THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GLOBAL TELEMEDIA INTERNATIONAL, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
CONVERTIBLE NOTE
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FOR VALUE RECEIVED, GLOBAL TELEMEDIA INTERNATIONAL, INC., a Delaware
corporation (hereinafter called "Borrower"), hereby promises to pay to THE
KESHET FUND L.P., 000 Xxxx 0x " Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, Fax No.:
000-0000000 (the "Holder") or order, without demand, the sum of One Hundred and
Fifteen Thousand Dollars ($115,000.00), with simple interest accruing at the
annual rate of 8%, on December 20, 2002 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10) day
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grace period to pay any monetary amounts due under this Note, after which grace
period a default interest rate of 20% per annum shall apply to the amounts owed
hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
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Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert,
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interest payable on this Note shall accrue at the annual rate of eight percent
(8%) and be payable March 31, 2001 and quarterly thereafter, and on the Maturity
Date, accelerated or otherwise, when the principal and remaining accrued but
unpaid interest shall be due and payable, or sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. Conversion into the Borrower's Common Stock.
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(a) The Holder shall have the right from and after 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,
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and/or at the Holder's election, the interest accrued on the Note, (the date of
giving of such notice of conversion being a "Conversion Date") into fully paid
and nonassessable shares of common stock of Borrower as such stock exists on the
date of issuance of this Note, or any shares of capital stock of Borrower into
which such stock shall hereafter be changed or reclassified (the "Common Stock")
at the conversion price as defined in Section 2.1(b) hereof (the "Conversion
Price"), determined as provided herein. Upon delivery to the Company of a
Notice of Conversion as described in Section 9 of the subscription agreement
entered into between the Company and Holder relating to this Note (the
"Subscription Agreement") of the Holder's written request for conversion,
Borrower shall issue and deliver to the Holder within three business days from
the Conversion Date that number of shares of Common Stock for the portion of the
Note converted in accordance with the foregoing. At the election of the Holder,
the Company will deliver accrued but unpaid interest on the Note through the
Conversion Date directly to the Holder on or before the Delivery Date (as
defined in the Subscription Agreement). The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by dividing that
portion of the principal (and interest, at the election of the Holder) of the
Note 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 the lower of (i) eighty (80%) of the
average of the three lowest closing bid prices for the Common Stock on the NASD
OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System,
American Stock Exchange, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common Stock,
the "Principal Market"), or if not then trading on a Principal Market, such
other principal market or exchange where the Common Stock is listed or traded
for the thirty (30) trading days prior to but not including the Closing Date (as
defined in the Subscription Agreement) in connection with which this Note is
issued ("Maximum Base Price"); or (ii) eighty percent (80%) percent of the
average of the three lowest closing bid prices for the Common Stock on the
Principal Market, or on any securities exchange or other securities market on
which the Common Stock is then being listed or traded, for the sixty (60)
trading days prior to but not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1 (b)(i) above
and number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. 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, 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
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issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares
of Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.
D. Share Issuance. Subject to the provisions of this
Section, if the Borrower at any time shall issue any shares of Common Stock
prior to the conversion of the entire principal amount of the Note (otherwise
than as: (1) provided in Sections 2. 1(c)A, 2.1(c)B or 2.l(c)C or this
subparagraph D; (ii) pursuant to options, warrants, or other obligations to
issue shares, outstanding on the date hereof as described in the Reports and
Other Written Information, as such terms are defined in the Subscription
Agreement (which agreement is incorporated herein by this reference); or (iii)
Excepted Issuances, as defined in Section 12(a) of the Subscription Agreement;
[(i), (ii) and (iii) above, are hereinafter referred to as the "Existing Option
Obligations"] for a consideration less than the Conversion Price that would be
in effect at the time of such issue, then, and thereafter successively upon each
such issue, the Conversion Price shall be reduced as follows: (i) the number of
shares of Common Stock outstanding immediately prior to such issue shall be
multiplied by the Conversion Price in effect at the time of such issue and the
product shall be added to the aggregate consideration, if any, received by the
Borrower upon such issue of additional shares of Common Stock; and (ii) the sum
so obtained shall be divided by the number of shares of Common Stock outstanding
immediately after such issue. The resulting quotient shall be the adjusted
conversion price. Except for the Existing Option Obligations, for purposes of
this adjustment, the issuance of any security of the Borrower 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 an adjustment to the Conversion
Price upon the issuance of shares of Common Stock upon exercise of such
conversion or purchase rights.
(d) During the period the conversion right exists, Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of Common Stock 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. Xxxxxxxx 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.
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 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.
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ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, all without demand, presentment or
notice, or grace period, all of which hereby are expressly waived, except as set
forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to
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pay any installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after the due date. The ten (10) day
period described in this Section 3.1 is the same ten (10) day period described
in Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material
--------------------
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of seven (7) days after
written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
--------------------------------------------
representation or warranty of the Borrower made herein, in the Subscription
Agreement entered into by the Holder and Borrower in connection with this Note,
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.
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 forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
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liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower and if instituted against Borrower are not dismissed within 45 days of
initiation.
3.7 Delisting. Delisting of the Common Stock from the Principal
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Market or such other principal exchange on which the Common Stock is listed for
trading; Borrower's failure to comply with the conditions for listing; or
notification that the Borrower is not in compliance with the conditions for such
continued listing.
3.8 Concession. A concession by the Borrower, after applicable
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notice and cure periods, under any one or more obligations in an aggregate
monetary amount in excess of $100,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
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trading suspension for longer than five (5) trading days.
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3.10 Failure to Deliver Common Stock or Replacement Note.
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Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 9 of the Subscription Agreement,
or if required a replacement Note.
3.11 Registration Default. The occurrence of a Non-Registration
---------------------
Event as described in Section 10.4 of the Subscription Agreement.
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. Any notice herein required or permitted to be given
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shall be in writing and may be personally served or sent by fax transmission
(with copy sent by regular, certified or registered mail or by overnight
courier). For the purposes hereof, the address and fax number of the Holder is
as set forth on the first page hereof. The address and fax number of the
Borrower shall be Global Telemedia International, Inc., 0000 XxxXxxxxx Xx.,
Xxxxx 000, Xxxxxxx Xxxxx, XX 00000, telecopier number: (000) 000-0000. Both
Xxxxxx and Borrower may change the address and fax number for service by service
of notice to the other as herein provided. Notice of Conversion shall be deemed
given when made to the Company pursuant to the Subscription Agreement.
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
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and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder.
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 New York or in the
federal courts located in the state of New York. 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.
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4.7 Maximum Payments. Nothing contained herein shall be deemed to
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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 Prepayment. This Note may not be paid prior to the Maturity
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Date without the consent of the Holder except as disclosed in Section 9.6 of the
Subscription Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its name
by its Chief Executive Officer on this .day of December, 2000.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
By:_________________________
WITNESS:
______________________________
December 14, 2000 3:26 PM
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NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by GLOBAL TELEMEDIA
INTERNATIONAL, INC. on December, 2000 into Shares of Common Stock of GLOBAL
TELEMEDIA INTERNATIONAL, INC. (the "Company") according to the conditions set
forth in such Note, as of the date written below.
Date of Conversion:________________________________________________________
Conversion Price:___________________________________________________________
Shares To Be Delivered:___________________________________________________
Signature:___________________________________________________________________
Print Name:_________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________
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