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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS
GLOBAL TELEPHONE COMMUNICATION, INC.
15% CONVERTIBLE PROMISSORY NOTE
DUE JUNE 30, 2000
$800,000 New York, New York
March 31, 2000
FOR VALUE RECEIVED, the undersigned, GLOBAL TELEPHONE COMMUNICATION, INC, a
Nevada corporation (the "BORROWER"), hereby promises to pay to the order of
PINEHURST/L.O.F., LLC (the "LENDER"), a Cayman Islands limited liability
company, or its registered assigns (the "HOLDER"), the principal sum of EIGHT
HUNDRED THOUSAND DOLLARS ($800,000), or such lesser principal sum as may have
been advanced by the Lender and not repaid by the Borrower, on June 30, 2000
(the "MATURITY DATE"), with interest thereon from time to time as provided
herein.
The books and records of the Lender shall be presumptive evidence as to the
dates and amounts of each advance reflected thereon and the aggregate unpaid
principal amount of this Note.
1. ADVANCES. An initial advance of principal ("INITIAL ADVANCE")in the
amount of FIVE HUNDRED FIFTY THOUSAND DOLLARS ($550,000) shall be made to the
Borrower by the Lender on the date hereof. Provided no default has occurred and
is continuing hereunder, the Borrower may at any time after May 15, 2000 and
prior to the Maturity Date request an additional advance of principal
("ADDITIONAL ADVANCE") in the amount of up to TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000). Any such request for an Additional Advance shall be in writing and
shall be accompanied by a certificate signed by the President or a Vice
President of the Borrower certifying that the Borrower has delivered in escrow
executed copies of all Debenture Documents (as hereinafter defined) required in
connection with such additional advance pursuant to Section 8(c) below. The
Lender shall thereupon promptly advance such additional principal amount to the
Borrower.
2. INTEREST. The Borrower promises to pay interest on the principal amount
of this Note at the rate of 15% per annum. Interest on this Note shall accrue
from and including the date
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of issuance through and until repayment of the principal and payment of all
accrued interest in full. Interest shall accrue and be computed on the basis of
a 360-day year of twelve 30-day months.
3. PAYMENT. The principal amount of this Note, with interest thereon to the
date of payment, shall be due and payable on the earlier to occur of the
Maturity Date and the date that is five days after the Borrower and Lender have
entered into a refinancing transaction (the "REFINANCING TRANSACTION") for TEN
MILLION DOLLARS ($10,000,000) on substantially the same terms as are set forth
in the Debenture Documents.
4. OPTIONAL PREPAYMENT. The Borrower, at its option, may prepay all or any
portion of this Note at any time, by paying an amount equal to the outstanding
principal amount of this Note, or the portion of this Note called for
prepayment, together with interest accrued and unpaid thereon to the date fixed
for prepayment, without penalty or premium; PROVIDED, HOWEVER, that
notwithstanding any such prepayment the Lender shall have the right to make a
subordinated debt investment in the Borrower on the terms set forth in the
Debenture Documents in the event the Borrower and the Lender have not entered
into to the Refinancing Transaction. All optional prepayments under this Section
4 shall include payment of accrued interest on the principal amount so prepaid.
5. AMENDMENT. Amendments and modifications of this Note may be made only in
writing signed by the Borrower and the Holder.
6. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur if:
(i) the Borrower shall default in the payment of the principal of
or interest on this Note, when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(ii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(a) relief in respect of the Borrower or any of its subsidiaries, or of a
substantial part of its property or assets, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (b) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower or any of its subsidiaries, or for a substantial part of its
property or assets, or (c) the winding up or liquidation of the Borrower or any
of its subsidiaries; and such proceeding or petition shall continue undismissed
for 60 days, or an order or decree approving or ordering any of the foregoing
shall be entered; or
(iii) the Borrower or any of its subsidiaries shall (a)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States
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Code, as now constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (b) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in paragraph (ii) of this
Section 6(a), (c) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any of its subsidiaries, or for a substantial part of their property
or assets, (d) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (e) make a general assignment for the
benefit of creditors, (f) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (g) take any action for the
purpose of effecting any of the foregoing.
(b) ACCELERATION. If an Event of Default occurs under Section 6(a)(ii)
or (iii), then the outstanding principal of and all accrued interest on this
Note shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. If any other Event of Default occurs and is continuing the
Holder, by written notice to the Borrower, may declare the principal of and
accrued interest on this Note to be immediately due and payable. Upon such
declaration, such principal and interest shall become immediately due and
payable. The Holder may rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived, except nonpayment of
principal or interest that has become due solely because of the acceleration,
and if the rescission would not conflict with any judgment or decree.
7. CONVERSION. Notwithstanding anything to the contrary contained herein,
upon the occurrence of an Event of Default, the Holder may but shall not be
required to elect, upon notice in writing to the Borrower and payment to the
Borrower of the Conversion Amount (as hereinafter defined), to convert this Note
to a subordinated loan pursuant to the terms of the Debenture Documents. As used
in this Note, the term "CONVERSION AMOUNT" shall mean an amount equal to the
difference between the principal amount stated in the Convertible Subordinated
Debenture which is included in the Debenture Documents and all amounts due from
the Borrower hereunder on the date of conversion.
8. FEE. The Borrower shall pay a closing fee to the Lender in the amount of
FIFTY THOUSAND DOLLARS ($50,000), which fee shall be deducted from the proceeds
of the Initial Advance.
9. CONDITIONS. It shall be a condition to the obligation of the Lender to
make the Initial Advance (and, as applicable, each Additional Advance) hereunder
that
(a) WARRANTS. The Borrower shall have delivered to the Lender warrants
(the "WARRANTS") to purchase an aggregate of 200,000 shares of common stock, par
value $.001 per share, of the Borrower. The exercise price of the Warrants shall
be $2.25 per share and they shall be exercisable for a period of five years from
the date of issuance. In the event that the Borrower requests an Additional
Advance, the Borrower shall, within five business days from the date of such
Additional Advance, issue additional Warrants in a PRO RATA amount equal to
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40,000 Warrants per ONE HUNDRED THOUSAND DOLLARS ($100,000) in additional
principal amount of such Additional Advance.
(b) DEBENTURE DOCUMENTS. The Borrower shall have executed and
delivered in escrow, pursuant to an escrow agreement in form and substance
satisfactory to the Borrower and the Lender, definitive documents relating to a
subordinated debt investment in the Borrower (the "SUBORDINATED DEBT DOCUMENTS")
in an initial principal amount of TWO MILLION TWO HUNDRED THOUSAND DOLLARS
($2,200,000) substantially in the form attached hereto as Exhibit A. In the
event that the Borrower requests an Additional Advance, the Borrower shall, as a
condition thereto, execute and deliver in escrow replacement Subordinated Debt
Documents in a principal amount equal to four (4) times the aggregate principal
amount of this Note to be outstanding after the making of such Additional
Advance.
10. SUITS FOR ENFORCEMENT. Upon the occurrence of any one or more Events of
Default, the Holder of this Note may proceed to protect and enforce its rights
hereunder by suit in equity, action at law or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Note or in aid of the exercise of any power granted in this Note, or may
proceed to enforce the payment of this Note, or to enforce any other legal or
equitable right of the Holders of this Note. The Borrower agrees to pay all
reasonable expenses and costs, including attorney fees and costs of collection,
which may be incurred by the Holder in connection with the enforcement of any of
Borrower's obligations hereunder or by representatives of the Holder with
respect to any bankruptcy or insolvency proceedings of the Borrower.
11. REMEDIES CUMULATIVE. No remedy herein conferred upon the Holder is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
12. REMEDIES NOT WAIVED. No course of dealing between the Borrower and the
Holder or any delay on the part of the Holder in exercising any rights hereunder
shall operate as a waiver of any right.
13. REPLACEMENT OF NOTE. On receipt by the Borrower of an affidavit of an
authorized representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Note (and in the case of any such
mutilation, on surrender and cancellation of such Note), the Borrower, at its
expense, will promptly execute and deliver, in lieu thereof, a new Note of like
tenor. If required by the Borrower, such Holder must provide indemnity
sufficient in the reasonable judgment of the Borrower to protect the Borrower
from any loss which they may suffer if a lost, stolen or destroyed Note is
replaced.
14. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the Borrower
shall bind its successors and assigns, whether so expressed or not.
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15. NOTICES. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier (with receipt
confirmed), courier service or personal delivery at the addresses specified
below:
If to the Borrower:
Global Telephone Communications, Inc.
510 Burrard Street, Suite 910
Vancouver, BC
Canada V6C 3A8
Attn: Thomas C. Brandenburg
Fax: (604)699-3565
If to the Lender:
Pinehurst/L.O.F., LLC
JE Matthew LLC
600 Central Avenue, Suite 214
Highland Park, Illinois 60035
Att: Howard Spivack
Fax: (847) 681-1541
All such notices and communications shall be deemed to have been duly given
when: delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial overnight courier service; if mailed, five Business Days
after being deposited in the mail, postage prepaid; or if telecopied, when
receipt is acknowledged.
16. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE (INCLUDING GIVING EFFECT TO GOL
SECTION 5-1401).
17. SEVERABILITY. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
18. HEADINGS. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof
GLOBAL TELEPHONE COMMUNICATION, INC.
By:
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Name:
Title:
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