Contract
THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
FLINT
TELECOM GROUP, INC.
Convertible
Promissory Note
due
December 31, 2010
Reference:
Date: May
13,
2009 US$
1,516,000
For value
received, Flint Telecom Group, Inc., a Nevada corporation whose principal office
is located at 000 Xxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, XX 00000 (the “Maker”), hereby
promises to pay to the order of
Xxxxxxx Xxxxxx, (together with its successors, representatives, and
permitted assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of One Million, Five Hundred and Sixteen
Dollars ($1,516,000).
All
payments under or pursuant to this Note shall be made in United States Dollars
in immediately available funds to the Holder at the address of the Holder first
set forth above or at such other place as the Holder may designate from time to
time in writing to the Maker or by wire transfer of funds to the Holder’s
account, instructions for which are attached hereto as Exhibit A. The
outstanding principal balance of this Note hereon shall be due and payable on
December 31, 2010 (the “Maturity Date”) or at
such earlier time as provided herein.
ARTICLE
I
GENERAL
Section
1.1 Interest. The
Note shall not bear any interest.
Section
1.2 Payment. The
principal amount shall be due and payable through installment payments of
$100,000 each, beginning as of October 31, 2009 and monthly thereafter until all
unconverted principal is repaid in full, and, at any time thereafter, the
Holder may proceed to collect such unconverted principal.
Section
1.3 No
Security. This Note and the amounts due hereunder are
unsecured.
Section
1.4 Payment on Non-Business
Days. Whenever any payment to be made hereunder shall be due
on a Saturday, Sunday or a public holiday under the laws of the State of
Florida, such payment may be due on the next succeeding business day and such
next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.
Section
1.5 Transfer. Subject
to the provisions of Section 4.8 of this Note, this Note may be transferred or
sold or pledged, hypothecated or otherwise granted as security by the
Holder.
Section
1.6 Replacement. Upon
receipt of a duly executed, notarized and unsecured written statement from the
Holder with respect to the loss, theft or destruction of this Note (or any
replacement hereof) and a standard indemnity, or, in the case of a mutilation of
this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.
ARTICLE
II
EVENTS OF
DEFAULT; REMEDIES
Section
2.1 Events of
Default. The occurrence of any of the following events shall
be an “Event of
Default” under this Note:
(a) the
Maker shall fail to make any principal payments on the date such payments are
due and such default is not fully cured within five (5) business days after the
occurrence thereof; or
(b) the
Maker’s notice to the Holder, including by way of public announcement, at any
time, of Maker’s inability to comply (including for any of the reasons described
in Section 3.6(a) hereof) or its intention not to comply with proper requests
for conversion of this Note into shares of Common Stock; or
(c) the
Maker shall fail to timely deliver the shares of Common Stock upon conversion of
the Note, which failure of this Section 2.1(c) is not remedied within ten (10)
business days after the occurrence thereof; or
LEGAL_US_E # 77321610.1
(d) the
Maker shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it
in an involuntary case under United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or
domestic), (vi) issue a notice of bankruptcy or winding down of its operations
or issue a press release regarding same, or (vii) take any action under the laws
of any jurisdiction (foreign or domestic) analogous to any of the foregoing;
or
(e) a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it for all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker or
(iii) similar relief in respect of it under any law providing for the
relief of debtors, and such proceeding or case described in clause (i), (ii) or
(iii) shall continue undismissed, or unstayed and in effect, for a period of
thirty (30) days or any order for relief shall be entered in an involuntary case
under United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of thirty (30) days;
or
(f) the
Maker ceases to operate its business as a going concern.
Section
2.2 Remedies Upon An Event
of Default. If an Event of Default other than a default under
Section 2.1(a) shall have occurred and shall be continuing, the Holder of this
Note may at any time at its option, (a) declare the entire unpaid principal
balance of this Note due and payable, and thereupon, the same shall be
accelerated and so be due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably waived
by the Maker, (b) exercise or otherwise enforce any one or more of the Holder’s
rights, powers, privileges, remedies and interests under this
Note. No course of delay on the part of the Holder shall operate as a
waiver thereof or otherwise prejudice the right of the Holder. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or
otherwise.
If an
Event of Default under Section 2.1(a) occurs and shall be continuing, then
a penalty rate of three percent (3%) per month will apply on the total balance
that remains unpaid as of the date of the such default and it will become
immediately due and payable. The penalty rate will continue to apply until the
monthly payment in default and all accrued penalty interest is paid. Any
payments made hereunder will be first set against the penalty interest and then
to the principal payment. Once payments are up-to-date, no penalty will
apply.
ARTICLE
III
CONVERSION
Section
3.1 Conversion
Option. The Holder may convert this Note, in whole or in part,
at the option of the Holder into such number of fully paid and non-assessable
shares of Common Stock as is determined by dividing (x) that portion of the
outstanding principal balance under this Note by (y) the Conversion Price (as
defined in Section 3.2(a) hereof) then in effect on the date on which the Holder
faxes a notice of conversion in the form attached hereto (the “Conversion Notice”),
duly executed, to the Maker (the “Conversion Date”),
provided, however, that the Conversion Price shall be subject to adjustment as
described in Section 3.4 of this Note. The Holder shall deliver this
Note to the Maker at the address of the maker first set forth above at such time
that this Note is fully converted. This Note shall not be convertible
after it has been paid in full.
Section
3.2 Conversion
Price.
(a) The
term “Conversion
Price” shall be $0.40 per share.
Section
3.3 Mechanics of
Conversion.
(a) Not
later than three (3) Trading Days after any Conversion Date (the “Delivery Date”), the
Maker shall deliver to the Holder by express courier a certificate or
certificates representing the number of shares of Common Stock being acquired
upon the conversion of all or part of this Note.
Section
3.4 Other Provisions Related to
Conversion.
(a) Issue
Taxes. The Maker shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant thereto; provided, however, that the
Maker shall not be obligated to pay any transfer taxes resulting from any
transfer requested by the Holder in connection with any such
conversion.
(b) Fractional
Shares. No fractional shares of Common Stock shall be issued
upon conversion of this Note. In lieu of any fractional shares to
which the Holder would otherwise be entitled, the Maker shall pay cash equal to
the product of such fraction multiplied by the Conversion Price.
(c) Reservation of Common
Stock. In the event that at anytime when this Note shall be
outstanding, the Maker shall not have sufficient authorized but unissued Common
Stock for the purpose of effecting the conversion of all amounts outstanding
under this Note at such time (without regard to any limitations on conversion)
(an “Authorized Share
Failure”), it shall immediately reserve and keep available such number of
its duly authorized shares of Common Stock as is in fact available as of that
date and shall immediately take all action necessary to increase the number of
its authorized shares of Common Stock until such time as the Maker’s certificate
of incorporation shall have been amended to increase the number of authorized
shares of Common Stock to such number as would, at a minimum, permit the
reservation by the Maker of sufficient shares to allow conversion of all amounts
outstanding under this Note as provided.
Section
3.5 Prepayment. The Maker
shall be permitted to prepay some or all of the principal outstanding under this
Note at any time prior to the Maturity Date.
Section
3.6 No Rights as
Shareholder. Nothing contained in this Note shall be construed
as conferring upon the Holder, prior to the conversion of this Note, the right
to vote or to receive dividends or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 Notices. Any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery, telecopy or facsimile at the address or number first set forth above
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur.
Section
4.2 Governing
Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of Nevada, without giving effect
to any of the conflicts of law principles which would result in the application
of the substantive law of another jurisdiction. This Note shall not
be interpreted or construed with any presumption against the party causing this
Note to be drafted.
Section
4.3 Headings. Article
and section headings in this Note are included herein for purposes of
convenience of reference only and shall not constitute a part of this Note for
any other purpose.
Section
4.4 Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief. The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, 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 a Holder’s
right to pursue actual damages for any failure by the Maker to comply with the
terms of this Note. 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 Maker (or
the performance thereof). The Maker acknowledges that a breach by it
of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section
4.5 Enforcement
Expenses. The Maker agrees to pay all costs and expenses of
enforcement of this Note, including, without limitation, reasonable attorneys’
fees and expenses.
Section
4.6 Binding
Effect. The obligations of the Maker and the Holder set
forth herein shall be binding upon the successors and permitted assigns of each
such party.
Section
4.7 Amendments. This
Note may not be modified or amended in any manner except in a writing executed
by the Maker and the Holder.
Section
4.8 Compliance with
Securities Laws. The Holder of this Note acknowledges that
this Note is being acquired solely for the Holder’s own account and not as a
nominee for any other party, and for investment, and that the Holder shall not
offer, sell or otherwise dispose of this Note. This Note and any Note
or shares of common stock issued in substitution or replacement therefor shall
be stamped or imprinted with legends in substantially the following
form:
THIS NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
THE
SECURITIES MAY ONLY BE SOLD OR OTHERWISE DISPOSED OF AS FOLLOWS: THE MAXIMUM
AMOUNT OF SHARES SOLD OR OTHERWISE DISPOSED OF PER DAY MAY NOT EXCEED THE DAILY
AVERAGE TRADING VOLUME OF THE ISSUER’S COMMON STOCK IN THE PRIOR MONTH. THIS
RESTRICTION IS INDEPENDENT OF AND IN ADDITION TO THE OTHER RESTRICTIONS ON
TRANSFER NOTED HEREON.
Section
4.9 Parties in
Interest. This Note shall be binding upon, inure to the
benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.
Section
4.10 Failure or Indulgence
Not Waiver. No failure or delay on the part of the Holder 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.
Section
4.11 Maker
Waivers. Except as otherwise specifically provided herein, the
Maker and all others that may become liable for all or any part of the
obligations evidenced by this Note, hereby waive presentment, demand, notice of
nonpayment, protest and all other demands’ and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.
(a) No
delay or omission on the part of the Holder in exercising its rights under this
Note, or course of conduct relating hereto, shall operate as a waiver of such
rights or any other right of the Holder, nor shall any waiver by the Holder of
any such right or rights on any one occasion be deemed a waiver of the same
right or rights on any future occasion.
(b) THE
MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A
COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section
4.12 Definitions. For
the purposes hereof, the following terms shall have the following
meanings:
“business day” means
any day other than a Saturday, Sunday or other day on which banks in New York
City, New York are authorized or required by law to close.
“Common Stock” means
the common stock of Maker, par value $0.01 per share.
“Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
“Securities Act” means
the Securities Act of 1933, together with the rules and regulations promulgated
thereunder.
“Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close. IN WITNESS WHEREOF, this Note is executed and delivered by
a duly authorized and empowered officer of the Maker as of the date first
written above.
FLINT
TELECOM GROUP, INC.
By: /s/ Xxxxxxx
Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title: Chief
Executive Officer
