two parts. You may accept either one, or neither.
The first part, which is recommended by the Company, allows you to convert a
Unit into 17,832 shares of common stock of the Company. The average value of our
common stock over the six-week period from February 16 ? March 29, 2000, was
$3.4240. At this figure, the calculated value of these shares is $61,056.77.
The closing price of the stock on the OTC Bulletin Board on April 20, 2000 was
$2.03125, resulting in a calculated value of these shares on that date of
$36,221.25.
If you accept these shares, the date that they become freely trading will be
based on the date of purchase of the Unit, and not from the date you accept the
Offering. This beneficial tacking feature is not available if, for example, you
were to exercise the warrant in the Unit. The waiting period would be calculated
from the date of the exercise, rather than from the date of the purchase of the
Unit.
Delano Group Securities and other companies deal in restricted shares. For
information purposes only, we have enclosed a letter from them that describes
their services.
Your other option (in addition to doing nothing) is to allow us to amend your
note(s) to secure them with certain of our assets and to make them convertible
at your option into our common stock at any time at a fixed rate, in return for
certain concessions.
Remember; please acquaint yourself with the details of this offering that are in
the enclosed documents. The above outline was intended only to provide the
company's point of view.
3. HOW TO TAKE ADVANTAGE OF THIS OFFERING
It is simple to convert your Unit(s) or to have your Notes(s) amended. You need
only return the Election form that is attached to the Offering Circular. The
Company will take care of the rest of the transaction, and will promptly issue
to you, at the expiration of the offering, the new certificates that evidence
your new investment in IPVoice. There is no transaction cost to you.
4. CONSENT FORMS REQUESTED
Whatever your choice, we ask that you return a signed Consent Form that gives
your consent to this Offering. It, too, is attached to the Offering Circular.
This will help the Arizona Unit holders (the Consent is otherwise not needed for
this Offering).
The securities involved in this Offering, like the Units themselves. involve a
high degree of risk. That is why it is critical that you fully acquaint yourself
with the details of this Offering. We hope that, when you fully understand the
purpose for and effect of this Offering, you will agree with
<PAGE> 3
the Company that it is the right thing to do for both the Company and for the
Unit holders.
Please call me with any questions.
Sincerely,
Barbara Will
