GLOBETEL COMMUNICATIONS CORP. 7% Convertible Note Due February __, 2009
EXECUTION
COPY
NEITHER
THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
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No.
2007-8
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$_____________
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GLOBETEL
COMMUNICATIONS CORP.
Due
February __, 2009
FOR VALUE
RECEIVED, GLOBETEL COMMUNICATIONS CORP., a Delaware corporation (hereinafter
called the “Borrower” or
the “Company”), hereby
promises to pay to _______________________________________ (the
“Holder”) or order,
without demand, the sum of __________________________________________________
Dollars ($___________________),
with simple interest accruing at the rate described below, on February __, 2011 (the "Maturity Date").
This Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription Agreement”), and
shall be governed by the terms of such Subscription Agreement. Unless otherwise
separately defined herein, all capitalized terms used in this Note shall have
the same meaning as is set forth in the Subscription Agreement. The following
terms shall apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payments. The entire
unpaid principal amount due under this Note (the “Principal”) shall be due and
payable on the Maturity Date. Interest on the Notes (the “Interest”) will be payable
semi-annually commencing on the date that shall be six (6) months from the date
hereof (each such date, a “Semi-Annual Payment Date”) as
further described on the payment schedule attached hereto as Exhibit
A (the “Payment
Schedule”). Interest shall be payable in cash or, at the Company's
option, in shares of the Company’s common stock, par value $0.00001 per share
(the "Common Stock").
Any payment made on a Semi-Annual Payment Date is referred to herein as a “Semi-Annual
Payment.”
Upon any conversion in part by the
Holder in accordance with Article II, the Holder and the Borrower shall in good
faith recalculate the outstanding principal balance and the amounts of the
Semi-Annual Payments. Upon any full conversion by the Holder in accordance with
Article II of all of the Semi-Annual Payments and the Principal due hereunder,
all of the Borrower's payment obligations shall terminate. All payments in
respect of the indebtedness evidenced hereby shall be applied in the following
order: to accrued Interest, Principal, and charges and expenses owing under or
in connection with this Note.
If any payment of interest is paid in
Common Stock, the number of shares issuable will be determined utilizing the
conversion ratio as set forth in Article II. Notwithstanding the foregoing, the
Company’s right to pay the Notes, including any Interest due thereunder, in
shares of Common Stock on each Semi-Annual Payment Date is subject to the
condition that: (i) the Common Stock is trading on the Pink Sheets, OTC Bulletin
Board, American Stock Exchange or Nasdaq; and (ii) there is an effective
Registration Statement on such Semi-Annual Payment Date or the shares are
otherwise eligible for resale pursuant to Rule 144.
In the event a Holder converts any
portion of the principal amount of its Note into shares of Common Stock prior to
the date of the next Semi-Annual Payment, such Semi-Annual Payment shall be
reduced by the principal amount so converted. In addition, if a
Holder converts any portion of its Note into shares of Common Stock prior to the
date of the next Semi-Annual Payment in an amount that is greater than the
amount of such Semi-Annual Payment and any accrued interest, the excess over
such Semi-Annual Payment will be credited against future Semi-Annual
Payments.
1.2 Interest. Interest
shall accrue on the outstanding principal balance hereof at an annual rate equal
to seven percent (7%) from the date Principal was advanced in
connection with this Note. Interest shall be calculated on the basis
of a 360-day year and the actual number of days elapsed, to the
extent permitted by applicable law. Interest hereunder
will be paid to the Holder or its assignee in whose name this Note is registered
on the records of the Borrower regarding registration and transfers of
Notes (the “Note
Register”). In the event the Holder has elected to convert
Interest due hereunder into shares of Common Stock or the Company has elected to
make an Interest payment hereunder in shares of Common
Stock, the number of shares of such Common Stock to be issued will be calculated
using a value of the Common Stock that shall be its last sale price
on the date immediately preceding the Semi-Annual Payment Date. A
number of shares of Common Stock with a value equal to the amount
of Interest due shall be issued to the Holder within five
(5) days of the Semi-Annual Payment Date. No fractional shares will be issued;
therefore, in the event that the value of the Common Stock per share does not
equal the total Interest due, the Company shall round up the number
of shares of Common Stock due.
1.3 Payment Grace Period.
From and after the 10th day
after an Event of Default under Section 3.1, the Interest Rate applicable to any
unpaid amounts owed hereunder shall be increased to sixteen percent (16%) per
annum.
1.4 Conversion
Privileges. The conversion privileges set forth in Article II shall
remain in full force and effect immediately from the date hereof and until the
Note is paid in full regardless of the occurrence of an Event of Default. The
Note shall be payable in full on the Maturity Date, unless previously converted
into Common Stock in accordance with Article II hereof; provided, that if an
Event of Default has occurred, the Holder may elect to extend the Maturity Date
by the amount of days of the pendency of the Event of Default.
1.5 Corporate
Existence. So long as any of the Notes remains outstanding,
the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, reverse stock split, consolidation, sale of all
or substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a “Fundamental Change”) unless,
prior to the consummation a Fundamental Change, the Company obtains the written
consent of each of the Holders. In any such case, the Company will
(i) make appropriate provision with respect to such holders' rights and
interests to ensure that the provisions of this Section 1.5 will thereafter be
applicable to the Notes, (ii) grant the Holders the right to put the Notes to
the Company at 115% of the then outstanding Principal plus any unpaid and
accrued Interest and (iii) take any other action required under Section 2.1(c)
hereof.
This Note
is subject to the following additional provisions:
ARTICLE
II
CONVERSION
RIGHTS AND REDEMPTION RIGHTS
The
Holder shall have the right to convert the principal and accrued and unpaid
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2
2.1 Conversion into the
Borrower's Common Stock.
(a) The
Holder shall have the right from and after the date of the issuance of this Note
and then at any time until this Note is fully paid, to convert any outstanding
and unpaid principal portion of this Note, and accrued Interest, at the election
of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully
paid and non-assessable shares of Common Stock as such stock exists on the date
of issuance of this Note (such shares, the “Conversion Shares”), or any
shares of capital stock of Borrower into which such Common Stock shall hereafter
be changed or reclassified (the “Other Securities”), at the
conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined
as provided herein. Upon delivery to the Borrower of a completed Notice of
Conversion, a form of which is attached hereto as Exhibit
B, Borrower shall issue and deliver to the Holder within three (3)
business days from the Conversion Date (such third day being the “Delivery Date”) that number of
Conversion Shares for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Borrower will deliver accrued but
unpaid interest on the principal amount of the Note being converted in the
manner provided in Section 1.1 through the Conversion Date directly to the
Holder on or before the Delivery Date. The number of Conversion Shares to be
issued upon each conversion of this Note shall be determined by dividing that
portion of the principal of the Note and accrued interest to be converted, by
the Conversion Price.
(b) Subject
to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
share shall be $.105.
However, if after 90 days from the date hereof the market price of the
Company’s common shares during the 90 day period has not closed at a bid price
at or above $.12 per share for 3 or more consecutive trading days. In such
instance then the Investors’s price per share shall be equal to the average
closing bid price for the last 30 trading days immediately prior to the 90th day
after the date of this addendum. Should the price of the common shares be $.105
or higher on the 90th day
after the date of this addendum, then the purchase price per share shall remain
at $.105 per share. Should the Market Price of the shares be $.105 or
higher on the 90th day
after the date of this addendum, but less than $.125, then the Investor shall be
entitled to an amount of additional shares equal to 10% of the number of shares
to which the Investor is otherwise entitled.
(c)
The Conversion Price and number and kind of shares or other securities to be
issued upon conversion determined pursuant to Section 2.1(a), shall be subject
to adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
A. Reorganization,
Consolidation, Merger, etc.; Reclassification. In case at any
time or from time to time, the Company shall, subject to Section 1.5 hereof,
effect a Fundamental Change, then, in each such case, as a condition to the
consummation of such a transaction, proper and adequate provision shall be made
by the Company whereby the Holder of this Note, on the conversion hereof as
provided in Article II, at any time after the consummation of such Fundamental
Change, shall receive, in lieu of the Conversion Shares (or Other Securities)
issuable on such conversion prior to such consummation or such effective date,
the stock and other securities and property (including cash) to which such
Holder would have been entitled upon such consummation of a Fundamental Change
if such Holder had so converted this Note, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section
2.1(c)(E).
If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes that may be issued or
outstanding, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
B. Dissolution. In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of the Notes after the effective date of such dissolution pursuant to
this Article II to a bank or trust company (a “Trustee”) having its principal
office in New York, NY, as trustee for the Holder of the Notes.
C. Continuation of
Terms. Upon any Fundamental Change or transfer (and any dissolution
following any transfer) referred to in this Article II, this Note shall continue
in full force and effect and the terms hereof shall be applicable to the Other
Securities and property receivable on the conversion of this Note after the
consummation of such Fundamental Change or transfer or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any other securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Note as provided in Section 2.1(c)(E). In the event
this Note does not continue in full force and effect after the consummation of
the transaction described in this Article II, then only in such event will the
Company's securities and property (including cash, where applicable) receivable
by the Holder of the Notes be delivered to the Trustee as contemplated by
Section 2.1(c)(B).
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D. Share
Issuance. If at any time Notes or the Warrants are outstanding
the Company shall offer, issue or agree to issue any common stock or securities
convertible into or exercisable for shares of common stock (or modify any of the
foregoing which may be outstanding) to any person or entity at a price per share
or conversion or exercise price per share which shall be less than the
Conversion Price in respect of the Shares, without the consent of each
Subscriber holding Notes and/or other Securities, then the Company shall issue,
for each such occasion, additional shares of Common Stock to each Subscriber so
that the average per share purchase price of the shares of Common Stock issued
to the Subscriber (of only the Conversion Shares or Warrant Shares still owned
by the Subscriber) is equal to such other lower price per share and the
Conversion Price shall automatically be reduced to such other lower price per
share. The average Conversion Price of the Conversion Shares and
average Warrant Exercise Price in relation to the Warrant Shares shall be
calculated separately for the Conversion Shares and Warrant
Shares. The foregoing calculation and issuance shall be made
separately for Conversion Shares received upon conversion and separately for
Warrant Shares. The delivery to the Subscriber of the additional
shares of Common Stock shall be not later than the closing date of the
transaction giving rise to the requirement to issue additional shares of Common
Stock. The Subscriber is granted the registration rights described in
Section 11 of the Subscription Agreement in relation to such additional shares
of Common Stock except that the Filing Date and Effective Date with respect to
such additional shares of Common Stock shall be, respectively, the sixtieth
(60th) and one hundred and twentieth (120th) date after the closing date giving
rise to the requirement to issue the additional shares of Common
Stock. For purposes of the issuance and adjustment described in this
paragraph, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in the issuance of the additional
shares of Common Stock upon the issuance of such convertible security, warrant,
right or option and again at any time upon any subsequent issuances of shares of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the Conversion Price in effect upon such
issuance. The rights of the Subscriber set forth in this Section 2.1
(c)(D) are in addition to any other rights the Subscriber has pursuant to this
Note, the Subscription Agreement, any Transaction Document and any other
agreement referred to or entered into in connection herewith.
E. Extraordinary Events
Regarding Common Stock. In the event that the Company shall (a) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock,
or (c) subject to Section 1.5 hereof, combine its outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock, then, in each
such event, the Conversion Price shall, simultaneously with the happening of
such event, be adjusted by multiplying the then Conversion Price by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Conversion Price then in effect. The
Conversion Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this Section
2.1(c)(E). The number of Conversion Shares that the Holder of this Note shall
thereafter, on the conversion hereof as provided in Article II, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
Conversion Shares that would otherwise (but for the provisions of this Section
2.1(c)(E)) be issuable on such conversion by a fraction of which (a) the
numerator is the Conversion Price that would otherwise (but for the provisions
of this Section 2.1(c)(E)) be in effect, and (b) the denominator is the
Conversion Price in effect on the date of such conversion.
F. Certificate as to
Adjustments. In each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable on the conversion of the Notes,
the Company at its expense will promptly cause its Chief Financial Officer or
other appropriate designee to compute such adjustment or readjustment in
accordance with the terms of the Note and prepare a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Conversion Price and the
number of Conversion Shares to be received upon conversion of this Note, in
effect immediately prior to such adjustment or readjustment and as adjusted or
readjusted as provided in this Note. The Company will forthwith mail a copy of
each such certificate to the Holder of the Note and any transfer agent of the
Company.
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2.2 Method of Conversion.
This Note may be converted by the Holder in whole or in part as described in
Section 2.1(a) hereof and the Subscription Agreement. Upon partial conversion of
this Note, a new Note containing the same date and provisions of this Note
shall, at the request of the Holder, be issued by the Borrower to the Holder for
the principal balance of this Note and interest which shall not have been
converted or paid.
2.3 Intentionally
Left Blank
2.4 Mandatory
Conversion. Commencing after the Effective Date, the Borrower
will have the option by written notice to the Holder (“Notice of Mandatory
Conversion”) of compelling the Holder to convert the outstanding and
unpaid principal amount, and accrued interest, of this Note into Common Stock at
the Conversion Price then in affect (“Mandatory Conversion”). The
Notice of Mandatory Conversion must be given, if at all, within thirty (30) days
following any consecutive ten (10) day trading period (the “Lookback Period”) during which
the closing bid price or last sale price, as the case may be, for the Borrower’s
Common Stock as reported by Bloomberg, LP for the principal market on which the
shares of Common Stock are then traded (the “Principal Market”) is more
than 150% of the Conversion Price each day during the Lookback Period and there
is not less than reported average daily trading of 1,000,000 shares of Common
Stock during the Lookback Period. The date the Notice of Mandatory
Conversion is given is the “Mandatory Conversion Date.”
The Notice of Mandatory Conversion shall specify the aggregate principal amount
of the Note which is subject to Mandatory Conversion. Mandatory
Conversion Notices must be given proportionately to all Holders of Notes who
hold Notes similar in terms and tenure as this Note. A Notice of
Mandatory Conversion may not be given unless the Registration Statement has been
effective for the unrestricted public resale of the Registrable Securities each
day during the Lookback Period and for the three trading days
thereafter. Notices of Mandatory Conversion may not be given in
connection with the aggregate amount of Common Stock that would exceed 25% of
the aggregate volume of Common Stock traded on the Principal Market as reported
by Bloomberg L.P. for the fifteen (15) trading days preceding the Mandatory
Conversion Date, or 20% of the initial principal amount of this
Note. The amount of Note principal included in a Mandatory Conversion
Notice shall be further reduced to an amount that would not cause the Holder to
exceed the limitation described in Section 2.3 of this Note. A
further Mandatory Conversion Notice may not be given until thirty (30) trading
days have elapsed from the preceding Mandatory Conversion Date. Each
Mandatory Conversion Date shall be a Deemed Conversion Date (as hereinafter
defined) and the Borrower will be required to deliver the Common Stock issuable
pursuant to a Mandatory Conversion Notice in the same manner and time period as
described in Section 2.1 above. In the event the Borrower fails to
deliver the Common Stock in the same manner and time period as described in
Section 2.1 above, then such Notice of Conversion will be null and
void. A Notice of Conversion must be given to all Holders of Notes
similar to this Note, in proportion to the amount of Note Principal held by all
Holders of such Notes. Except as described in this Section 2.4, the
Note may not be paid prior to the Maturity Date without the consent of the
Holder.
2.5 Conversion of
Note.
(a) Upon
the conversion of a Note or part thereof, the Company shall, at its own cost and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company's transfer agent shall issue stock
certificates in the name of Subscriber (or its nominee) or such other persons as
designated by Subscriber and in such denominations to be specified at conversion
representing the number of Conversion Shares issuable upon such conversion. The
Company warrants that no instructions other than these instructions have been or
will be given to the transfer agent of the Company's Common Stock and that,
unless waived by the Subscriber, the Conversion Shares will be free-trading, and
freely transferable, and will not contain a legend restricting the resale or
transferability of the Conversion Shares provided the Conversion Shares are
being sold pursuant to an effective registration statement covering the
Conversion Shares or are otherwise exempt from registration.
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(b) Subscriber
will give notice of its decision to exercise its right to convert the Note or
part thereof by telecopying an executed and completed Notice of Conversion (a
form of which is attached as Exhibit
B to the Note) to the Company via confirmed telecopier transmission and
overnight courier or otherwise pursuant to Section 4.2 of this Note. The
Subscriber will not be required to surrender the Note until the Note has been
fully converted or satisfied, with each date on which a Notice of Conversion is
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date (as defined above). The Company will itself or cause
the Company’s transfer agent to transmit the Company's Common Stock certificates
representing the Conversion Shares issuable upon conversion of the Note to the
Subscriber via express courier for receipt by such Subscriber on or before the
Delivery Date (as defined above). In the event the Conversion Shares are
electronically transferable, then delivery of the Conversion Shares must be made
by electronic transfer provided request for such electronic transfer has been
made by the Subscriber and the Subscriber has complied with all applicable
securities laws in connection with the sale of the Common Stock, including,
without limitation, the prospectus delivery requirements. A Note
representing the balance of the Note not so converted will be provided by the
Company to the Subscriber if requested by Subscriber, provided the Subscriber
delivers the original Note to the Company.
(c) The
Company understands and agrees that a delay in the delivery of the Conversion
Shares in the form required pursuant to Section 2.5(a) hereof, or the Mandatory
Redemption Amount described in Section 2.8 hereof, respectively after the
Delivery Date or the Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Subscriber. As compensation to the
Subscriber for such loss, the Company agrees to pay (as liquidated damages and
not as a penalty) to the Subscriber for late issuance of Conversion Shares upon
Conversion of the Note in the amount of $20 per business day after the Delivery
Date for each $10,000 of Note principal amount being converted of the
corresponding Conversion Shares which are not timely delivered. The Company
shall pay any payments incurred under this Section in immediately available
funds upon demand. Furthermore, in addition to any other remedies which may be
available to the Subscriber, in the event that the Company fails for any reason
to effect delivery of the Conversion Shares by the Delivery Date or make payment
by the Mandatory Redemption Payment Date, the Subscriber will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or part
of the notice of Mandatory Redemption by delivery of a notice to such effect to
the Company whereupon the Company and the Subscriber shall each be restored to
their respective positions immediately prior to the delivery of such notice,
except that the liquidated damages described above shall be payable through the
date notice of revocation or rescission is given to the Company.
(d) Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum permitted by such law, any
payments in excess of such maximum shall be credited against amounts owed by the
Company to the Subscriber and thus refunded to the Company.
2.6 Injunction Posting of
Bond. In the event a Subscriber shall elect to convert a Note or part
thereof in whole or in part, the Company may not refuse conversion based on any
claim that such Subscriber or any one associated or affiliated with such
Subscriber has been engaged in any violation of law, or for any other reason,
unless an injunction from a court, on notice, restraining and or enjoining
conversion of all or part of such Note shall have been sought and obtained by
the Company and the Company has posted a surety bond for the benefit of such
Subscriber in the amount of 120% of the amount of the Note, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Subscriber to the extent
Subscriber obtains judgment.
6
2.7 Optional
Redemption.
(a) Provided
that the Company has a number of authorized but unissued shares of Common Stock
sufficient for the issuance of all Conversion Shares underlying the remaining
principal amount of this Note, such Common Stock is listed or quoted (and is not
suspended from trading) on the Principal Market and such shares of Common Stock
are approved for listing on such Principal Market upon issuance if applicable,
such Common Stock is registered for resale under the Registration Statement and
the prospectus under such Registration Statement is available for the sale of
all Registrable Securities held by the Subscriber, such issuance would be
permitted in full without violating Section 2.3 herein or the rules or
regulations of any trading market on which such Common Stock may be listed or
quoted, and both immediately before and after giving effect thereto, no Event of
Default under the Subscription Agreement or this Note shall or would exist, the
Borrower will have the option of prepaying the outstanding principal amount of
this Note ("Optional
Redemption"), in whole or in part, together with interest accrued
thereon, by paying to the Holder a sum of money equal to one hundred twenty-five
percent (125%) of the principal amount to be redeemed, together with accrued but
unpaid interest thereon and interest that will accrue until the actual repayment
date and any and all other sums due, accrued or payable to the Holder arising
under the Note, the Subscription Agreement or any Transaction Document (the
"Redemption Amount") on
the day written notice of redemption (the "Notice of Redemption") is
given to the Holder. The Notice of Redemption shall specify the date for such
Optional Redemption (the "Redemption Payment Date"),
which date shall be not less than five (5) business days after the date of the
Notice of Redemption (the "Redemption Period"). The
Borrower may provide a Notice of Redemption prior to the Effective Date only in
connection with up to 20% the principal amount of this Note then outstanding
together with interest accrued thereon. A Notice of Redemption shall not be
effective with respect to any portion of the Note for which the Holder has a
pending election to convert, or for Conversion Notices given by the Holder prior
to the Redemption Payment Date. During a Redemption Period occurring after the
Actual Effective Date, the Holder may deliver Notices of Conversion for up to
20% of the initial principal amount of the Note and accrued
interest. On the Redemption Payment Date, the Redemption Amount shall
be paid in good funds to the Holder. In the event the Borrower fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then (i)
such Notice of Redemption will be null and void, (ii) Borrower will have no
further right to deliver another Notice of Redemption, and (iii) Borrower’s
failure may be deemed by Holder to be a non-curable Event of
Default.
(b) A
Notice of Redemption must be given proportionately to all Holders of Notes
bearing similar terms to this Note issued on the date of this Note.
2.8 Mandatory Redemption at
Subscriber’s Election. In the event the Company is prohibited
from issuing Conversion Shares, or fails to timely deliver Shares on a Delivery
Date, or upon the occurrence of any other Event of Default (as defined in this
Note or in the Subscription Agreement) or for any reason other than pursuant to
the limitations set forth in Section 2.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber, at the Subscriber's election, a sum of money in
immediately available terms equal to the greater of (i) the product of the
outstanding principal amount of the Note designated by the Subscriber multiplied
by 120%, or (ii) the product of the number of Conversion Shares otherwise
deliverable upon conversion of an amount of Note principal and/or interest
designated by the Subscriber (with the date of giving of such designation being
a “Deemed Conversion
Date”) at the then Conversion Price that would be in effect on the Deemed
Conversion Date multiplied by the average of the closing bid prices for the
Common Stock for the five consecutive trading days preceding either: (1) the
date the Company becomes obligated to pay the Mandatory Redemption Payment, or
(2) the date on which the Mandatory Redemption Payment is made in full,
whichever is greater, together with accrued but unpaid interest thereon and any
liquidated damages then payable (“Mandatory Redemption
Payment”). The Mandatory Redemption Payment must be received
by the Subscriber on the same date as the Company Shares otherwise deliverable
or within ten (10) business days after request, whichever is sooner (“Mandatory Redemption Payment
Date”). Upon receipt of the Mandatory Redemption Payment, the
corresponding Note principal and interest will be deemed paid and no longer
outstanding. Liquidated damages calculated pursuant to Section 2.5(c)
hereof, that have been paid or accrued for the twenty (20) day period prior to
the actual receipt of the Mandatory Redemption Payment by the Subscriber shall
be credited against the Mandatory Redemption Payment.
2.9 Buy-In. In
addition to any other rights available to the Subscriber, if the Company fails
to deliver to the Subscriber the Conversion Shares issuable upon conversion of a
Note by the Delivery Date and if after five (5) business days after the Delivery
Date the Subscriber purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Subscriber
of the Common Stock which the Subscriber was entitled to receive upon such
conversion (a “Buy-In”),
then the Company shall pay in cash to the Subscriber (in addition to any
remedies available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For
example, if the Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000 of note principal and/or interest, the Company shall be
required to pay the Subscriber $1,000, plus interest. The Subscriber
shall provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.
7
2.10 Reservation. During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock a number of shares of Common Stock equal to
150% of the amount of Common Stock issuable upon the full conversion of this
Note. Borrower represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. ▇▇▇▇▇▇▇▇ agrees that its issuance
of this Note shall constitute full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
ARTICLE
III
EVENTS
OF DEFAULT
An “Event
of Default,” wherever used herein,
means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or
governmental body):
3.1 Failure to Pay Principal or
Interest. The Borrower fails to pay any installment of Principal,
Interest or other sum due under this Note when due.
3.2 Breach of Covenant.
The Borrower breaches any other covenant or other term or condition of the
Subscription Agreement or this Note in any material respect and such breach, if
subject to cure, continues for a period of ten (10) business days after written
notice to the Borrower from the Holder.
3.3 Breach of Representations
and Warranties. Any representation or warranty of the Borrower made
herein, in the Subscription Agreement, or in any agreement, statement or
certificate given in writing pursuant hereto or in connection therewith shall be
false or misleading in any material respect as of the date made and the Closing
Date.
3.4 Receiver or Trustee.
The Borrower shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business; or such a receiver or trustee
shall otherwise be appointed.
3.5 Judgments. Any money
judgment, writ or similar final process shall be entered or filed against
Borrower or any of its property or other assets for more than $100,000, and
shall remain unvacated, unbonded or unstayed for a period of thirty (30)
days.
3.6 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower and if instituted against Borrower are not
dismissed within thirty (30) days of initiation.
3.7 Non-Payment. A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $50,000 for more than twenty (20) days after the
due date.
3.8 Stop Trade. An SEC or
judicial stop trade order or Principal Market trading suspension that lasts for
five or more consecutive trading days.
3.9 Failure to Deliver Common
Stock or Replacement Note. ▇▇▇▇▇▇▇▇'s failure to timely deliver Common
Stock to the Holder pursuant to and in the time required by this Note and
Sections 9 and 11 of the Subscription Agreement, or, if required, a replacement
Note.
3.10 Non-Registration
Event. The occurrence of a Non-Registration Event as described in Section
11.4 of the Subscription Agreement.
3.11 Reverse
Splits. The Borrower effectuates a reverse split of its Common
Stock without the prior written consent of each Holder.
8
3.12 Reservation
Default. Failure by the Borrower to have reserve for issuance
upon conversion of the Note the amount of Common stock as set forth in the
Subscription Agreement.
3.13 Cross Default. A
default by the Borrower of a material term, covenant, warranty or undertaking of
any other agreement to which the Borrower and Holder are parties, or the
occurrence of a material event of default under any such other agreement which
is not cured after any required notice and/or cure period.
3.14 Change in Control. A
change in control of the Company without the written consent of each Holder. A
change in control shall mean that more than 30% of the shares of common stock
are consolidated in one person or entity so that the person or entity may
control the election of the board of directors or the passage of a proposal that
would normally require a shareholder vote without such shareholder vote and that
such person or entity was not a holder of shares of the Company at the date of
execution hereof.
3.15 Asset
Sales. Any instance, undertaken without the written consent of
each Holder, whereby the Company or any of its subsidiaries, sells, transfers,
leases or otherwise disposes (including pursuant to a merger) of substantially
all of the Company’s assets, including any asset constituting an equity interest
in any other person, except sales, transfers, leases and other dispositions of
inventory, used, obsolete or surplus equipment or other property, in each case
in the ordinary course of the Company’s business and consistent with past
practice.
3.16 Delisting. Delisting
of the Common Stock from the American Stock Exchange or such other Principal
Market, including the Over-the-Counter Bulletin Board, on which the Common Stock
is then listed or quoted for trading.
During the time that any portion of
this Note is outstanding, if any Event of Default has
occurred, the full principal amount of this Note, together with
interest and other amounts owing in
respect hereof, to the date
of acceleration shall become, at
the Holder's election, immediately due
and payable in cash, provided however, the
Holder may request (but shall have no obligation to
request) payment of such amounts in Common Stock of the Borrower. In
addition to any other remedies, the Holder shall have the right (but
not the obligation) to convert this Note at any time after (x) an
Event of Default or (y) the Maturity Date at the Conversion Price then
in-effect. The Holder need not provide and the Borrower hereby waives
any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by ▇▇▇▇▇▇ at any
time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or
impair any right consequent thereon. Upon an
Event of Default, notwithstanding any other provision of
this Note or any Transaction Document, the Holder shall have no
obligation to comply with or adhere to any limitations, if
any, on the conversion of this Note or the sale of the Conversion Shares, Shares
or Other Securities.
ARTICLE
IV
MISCELLANEOUS
4.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of Holder hereof in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing hereunder are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices,
demands, requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be: (i)
if to the Borrower to: Sanswire Corp., ▇▇▇ ▇▇ ▇▇▇ ▇▇▇.,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO, telecopier
number: (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note.
9
4.3 Amendment Provision.
The term "Note" and all reference thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
4.4 Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.
4.5 Cost of Collection.
If default is made in the payment of this Note, Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys'
fees.
4.6 Governing Law. This
Note shall be governed by and construed in accordance with the laws of the State
of New York. Any action brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only in the state
courts of Florida or in the federal courts located in the state of New Florida
located in Broward County, Florida. Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the jurisdiction of such
courts. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs.
4.7 Maximum Payments.
Nothing contained herein shall be deemed to establish or require the payment of
a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or
other charges hereunder exceed the maximum permitted by such law, any payments
in excess of such maximum shall be credited against amounts owed by the Borrower
to the Holder and thus refunded to the Borrower.
4.8 Waiver of Jury
Trial. THE PARTIES
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON OR ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR
ANY TRANSACTION DOCUMENT OR
ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ACCEPTANCE OF THIS
AGREEMENT.
4.9 Redemption. This Note
may not be redeemed or paid without the consent of the Holder except as
described in this Note or in the Subscription Agreement.
4.10 Shareholder Status.
The Holder shall not have rights as a shareholder of the Borrower with respect
to unconverted portions of this Note. However, the Holder will have all the
rights of a shareholder of the Borrower with respect to the shares of Common
Stock to be received by Holder after delivery by the Holder of a Conversion
Notice to the Borrower.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOLLOWS]
10
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇
has caused this Note to be signed in its name by an authorized officer as of the
_______th day of
____________, 2009.
|
By:
|
|||
|
Name:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|||
|
Title:
CEO
|
|||
|
WITNESS:
|
|||
11
Exhibit
A
PAYMENT
SCHEDULE
12
Exhibit
B
NOTICE OF
CONVERSION
(To be
executed by the Holder in order to Convert the Note)
TO:
The
undersigned hereby irrevocably elects to convert $_________________ of
the principal amount of the
above Note into Shares of
Common Stock of Sanswire Corp., according to the
conditions stated therein, as of the Conversion Date
written below.
|
Conversion
Date:
|
______________________________________
|
|
Applicable
Conversion Price:
|
______________________________________
|
|
Signature:
|
______________________________________
|
|
Name:
|
______________________________________
|
|
Address:
|
______________________________________
|
|
Amount
to be converted:
|
$_____________________________________
|
|
Amount
of Note unconverted:
|
$_____________________________________
|
|
Conversion
Price per share:
|
$_____________________________________
|
|
Number
of shares to be issued:
|
______________________________________
|
|
Amount
of Interest Converted:
|
$_____________________________________
|
|
Conversion
Price per share:
|
$_____________________________________
|
|
Number
of shares of to be issued:
|
______________________________________
|
|
Please issue the shares of to:
|
______________________________________
|
|
Issue
to:
|
______________________________________
|
|
Authorized
Signature:
|
______________________________________
|
|
Name:
|
______________________________________
|
|
Title:
|
______________________________________
|
|
Phone
Number:
|
______________________________________
|
|
Broker
DTC Participant Code:
|
______________________________________
|
|
Account
Number:
|
______________________________________
|
13