Exhibit 10.3
NEITHER
THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE NOR ANY SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTION. NO SALE OR DISPOSITION HEREOF OR THEREOF MAY BE
EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT, AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE LENDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND
COMPLIANCE, TO THE REASONABLE SATISFACTION OF THE COMPANY, WITH ANY
OTHER APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION.
Global Telecom & Technology, Inc.
Convertible Subordinated Promissory Note
For value received, GLOBAL TELECOM
& TECHNOLOGY, INC., a Delaware corporation (the “
Company ”), hereby promises to pay to the order of
or its registered assigns (hereinafter together with successors in
title and assigns referred to as the “ Lender
”), the principal sum of
Dollars ($
), together with interest from the date hereof on the principal
amount outstanding from time to time, as specified below. This Note
is one of a series of notes issued by the Company for up to an
aggregate principal amount of $8,600,000 pursuant to substantially
the same terms and conditions (the “ 2010 Notes
”). Certain of the 2010 Notes have been issued in exchange
and substitution for the amount remaining due under notes of the
Company originally issued on October 16, 2006 and maturing on
April 30, 2008, as amended (the “ 2008 Notes
”) after the exchange for part of the balance due under such
2008 Notes for shares of the Company’s common stock (“
Exchange Shares ”). As to the holders of such 2010
Notes, acceptance of this Note shall constitute consent to the
exchange and substitution of such holder’s 2008 Note.
1. Interest . This Note
shall bear interest at an annual rate of ten percent (10%).
Interest shall be computed on the basis of the actual number of
days elapsed.
2. Due Date . Subject to
the conversion and default provisions set forth herein, the
principal amount of this Note together with accrued and unpaid
interest (the sum of such principal and accrued and unpaid interest
being hereinafter referred to as the “ Amount Due
”) shall be due on December 31, 2010 (the “
Maturity Date ”).
3. Prepayment .
(a)
Voluntary Prepayment . Upon 30 day’s prior
written notice, this Note may be prepaid, in whole or in part,
prior to the Maturity Date, at the option of the Company, without
penalty or additional fees; provided , however , any
such prepayment shall be proportionately applied against all the
2010 Notes such that the prepayment against this Note shall bear
the same ratio to the prepayments against all the 2010 Notes as the
principal and interest then due under this Note bears to the
principal and interest then due under all the 2010 Notes. In the
event any
prepayment is made against the principal due under the
Company’s series of 6% $4.0 million promissory notes due
on December 31, 2008 (“ $4,000,000 Notes
”), the Company, subject to the consent of the Lender, will
make a prepayment against this Note. The same percentage of the
outstanding principal prepaid against the $4,000,000 Notes will
establish the aggregate amount of the prepayment to be made against
the 2010 Notes. Of the amount so determined, the Lender shall be
entitled to obtain a prepayment against this Note equal to the
product of such amount and a fraction, the numerator of which is
the principal balance due under this Note and the denominator of
which shall be the then principal balances due under all the 2010
Notes. All principal amounts shall be determined as of the date of
the prepayment against the $4,000,000 Notes. The Company shall
provide the Lender with written notice of such prepayment within
five Business Days (as hereafter defined) after the prepayment
against the $4,000,000 is made and the prepayment against this Note
shall be made 30 days from the date of such notice. A partial
prepayment shall first be credited to the payment of accrued
interest and the balance, if any, shall be credited to the
then-outstanding principal amount hereunder.
(b) Mandatory Prepayment
. Upon the closing of a Change in Control (as defined below) this
Note shall immediately become due and payable both as to principal
and any accrued and unpaid interest. For purposes hereof, a “
Change in Control ” means (i) any consolidation
or merger of the Company with or into any other entity, or any
other corporate reorganization or transaction as a result of which
the stockholders of the Company immediately prior to such
consolidation, merger or reorganization own less than 50% of the
Company’s (or the surviving entity’s) voting power
immediately after such consolidation, merger, reorganization or
transaction, or any individual person or entity or persons or
entities acting in concert who are not stockholders as of the date
of issuance of this Note obtains control of 50% or more of the
voting power of the Company, or (ii) any sale of all or
substantially all of the assets of the Company (except, in the case
of clause (ii), for a transaction in which the Company transfers
such assets to one or more affiliates of the Company and the
Company and such affiliate(s) then are and remain jointly and
severally liable under this Note).
4. Conversion .
(a) Optional Conversion
. The principal due under this Note may be converted, in whole but
not in part, at the option of Lender, into shares of the
Company’s common stock, par value $.0001 per share (the
“ Common Stock ”), at a price per share equal to
$1.70 (the “ Conversion Price ”).
(b) Mandatory Conversion
. The principal due under this Note shall be converted, in whole
but not in part, at the option of the Company, into shares of
Common Stock at a price per share equal to the Conversion Price if
the average closing price of the Common Stock is equal to or
greater than $2.64 for 15 consecutive Business Days. For purposes
hereof, a “ Business Day ” means any day other
than a Saturday, a Sunday or a day on which banking institutions in
New York are permitted or required to be closed.
(c) Payment of Interest
. Upon conversion of this Note, any interest due under this Note
shall be paid in cash or shares of Common Stock, at the
Company’s option, at a price per share equal to the closing
price of the Common Stock on the Business Day immediately prior to
such conversion.
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(d) No Fractional Shares
. No fractional shares of Common Stock shall be issued upon
conversion of this Note. Instead of any fractional share of Common
Stock that would otherwise be issuable upon conversion of this
Note, the Company shall pay to the Lender a cash adjustment in
respect of such fractional share of Common Stock in an amount equal
to the portion of the conversion price per share of Common
Stock.
(e) Conversion Shares .
The shares of Common Stock issuable upon conversion of this Note,
including any shares of Common Stock issued as payment for interest
due under this Note, shall be referred to as the “
Conversion Shares ”. Upon the conversion of this Note,
the Lender shall surrender this Note to the Company marked
“paid in full” and, upon such surrender, the Company
shall concurrently issue and deliver to the Lender a certificate
evidencing the Conversion Shares.
(f) Any conversion will be
subject to the Company’s receipt of any regulatory approval
if any such conversion would cause Lender to hold a percentage
interest in the Company of at least ten percent (10%).
5. Adjustment for Certain
Events . So long as this Note shall be outstanding, the
Conversion Price in effect at any time shall be subject to
adjustment from time to time upon the happening of certain events
as follows:
(a) Adjustments for Certain
Dividends, Distributions, Stock Splits, Etc . In case the
Company shall (i) declare a dividend or make a distribution on
its outstanding shares of Common Stock in shares of Common Stock or
(ii) subdivide, combine or reclassify its outstanding shares
of Common Stock into a greater or lesser number of shares, the
Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately adjusted
as of the record or effective date of such event by multiplying
such Conversion Price by a fraction, the denominator of which shall
be the number of shares of Common Stock outstanding immediately
following such event and the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior
thereto.
(b) Adjustments to
Conversion Price for Diluting Issues .
(i)
Special Definitions . For purposes of this
Section 5(b) , the following definitions shall
apply:
(A)
“ Option ” shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common
Stock or Convertible Securities (as defined below) or restricted
stock, excluding options granted to or shares of restricted stock
acquired by employees, directors, consultants or advisors of the
Company pursuant to an option plan or other compensation
arrangement adopted by the Company’s board of directors, and
any shares issued upon exercise of such options (such excluded
options and shares, the “ Option Shares
”).
(B)
“ Convertible Securities ” shall mean any
evidences of indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
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(C)
“ Additional Shares of Common Stock ” shall mean
all shares of Common Stock issued (including the sale of shares of
Common Stock held as treasury stock and shares deemed to be issued
pursuant to Section 5(b)(iii) below) by the Company
after the Original Issue Date (as defined below), other than:
(1) shares of Common Stock issued or issuable upon conversion
or exchange of any Convertible Securities outstanding on the
Original Issue Date; (2) shares of Common Stock issued or
issuable as a dividend or distribution on any capital stock of the
Company; (3) the Option Shares; (4) shares of Common Stock
issued or issuable upon exercise of warrants or other securities
issued or issuable to equipment lessors, banks or similar
institutional credit financing sources, or to holders of
Convertible Securities in respect of obtaining guaranties for such
debt financing, or to third parties in connection with acquisitions
or strategic alliances (including, without limitation, this Note),
in each such case, if the issuance in question has obtained the
consent of the Company’s board of directors; and
(5) shares of Common Stock issued or issuable as a result of
any stock split, subdivision, combination, reclassification,
reorganization or merger for which an adjustment is provided in
Section 5(a) .
(D)
“ Original Issue Date ” shall mean the date of
this Note.
(ii)
No Adjustment of Conversion Price . No adjustment to the
Conversion Price shall be made pursuant to this
Section 5(b) unless the consideration per share
(determined pursuant to Section 5(b)(v) below) for an
Additional Share of Common Stock issued or, pursuant to
Section 5(b)(iii) below, deemed to be issued by the
Company, is less than the Conversion Price in effect on the date
of, and immediately prior to, the issue of such Additional Shares
of Common Stock.
(iii)
Issue of Options and Convertible Securities Deemed Issue of
Additional Shares of Common Stock . If the Company at any time
or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of secur
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