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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY TRANSFEREE OF THIS
DEBENTURE SHOULD CAREFULLY REVIEW THE TERMS OF THIS DEBENTURE, INCLUDING SECTION
2(E)(VI) HEREOF. THE PRINCIPAL AMOUNT AND THE INTEREST THEREON REPRESENTED BY
THIS DEBENTURE MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 2(E)(VI) OF THIS DEBENTURE.
SUBORDINATED CONVERTIBLE DEBENTURE
Chicago, Illinois
June 30, 2000 $2,200,000
FOR VALUE RECEIVED, GLOBAL TELEPHONE COMMUNICATION, INC., a
Nevada corporation (the "COMPANY"), hereby promises to pay to the order of
PINEHURST/L.O.F., LLC, a Cayman Islands limited liability company, or
registered assigns in accordance with SECTION 20 hereof ("HOLDER") the
principal amount of Two Million Two Hundred Thousand Dollars ($2,200,000), on
December 31, 2003 (the "MATURITY DATE"), and to pay interest on the unpaid
principal balance hereof until payment in full thereof at the rate of 9% per
annum from the date hereof (the "ISSUANCE DATE") until the same becomes due
and payable, whether at maturity or upon acceleration or by conversion or
redemption in accordance with the terms hereof or otherwise. Interest on this
Debenture shall commence accruing on the Issuance Date and shall be computed
on the basis of a 365-day year and actual days elapsed and shall be payable
at the time of optional or mandatory redemption or conversion of principal in
accordance with SECTION 1 hereof; PROVIDED, THAT until the Registration
Statement contemplated by the Securities Purchase Agreement dated as of the
date hereof between the Company an the Holder (the "Securities Purchase
Agreement") and Registration Rights Agreement (as defined in the Securities
Purchase Agreement) is declared effective by the Securities and Exchange
Commission, such interest shall be payable in accordance with the last
sentence of SECTION 1 hereof. Any amount of this Debenture which is not paid
when due shall bear interest at the rate of 2.5% per month (prorated for
partial months) until the same is paid in full ("DEFAULT INTEREST").
1. PAYMENTS OF PRINCIPAL AND INTEREST.
All payments of principal and interest on this Debenture (to the
extent such principal and/or interest is not converted into Common Stock in
accordance with the terms hereof) shall be made in lawful money of the United
States of America by wire transfer of immediately available funds as follows:
American National Bank and Trust, 120 South LaSalle Street, Chicago, IL
60603, ABA 071000770, FBO PINEHURST/L.O.F., LLC, A/C #5330255651, or to such
other account as Holder may from time to time designate by written notice in
accordance
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with the provisions of this Debenture. Whenever any amount
expressed to be due by the terms of this Debenture is due on any day which is
not a Business Day (as defined below), the same shall instead be due on the
next succeeding day which is a Business Day and, in the case of any interest
payment date which is not the date on which this Debenture is paid in full,
the extension of the due date thereof shall not be taken into account for
purposes of determining the amount of interest due on such date. For purposes
of this Debenture, "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the City of Chicago, Illinois
are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the
meaning ascribed thereto in the Securities Purchase Agreement.
Notwithstanding anything to the contrary set forth herein, interest shall be
payable on a monthly basis, in arrears in cash by wire transfer of
immediately available funds to the account designated above in this SECTION 1
until such time as the Registration Statement contemplated by the Securities
Purchase Agreement and Registration Rights Agreement is declared effective by
the Securities and Exchange Commission.
2. PREPAYMENT.
At any time during the term of this Debenture, the Company may
prepay all or a portion of the Debenture at a price equal to (A)(x) the
outstanding principal balance on the Debenture PLUS (y) accrued past due
interest MULTIPLIED BY (B) 110%, plus current interest. At such time as the
Company notifies the Buyer of a Prepayment, the Buyer shall also vest its
interest in the additional Redemption Warrants, as described in the Warrant.
For purposes of this section, all interest which is due and owing from any
month prior to the current month shall be defined as past due. All interest
which is due and owing for the month during which the prepayment is made
shall be defined as current.
(a) MECHANICS OF COMPANY PREPAYMENT. Upon a determination by
the Company to Prepay all or a portion of the Debenture, including accrued
and unpaid interest, the Company shall deliver a written notice thereof via
facsimile and overnight courier ("NOTICE OF PREPAYMENT") to Holder, which
notice shall specify the date such prepayment is to be effected and the
Prepayment Price, (the "PREPAYMENT PRICE"). The Company shall pay the
Prepayment Price to Holder in cash by wire transfer as follows: American
National Bank and Trust, 120 South LaSalle Street, Chicago, IL 60603, ABA
071000770, FBO PINEHURST/L.O.F., LLC, A/C#5330255651, or to such other
account or accounts as Holder may designate in writing to the Company from
time to time.
(b) VOID PREPAYMENT. In the event that the Company does not
pay the Prepayment Price to Holder on a timely basis as described in this
SECTION 2, in addition to any remedy otherwise available to the Holder
hereunder or under the Securities Purchase Agreement, such unpaid amount
shall bear interest at the Default Rate until paid in full. In the event that
the Company does not pay the Prepayment Price within the time period set
forth in SECTION 2(C), at any time thereafter and until the Company pays such
unpaid Prepayment Price in full, Holder shall have the option (the "VOID
PREPAYMENT OPTION") to, in lieu of prepayment, require the Company to rescind
the Notice of Prepayment by sending written notice thereof to the Company via
facsimile (the "VOID OPTIONAL PREPAYMENT NOTICE"). Upon the Company's receipt
of such Void Prepayment Notice, (i) the Notice of Prepayment pursuant to the
Company's prepayment rights as described in SECTION 2(c), shall be null and
void with respect to
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that portion of the Debenture subject to the Void Prepayment Notice, (ii) the
Company shall immediately rescind such Prepayment Notice, and (iii) the Fixed
Conversion Price of the Debenture shall be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Void Prepayment Notice
is delivered to the Company and (B) the lowest trade price for the Common
Stock (as reported by Bloomberg) during the period beginning on the date on
which the Notice of Prepayment is delivered to the Holder and ending on the
date on which the Void Prepayment Notice is delivered to the Company.
3. CONVERSION OF DEBENTURE.
This Debenture shall be convertible into shares of the Company's
common stock, $.001 par value per share (the "COMMON STOCK"), on the terms
and conditions set forth in this SECTION 3.
(a) CERTAIN DEFINED TERMS. For purposes of this Debenture, the
following terms shall have the following meanings:
`(i) "Closing Bid Price" means, for any security as of any
date, the last closing bid price for such security on
the Principal Market (as defined below) as reported
by Bloomberg Financial Markets ("Bloomberg"), or, if
the Principal Market is not the principal securities
exchange or trading market for such security, the
last closing bid price of such security on the
principal securities exchange or trading market where
such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the
last closing bid price of such security in the
over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg,
or, if no last closing bid price is reported for such
security by Bloomberg, the last closing trade price
for such security as reported by Bloomberg, or, if no
last closing trade price is reported for such
security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Bid Price cannot be calculated
for such security on such date on any of the
foregoing bases, the Closing Bid Price of such
security on such date shall be the fair market value
as mutually determined by the Company and Holder.
If the Company and Holder are unable to agree upon
the fair market value of the Common Stock, then such
dispute shall be resolved pursuant to Section 3(e)
(iii) below with the term "Closing Bid Price" being
substituted for the term "Market Price." All such
determinations to be appropriately adjusted for any
stock dividend, stock split or other similar
transaction during such period.
(ii) "Conversion Amount" means the sum of (A) the
principal amount of the Debenture to be converted,
redeemed or otherwise with respect to which this
determination is being made, and (B) accrued and
unpaid interest, calculated as the outstanding
principal amount of the Debenture times .09 times
(N/365) and (C) Default Interest, if any.
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(iii) "CONVERSION PRICE" means, as of any Conversion Date
(as defined below) or other date of determination and
subject to adjustment as provided herein, a price
equal to the lesser of (A) the Fixed Conversion Price
(as defined below) and (B) the Variable Conversion
Price (as defined below).
(iv) "DUE DATE" means the Issuance Date and each monthly
anniversary after the Issuance Date.
(v) "FIXED CONVERSION PRICE" means a price equal to
$2.50, subject to adjustment as provided herein.
(vi) "INTEREST DATE" means the day on which the
outstanding interest on the Debenture is effected
either through cash payment, redemption or delivery
to the Company of a Conversion Notice as appropriate.
(vii) "ISSUANCE DATE" means the date of issuance of this
Debenture.
(viii) "N" means the number of days from, but excluding, the
most recent Interest Date through and including the
Interest Date for any portion of this Debenture for
which conversion is being elected.
(ix) "PERSON" means a natural person, a partnership, a
corporation, a limited liability company, an
association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a
governmental or any department, agency or political
subdivision thereof.
(x) "PRINCIPAL MARKET" means OTC Bulletin Board or other
comparable national exchange or trading market.
(xi) "VARIABLE CONVERSION PRICE" means a price equal to
100% of the lowest daily trading price of the Common
Stock (as reported by Bloomberg) of the twenty (20)
consecutive trading days ending on the trading day
immediately preceding the date of submission of a
Conversion Notice by the Holder.
(b) HOLDER'S MONTHLY CONVERSION RIGHT; CONVERSION UPON SPECIAL
EVENT. Holder shall have the right, at the Holder's option, to convert the
outstanding and unpaid principal amount of this Debenture into shares of the
Company's Common Stock, on the following terms and conditions:
(i) MONTHLY PAYMENT AMOUNT. Subject to the provisions of
SECTION 3(d) and SECTION 5 below, on the Issuance Date and
each Due Date thereafter, Holder shall be entitled to convert
$122,223 of the outstanding and unpaid principal amount of
this Debenture (together with all accrued and unpaid interest
of the Debenture) into fully paid and nonassessable shares of
Common Stock in accordance with SECTION 3(e), at the
Conversion Rate (as defined below) (the "MONTHLY PAYMENT
AMOUNT"). Delivery of such shares in accordance with SECTION
3(e)(ii) shall be considered payment in full of that portion
of the Debenture.
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(ii) CONVERSIONS UPON SPECIAL EVENT. Notwithstanding the
Holder's option to convert the Monthly Payment Amount
described in item (i) above and in addition to all other
rights of Holder contained herein, upon the occurrence of any
Special Event (as described below), 100% of the remaining
principal balance hereunder, plus accrued and unpaid interest
thereon, shall become subject to conversion, at the option of
Holder, without any restriction or limitation. A "SPECIAL
EVENT" shall be deemed to have occurred at such time as any of
the following events:
(A) the consolidation, merger or other business
combination of the Company with or into another Person (other
than solely pursuant to a migratory merger effected solely for
the purpose of changing the jurisdiction of incorporation of the
Company);
(B) the sale or transfer of all or substantially all of
the Company's assets;
(C) a purchase, tender or exchange offer made to holders
of more than 30% of the outstanding shares of Common Stock; or
(D) any event constituting an Event of Default pursuant
to SECTION 11(A) hereof.
(iii) FRACTIONAL SHARES. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All
shares of Common Stock (including fractions thereof) issuable
upon conversion of this Debenture by a holder thereof shall be
aggregated for purposes of determining whether the conversion
would result in the issuance of a fraction of a share of
Common Stock. If, after the aforementioned aggregation, the
issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a
share of Common Stock up or down to the nearest whole share.
(c) CONVERSION RATE. The number of shares of Common Stock
issuable upon conversion of a Conversion Amount of this Debenture pursuant to
SECTION 3(b) shall be determined according to the following formula (the
"CONVERSION RATE"):
Conversion Rate = Conversion amount
-----------------
Conversion Price
(d) LIMITATION ON BENEFICIAL OWNERSHIP. The Company shall
not effect any conversion of this Debenture and Holder shall not have the
right to convert any portion of this Debenture pursuant to SECTION 3(b)(i) to
the extent that after giving effect to such conversion such Person (together
with such Person's affiliates) would beneficially own in excess of 4.99% of
the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by a Person and its affiliates or acquired by a Person and
its affiliates, as the case may be, shall include the number of shares of
Common Stock issuable upon conversion of this Debenture with respect to which
the determination of such sentence is being made, but shall exclude the
number of shares
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of Common Stock which would be issuable upon (i) conversion of the remaining,
nonconverted portion of this Debenture beneficially owned by such Person and
its affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including,
without limitation, any warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by
such Person and its affiliates. Except as set forth in the preceding
sentence, for purposes of this SECTION 3(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. Notwithstanding anything to the contrary contained herein,
each Conversion Notice (as defined below) shall constitute a representation
by Holder that, after giving effect to such Conversion Notice, Holder will
not beneficially own (as determined in accordance with this SECTION 3(d)) a
number of shares of Common Stock in excess of 4.99% of the outstanding shares
of Common Stock (1) as reflected in the Company's most recent shareholder
list, which list shall be provided to Holder by the Company on a quarterly
basis and certified by the Company as true, complete and accurate as of the
date thereof, or (2) at such time as the Company is a Reporting Company under
the Securities Exchange Act of 1934, as reflected in the Company's most
recent Form 10-QSB or Form 10-KSB, as the case may be, or more recent public
press release by the Company or other notice by the Company to Holder setting
forth the number of shares of Common Stock outstanding, but after giving
effect to conversions of this Debenture (including the conversion with
respect this determination is being made) by Holder since the date as of
which such number of outstanding shares of Common Stock was disclosed.
(e) MECHANICS OF CONVERSION. The conversion of this Debenture
shall be conducted in the following manner:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert this
Debenture into shares of Common Stock on any date
(the "CONVERSION DATE"), Holder hereof shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior
to 11:59 p.m., Eastern Time on such date, a copy of a fully
executed notice of conversion in the form attached hereto as
EXHIBIT A (the "CONVERSION NOTICE") to the Company's
designated transfer agent (the "TRANSFER AGENT") with a copy
thereof to the Company and (B), subject to SECTION 3(e)(vi),
surrender to a common carrier for delivery to the Transfer
Agent as soon as practicable following such date the original
Debenture being converted (or an indemnification undertaking
with respect to such Debenture in the case of its loss, theft
or destruction).
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a
copy of a Conversion Notice, the Company shall as soon as
practicable, but in no event later than one (1) Business Day
after receipt of such Conversion Notice, send, via facsimile,
a confirmation of receipt of such Conversion Notice to Holder
and the Transfer Agent, which confirmation shall constitute an
instruction to the Transfer Agent to process such Conversion
Notice in accordance with the terms herein. Upon receipt by
the Transfer Agent of a copy of the executed Conversion
Notice, the Transfer Agent shall, no later than the second
trading day following the date of receipt by it of the
Conversion Notice, (A) issue and surrender to a common carrier
for overnight delivery to Holder's brokerage account
#_________________ (the "Pinehurst Brokerage Account") with
Credit Suisse First Boston (the
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<PAGE>
"Broker"), a certificate, registered in the name of Holder
or its designee, for the number of shares of Common Stock
to which Holder shall be entitled, or (B) in the event the
Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate
number of shares of Common Stock to which Holder shall be
entitled to the Broker's balance account with DTC through
its Deposit Withdrawal Agent Commission system to be
further credited to the Pinehurst Brokerage Account by the
Broker. Subject to SECTION 3(e)(vi), if less than the
principal amount of this Debenture is submitted for
conversion, then the Company shall, as soon as practicable
and in no event later than three Business Days after
receipt of this Debenture and at its own expense, issue and
deliver to Holder or its designee a new Debenture for the
outstanding principal amount not converted.
(iii) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Conversion Price or the arithmetic
calculation of the Conversion Rate, the Company shall instruct
the Transfer Agent to issue to Holder the number of shares of
Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the
Holder via facsimile within one (1) Business Day of receipt of
Holder's Conversion Notice. If Holder and the Company are
unable to agree upon the determination of the Conversion Price
or arithmetic calculation of the Conversion Rate within one
(1) Business Day of such disputed determination or arithmetic
calculation being submitted to Holder, then the Company shall
within one (1) Business Day submit via facsimile (A) the
disputed determination of the Conversion Price to an
independent, reputable investment bank selected by the Company
and approved by Holder or (B) the disputed arithmetic
calculation of the Conversion Rate to the Company's
independent, outside accountant. The Company shall cause the
investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the
Company and Holder of the results no later than the fifth
(5th) day after the date it receives the disputed
determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be,
shall be binding upon all parties absent manifest error.
(iv) RECORD HOLDER. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion
of this Debenture shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the
Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT.
(A) CASH DAMAGES. If within five (5) Business Days
after Holder's delivery of the Conversion Notice (subject to extension
in accordance with SECTION 3(e)(iii) for a good faith dispute made in
accordance with the terms of SECTION 3(e)(iii)) (the "SHARE DELIVERY
PERIOD") the Transfer Agent shall fail to issue a certificate to Holder
or credit Holder's balance account with The Depository Trust Company
for the number of shares of Common Stock to which Holder is entitled
upon Holder's conversion of this
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Debenture (a "CONVERSION FAILURE"), in addition to all other available
remedies which Holder may pursue hereunder and under the Securities
Purchase Agreement (including indemnification pursuant to Article 8
thereof), the Company shall pay additional damages to Holder on each
day after such six (6th) Business Day such conversion is not timely
effected and/or such Debenture is not delivered in an amount equal to
2.0% of such principal amount of this Debenture submitted for
conversion by Holder until conversion is effected or the Holder voids
the Conversion Notice pursuant to Section 3(e)(B).
(B) VOID CONVERSION NOTICE; ADJUSTMENT TO CONVERSION
PRICE. If for any reason Holder has not received all of the shares of
Common Stock prior to the tenth (10th) Business Day after the
expiration of the Share Delivery Period with respect to a conversion
of this Debenture, then Holder, upon written notice to the Transfer
Agent, with a copy to the Company, may void its Conversion Notice with
respect to, and retain or have returned, as the case may be, any
principal amount of this Debenture that has not been converted pursuant
to Holder's Conversion Notice; provided, that the voiding of Holder's
Conversion Notice shall not affect the Company's obligations to make
any payments which have accrued prior to the date of such notice
pursuant to SECTION 3(e)(v)(A) or otherwise. Thereafter, the Fixed
Conversion Price of the principal amount of this Debenture returned
or retained by Holder for failure to timely convert shall be adjusted
to the lesser of (I) the Conversion Price as in effect on the date on
which the Holder submitted the Conversion Notice and (II) the lowest
trade price for the Common Stock during the period beginning on the
Conversion Date and ending on the date Holder voided the Conversion
Notice.
(vi) BOOK-ENTRY. Notwithstanding anything to the contrary
set forth herein, upon conversion of any portion of this
Debenture in accordance with the terms hereof, Holder shall
not be required to physically surrender this Debenture to the
Company unless the full Conversion Amount represented by this
Debenture is being converted. Holder and the Company shall
maintain records showing the Conversion Amount so converted
and the dates of such conversions or shall use such other
method, reasonably satisfactory to Holder and the Company, so
as not to require physical surrender of this Debenture upon
each such conversion. In the event of any dispute or
discrepancy, such records of the Company shall be controlling
and determinative in the absence of manifest error.
Notwithstanding the foregoing, if this Debenture is converted
as aforesaid, Holder may not transfer this Debenture unless
Holder first physically surrenders this Debenture to the
Company, whereupon the Company will forthwith issue and
deliver upon the order of Holder a new Debenture of like
tenor, registered as Holder may request, representing in the
aggregate the remaining Conversion Amount represented by this
Debenture. Holder and any assignee, by acceptance of this
Debenture or such new Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following
conversion of any portion of this Debenture, the Conversion
Amount (including the principal of this Debenture) represented
by this Debenture may be less than the principal amount and
the accrued interest set forth on the face hereof.
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(f) TAXES. The Company shall pay any and all taxes that
may be payable with respect to the issuance and delivery of Common Stock upon
the conversion of this Debenture.
4. ANTI-DILUTION.
(a) CERTAIN DEFINED TERMS. For purposes of this Section,
the following terms shall have the following meanings:
"COMMON STOCK" shall mean the Common Stock, $.001 par value,
of the Company as constituted on the date of this Debenture
and any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of
such Common Stock.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares (including, without limitation, Preferred Shares) of
stock or other securities which are convertible into or
exchangeable for, with or without payment of additional
consideration, shares of Common Stock, either immediately or
upon the arrival of a specified date or the happening of a
specified event.
"PREFERRED SHARES," as applied to any Person, shall mean
shares of such Person which shall be entitled to preference or
priority over any other shares of such Person in respect of
either the payment of dividends or the distribution of assets
upon liquidation.
"STOCK PURCHASE RIGHTS" shall mean any warrants, options or
other rights to subscribe for, purchase or otherwise acquire
any shares of Common Stock or any Convertible Securities,
either immediately or upon the arrival of a specified date or
the happening of a specified event.
(b) Except as otherwise provided in Section 4(b)0) below, the
Fixed Conversion Price shall be subject to adjustment from time to time as
set forth in this Section 4.
ISSUANCE OF ADDITIONAL COMMON STOCK. If and whenever the
Company shall issue or sell any shares of its Common Stock for
a consideration per share less than the Fixed Conversion Price
in effect immediately prior to the time of such issuance or
sale, then, upon such issuance or sale, the Fixed Conversion
Price shall be adjusted to that price equal to the fraction
(i) the numerator of which shall be equal to (A) (x) the Fixed
Conversion Price in effect immediately prior to such event
multiplied by (y) the total number of outstanding shares of
Common Stock immediately prior to such event PLUS (B) the
consideration received by the Company upon such issuance, and
(ii) the denominator of which shall be the total number of
outstanding shares of Common Stock immediately after such
event, treating as outstanding all shares of Common Stock
issuable upon conversions or exchanges of Convertible
Securities (including any Debentures held by Holder) and
exercises of Stock Purchase Rights (including any Warrants
held by Holder).
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STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If and whenever
the Company subsequent to the date hereof:
(A) declares a dividend upon, or makes any
distribution in respect of, any of its
capital stock, payable in shares of Common
Stock, Convertible Securities or Stock
Purchase Rights,
(B) subdivides its outstanding shares of Common
Stock into a larger number of shares of Common
Stock, or
(C) combines its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then the Fixed Conversion Price shall be adjusted to that
price determined by multiplying the Fixed Conversion Price in
effect immediately prior to such event by a fraction (A) the
numerator of which shall be the total number of outstanding
shares of Common Stock immediately prior to such event, and
(B) the denominator of which shall be the total number of
outstanding shares of Common Stock immediately after such
event, treating as outstanding all shares of Common Stock
issuable upon conversions or exchanges of Convertible
Securities (including any Debentures held by Holder) and
exercises of Stock Purchase Rights (including any Warrants
held by Holder).
ISSUANCE OF CONVERTIBLE SECURITIES OR STOCK PURCHASE RIGHTS.
If and whenever the Company shall issue or sell any
Convertible Securities or Stock Purchase Rights (other than
the granting of Stock Purchase Rights to officers, employees,
directors and consultants of the Company pursuant to any
qualified or non-qualified stock option plan or employee stock
ownership plan (ESOP)) under which a consideration per share
for which shares of Common Stock may at any time thereafter be
issuable upon exercise thereof (or, in the case of Stock
Purchase Rights exercisable for the purchase of Convertible
Securities, upon the subsequent conversion or exchange of such
Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issuance
or sale, then upon such issuance or sale the Conversion Price
shall be adjusted as provided in Section 4(a) on the basis
that the maximum number of shares of Common Stock ever
issuable upon exercise of such Convertible Securities or Stock
Purchase Rights (or upon conversion or exchange of such
Convertible Securities following such exercise) shall be
deemed to have been issued as of the date of the determination
of the Fixed Conversion Price.
READJUSTMENT OF CONVERSION PRICE. Upon (i) each change in the
purchase price payable for any Stock Purchase Rights or
Convertible Securities referred to in Section 4(b)0 each
change in the consideration, if any, payable upon exercise of
such Stock Purchase Rights or upon the conversion or exchange
of such Convertible Securities, (iii) each change in the
number of shares of Common Stock issuable upon the exercise of
such Stock Purchase Rights or the rate at which such
Convertible Securities are convertible into or exchangeable
for shares of Common Stock or (iv) the expiration of any Stock
Purchase Rights not
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exercised or of any right to convert or exchange under any
Convertible Securities not exercised, the Fixed Conversion
Price in effect at the time of such event shall forthwith be
readjusted to the Fixed Conversion Price which would have been
in effect at such time had such Stock Purchase Rights or
Convertible Securities provided for such change or expiration,
as applicable.
REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION OF THE
COMPANY. In the event that the Company effects (i) any
reorganization or reclassification or recapitalization of the
capital stock of the Company (other than in the cases referred
to in Section 4(b)), (ii) any consolidation or merger of the
Company with or into another Person, (iii) the sale, transfer
or other disposition of the property, assets or business of
the Company as an entirety or substantially as an entirety or
(iv) any other transaction or event as a result of which
holders of Common Stock become entitled to receive any shares
of stock or other securities and/or property (including,
without limitation, cash, but excluding any cash dividend that
is paid out of the earnings or surplus of the Company legally
available therefor) with respect to or in exchange for the
Common Stock of the Company, there shall thereafter be
deliverable upon the conversion of this Debenture or any
portion thereof (in lieu of or in addition to the Common Stock
theretofore deliverable, as appropriate) the highest number of
shares of stock or other securities and/or the greatest amount
of property (including, without limitation, cash) to which the
holder of the number of shares of Common Stock which would
otherwise have been deliverable upon the conversion of this
Debenture or any portion thereof at the time would have been
entitled upon such transaction or event.
OTHER DILUTIVE EVENTS. If the Company takes any other action,
or if any other event occurs to which the other provisions of
this Section 4 are not strictly applicable, but which could
result in an adjustment the Conversion Price or to any of the
other terms of this Debenture that would not fairly protect
the conversion rights and other rights represented by this
Debenture in accordance with the essential intent and
principles hereof, an appropriate adjustment in such purchase
rights comparable to the adjustments described in (a) and (b)
above shall be made by the Company.
MAXIMUM CONVERSION PRICE. At no time shall the Fixed
Conversion Price exceed the initial Conversion Price set forth
in Section 3(v) hereof except as a result of an adjustment
thereto pursuant to Section 4(b).
APPLICATION. All subdivisions of this Section 4 are intended
to operate independently of one another. If a transaction or
an event occurs that requires the application of more than one
subsection, all applicable subdivisions shall be given
independent effect.
WAIVER. In the event that Holder consents in writing to limit,
or waive in its entirety, any anti-dilution adjustment to
which it would otherwise be entitled hereunder, the Company
shall not be required to make any adjustment whatsoever with
respect to this Debenture in excess of such limit or at all,
as the terms of such consent may dictate.
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NOTICE OF ADJUSTMENTS TO FIXED CONVERSION PRICE. As promptly
as practicable after the occurrence of any event requiring any
adjustment under this Section 4 to the Conversion Price (or to
the number or kind of securities or other property deliverable
upon the conversion of this Debenture), the Company shall, at
its expense, mail to Holder a certificate of an officer of the
Company setting forth in reasonable detail the events
requiring the adjustment and the method by which such
adjustment was calculated and specifying the adjusted Fixed
Conversion Price and the number of shares of Common Stock
issuable upon conversion of this Debenture after giving effect
to such adjustment.
ANTI-DILUTION PROVISIONS IN OTHER SECURITIES. If the Company
issues any Stock Purchase Rights or Convertible Securities or
other securities containing provisions protecting the holder
or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set
forth in this Debenture, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated
herein as if fully set forth in this Debenture and, to the
extent inconsistent with any provision of this Debenture,
shall be deemed to be substituted therefor.
5. REDEMPTION.
This Debenture shall be subject to mandatory redemption upon the
occurrence of certain events and optional redemption at the option of the
Company, each as discussed below.
(a) MANDATORY MONTHLY REDEMPTION. Upon the occurrence of a
Mandatory Redemption Event, and on each month anniversary thereafter until
such Mandatory Redemption Event shall have been cured, if any, the Company
will be required to redeem the Monthly Payment Amount for such month at a
price equal to 120% of such Monthly Payment Amount plus accrued and unpaid
interest thereon (the "MANDATORY REDEMPTION PRICE"). For purposes of this
Debenture, "MANDATORY REDEMPTION EVENT" means any of the following events:
the failure of the Company to satisfy any listing criteria of
its Principal Market necessary to maintain the continued
listing of the Common Stock, without regard to any grace
period or other timing issues;
the suspension of the Common Stock from trading for three (3)
consecutive trading days or for a total of ten (10) trading
days out of the preceding 365 days; or
if for any reason pursuant to the registration statement (the
"REGISTRATION STATEMENT") covering the resale of shares of
Common Stock issuable upon conversion of this Debenture and
the exercise of the Warrants required to be filed by the
Company pursuant to the Registration Rights Agreement between
the Company and Holder (the "REGISTRATION RIGHTS AGREEMENT")
sales cannot be made following the date such Registration
Statement has been declared effective by the SEC (whether
because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for
sales to be made pursuant to the Registration Statement, to
register sufficient shares of Common Stock, or
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<PAGE>
otherwise) for three (3) consecutive trading days or for a
total of ten (10) trading days out of the preceding 365 days.
(b) OPTIONAL MONTHLY REDEMPTION. At any time during the
five (5) trading days prior to each Due Date (other than the Issuance Date),
if the Closing Bid Price of the Common Stock on each such trading day is less
than the Fixed Conversion Price on such day then the Company shall have the
option to redeem (the "OPTIONAL MONTHLY REDEMPTION RIGHT") the Monthly
Payment Amount for such month at a price equal to the Applicable Optional
Redemption Price times the Monthly Payment Amount, plus all accrued and
unpaid interest thereon. The "APPLICABLE OPTIONAL REDEMPTION PRICE" shall be
calculated as follows: (i) 105% for each of the first and second months in
which the Company exercises such Optional Redemption Right; (ii) 106.5% for
each of the third and fourth months in which the Company exercises such
Optional Monthly Redemption Right; (iii) 108% for the fifth month and each
month thereafter in which the Company exercises its Optional Monthly
Redemption Right.
(c) MECHANICS OF COMPANY REDEMPTION. Within one (1) day
after the occurrence of a Mandatory Redemption Event, or upon a determination
by the Company to exercise its Optional Monthly Redemption Right, the Company
shall deliver a written notice thereof via facsimile and overnight courier
("NOTICE OF REDEMPTION") to Holder, which notice shall specify the type of
redemption (and the nature of event with respect to any Mandatory
Redemption), and the Mandatory Full Redemption Price or Applicable Optional
Redemption Price, as appropriate (in any case, the "REDEMPTION PRICE"). The
Company shall pay the Redemption Price to Holder in cash by wire transfer on
the applicable Due Date. The Redemption Price shall be delivered to Holder by
wire transfer as follows: American National Bank and Trust, 120 South LaSalle
Street, Chicago, IL 60603, ABA 071000770, FBO PINEHURST/L.O.F., LLC,
A/C#5330255651, or to such other account or accounts as Holder may designate
in writing to the Company from time to time.
(d) VOID REDEMPTION. In the event that the Company does not
pay the Mandatory Full Redemption Price to Holder on a timely basis as
described in this SECTION 3, in addition to any remedy otherwise available to
the Holder hereunder or under the Securities Purchase Agreement, such unpaid
amount shall bear interest at the Default Rate until paid in full. Michael
you wrote the phrase "or until" in the margin here and didn't complete your
thought. Let's discuss. In the event that the Company does not pay the
Applicable Optional Redemption Price within the time period set forth in
SECTION 5(C), at any time thereafter and until the Company pays such unpaid
Applicable Optional Redemption Price in full, Holder shall have the option
(the "VOID OPTIONAL REDEMPTION OPTION") to, in lieu of redemption, require
the Company to rescind the Notice of Redemption for that portion of the
Debenture for which the Applicable Optional Redemption Price (together with
any interest thereon) has not been paid, by sending written notice thereof to
the Company via facsimile (the "VOID OPTIONAL REDEMPTION Notice"). Upon the
Company's receipt of such Void Optional Redemption Notice, (i) the Notice of
Redemption pursuant to the Company's optional redemption rights as described
in SECTION 5(C), shall be null and void with respect to that portion of the
Debenture subject to the Void Optional Redemption Notice, (ii) the Company
shall immediately rescind such Redemption Notice, and (iii) the Conversion
Price of that portion of the Debenture returned shall be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Void
Optional Redemption Notice is delivered to the Company and (B) the lowest
trade price for the Common
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<PAGE>
Stock (as reported by Bloomberg) during the period beginning on the date on
which the Notice of Redemption is delivered to the Holder and ending on the
date on which the Void Optional Redemption Notice is delivered to the Company.
(e) DISPUTES; MISCELLANEOUS. In the event of a dispute as
to the determination of the lowest trade price or the arithmetic calculation
of the Redemption Price, such dispute shall be resolved pursuant to SECTION
3(e)(iii) above with the term "lowest trade price" being substituted for the
term "Conversion Price" and the term "Redemption Price" being substituted for
the term "Conversion Rate." Holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not affect the
Company's obligations to make any payments which have accrued prior to the
date of such notice. In the event of a redemption pursuant to this SECTION 5
of less than all of the principal amount and interest of this Debenture and
subject to SECTION 3(e)(vi), the Company shall promptly cause to be issued
and delivered to Holder a new Debenture representing the remaining unpaid
principal amount which has not been redeemed.
6. OTHER RIGHTS OF HOLDER.
(a) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "ORGANIC CHANGE." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which
the Company is not a surviving entity, the Company will secure from the
Person purchasing such assets or the successor resulting from such Organic
Change (in each case, the "ACQUIRING ENTITY") a written agreement (in form
and substance satisfactory to Holder) to deliver to Holder in exchange for
this Debenture, a security of the Acquiring Entity evidenced by a written
instrument substantially similar in form and substance to this Debenture, and
satisfactory to Holder. Prior to the consummation of any other Organic
Change, the Company shall make appropriate provision (in form and substance
satisfactory to Holder) to insure that Holder will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the conversion of Holder's Debenture such shares of stock, securities or
assets that would have been issued or payable in such Organic Change with
respect to or in exchange for the number of shares of Common Stock which
would have been acquirable and receivable upon the conversion of Holder's
Debenture as of the date of such Organic Change (without taking into account
any limitations or restrictions on the convertibility of the Debenture).
(b) PURCHASE RIGHTS. If at any time the Company grants,
issues or sells any options, convertible securities or rights to purchase
stock, warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the "PURCHASE RIGHTS"), then Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which Holder could have acquired if Holder had held
the number of shares of Common Stock acquirable upon complete conversion of
the Debenture (without taking into account any limitations or restrictions on
the convertibility of the Debenture) immediately
14
<PAGE>
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights.
7. RESERVATION OF SHARES.
The Company shall, so long as any principal amount of the Debenture
is outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Debenture, such number of shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all of the principal amount of the
Debenture then outstanding; provided that the number of shares of Common
Stock so reserved shall at no time be less than 140% of the number of shares
of Common Stock for which the principal amount of the Debenture are at any
time convertible.
8. VOTING RIGHTS.
Holder shall have no voting rights, except as required by law,
including but not limited to the Corporation Law of the State of Nevada, and
as expressly provided in this Debenture.
9. RESTRICTION ON REDEMPTION AND CASH DIVIDENDS.
Until all of the outstanding principal amount of this Debenture has
been converted, redeemed or otherwise satisfied as provided herein, the
Company shall not, directly or indirectly, redeem, or declare or pay any cash
dividend or distribution on, its capital stock without the prior express
written consent of Holder.
10. REISSUANCE OF DEBENTURE.
Subject to SECTION 3(e)(vi) in the event of a conversion or
redemption pursuant to this Debenture of less than all of the Conversion
Amount represented by this Debenture, the Company shall promptly cause to be
issued and delivered to Holder, upon tender by Holder of the Debenture
converted or redeemed, a new debenture of like tenor representing the
remaining principal amount of this Debenture which has not been so converted
or redeemed.
11. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "EVENT OF DEFAULT" is: (i)
failure of the Company's Registration Statement to be declared effective
within 180 days following the Issuance Date, (ii) default in payment of (x)
principal, or Default Interest on this Debenture when and as due, or (y)
interest within 3 business days of becoming due; (iii) failure by the Company
(A) for thirty (30) days after notice to it to comply with any other material
provision of this Debenture except for delivery of a replacement Debenture
within three Business Days as described in Section 3(e)(ii); or (B) for five
(5) Business Days after notice to it to comply with the replacement Debenture
delivery requirement set forth in Section 3(e)(ii); (iv) any default under or
acceleration prior to maturity of any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or for money borrowed the
repayment of which is guaranteed by the Company, whether such indebtedness or
guarantee now exists or shall be created hereafter
15
<PAGE>
in an amount greater than $100,000 ; (v) a Closing Bid Price of the Common
Stock on any trading day of less than ten cents ($0.10), or (vi) if the
Company pursuant to or within the meaning of any Bankruptcy Law: (A)
commences a voluntary case; (B) consents to the entry of an order for relief
against it in an involuntary case; (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property; (D) makes a
general assignment for the benefit of its creditors; or (E) admits in writing
that it is generally unable to pay its debts as the same become due; or (vii)
a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (1) is for relief against the Company in an involuntary
case; (2) appoints a Custodian of the Company or for all or substantially all
of its property; or (3) orders the liquidation of the Company or any
subsidiary, and the order or decree remains unstayed and in effect for ninety
(90) days. The term "BANKRUPTCY LAW" means Title 11, U.S. Code, or any
similar Federal or State Law for the relief of debtors. The term "CUSTODIAN"
means any receiver, trustee, assignee, liquidator or similar official under
any Bankruptcy Law. Let's discuss a grace period for interest payments.
(b) REMEDIES. If an Event of Default occurs and is
continuing, Holder may declare all of this Debenture, including any interest
and Default Interest and other amounts due, to be due and payable
immediately, except that in the case of an Event of Default arising from
events described in clauses (iv) and (v) of SECTION 11(a), this Debenture
shall become due and payable without further action or notice. Holder may not
enforce the agreements contained in this Debenture except as provided herein.
In addition to any remedy Holder may have under this Debenture and the
Securities Purchase Agreement, such unpaid amount shall bear interest at the
Default Rate until paid in full.
12. VOTE TO CHANGE THE TERMS OF THIS DEBENTURE.
This Debenture and any provision hereof may only be amended by an
instrument in writing signed by the Company and Holder. The term "Debenture"
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.
13. LOST OR STOLEN DEBENTURE.
Upon receipt by the Company of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Debenture, and, in the
case of loss, theft or destruction, of an indemnification undertaking by the
holder to the Company in a form reasonably acceptable to the Company and, in
the case of mutilation, upon surrender and cancellation of the Debenture, the
Company shall execute and deliver a new debenture of like tenor and date;
provided, however, the Company shall not be obligated to re-issue the
Debenture if Holder contemporaneously requests the Company to convert such
remaining principal amount into Common Stock.
14. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
If: (i) this Debenture is placed in the hands of an attorney for
collection or enforcement or is collected or enforced through any legal
proceeding; or (ii) an attorney is retained to represent the Holder of this
Debenture in any bankruptcy, reorganization, receivership or other
proceedings affecting creditors' rights and involving a claim under this
Debenture; or (iii) an
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<PAGE>
attorney is retained to represent the Holder of this Debenture in any other
proceedings whatsoever in connection with this Debenture, then the Company
shall pay to Holder all attorneys' fees, costs and expenses incurred in
connection therewith, in addition to all other amounts due hereunder.
15. CANCELLATION.
After all principal and accrued interest at any time owed on this
Debenture has been paid in full, this Debenture shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not
be reissued.
16. DEBENTURE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Debenture is exchangeable, upon the surrender hereof by Holder
at the principal office of the Company, for a new Debenture or Debenture (in
principal amounts of at least $1,000) containing the same terms and
conditions and representing in the aggregate the principal amount of this
Debenture, and each such new Debenture will represent such portion of such
principal amount as is designated by Holder at the time of such surrender.
The date the Company initially issues this Debenture will be deemed to be the
"Issuance Date" hereof regardless of the number of times a new Debenture
shall be issued.
17. WAIVER OF NOTICE.
To the extent permitted by law, the Company hereby waives demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Debenture
and the Securities Purchase Agreement.
18. GOVERNING LAW.
This Debenture shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Debenture shall be governed by, the laws of the State of
Illinois, without giving effect to provisions thereof regarding conflict of
laws.
19. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.
The remedies provided in this Debenture shall be cumulative and in
addition to all other remedies available under this Debenture, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit
Holder's right to pursue actual damages for any failure by the Company to
comply with the terms of this Debenture. The Company covenants to Holder that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall not,
except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to
Holder and that the remedy at law for any such
17
<PAGE>
breach may be inadequate. The Company therefore agrees that, in the event of
any such breach or threatened breach, Holder shall be entitled, in addition
to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other
security being required.
20. SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION.
No specific provision contained in this Debenture shall limit or
modify any more general provision contained herein. This Debenture shall be
deemed to be jointly drafted by the Company and Holder and shall not be
construed against any person as the drafter hereof.
21. FAILURE OR INDULGENCE NOT WAIVER.
No failure or delay on the part of this Debenture 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.
22. TRANSFER.
This Debenture and the rights granted to the Holder are transferable
without the consent of the Company in whole or in part, upon notice and
surrender of this Debenture to the Company. The Company shall maintain at its
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the Holder), a register for this Debenture, in
which the Company shall record the name and address of the person in whose
name this Debenture has been issued, as well as the name and address of each
transferee. The Company may treat the person in whose name the Debenture is
registered on the register as the owner and Holder for all purposes,
notwithstanding any notice to the contrary, but in all events recognizing any
transfers made in accordance with the terms of this Debenture.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed and delivered as of the _____ day of _______________, 2000.
GLOBAL TELEPHONE COMMUNICATION, INC.
By: _______________________________
[Name]
[Title]
<PAGE>
EXHIBIT A
ISSUER
CONVERSION NOTICE
Reference is made to the Debenture issued by GLOBAL TELEPHONE COMMUNICATION,
INC. (the "DEBENTURE"). In accordance with and pursuant to the Debenture, the
undersigned hereby elects to convert the principal amount of the Debenture,
indicated below into shares of common stock, no par value per share (the
"COMMON STOCK"), of the Company, by tendering the Debenture amount specified
below as of the date specified below.
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------- ------- ------------------------------------------------
DATE ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
CURRENTLY OUTSTANDING PRINCIPAL ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
CURRENT VALUE OF LETTER OF CREDIT ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
ACCRUED BUT UNPAID INTEREST ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
CONVERSION AMOUNT ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
(divided by)
CONVERSION PRICE ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
(equals)
CONVERSION SHARES ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
ACCRUED INTEREST CONVERTED ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
PRINCIPAL CONVERTED ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
(times) LETTER OF CREDIT RATIO ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
(equals) LETTER OF CREDIT REDUCTION ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
NEW OUTSTANDING PRINCIPAL ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
NEW LETTER OF CREDIT AMOUNT ______________________________________
------------------------------------------------------- ------- ------------------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
AGREED TO:
[-----------------] GLOBAL TELEPHONE COMMUNICATION, INC.
-------------------------------------- --------------------------------------
------------------------------------------------------- ------- ------------------------------------------------
</TABLE>
