United States
Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the Period Ended December 31, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the Transition Period From _____________to
_____________.
Commission File Number 33-92894
--------
PREFERRED VOICE, INC.
Delaware 75-2440201
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6500 Greenville Avenue
Suite 570
Dallas, TX 75206
- -------------------------------- -----------------------------------
(Address of Principal Executive (Zip Code)
Offices)
(214) 265-9580
---------------------------------------------------------
(Registrant's Telephone Number, including area code.)
Not Applicable
----------------------------------------------------------
(Former name, Former Address and Former Fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
------ ------
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practical date.
Common Stock, $ 0.001 Par Value - 13,103,879 shares as of December 31, 1999.
Transitional Small Business Format Yes No X
----- -----
<PAGE>
INDEX
Preferred Voice, Inc.
Part I. Financial Information 1
Item 1. Financial Statements 1
Balance Sheets-December 31, 1999, December 31, 1998
and March 31, 1999. 1
Statements of Operations-Three Months Ended December 31, 1999
and 1998, and Nine Months Ended December 31, 1999 and 1998,
and for the Year Ended March 31, 1999. 3
Statements of Cash Flows-Nine Months Ended December 31, 1999
and 1998 and for the Year Ended March 31, 1999. 4
Notes to Financial Statements - December 31, 1999. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Part II. Other Information 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Preferred Voice, Inc.
Balance Sheets
December 31, 1999 and 1998 and March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31, December 31, March 31,
1999 1998 1999
Assets (Unaudited) (Unaudited) (Audited)
Current Assets:
Cash and Cash Equivalents $ 1,935,896 $ 376 $ 41,750
Accounts Receivable, net of allowance 391,382 323 860
for doubtful accounts of $ -0-, $-0-
and $-0- respectively
Employee Receivables -0- -0- 2,500
------------------- ------------------- ------------------
Total Current Assets $ 2,327,278 $ 699 $ 45,110
------------------- ------------------- ------------------
Property and Equipment:
Computer Equipment $ 285,453 $ 329,950 $ 223,046
Furniture and Fixtures 24,495 16,934 16,934
Office Equipment 10,393 12,493 12,493
Computer Software 274,145 153,412 190,063
LESS: Accumulated Depreciation (249,957) (103,281) (161,049)
------------------- ------------------- ------------------
Net Property and Equipment $ 349,069 $ 409,508 $ 281,487
------------------- ------------------- ------------------
Other Assets:
Deposits $ 85,114 $ 81,012 $ 81,535
Deferred Stock Issue Costs -0- 10,000 -0-
Prepaid Expenses 761,018 761,018 761,018
------------------- ------------------- ------------------
Total Other Assets $ 846,132 $ 852,030 $ 842,553
------------------- ------------------- ------------------
Total Assets $ 3,522,479 $1,262,237 $1,169,150
=================== =================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31, December 31, March 31,
1999 1998 1999
Liabilities and Stockholder's Deficit (Unaudited) (Unaudited) (Audited)
Current Liabilities:
Accounts Payable $ 319,946 $ 362,711 $ 363,834
Accrued Operating & Vacation Expenses 180,400 18,822 19,611
Accrued Payroll and Related Tax 151,006 173,291 226,755
Accrued Interest Payable 219,392 264,826 248,967
Notes Payable 90,866 463,866 103,866
Notes Payable-Related Parties -0- 100,000 100,000
------------------- ------------------- -------------------
Total Current Liabilities $ 961,610 $ 1,383,516 $ 1,063,033
------------------- ------------------- -------------------
Long Term Debt:
Notes Payable-Related Parties $ -0- $ 590,946 $ 590,946
Deferred Gain on Sale-Leaseback Transaction -0- 136,242 -0-
Long-Term Debt, Net Of Current Maturities -0- -0- 253,000
------------------- ------------------- -------------------
Total Long Term Debt $ -0- $ 727,188 $ 843,946
------------------- ------------------- -------------------
Commitments and Contingencies (Note H)
Stockholders Deficit:
Common Stock, $0.001 par value
20,000,000 shares authorized;
shares issued 13,170,546, 9,113,045
and 9,695,681 respectively $ 13,170 $ 9,113 $ 9,695
Additional Paid In Capital 8,737,244 4,935,721 5,192,033
Accumulated Deficit (6,187,677) (5,791,433) (5,937,689)
Treasury Stock - at cost (1,868) (1,868) (1,868)
------------------- ------------------- -------------------
Total Stockholder Deficit $ 2,560,869 $ (848,467) $ (737,829)
------------------- ------------------- -------------------
Total Liabilities and Stockholder Deficit $ 3,522,479 $ 1,262,237 $ 1,169,150
=================== =================== ===================
</TABLE>
<PAGE>
Preferred Voice, Inc.
Statements of Operations
For The Three Months Ended December 31, 1999 and 1998
And For the Nine Months Ended December 31, 1999 and 1998
And For the Year Ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31, March 31,
1999 1998 1999 1998 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
--------------- ---------------- ---------------- ---------------- ----------------
Sales $ 393,005 $ 2,610 $ 1,215,650 $ 2,610 $ 180,383
Cost of Sales 265,884 1,072 401,965 1,486 15,033
--------------- ---------------- ---------------- ---------------- ----------------
Gross Profit (loss) $ 127,121 $ 1,538 $ 813,685 $ 1,124 $ 165,350
--------------- ---------------- ---------------- ---------------- ----------------
Costs and Expenses:
General & Administrative 482,479 162,107 1,071,651 483,160 768,024
Interest Expense 5,247 44,409 27,137 151,133 176,752
--------------- ---------------- ---------------- ---------------- ----------------
Total Costs and Expenses $ 487,726 $ 206,516 $ 1,098,788 $ 634,293 $ 944,776
--------------- ---------------- ---------------- ---------------- ----------------
Gain/(Loss) Before Income Tax $ (360,605) $ (204,978) $ (285,103) $ (633,169) $ (779,426)
Provision for Income Tax -0- -0- -0- -0- -0-
--------------- ---------------- ---------------- ---------------- ----------------
Loss Before Extraordinary Item $ (360,605) $ (204,978) $ (285,103) $ (544,341) (779,426)
=============== ================ ================ ================ ================
Extraordinary Item:
Gain from Extinguishment of Debt 5,125 -0- 35,116 88,828 88,828
(less applicable income taxes
of -0-)
(Note K)
Net Loss $ (355,480) $ (204,978) $ (249,987) $ (544,341) $ (690,598)
=============== ================ ================ ================ ================
Per Share Amounts:
Gain/(Loss) from Operations $ (0.03) $ (0.03) $ (0.03) $ (0.10) $ (0.11)
Gain from Extinguishment of Debt $ - $ - $ - $ 0.01 $ 0.01
Net Gain/Loss (Per Share) $ (0.03) $ (0.03) $ (0.03) $ (0.09) $ (0.10)
</TABLE>
<PAGE>
Preferred Voice, Inc.
Statement of Cash Flows
For the Nine Months Ended December 31, 1999 and 1998
And For the Year Ended March 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31, December 31, March 31,
1999 1998 1999
(Unaudited) (Unaudited) (Audited)
------------------- ------------------- -------------------
Cash Flows from Operating Activities:
Cash Received from customers $ 823,868 $ 7,532 $ 179,510
Cash Paid to suppliers and employees (1,306,402) (354,519) (500,572)
Interest Paid (16,978) -0- -0-
------------------- ------------------- -------------------
Net Cash used by Operating Activities $ (499,512) $ (346,987) $ (321,062)
------------------- ------------------- -------------------
Cash Flows from Investing Activities:
Capital Expenditures $ 158,592) $ (114,222) $ (151,772)
Proceeds from Sale of Fixed Assets 250 1,300 1,300
------------------- ------------------- -------------------
Net Cash used by Investing Activities $ (158,342) $ (112,922) $ (150,472)
------------------- ------------------- -------------------
Cash Flows from Financing Activities:
Proceeds from Sale of Stock $ 2,570,000 -0- -0-
Proceeds from Notes Payable 200,000 298,000 351,000
Note Principal Payments (218,000) (20,000) (20,000)
Proceeds from Sale-Leaseback Transaction -0- 100,000 100,000
------------------- ------------------- -------------------
Net Cash provided by Financing Activities $ 2,552,000 $ 378,000 $ 431,000
------------------- ------------------- -------------------
Net Increase (Decrease) in Cash and
Cash Equivalents $ 1,894,146 $ (81,900) $ (40,534)
Cash and Cash Equivalents:
Beginning of Period 41,750 82,285 82,284
------------------- ------------------- -------------------
End of Period $ 1,935,896 $ 376 $ 41,750
=================== =================== ===================
Supplemental Schedule of non-cash investing and
financing activities:
Issuance of Common Stock in $ 852,383 $ 1,622,914 $ 1,879,809
Exchange for Debt
------------------- ------------------- -------------------
Total Non-Cash Investing Activities $ 852,383 $ 1,622,914 $ 1,879,809
=================== =================== ===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31, December 31, March 31,
1999 1998 1999
(Unaudited) (Unaudited) (Audited)
------------------- ------------------- -------------------
Reconciliation of Net Gain/(Loss) to Net
Cash used by Operating Activities:
Net Gain/(Loss) $ (249,987) $ (544,342) $ (690,598)
------------------- ------------------- -------------------
Adjustments to Reconcile Net Loss to Net Cash
used by Operating Activities:
Depreciation $ 90,484 $ 22,375 $ 80,113
Amortization - 2,869 2,869
(Gain) Loss on Sale of Fixed Assets 275 (216) (186)
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (390,921) (323) (860)
(Increase) Decrease in Employee Receivables 2,900 - (2,500)
(Increase) Decrease in Deposits (3,579) 3,398 2,875
(Increase) Decrease in Prepaid Expenses -0- 38,982 38,982
(Increase) Decrease in Deferred Debt Issue Costs -0- (7,131) -0-
Increase (Decrease) in Accounts Payable (20,115) 20,864 58,635
Increase (Decrease) in Accrued Expenses 71,431 116,537 189,608
------------------- ------------------- -------------------
Total Adjustments $ (249,525) $ 197,355 $ 369,536
------------------- ------------------- -------------------
Net Cash used by Operating Activities $ (499,512) $ (346,987) $ (321,062)
=================== =================== ===================
</TABLE>
<PAGE>
Note A - General organization:
Preferred Voice, Inc. (the "Company") is a Delaware corporation
incorporated in 1992. On February 25, 1997, the Company's stockholders approved
changing the name of the Company to better reflect the nature of the Company's
business. The Company commenced business on May 13, 1994, and was in the
development stage until August 1, 1995. The Company provides products and
services to the telecommunications industry throughout the United States and
maintains its principal offices in Dallas, Texas. The Company has not presented
financial statements for the period from incorporation in 1992 through May 13,
1994, as the Company did not begin its planning and organizational activities
until May 13, 1994. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates. Certain
prior year amounts have been reclassified for comparison purposes.
Note B - Summary of significant accounting policies:
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include
amounts due from banks.
Accounts receivable
In the normal course of business, the Company extends unsecured credit to
its customers with payment terms generally 30 days. Because of the credit risk
involved, management has provided an allowance for doubtful accounts which
reflects its opinion of amounts which will eventually become uncollectible. In
the event of complete nonperformance by the Company's customers, the maximum
exposure to the Company is the outstanding accounts receivable balance at the
date of nonperformance.
Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed on the straight-line
method for financial reporting purposes and the double declining method for
income tax purposes.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized.
The useful lives of property and equipment for purposes of computing
depreciation are as follows:
Computer equipment 5 years
Furniture and fixtures 5 years
Office equipment 5 years
Software development 3 years
Income taxes
Income taxes are accounted for using the liability method under the
provisions of SFAS 109 "Accounting for Income Taxes".
Fair value of financial instruments
The Company defines the fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. Financial instruments included in the Company's financial
statements include cash and cash equivalents, trade accounts receivable, other
receivables, other assets, notes payable and long-term debt. Unless otherwise
disclosed in the notes to the financial statements, the carrying
<PAGE>
value of financial instruments is considered to approximate fair value due to
the short maturity and characteristics of those instruments. The carrying value
of long-term debt approximates fair value as terms approximate those currently
available for similar debt instruments.
Revenue recognition
The Company is engaged as a provider of telecommunication products and
services. Generally, the Company recognizes revenue under the accrual method
when its services and products are provided. During the nine month period ended
December 31, 1999, license fees and system sales were the two primary sources of
revenue, even though there were revenues from distributor fees and customer
tests. A one-time only license fee is paid by customers who purchase the
Company's VIP system. This gives the customer the right to utilize the Company's
software applications on the customer's own equipment. The license fee income
was derived from one major customer and was recognized when the contract became
final. The license fee income was $-0-, and $570,000 for the three month and the
nine month period ended December 31, 1999, respectively; and $-0- and $-0-for
the three month and the nine month period ended December 31, 1998, respectively,
and $-0- for the period ended March 31, 1999. System sales revenues are
recognized when the customer orders the system. The system sale income was
$390,992, and $586,488 for the three month and the nine month period ended
December 31, 1999, respectively; and $-0- and $-0-for the three month and the
nine month period ended December 31, 1998, respectively, and $-0- for the period
ended March 31, 1999. A one-time only distributor fee is paid by master
distributors in order to obtain distribution rights to the Company's products
and services. The distributor fee income was recognized when the contract became
final. The distributor fee income was $-0-, and $25,000 for the three month and
the nine month period ended December 31, 1999, respectively; and $-0- and
$-0-for the three month and the nine month period ended December 31, 1998,
respectively and $170,000 for the period ended March 31, 1999
Loss per share
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share, during the year ended March 31,
1998. SFAS No. 128 reporting requirements replace primary and fully-diluted
earnings per share (EPS) with basic and diluted EPS. Basic EPS is calculated by
dividing net income (available to common stockholders) by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. The adoption of SFAS
128 did not affect per share amounts for 1997 as previously reported.
Loss per share is based on the weighted average number of shares
outstanding of 11,152,246 and 10,390,308 for the three months and nine months
ending December 31, 1999, respectively; 7,659,740 and 6,544,100 for the three
months and nine months ending December 31, 1998, respectively and 7,205,065 for
the period ending March 31, 1999.
Amortization
Fees and other expenses associated with the issuance of subordinated
convertible debentures are being amortized on the straight-line method over the
term of the debentures beginning in April, 1995. Amortization expense was
$-0-and $-0- for the three months and nine months ended December 31, 1999,
respectively; and $-0- and $2,869 for the three months and nine months ended
December 30, 1998, respectively; and $2,869 for the fiscal year ended March 31,
1999.
Transfers and servicing of financial assets and extinguishment of liabilities
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. SFAS No. 125 is effective for transfers and servicing of financial
assets and extinguishment of liabilities occurring after December 31, 1996, and
is to be applied prospectively. This statement provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components approach
that focuses on control. It distinguishes transfers of financial assets that are
sales from transfers that are secured
<PAGE>
borrowings. Adoption of this statement did not have a material impact on the
Company's financial position, results of operations or liquidity.
Impairment of long-lived assets and long-lived assets to be disposed of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
April 1, 1997. This statement requires that long-lived assets and certain
identified intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison on the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this statement did not have a material impact on the Company's
financial position, results of operations or liquidity.
Comprehensive income
The Company adopted the provisions of SFAS No. 130, Reporting Comprehensive
Income on April 1, 1998. SFAS No. 130 requires that an enterprise report, by
major components and as a single total, the change in its net assets during the
period from nonowner sources. Adoption of this statement did not have a material
impact on the Company's financial position, results of operations or cash flows,
as the Company did not have any changes in net assets resulting from nonowner
sources during the periods covered by the accompanying financial statements.
Segments of an enterprise and related information
The Company adopted the provisions of SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information on April 1, 1998. SFAS No. 131
establishes annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services, geographic areas
and major customers. Adoption of this statement did not have a material impact
on the Company's financial position, results of operations or cash flows, as any
effects are limited to the form and content of its disclosures.
New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No.1-33
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Adoption of this statement is not expected to impact the
Company's financial position, results of operations or cash flows. This
statement is effective for fiscal years beginning after June 15, 1999.
Note C - Notes payable:
Notes payable consist of the following at December 31, 1999 and 1998, and March
31, 1999:
Dec. 31, Dec. 31, March 31,
1999 1998 1999
-------------- -------------- -------------
Outside interests $ 50,866 $ 50,866 $ 50,866
Related parties 0 690,946 690,946
-------------- -------------- -------------
$ 50,866 $ 741,812 $ 741,812
============== ============== =============
<PAGE>
Note payable to outside interests include:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dec. 31, Dec. 31, March 31,
1999 1998 1999
----------- ----------- ------------
Note payable, Brite Voice Systems, Inc., dated January 31,
1997. Note is unsecured and payable in monthly installments of
$8,112, including interest at the rate of prime + 2 (8.5% at
March 31, 1999 and 1998) through January 1, 1998. $50,866 $50,866 $50,866
=========== =========== ============
</TABLE>
The note to Brite Voice Systems, Inc. is currently in dispute and beginning
April 1996, the Company has discontinued the accrual of interest expense.
Interest expense charged to operations related to the note payable to outside
parties was $-0- for each of the three month and nine month periods ended
December 31, 1999 and 1998, and March 31, 1999 respectively.
Notes payable to related parties include:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dec. 31, Dec. 31, March 31,
1999 1998 1999
------------ ------------ -------------
Notes payable to Pegasus Settlement Trust (PST), a stockholder of the
Company. The beneficiary and a trustee of PST are officers of the
Company. The notes are unsecured and bear interest at rates ranging from
9% to 10% and prime rate (8.5% at March 31, 1999 and 1998) with the
principal and accrued interest payable at maturity on various dates
through December 31, 1998. Subsequent to the balance sheet date of March
31, 1999, the notes were converted into 787,928 shares of common stock
on April 6, 1999. 0 590,946 590,946
Notes payable to a stockholder of the Company. The notes are unsecured
and bear interest at 10% per annum with the principal and interest due
on various maturity dates through October 16, 1999. Subsequent to the
balance sheet date of March 31, 1999, the notes were paid in full on
December 30, 1999. 0 100,000 100,000
------------ ------------ -------------
Total related party notes payable $ 0 $690,946 $ 690,946
Less current portion 0 690,946 100,000
------------ ------------ -------------
Long-term portion $ 0 $ 0 $ 590,946
============ ============ =============
</TABLE>
Related party notes payable that were converted into common stock subsequent to
the balance sheet date have been classified as long-term liabilities in the
accompanying 1999 balance sheet.
Interest expense charged to operations related to the related party notes
payable was $2,500 and $8,485 for the three months and the nine months ended
December 31, 1999, respectively; and $17,059 and $46,925 for the three months
and the nine months ended December 31, 1998, respectively; and $64,199 for the
fiscal year ended March 31, 1999.
<PAGE>
Note D - Long-term debt:
Long-term debt consisted of the following at December 31, 1999 and
1998, and March 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dec. 31, Dec. 31, March 31,
1999 1998 1999
----------- ------------ --------------
Notes payable dated various dates from May 20, 1996 through
September 9, 1996, secured by common stock with principal and
accrued interest due at maturity on various dates through
September 9, 1998. 216,250 warrants to purchase shares of common
stock at $3.00 per share expiring on various dates through
September 9, 1998 were issued to the note holders. These notes
were converted into 1,555,458 shares of common stock on various
dates through June 30, 1999. 30,000 220,000 60,000
Notes payable to Bisbro Investments Co., Ltd. The notes are
unsecured and bear interest at 10% per annum with the
principal and interest due on various maturity dates through
January 5, 2000. These notes are convertible into shares of
common stock at a conversion price of $.50 per share.
Subsequent to the balance sheet date, the notes were converted
into 120,000 shares of common stock on June 18, 1999. 0 50,000 60,000
Notes payable to Universal Asset Fund, Ltd. The notes are
unsecured and bear interest at 10% per annum with the principal
and interest due on various maturity dates through November 25,
1999. These notes are convertible into shares of common stock at a
conversion price of $.50 per share. Subsequent to the balance
sheet date, the notes were converted into 80,000 shares of common
stock on June 18, 1999. 0 40,000 40,000
Notes payable to Capital Growth Fund, Ltd. The notes are unsecured
and bear interest at 10% per annum with the principal and
interest due on various maturity dates through August 14, 1999.
These notes are convertible into shares of common stock at a
conversion price of $.50 per share. Subsequent to the balance
sheet date, the notes were converted into 186,000 shares of
common stock on June 18, 1999. 0 93,000 93,000
Note payable to Equity Communication. This note is unsecured,
non-interest bearing, and due upon demand. 10,000 10,000 10,000
Note payable to an individual. This note is unsecured and bears
interest at 12% per annum with the principal and interest due on
March 30, 2000. This note is convertible into shares of common
stock at a conversion price of $1.00 per share. This note was paid
in full on June 16, 1999. 0 0 43,000
----------- ------------ --------------
$ 40,000 $ 413,000 $306,000
Less current portion 40,000 413,000 53,000
----------- ------------ --------------
Total $ 0 $ 0 $ 253,000
=========== ============ ==============
</TABLE>
Current maturities of long-term debt obligations that were converted into
common stock subsequent to the balance sheet date have been classified as
long-term liabilities in the accompanying 1999 balance sheet.
<PAGE>
Interest expense charged to operations related to the long term debt was
$2,747 and $18,652 for the three months and the nine months ended December 31,
1999, respectively; and $26,068 and $80,991 for the three months and the nine
months ended December 31, 1998, respectively; $112,553 for the fiscal year ended
March 31, 1999.
Note E - Common stock:
Stock purchase warrants
At December 31, 1999, the Company had outstanding warrants to purchase
2,303,203 shares of the Company's common stock at prices which ranged from $0.50
per share to $4.00 per share. The warrants are exercisable at any time and
expire on dates ranging from June 12, 2000 to March 31, 2004. At December 31,
1999, 2,303,203 shares of common stock were reserved for that purpose.
Common stock reserved
At December 31, 1999, shares of common stock were reserved for the
following purposes:
Exercise of stock warrants 2,303,203
Exercise and future grants of stock
options and stock appreciation rights 423,000
--------------
2,726,203
==============
Note F - Income taxes:
The Company uses the liability method of accounting for income taxes under
the provisions of Statement of Financial Accounting Standards No. 109. Under the
liability method, a provision for income taxes is recorded based on taxes
currently payable on income as reported for federal income tax purposes, plus an
amount which represents the change in deferred income taxes for the year.
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax reporting basis of the Company's
assets and liabilities. The major areas in which temporary differences give rise
to deferred taxes are accounts receivable, accrued liabilities, start-up
expenditures, accumulated depreciation, and net operating loss carryforwards.
Deferred income taxes are classified as current or noncurrent depending on the
classification of the assets and liabilities to which they relate. Deferred
income taxes arising from temporary differences that are not related to an asset
or liability are classified as current or noncurrent depending on the years in
which the temporary differences are expected to reverse.
The provision for income taxes consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sept. 30, Sept. 30, March 31,
1999 1998 1999
--------------- ---------------- ---------------
Current income taxes $ 0 $ 0 $ 0
Change in deferred income taxes due
to temporary differences $ 0 $ 0 $ 0
--------------- ---------------- ---------------
$ 0 $ 0 $ 0
=============== ================ ===============
</TABLE>
Deferred tax (liabilities) assets consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
--------------- ----------------
Accumulated depreciation $ (30,000) $ (22,000)
--------------- ----------------
Gross deferred tax liabilities $ (30,000) $ (22,000)
--------------- ----------------
Accounts receivable $ 0 $ 29,000
Accrued liabilities 2,000 2,000
Start-up expenditures 7,000 18,000
Net operating loss carryforward 2,010,000 1,727,000
--------------- ----------------
Gross deferred tax assets $ 2,019,000 $ 1,776,000
Valuation allowance (1,989,000) (1,754,000)
--------------- ----------------
Net deferred tax assets $ 30,000 $ 22,000
--------------- ----------------
$ 0 $ 0
=============== ================
1999 1998
--------------- ----------------
The increases in the deferred tax valuation
allowance are as follows: $ 235,000 $ 128,000
=============== ================
</TABLE>
The Company has recorded a valuation allowance amounting to the entire
deferred tax asset balance because of the Company's uncertainty as to whether
the deferred tax asset is realizable. However, if the Company is able to utilize
the deferred tax asset in the future, the valuation allowance will be reduced
through a credit to income.
The Company had available at March 31, 1999, a net operating loss
carryforward of approximately $5,910,000 which can be used to offset future
taxable income through the year 2019.
Note G - Stock option plan:
On November 1, 1994, the Company adopted a stock award and incentive plan
which permits the issuance of options and stock appreciation rights to selected
employees and independent contractors of the Company. The plan reserved 450,000
shares of common stock for grant, of which 27,000 shares have been purchased,
and provides that the term of each award be determined by the committee of the
Board of Directors (Committee) charged with administering the plan.
Under the terms of the plan, options granted may be either nonqualified or
incentive stock options, and the exercise price, determined by the Committee,
may not be less than the fair market value of a share on the date of grant.
Stock appreciation rights granted in tandem with an option shall be exercisable
only to the extent the underlying option is exercisable and the grant price
shall be equal to the exercise price of the underlying option. At December 31,
1999, options to purchase 412,750 shares at exercise prices of $0.20 to $1.50
per share had been granted. No stock appreciation rights had been granted at
December 31, 1999.
<PAGE>
Note H - Commitments and contingencies:
Lease commitments
The Company has entered into a non-cancelable operating lease for office
facilities under a lease arrangement commencing on February 3, 1998 and expiring
on December 31, 2003.
Minimum future rentals to be paid on non-cancelable leases as of December
31, 1999 for each of the next five years and in the aggregate are:
Year ending
March 31, Amount
---------------- -----------------
2000 $ 25,074
2001 101,060
2002 103,540
2003 104,856
2004 80,364
-----------------
$ 414,894
=================
Total rent expense charged to operations was $19,988 and $47,999 for the
three months and the nine months ended December 31, 1999, respectively; and
$6,846 and $20,383 for the three months and the nine months ended December 31,
1998, respectively; $27,416 for the fiscal year ended March 31, 1999.
Note I - Barter transaction:
On June 3, 1996, the Company entered into a media purchase agreement for
the promotion of its products and services with Proxhill Marketing, Ltd.
(Proxhill). Under the terms of the agreement, the Company committed to purchase
$1,200,000 of media advertising time in exchange for 200,000 shares of common
stock at a value of $4.00 per share, and $400,000 in cash. The agreement is for
a period of five years. For each purchase of media advertising time, the Company
will receive a barter credit equal to 66.67% of the transaction value with the
remaining balance payable in cash. A prepaid barter credit in the amount of
$761,018 is included in other assets in the accompanying balance sheet as of
December 31, 1999 and 1998 and March 31, 1999, respectively. In connection with
this agreement, the Company issued to Proxhill 50,000 warrants to purchase the
Company's common stock at a price of $4.00 per share. The options expire June 3,
2001.
Note J - Sale - leaseback transaction:
The Company entered into a sale-leaseback arrangement during each of the
years ended March 31, 1999 and 1998. Under these arrangements, the Company sold
telecommunications equipment and leased it back for a period of three years.
Both leases were originally accounted for as operating leases. The gain of
$66,119 and $70,124 realized in these transactions had originally been deferred
and amortized to income in proportion to rental expense over the term of the
lease. In November 1998, the Company agreed to issue 579,971 shares of common
stock to the lessor in exchange for the release of the liability for all future
and past due lease payments.
Note K - Extinguishment of debt:
During the periods ended December 31, 1999 and 1998 and March 31, 1999, the
Company negotiated settlements of amounts owed to certain of its vendors and
employees. The negotiated settlements resulted in a reduction of the Company's
accounts payable and accrued operating expenses in the amount of $5,125 and
$35,116 for the three months and the nine months ended December 31, 1999,
respectively; and $-0- and $88,828 for the three months and the nine months
ended December 31, 1998, respectively; and $88,828 for the fiscal year ended
March 31, 1999 which has been reported as an extraordinary item in the
accompanying statements of operations.
<PAGE>
Note L - Going concern:
The Company has incurred substantial operating losses to date. In June
1995, the Company issued 600,000 shares of its common stock to Star Resources,
Inc. (Star), a public company, for $24,000. The Company then filed a
registration statement with the Securities and Exchange Commission to allow Star
to distribute to its stockholders the 600,000 shares of common stock. Upon
completion of the Star distribution, the Company became a separate public
company. The Company has raised, and intends to continue to raise, additional
capital through subsequent offerings of its common stock in over-the-counter
securities markets.
On June 3, 1999, the Company entered into a software license agreement with
KMC Telecom Holdings, Inc. (KMC). Under the terms of the agreement, KMC paid the
Company an initial license fee of $570,000. The agreement is for a period of 10
years and provides for a total of 39 installations and grants KMC the ability to
add up to 81 additional installations. The agreement also calls for KMC to pay
the Company a monthly license fee ranging from $1,000 to $3,500 per month for
each software and hardware installation beginning in the 25th month after each
installation. The Company anticipates having the initial 39 installations
completed by June 2000 which would obligate KMC to pay the Company monthly
license fees of $131,500, subject to certain adjustments, beginning July 2002
and continuing through July 2009.
On July 1, 1999 the Company closed a private offering of 320,000 shares of
the Company's $.001 par value common stock for total proceeds of $400,000.
On December 22, 1999 the Company closed a private offering of 1,500,000
shares of the Company's $.001 par value common stock for total proceeds of
$2,250,000.
In view of these matters, realization of a major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations. Management
believes that actions presently being taken to meet the Company's financial
requirements will provide the Company the opportunity to continue as a going
concern.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in, or incorporated by reference into this report.
Overview
The Company integrates and markets speech recognition technologies to
be used by telecommunications providers, to enhance a provider's overall package
of voice services through voice dialing. The Company's key product, the Voice
Integrated Platform ("VIP System" or the "System"), successfully integrates the
Philips Speech Pearl Natural Dialog, Philips Speech Processing's speech
recognition technology, with the Company's proprietary software application. The
System is designed to utilize standard industrial grade hardware and a
rack-mountable microprocessor-based computing system, with a Windows NT
operating system. The System has been developed for collocation at the
telecommunication provider's central office switch. With the VIP System, a
provider's subscriber can use natural conversational speech to access a variety
of enhanced service applications. The Company believes that the Philips speech
recognition technology that its System incorporates is superior to other similar
technologies and that its VIP System's enhanced services will become standard
telephony options offered by telecommunications providers in the 21st century.
The Company was incorporated in Delaware in 1992 under the name of
Direct Connect, Inc. and began operations in the telecommunications industry
under the name of Preferred Telecom, Inc. in April 1995. The Company began as a
long distance telecommunications carrier with a variety of enhanced services,
however, in February 1997 the Company sold to Brite Voice Systems, Inc.
("Brite") a number of assets, including the Company's end-user customer base.
The Company elected to sell these assets because it believed that the growth
prospects of this aspect of the business were limited. The Company has since
focused on enhanced telephone services that feature speech recognition
technology, believing that there are larger market opportunities in offering
enhanced speech recognition services to telecommunications providers.
From June of 1997 until April of 1998, all corporate activities were
focused on the development and testing of services to be deployed to the public
through a platform the Company calls the VIP System. In late April 1998 the
first operational VIP System was collocated in a switch environment. The initial
sales activity focused its efforts on introducing the concept of voice dialing
to prospective customers to gauge consumer response with respect to pricing,
features and viability of the services provided.
In December of 1998, the Company realized that the resources necessary
to sell and market its services directly to subscribers would require extensive
amounts of working capital and began researching venues which already had
inherent customer bases. The first distribution channel that the Company
explored was master distributors in various cities and states around the
country. The Company believes this will be a source of customer addition once
the Company is in the position to locate its VIP Systems in the master
distributor marketing areas. The second is through revenue sharing directly with
incumbent local exchange carriers ("ILECs"), wireless communications carriers
("WCCs"), and competitive local exchange carriers ("CLECs"). This avenue is
extremely attractive to the Company because these entities already have customer
bases and the infrastructure to service large number of customers. In June of
1999, the Company announced its revenue sharing marketing plan to wireline and
wireless telecommunications providers providing services such as The Smart
Linesm, Emma-The Perfect Receptionistsm, ** Talksm, My One Special Number sm ,
and Safety*Talksm.
The Company is at a very early stage of implementing its business plan.
It is subject to risks inherent in the establishment and deployment of
technology with which the consumer has very little experience. As voice
recognition becomes more prevalent in everyday life, such as in computer
programs, reservation systems and telecommunications information systems, the
public will be more apt to accept and utilize its many features. In order
<PAGE>
for the Company to succeed it must secure adequate financial and human resources
to meet its requirements; establish and maintain relationships with
telecommunications providers; facilitate integration with various switch
environments; establish a lead time for delivery of hardware; achieve user
acceptance for its services; generate reasonable margins on its services; deploy
and install VIP Systems on a timely and acceptable schedule; respond to
competitive developments; mitigate risk associated with obtaining patents and
copyrights and other protections of intellectual property; and continually
update its software to meet the needs of end users. Failure to achieve these
objectives could adversely effect the Company's business, operating results and
financial condition.
Results of Operations
For the nine month period ended December 31,1999, the Company recorded
net loss of $249,982, or $.03 per share compared to a net loss of $544,341, or
$.09 per share for the nine month period ended December 31, 1998. For the three
month period ended December 31, 1999, the Company recorded a net loss of
$355,480, or $.03 per share compared to a net loss of $204,978, or $.03 per
share for the three month period ended December 31, 1998.
Total Revenue
Total revenue for the nine months period ended December 31, 1999, was
$1,215,650 compared to $2,610 for the nine months period ended December 31,
1998. Of the revenue booked in the nine months period ended December 31, 1999,
47% was generated from one-time licensing fees to KMC Telecom Holdings, 48% was
from sales of its VIP systems, 2.5% from customer tests, 2% from master
distributor fees for specific marketing rights, and the remaining .5% from
service fees for the Company's "Emma the Perfect Receptionist" and "Smart Line".
Total revenue for the three months period ended December 31, 1999 was $393,005
compared to $2,610 for the three month period ended December 31, 1998. Of the
revenue booked in the three months period ended December 31, 1999, 99% was from
sales of the Company's VIP systems, and 1% from service fees for the Company's
"Emma the Perfect Receptionist" and "Smart Line". For the fiscal period ended
March 31, 1999, revenues of $180,383 were generated -- 94% from master
distributor fees and the remaining 6% from service fees from the Company's end
user customers. The Company does not anticipate significant revenue growth from
either direct sales to ILECs and WCCs as negotiated with KMC or through master
distributorships. However the Company does anticipate significant revenue growth
in the second half of the year 2000 from its revenue sharing agreements and as
more ILEC, WCC and CLEC agreements are completed.
Cost of Sales
Cost of sales for the nine months period ended December 31, 1999 was
$401,966 compared to $1,486 for the six months period ended December 31, 1998.
Cost of sales for the three months period ended December 31, 1999 was $265,884
compared to $1,072 for the three months period ended December 31, 1998. For the
nine months period ended December 31, 1999, 78% of costs were for VIP system
hardware purchased by KMC, 8% direct costs associated with the closing of the
KMC licensing agreement, and 14% for network infrastructure such as
collocations, connectivity, system access and long distance.
Selling, General and Administrative
Selling, general and administrative expenses for the nine months period
ended December 31, 1999 was $1,071,371 compared to $488,635 for the nine months
period ended December 31, 1998. Selling, general and administrative expenses for
the three months period ended December 31, 1999 was $482,479 compared to
$162,107 for the three months period ended December 31, 1998. The increase in
the period ended December 31, 1998 and the same period in 1999 was primarily due
from the staffing increases and increased marketing efforts of the Company's
revenue sharing program to wireline and wireless carriers.
The Company expects that selling, general and administrative expenses
will increase significantly as it begins its full deployment of its sales and
marketing plan. To date the Company infrastructure has focused on system
development and now must support its sales, marketing and customer service
departments, as such, the Company believes fiscal 2000 will experience increases
in cost related to increased headcount, lease space, and general overhead.
<PAGE>
Extraordinary Items
The Company has recognized income from the extinguishment of debt of
$35,116 and $88,828 respectively for the nine months period ended December 31,
1999 and 1998. For the three months period ended December 31, 1999 and 1998, the
Company recognized income from extinguishment of debt of $5,125 and $-0-,
respectively.
Liquidity and Capital Resources
The Company's cash and cash equivalents at December 31, 1999 were
$1,935,896 an increase of $1,894,146 from $41,750 at March 31, 1999. Liquidity
was enhanced by the licensing of the Company's VIP application software to KMC
Telecom Holdings, Inc. (KMC). Under the terms of the agreement, KMC paid the
Company an initial license fee of $570,000. The agreement is for a period of 10
years and provides for a total of 39 installations and grants KMC the ability to
add up to 81 additional installations. The agreement also calls for KMC to pay
the Company a monthly license fee ranging from $1,000 to $3,500 per month for
each software and hardware installation beginning in the 25th month after each
installation. The Company anticipates having the initial 39 installations
completed by June 2000 which would obligate KMC to pay the Company monthly
license fees of $131,500, subject to certain adjustments, beginning July 2002
and continuing through July 2009.
On July 1, 1999, pursuant to Section 4(2) of the Securities Act, the
Company conducted an offering of 320,000 shares of the Company's common stock at
$1.25 per share providing the Company with $400,000 working capital.
On December 22, 1999, pursuant to Section 4(2) of the Securities Act,
the Company conducted an offering of 1,500,000 shares of the Company's common
stock at $1.50 per share providing the Company with $2,250,000 working capital.
Future Obligations
During the next twelve months, the Company plans, subject to raising
adequate capital, to increase substantially the marketing of its VIP Systems, to
introduce new services, and to continue refining the services it currently
provides. Subject to the Company's ability to fund the cost, management expects
the Company to hire or contract with approximately 50 additional persons during
the next twelve (12) months, primarily to support its expanding marketing
activities and system installations. At February 17, 2000, the Company employed
22 employees.
The ability of the Company to raise capital is, in the opinion of
management, the primary constraint on the implementation of its business plan.
Management estimates that during the next twelve (12) months, the Company will
require approximately $15,000,000 of equity and/or long term debt to finance its
costs of marketing, system deployment, and continued refinement of its services.
In addition, the Company will be required to obtain extensions of its current
debt or raise additional funds of approximately $500,000 to retire its debt.
There is no assurance that the Company will be able to secure any such financing
or extensions of its current debt.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, many companies' computer systems and/or
software may need to be upgraded or replaced to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the potential effects associated with such compliance.
The Company has reviewed its own software products and believes that
there will be no adverse impact with the Year 2000 date change. All of the
Company's products are designed to record, store, and process calendar dates
occurring before and after January 1, 2000 with the same full year accuracy
(i.e. four numeric characters instead of two).
<PAGE>
An impact analysis has been conducted to identify the risk of failure
within the Company's in-house computer systems. The Company believes that there
will be no adverse impact with the Year 2000 date changes. However, this risk to
the Company's business relates not only to the Company's computer systems, but
also to some degree to those of the Company's suppliers and customers. The
Company has developed a policy to ensure that all key customers, suppliers and
strategic partners operate and provide Year 2000 compliant systems and software.
[The Company is currently collecting certifications from third parties on
compliance.] Also, there is a risk that existing and potential customers may not
purchase the Company's products in the future if the computer systems of such
existing or potential customers are adversely impacted by the Year 2000 date
changes.
Based on the information to date, the Company has completed its Year
2000 compliance review and made necessary modifications. However, the issue is
complex and no business can guarantee that there will be no Year 2000 problems.
Some commentators have stated that a significant amount of litigation will arise
out of Year 2000 compliance issues, and the Company is aware of a growing number
of lawsuits against other software vendors. Because of the unprecedented nature
of such litigation, it is uncertain to what extent the Company may be affected
by it.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not involved in any material legal proceedings.
Item 2. Changes in Securities.
(a) There have been no material changes in securities during the period
(b) There have been no material changes in the class of securities or the
rights of the holders of the registered securities.
(c) Recent Sales of Unregistered Securities
On October 5, 1999, the Company issued two warrants. The Company issued Bisbro
Investments Company, Ltd. ("Bisbro") a warrant to purchase 177,703 shares of
common stock of the Company at an exercise price of $1.25 replacing warrant #71
issued to Bisbro after they exercised their right to purchase 22,297 shares out
of the original 200,000 shares that could be purchased under that warrant. The
Company also issued Invest, Inc. a warrant to purchase 100,000 shares of common
stock of the Company under the same terms as the Bisbro warrant.
On December 1, 1999, the Company issued Alexander Associates a warrant to
purchase 50,000 shares of common stock of the Company at an exercise price of
$1.50 per share on or before December 1, 2004.
On December 10, 1999, the Company issued Steve Chizzik a warrant to purchase
35,000 shares of common stock of the Company at an exercise price of $1.60 per
share on or before December 10, 2001.
On December 10, 1999, the Company issued Howard Isaacs a warrant to purchase
5,000 shares of common stock of the Company at an exercise price of $1.60 per
share on or before December 10, 2001.
On December 10, 1999, the Company issued William Reininger a warrant to purchase
5,000 shares of common stock of the Company at an exercise price of $1.60 per
share on or before December 10, 2001.
On December 10, 1999, the Company issued Elizabeth Valdes a warrant to purchase
5,000 shares of common stock of the Company at an exercise price of $1.60 per
share on or before December 10, 2001.
On December 22, 1999, the Company issued 1,500,000 shares of common stock to a
number of private investors at a purchase price of $1.50 per share for an
aggregate offering price and total proceeds of $2,250,000.00.
<PAGE>
None of these transactions involved an underwriter and no underwriting discounts
or commissions were paid. These transactions are exempt from registration under
the Securities Act of 1933 (the "Securities Act") pursuant to Section 4(2) of
the Securities Act.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibits
<TABLE>
<S> <C>
4.1* Warrant Certificate No. 99 issued to Bisbro Investments Company, Ltd., dated October 5, 1999
4.2* Warrant Certificate No. 100 issued to Invest, Inc., dated October 5, 1999
4.3* Warrant Certificate No. 101 issued to Alexander Associates, dated December 1, 1999
4.4* Warrant Certificate No. 102 issued to Steve Chizzik, dated December 10, 1999
4.5* Warrant Certificate No. 103 issued to Howard Isaacs, dated December 10, 1999
4.6* Warrant Certificate No. 104 issued to William Reininger, dated December 10, 1999
4.7* Warrant Certificate No. 105 issued to Elizabeth Valdes, dated December 10, 1999
4.8* Form of Subscription Agreement and Schedule
27* Financial Data Schedule
</TABLE>
* Filed herewith.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PREFERRED VOICE, INC.
February 18, 2000 /s/ G. Ray Miller
- ------------------ --------------------------------------
Date G. Ray Miller
President, Chief Executive Officer and
Chairman of the Board of Directors
(Principal Executive Officer)
February 18, 2000 /s/ Mary G. Merritt
- ----------------- --------------------------------------
Date Mary G. Merritt
Secretary, Treasurer and Vice President
of Finance
(Principal Financial Officer)
These Warrants have not been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be sold, transferred, assigned or otherwise
disposed of unless the person requesting the transfer of the Warrants shall
provide an opinion of counsel to Preferred Voice, Inc. (the "Company") (both
counsel and opinion to be satisfactory to the Company) to the effect that such
sale, transfer, assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding statute.
No. 99 177,703 Warrants
-------------- ----------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for value
received Bisbro Investment Company, Ltd.(the "Initial Warrant Holder") or
registered assigns is the owner of the number of warrants specified above, each
of which entitles the holder thereof to purchase, at any time on or before the
Expiration Date hereinafter provided, one fully paid and non-assessable share of
common Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.25 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.25 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
November 12, 2000, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
-2-
<PAGE>
registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
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<PAGE>
in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
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8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 5th day of October, 1999.
PREFERRED VOICE, INC.
BY:/s/
----------------------
Chairman of the Board
Attest:
/s/
- --------------------------
Secretary
These Warrants have not been registered under the Securities Act of 1933, as
amended (the "Act"), and may not be sold, transferred, assigned or otherwise
disposed of unless the person requesting the transfer of the Warrants shall
provide an opinion of counsel to Preferred Voice, Inc. (the "Company") (both
counsel and opinion to be satisfactory to the Company) to the effect that such
sale, transfer, assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding statute.
No. 100 100,000 Warrants
-------------- ----------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for value
received Invest, Inc. (the "Initial Warrant Holder") or registered assigns is
the owner of the number of warrants specified above, each of which entitles the
holder thereof to purchase, at any time on or before the Expiration Date
hereinafter provided, one fully paid and non-assessable share of common Stock,
$0.001 par value per share, of Preferred Voice, Inc., a Delaware corporation
(the "Company"), at a purchase price of $1.25 per share of Common Stock payable
in lawful money of the United States of America, in cash, by official bank or
certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.25 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
November 12, 2000 or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
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registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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<PAGE>
securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
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in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
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8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 5th day of October, 1999.
PREFERRED VOICE, INC.
BY:/s/
----------------------
Chairman of the Board
Attest:
/s/
- --------------------------
Secretary
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These Warrants have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred Voice, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 101 50,000 Warrants
-------------- ----------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Alexander Associates (the "Initial Warrant Holder") or registered
assigns is the owner of the number of warrants specified above, each of which
entitles the holder thereof to purchase, at any time on or before the Expiration
Date hereinafter provided, one fully paid and non-assessable share of common
Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.50 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.50 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
December 1, 2004, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
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registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
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in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
-8-
<PAGE>
8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 1st day of December, 1999.
PREFERRED VOICE, INC.
BY:/s/
----------------------
Chairman of the Board
Attest:
/s/
- --------------------------
Secretary
-9-
These Warrants have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred Voice, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 102 35,000 Warrants
--------------- ----------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Steve Chizzik (the "Initial Warrant Holder") or registered
assigns is the owner of the number of warrants specified above, each of which
entitles the holder thereof to purchase, at any time on or before the Expiration
Date hereinafter provided, one fully paid and non-assessable share of common
Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.60 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.60 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
December 10, 2001, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
-2-
<PAGE>
registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
-3-
<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
-4-
<PAGE>
securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
-5-
<PAGE>
rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
-6-
<PAGE>
Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
-7-
<PAGE>
in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock
of any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
-8-
<PAGE>
8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 10th day of December, 1999.
PREFERRED VOICE, INC.
BY:/s/
---------------------
Chairman of the Board
Attest:
/s/
- ---------------------------
Secretary
-9-
These Warrants have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred Voice, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 103 5,000 Warrants
--------------- ---------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Howard Isaacs (the "Initial Warrant Holder") or registered
assigns is the owner of the number of warrants specified above, each of which
entitles the holder thereof to purchase, at any time on or before the Expiration
Date hereinafter provided, one fully paid and non-assessable share of common
Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.60 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.60 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
December 10, 2001, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
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registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
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<PAGE>
in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of
any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
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8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 10th day of December, 1999.
PREFERRED VOICE, INC.
BY:/s/
---------------------
Chairman of the Board
Attest:
/s/
- -----------------------
Secretary
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These Warrants have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred Voice, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 104 5,000 Warrants
--------------- ---------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received William Reininger (the "Initial Warrant Holder") or registered
assigns is the owner of the number of warrants specified above, each of which
entitles the holder thereof to purchase, at any time on or before the Expiration
Date hereinafter provided, one fully paid and non-assessable share of common
Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.60 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.60 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
December 10, 2001, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
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<PAGE>
registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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<PAGE>
securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
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<PAGE>
in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of
any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
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8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 10th day of December, 1999.
PREFERRED VOICE, INC.
BY:/s/
---------------------
Chairman of the Board
Attest:
/s/
- ----------------------------
Secretary
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These Warrants have not been registered under the Securities Act of
1933, as amended (the "Act"), and may not be sold, transferred,
assigned or otherwise disposed of unless the person requesting the
transfer of the Warrants shall provide an opinion of counsel to
Preferred Voice, Inc. (the "Company") (both counsel and opinion to be
satisfactory to the Company) to the effect that such sale, transfer,
assignment or disposition will not involve any violation of the
registration provisions of the Act or any similar or superseding
statute.
No. 105 5,000 Warrants
--------------- ---------
PREFERRED VOICE, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Elizabeth Valdes (the "Initial Warrant Holder") or registered
assigns is the owner of the number of warrants specified above, each of which
entitles the holder thereof to purchase, at any time on or before the Expiration
Date hereinafter provided, one fully paid and non-assessable share of common
Stock, $0.001 par value per share, of Preferred Voice, Inc., a Delaware
corporation (the "Company"), at a purchase price of $1.60 per share of Common
Stock payable in lawful money of the United States of America, in cash, by
official bank or certified check, or by wire transfer ("Warrants").
1. Warrant; Purchase Price
Each Warrant shall entitle the holder thereof to purchase one share of
Common Stock, $0.001 par value per share, of the Company ("Common Stock") during
the period commencing on the date hereof and ending on the Expiration Date. The
purchase price payable upon exercise of a Warrant shall be $1.60 (the "Purchase
Price"). The Purchase Price and number of Warrants evidenced by this Warrant
Certificate are subject to adjustment as provided in Article 7. Common Stock
purchased or subject to purchase pursuant to the Warrants shall be called
"Warrant Shares" herein.
2. Exercise; Expiration Date
2.1 Each Warrant is exercisable, at the option of the holder, at any
time after issuance and on or before the Expiration Date. In the case of
exercise of less than all the Warrants represented by a Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate for the balance of such
Warrants.
2.2 The term "Expiration Date" shall mean 5:00 p.m. Dallas time on
December 10, 2001, or if such date shall in the State of Texas be a holiday or a
day on which banks are authorized to close, then 5:00 p.m. Dallas time the next
following day which in the State of Texas is not a holiday or a day on which
banks are authorized to close.
<PAGE>
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and transfer
of Warrant Certificates.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, the Company may deem and treat the registered holder as the
absolute owner thereof.
3.3 The Company shall register upon its books any transfer of a Warrant
Certificate upon surrender of same to the Company accompanied (if so required by
the Company) by a written instrument of transfer duly executed by the registered
holder or by a duly authorized attorney. Upon any such registration of transfer,
new Warrant Certificate(s) shall be issued to the transferee(s) and the
surrendered Warrant Certificate shall be cancelled by the Company. A Warrant
Certificate may also be exchanged, at the option of the holder, for new Warrant
Certificates representing in the aggregate the number of Warrants evidenced by
the Warrant Certificate surrendered.
4. Securities Law Registration
4.1 The Warrant Shares will not be registered under the Securities Act
or any state securities law and shall not be transferrable unless registered or
an exemption from registration is available. A legend to the foregoing effect
will be placed on any certificate representing such shares.
4.2 If, at any time within five (5) years of the date of this Warrant
Certificate, the Company proposes for any reason to register any of its
securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Warrant Shares, it shall
each such time give written notice to the holder of these Warrants or the
Warrant Shares ("Holder" for purposes of this Section 4) of the Company's
intention to register such securities, and, upon the written request, given
within thirty (30) days after receipt of any such notice, of the Holders of the
Warrants and Warrant Shares outstanding, to register any of the Warrant Shares,
the Company shall cause the Warrant Shares so requested by the Holder to be
registered, whether such Warrant Shares are outstanding or subject to purchase
hereby, to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by the Holder of the Warrant Shares so
registered; provided, however, that the Warrant Shares as to which registration
had been requested need not be included in such registration if in the opinion
of counsel for the Company and counsel for the Holder the proposed transfer by
the Holder may be effected without registration under the Securities Act and any
certificate evidencing the Warrant Shares need not bear any restrictive legend.
In the event that any registration pursuant to this Section 4.2 shall be, in
whole or in part, an underwritten offering of securities of the Company, then
(i) any request pursuant to this Section 4.2 to register Warrant Shares may
specify that such shares are to be included in the underwriting on the same
terms and conditions as the shares of the Company's capital stock otherwise
being sold through underwriters under such
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<PAGE>
registration, (ii) if the managing underwriter of such offering determines that
the number of shares to be offered by all selling shareholders must be reduced,
then the Company shall have the right to reduce the number of shares registered
on behalf of the Holder, provided that the number of shares to be registered on
behalf of the Holder shall not be reduced to such an extent that the ratio of
the shares which the Holder is permitted to register to the total number of
shares the Holder owns is less than that ratio for any other selling
shareholder, and (iii) the Holder will be bound by the terms of the underwriting
agreement and the conditions imposed by the underwriter on selling shareholders.
4.3 If and whenever the Company is under an obligation pursuant to the
provisions of this Warrant Certificate to register any Warrant Shares, the
Company shall, as expeditiously as practicable:
(a) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with respect to
such shares and use its best efforts to cause such registration
statement to become and remain effective for at least nine (9) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least nine months and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Warrant Shares covered by such registration
statement;
(c) furnish to the Holder a suitable number of copies of all
preliminary and final prospectuses to enable the Holder to comply with
the requirements of the Securities Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under such securities or
blue sky laws of such jurisdictions as the Holder shall reasonably
request and where registration or qualification will not involve
unreasonable expense or delay and provided, however, that the Company
will not have to register or qualify in any state in which solely
because of such registration or qualification it would have to qualify
to do business; and the Company shall do any and all other reasonable
acts and things which may be necessary or advisable to enable the
Holder to consummate the public sale or other disposition of the
Warrant Shares in such jurisdiction;
(e) notify the Holder, at any time when a prospectus relating
to the Warrant Shares is required to be delivered under the Securities
Act within the appropriate period mentioned in clause (b) of this
Section 4.3, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of the Holder prepare and furnish to
the Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
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<PAGE>
delivered to the purchasers of the Warrant Shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing; and
(f) exercise its best efforts to furnish, at the request of
the Holder on the date that the Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if the Warrant
Shares are not being sold through underwriters, on the date that the
registration statements with respect to such Warrant Shares are
declared effective, (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration,
addressed to the Holder, stating that such registration statement has
become effective under the Securities Act and that (i) to the best of
the knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the
Securities Act; (ii) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form
in all material respects with the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder
(except that such counsel need express no opinion as to financial
statements and other financial data contained therein); and (iii) such
counsel has no reason to believe that either the registration statement
or the prospectus, or any amendment or supplement thereto, contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and (2) a letter dated such date, from the
independent certified public accountants of the Company, stating that
they are independent certified public accountants within the meaning of
the Securities Act and the rules and regulations of the Commission
thereunder and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the rules
and regulations of the Commission thereunder. Such letter from the
independent certified public accountants shall additionally cover such
other financial matters (including information as to periods ending not
more than five business days prior to the date of such letter) as the
Holder may reasonably request.
If the Holder exercises its rights to have the Warrant Shares
registered, it is understood that the Holder shall furnish to the Company such
information regarding the securities held by it and the intended method of
disposition thereof as the Company shall reasonably request and as shall be
required in connection with the action to be taken by the Company.
4.4 All Registration Expenses incurred in connection with any
registration pursuant to this Warrant Certificate shall be borne by the Company.
All Selling Expenses in connection with any registration pursuant to this
Warrant Certificate shall be borne by the Holder.
For purposes of Section 4.4, all expenses incurred by the company in
complying with Section 4.3, including, without limitation, all registration and
filing fees, fees and expenses of complying with
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<PAGE>
securities and blue sky laws, printing expenses, and fees and disbursements of
counsel and of independent public accountants for the Company (including the
expense of any special audits in connection with any such registration), are
herein called "Registration Expenses", and all underwriting discounts and
selling commissions applicable to the Warrant Shares covered by any such
registration and all fees and disbursements of counsel for the Holder are herein
called "Selling Expenses".
4.5 In the event of any registration of any Warrant Shares under the
Securities Act pursuant to this Warrant Certificate, the Company shall indemnify
and hold harmless the Holder, each underwriter of such shares, if any, each
broker, and any other person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which the Warrant Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document incident to registration or qualification of any Warrant Shares
pursuant to paragraph 4.3(d) above, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the company in connection with such registration or registration or
qualification under such state securities or blue sky laws; and shall reimburse
the Holder and such underwriter, broker or other person acting on behalf of the
Holder and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by the Holder or such underwriter specifically for use
in the preparation thereof. The indemnity agreement set forth in this Section
4.5, insofar as it relates to any such omission, alleged omission, untrue
statement or alleged untrue statement made in a preliminary prospectus but
eliminated or remedied in the final prospectus, shall not inure to the benefit
of any of the beneficiaries named in this Section 4.5 whose responsibility it
was to send, furnish or give a copy of the final prospectus to a person
asserting a claim for which indemnification is sought (the "Claimant") unless a
copy of the final prospectus was so sent, furnished or given to the Claimant at
or prior to the time such action is required by the Act.
Before Warrant Shares held or purchasable by the Holder shall be
included in any registration pursuant to this Warrant Certificate, the Holder
and any underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph) the Company, each director of the Company, each officer of
the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any failure of the Holder or such underwriter to comply with all laws,
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rules and regulations in connection with the offer and sale of Warrant Shares,
or any statement or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company in an instrument
duly executed by the Holder or such underwriter specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus or amendment or supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 4.5, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the indemnifying party of the commencement of such action. In case any such
action is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof.
5. Reservation of Warrant Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
6. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership of
and the loss, theft, destruction or mutilation of any Warrant Certificate and,
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to the Company, or, in the case of mutilation, upon surrender and cancellation
of the mutilated Warrant Certificate, the Company shall execute and deliver in
lieu thereof a new Warrant Certificate representing an equal number of Warrants.
7. Adjustment of Purchase Price and Number of Warrant Shares Deliverable
7.1 The Purchase Price and the number of shares of Common Stock
purchasable pursuant to this Warrant shall be subject to adjustment from time to
time as hereinafter set forth in this Article 7. Whenever reference is made in
this Article 7 to the issue or sale of shares of Common Stock, or simply shares,
such term shall mean any stock of any class of the Company other than preferred
stock with a fixed limit on dividends and a fixed amount payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company. The shares issuable upon exercise of the
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Warrants shall however be shares of Common Stock of the Company, par value
$0.001 per share, as constituted at the date hereof, except as otherwise
provided in Sections 7.3 and 7.4.
7.2 In case the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a stock dividend,
the number of outstanding shares into a different number of shares, with or
without par value, (i) the number of shares which immediately prior to such
change the holder of each Warrant shall have been entitled to purchase pursuant
to this Warrant shall be increased or decreased in direct proportion to the
increase or decrease, respectively, in the number of shares outstanding
immediately prior to such change, and (ii) the Purchase Price in effect
immediately prior to such change shall be increased or decreased in inverse
proportion to such increase or decrease in the number of such shares outstanding
immediately prior to such change. For the purpose of this Section 7.2, the
number of shares outstanding at any given time shall not include shares in the
treasury of the Company.
7.3 In case of any capital reorganization or any reclassification of
the capital stock of the Company or in case of the consolidation or merger of
the Company with another corporation, or in case of any sale, transfer or other
disposition to another corporation of all or substantially all the property,
assets, business and good will of the Company, the holder of each Warrant shall
thereafter be entitled to purchase (and it shall be a condition to the
consummation of any such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition that appropriate provision shall be
made so that such holder shall thereafter be entitled to purchase) the kind and
amount of shares of stock and other securities and property receivable in such
transaction which a shareholder receives who holds the number of shares which
the Warrant entitled the holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Article 7 with
respect to rights and interests thereafter of the holder of the Warrants to the
end that the provisions of this Article 7 shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Warrants.
7.4 In the event the Company shall declare a dividend upon the Common
Stock payable otherwise than out of earnings or earned surplus or otherwise than
in shares of Common Stock or in stock or obligations directly or indirectly
convertible into or exchangeable for such shares, the holder of each Warrant
shall, upon exercise of the Warrant, be entitled to purchase, in addition to the
number of shares deliverable upon such exercise, against payment of the Warrant
Price therefor but without further consideration, the cash, stock or other
securities or property which the holder of the Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares or in obligations convertible into or exchangeable for Common
Stock) if continuously since the date hereof such holder (i) had been the holder
of record of the number of shares deliverable upon such exercise and (ii) had
retained all dividends in stock or other securities (other than shares or such
convertible or exchangeable stock or obligations) paid or payable in respect of
said number of shares or in respect of any such stock or other securities so
paid or payable as such dividends.
7.5 No certificate for fractional shares shall be issued upon the
exercise of the Warrants, but
-7-
<PAGE>
in lieu thereof the Company shall purchase any such fractional interest
calculated to the nearest cent.
7.6 Whenever the Purchase Price is adjusted as herein provided, the
Company shall forthwith deliver to each Warrant holder a statement signed by the
President of the Company and by its Treasurer or Secretary stating the adjusted
Purchase Price and number of shares determined as herein specified. Such
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued.
7.7 In the event at any time:
(i) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(ii) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of
any class or any other rights; or
(iii) The Company shall effect any capital reorganization or
any reclassification of or change in the outstanding capital
stock of the Company (other than a chance in par value, or a
change from par value to no par value, or a change from no par
value to par value, or a change resulting solely from a
subdivision or combination of outstanding shares), or any
consolidation or merger, or any sale, transfer or other
disposition of all or substantially all its property, assets,
business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or
(iv) The Company shall declare a dividend upon its Common
Stock payable otherwise than out of earnings or earned surplus
or otherwise than in Common Stock or any stock or obligations
directly or indirectly convertible into or exchangeable for
Common Stock;
then, in any such case, the Company shall cause at least thirty days' prior
notice to be mailed to the registered holder of each Warrant at the address of
such holder shown on the books of the Company. Such notice shall also specify
the date on which the books of the Company shall close, or a record be taken,
for such stock dividend, distribution or subscription rights, or the date on
which such reclassification, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution, winding up or dividend, as the
case may be, shall take place, and the date of participation therein by the
holders of shares if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holders of the Warrants.
-8-
<PAGE>
8. Governing Law
8.1 This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed by its officers thereunto duly authorized and its corporate
seal to be affixed hereon as of the 10th day of December, 1999.
PREFERRED VOICE, INC.
BY:/s/
---------------------
Chairman of the Board
Attest:
/s/
- --------------------
Secretary
-9-
- 7 -
DALLAS1 572700v1 26287-00001
IMPORTANT
PLEASE READ CAREFULLY BEFORE SIGNING;
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN
SUBSCRIPTION AGREEMENT
AND
LETTER OF INVESTMENT INTENT
The undersigned (the "Subscriber") hereby subscribes to purchase from
Preferred Voice, Inc., a Delaware corporation (the "Company") _______ shares of
Preferred Voice, Inc. $.001 par value common stock (the "Securities") at a
purchase price of $_____. A wire transfer to the account of Preferred Voice,
Inc. in the amount of $ __________________ for such Securities has been made in
connection herewith.
1. General Representations. The Subscriber acknowledges and
represents as follows:
(a) The Subscriber has been given full access to information regarding the
Company (including the opportunity to meet with Company officers and
to review all material books and records, material contracts and
documents that Subscriber may have requested) and has utilized such
access for the purpose of obtaining all information the Subscriber
deems necessary for purposes of making an informed investment
decision. The Subscriber currently owns other securities issued by the
Company.
(b) The Subscriber understands that the purchase of the Securities is a
highly speculative investment and involves a high degree of risk, that
the Company may need additional financing in the future, and that the
Company makes no assurances whatever concerning the present or
prospective value of the Securities;
(c) The Subscriber has obtained, to the extent he or she deems necessary,
personal professional advice with respect to the risks inherent in an
investment in the Securities and the suitability of such investment in
light of the Subscriber's personal financial condition and investment
needs. Unless the Subscriber has otherwise advised the Company in
writing, the Subscriber did not employ the services of a purchaser
representative, as defined in the Securities and Exchange Commission's
Regulation D, in connection with this investment;
(d) The Subscriber has sufficient knowledge and experience in financial
and business matters to be capable of evaluating the merits and risks
of a prospective investment in the Securities; is experienced in
making investments which involve a high degree of risk, and is
sophisticated in making investment decisions; and believes that he or
she is able to bear the economic risk of an investment in the
Securities, including the total loss of such investment;
(e) The Subscriber realizes that (i) the purchase of the Securities is a
long-term investment, (ii) the purchaser of the Securities must bear
the economic risk of the investment for an indefinite period of time
because the Securities have not been registered under the Securities
Act of 1933, as amended, (the "Act"), or applicable state laws or laws
of other countries and, therefore, the Securities cannot be sold
unless they are subsequently registered under the Act and such other
laws or exemptions from such registration are available, (iii) the
Company is not current in its reporting responsibilities under the
Securities Act of 1934, as amended, (iv) there is no public market for
the Securities and the Subscriber may not be able to liquidate his or
her investment in the event of an emergency, or pledge the Securities
as collateral security for loans, and (v) the transferability of the
Securities is restricted and (A) requires conformity with the
restrictions contained in paragraph 2 below, and (B) will be further
restricted by a legend placed on the certificate(s) representing the
Securities stating that the Securities have not been registered under
the Act and applicable state laws and referencing the restrictions on
transferability of the Securities.
2. No Registration Under the Securities Laws. The Subscriber has been
advised that the Securities are not being registered under the Act or state
securities laws or securities laws of other nations pursuant to exemptions from
the Act and such laws, and that the Company's reliance upon such exemptions is
predicated in part on the representations of the Subscriber contained herein.
The Subscriber represents and warrants that the Securities are being purchased
for the Subscriber's own account and for investment without the intention of
reselling or redistributing the same, that no agreement has been made with
others regarding the Securities and that the Subscriber's financial condition is
such that it is not likely that it will be necessary to dispose of the
Securities in the foreseeable future. The Subscriber is aware that, in the view
of the Securities and Exchange Commission and state authorities that administer
state securities laws, a purchase of the Securities with an intent to resell by
reason of any foreseeable specific contingency or anticipated change in market
values, or any change in the condition of the Company or its business, or in
connection with a contemplated liquidation or settlement of any loan obtained
for the acquisition of the Securities and for which the Securities were pledged
as security, would represent an intent inconsistent with the representations set
forth above. The Subscriber further represents and agrees that, if contrary to
the foregoing intentions there should ever be a desire to dispose of or transfer
the Securities in any manner, the Subscriber shall not do so without first
obtaining (a) an opinion of counsel suitable to the Company that such proposed
disposition or transfer lawfully may be made without registration pursuant to
the Act and applicable securities laws of states and other nations or (b) such
registrations (it being expressly understood that the Company shall not have any
obligation to register the Securities for such purpose).
3. Registration Rights. If, at any time within three (3) years of the
date of this purchase, the Company proposes for any reason to register any of
its securities under the Securities Act other than a registration on Form S-8
relating solely to employee stock option or purchase plans, on Form S-4 relating
solely to an SEC Rule 145 transaction or on any other form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Securities, it shall each
such time give written notice to the holder of these Securities ("Holder" for
purposes of this Section 3) of the Company's intention to register such
securities, and, upon the written request, given within thirty (30) days after
receipt of any such notice, of the Holders of the Securites outstanding, to
register any of the Securities, the Company shall cause the Securities so
requested by the Holder to be registered, whether such Securities are
outstanding or subject to purchase hereby, to be registered under the Securities
Act, all to the extent requisite to permit the sale or other disposition by the
Holder of the Securities so registered; provided, however, that the Securities
as to which registration had been requested need not be included in such
registration if in the opinion of counsel for the Company and counsel for the
Holder the proposed transfer by the Holder may be effected without registration
under the Securities Act and any certificate evidencing the Securities need not
bear any restrictive legend. In the event that any registration pursuant to this
Section 3 shall be, in whole or in part, an underwritten offering of securities
of the Company, then (i) any request pursuant to this Section 3 to register the
Securities may specify that such shares are to be included in the underwriting
on the same terms and conditions as the shares of the Company's capital stock
otherwise being sold through underwriters under such registration, (ii) if the
managing underwriter of such offering determines that the number of shares to be
offered by all selling shareholders must be reduced, then the Company shall have
the right to reduce the number of shares registered on behalf of the Holder,
provided that the number of shares to be registered on behalf of the Holder
shall not be reduced to such an extent that the ratio of the shares which the
Holder is permitted to register to the total number of shares the Holder owns is
less than that ratio for any other selling shareholder, and (iii) the Holder
will be bound by the terms of the underwriting agreement and the conditions
imposed by the underwriter on selling shareholders.
4. State of Domicile. The Subscriber represents and warrants that the
Subscriber is a bona fide resident of, and is domiciled in, the state or country
so designated on the signature page hereto, and that the Securities are being
purchased solely for the beneficial interest of the Subscriber and not as
nominee for, or on behalf of, or for the beneficial interest of, or with the
intention to transfer to, any other person, trust, or organization.
5. Obligation to Update. The information provided by the Subscriber is
correct and complete as of the date hereof. The Subscriber is informed of the
significance to the Company of the foregoing representations, and they are made
with the intention that the Company will rely upon them. If there should be any
adverse change in such information prior to the subscription being accepted, the
Subscriber will immediately provide the Company with such information.
6. Entity Representation. The Subscriber makes the following additional
representations:
(a) The Subscriber was not organized for the specific purpose of acquiring
the Securities; and
(b) This Agreement has been duly authorized by all necessary actions of
the Board of Directors, shareholders, partners, trustees, or other
duly authorized acting body or person on the part of the Subscriber,
has been duly executed by an authorized officer or representative of
the Subscriber, and is a legal, valid, and binding obligation of the
Subscriber enforceable in accordance with its terms.
Dated: ______________, 1999.
________________________________
Signature
________________________________
Name Typed or Printed, Title
________________________________
Entity Name
________________________________
Address
________________________________
City, State and Zip Code
________________________________
(Area Code) Telephone Number
________________________________
Tax Identification or Social
Security Number
The Subscription Agreement and Letter of Investment Intent is accepted
as of ____________________________, 1999.
PREFERRED VOICE, INC.
_________________________________
By: _____________________________
Its: ____________________________
<PAGE>
SCHEDULE OF SUBSCRIPTION AGREEMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Address No. of Shares Purchase Price Per Share Total Purchase Price Date
First Union Securities Inc.,
Cust. FBO 33,334 $1.50 $50,000 12/22/99
Stephen C. Thayer IRA
4333 Westside Drive
Dallas, Texas 75209
David C. Tyrrell 66,667 $1.50 $100,000 12/22/99
12 Turtle Creek Bend
Dallas, Texas 75204
JMG Capital Partners, L.P. 333,334 $1.50 $500,000 12/22/99
1999 Avenue of the Stars,
Ste. 2530
Los Angeles, California 90067
JMG Triton Offshore Fund, Ltd. 333,334 $1.50 $500,000 12/22/99
1999 Avenue of the Stars,
Ste. 2530
Los Angeles, California 90067
Tom Wittenbraker 33,334 $1.50 $50,000 12/22/99
4626 Greenville Avenue, #101
Dallas, Texas 75206
Dan D. Warren 33,334 $1.50 $50,000 12/22/99
7317 Fisher Road
Dallas, Texas 75214
J.Steven Emerson IRA Rollover II 100,000 $1.50 $150,000 12/22/99
Bear Stearns Securities Corp.,
Custodian
1999 Avenue of the Stars, Ste. 2530
Los Angeles, California 90067
<PAGE>
Marciano Financial Holdings 333,334 $1.50 $500,000 12/22/99
9465 Wilshire Blvd., Ste 400
Beverly Hills, California 90212
Jacob Wizman 66,667 $1.50 $100,000 12/22/99
211 S. Beverly Drive, #108
Beverly Hills, California 90210
Windsor Capital Management, Ltd. 166,667 $1.50 $250,000 12/22/99
P.O. Box 146 Road Town, Tortola
British Virgin Islands
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,935,896
<SECURITIES> 0
<RECEIVABLES> 391,382
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,327,278
<PP&E> 594,486
<DEPRECIATION> (249,957)
<TOTAL-ASSETS> 3,522,479
<CURRENT-LIABILITIES> 961,610
<BONDS> 0
0
0
<COMMON> 13,170
<OTHER-SE> 2,547,699
<TOTAL-LIABILITY-AND-EQUITY> 3,522,479
<SALES> 1,215,650
<TOTAL-REVENUES> 1,215,650
<CGS> 401,965
<TOTAL-COSTS> 1,071,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,137
<INCOME-PRETAX> (285,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 35,116
<CHANGES> 0
<NET-INCOME> (249,987)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
