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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
j 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.
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By:
_______________________________
Name:
Title:
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