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Exhibit: 10.5
PROMISSORY NOTE
October
31, 2007
FOR VALUE RECEIVED ,
the undersigned,
ATSI COMMUNICATIONS, INC. ,
a Nevada corporation (the “
Company ”),
promises to pay
CCA FINANCIAL SERVICES (the
“
Lender ”)
at P.O. Box 16298, Sugar Land, TX 77496 or other address as the
Lender shall specify in writing, the principal sum of
Two Hundred Thousand Dollars ($200,000)
and interest at the annual rate of fifteen percent (15%) on the
unpaid balance pursuant to the following terms of this Promissory
Note (the “
Note ”):
1.
Principal and Interest
. For
value received, the Company hereby promises to pay to the order of
the Lender on the 6-month anniversary of the date hereof
(“
Maturity Date ”)
in lawful money of the United States of America and in immediately
available funds the principal sum of Two Hundred Thousand Dollars
($200,000), together with interest on the unpaid principal of this
note at the rate of fifteen percent (15%) per year (computed
on the basis of a 365-day year and the actual days elapsed) from
the date of this Note until paid.
2.
Monthly Principal and Interest Payments
.
The Company shall make monthly payments of principal and interest
in accordance with the
payment schedule attached hereto as Exhibit A (the “
Payment Schedule ”).
Each payment shall be due and payable as of the Payment Due Date
set forth on the Payment Schedule and all payment amounts shall be
first applied to interest and the balance to principal. There shall
be no prepayment fee or penalty.
3.
Right of Prepayment .
Notwithstanding the payments pursuant to Section 2, the Company at
its option shall have the right to prepay, with three (3) business
days advance written notice, any additional amounts of outstanding
principal of the Note without penalty.
4.
Waiver and Consent .
To the fullest extent permitted by law and except as otherwise
provided herein, the Company waives demand, presentment, protest,
notice of dishonor, suit against or joinder of any other person,
and all other requirements necessary to charge or hold the Company
liable with respect to this Note.
5.
Costs, Indemnities and Expenses .
In the event of default as described herein, the Company agrees to
pay all reasonable fees and costs incurred by the Lender in
collecting or securing or attempting to collect or secure this
Note, including reasonable attorneys’ fees and expenses,
whether or not involving litigation, collecting upon any judgments
and/or appellate or bankruptcy proceedings. The Company agrees to
pay any documentary stamp taxes, intangible taxes or other taxes
which may now or hereafter apply to this Note or any payment made
in respect of this Note, and the Company agrees to indemnify and
hold the Lender harmless from and against any liability, costs,
attorneys’ fees, penalties, interest or expenses relating to
any such taxes, as and when the same may be incurred.
6.
Secured Nature of the Note .
This Note is secured by the Security Agreement of even date
herewith between the Company and the Lender (the “
Security Agreement ”)
(collectively this Note, the Security Agreement, and any other
related agreements entered into between the Company and the Lender
are collectively referred to herein as the “
Transaction Documents ”).
7.
Event of Default .
An “
Event of Default ”
shall be deemed to have occurred upon the occurrence of any of the
following:
(i)
The
Company should fail for any reason or for no reason to make
any payment of the principal of, interest on or other charges
in respect of this Note, within ten (10) days of the date the
same shall become due and payable (whether on an installment
date or the Maturity Date or by acceleration or
otherwise);
(ii)
The
Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any
breach or default of any provision of this Note, or any of the
other Transaction Documents, which is not cured within fifteen
(15) days after the time of breach;
(iii)
The
Company or any subsidiary that is controlled by the Company
shall commence, or there shall be commenced against the
Company or any subsidiary controlled by the Company under any
applicable bankruptcy or insolvency laws as now or hereafter
in effect or any successor thereto, or the Company or any
subsidiary controlled by the Company commences any other
proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any subsidiary
controlled by the Company or there is commenced against the
Company or any subsidiary controlled by the Company any such
bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 61 days; or the Company or any
subsidiary controlled by the Company is adjudicated insolvent
or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Company or any
subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for
it or any substantial part of its property which continues
undischarged or unstayed for a period of sixty one (61) days;
or the Company or any subsidiary controlled by the Company
makes a general assignment for the benefit of creditors; or
the Company or any subsidiary controlled by the Company shall
fail to pay, or shall state that it is unable to pay, or shall
be unable to pay, its debts generally as they become due; or
the Company or any subsidiary controlled by the Company shall
by any act or failure to act expressly indicate its consent
to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any
subsidiary controlled by the Company for the purpose of
effecting any of the foregoing; provided however, that the no
such action relating to or affecting ATSI Communications,
Inc., a Texas corporation, or Telespan, Inc., a Texas
corporation) shall be considered an Event of Default
hereunder; and
(iv)
The
Company or any subsidiary controlled by the Company shall
default in any of its obligations under any other promissory
note, or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be
secured or evidenced any indebtedness for borrowed money or
money due under any long term leasing or factoring arrangement
of the Company or any subsidiary controlled by the Company in
an amount exceeding $200,000, whether such indebtedness now
exists or shall hereafter be created and such default shall
result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become
due and payable; and
(v)
The
Common Stock shall cease to be quoted for trading or listed
for trading on the OTC Bulletin Board (“
OTC ”),
Nasdaq SmallCap Market, New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market and shall not again be
quoted or listed for trading thereon within five (5) Trading Days
of such delisting.
8.
Remedies
. Upon
an Event of Default (as defined above), the entire principal
balance and accrued interest outstanding under this Note, and all
other obligations of the Company under this Note, shall be
immediately due and payable without any action on the part of the
Lender; interest shall accrue on the unpaid principal balance at
twenty four percent (24%) per year or the highest rate permitted by
applicable law, if lower; and the Lender shall be entitled to seek
and institute any and all remedies available to it. Furthermore,
anytime after the occurrence of an Event of Default the Lender from
time to time may convert the outstanding amounts owed under this
Note into shares of Common Stock (the “
Conversion Shares ”)
at a conversion price equal to the lesser of (a) the fixed price -
one hundred twenty percent (120%) of the Closing Bid Price as
quoted by Bloomberg, LP on the date of this Note, or (b) eighty
percent (80%) of the lowest Closing Bid Price of the Common Stock
as quoted by Bloomberg, LP during the five (5) trading days
immediately preceding the date of such conversion. However, in no
event, shall the number of shares issued exceed seventy-five
million (75,000,000) shares. In order to convert, the Lender shall
send a notice of conversion in the form attached hereto as Exhibit
B (“
Conversion Notice ”)
to the Company and to the Company’s transfer agent, and the
Company shall, or cause its transfer agent to, deliver to the
Lender the Conversion Shares in an amount equal to the outstanding
amount of this Note being converted divided by the applicable
conversion price as set forth on the Conversion Notice within three
(3) Trading Days receipt of such Conversion Notice.
9.
Maximum Interest Rate .
In no event shall any agreed to or actual interest charged,
reserved or taken by the Lender as consideration for this Note
exceed the limits imposed by New Jersey law. In the event that the
interest provisions of this Note shall result at any time or for
any reason in an effective rate of interest that exceeds the
maximum interest rate permitted by applicable law, then without
further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by the
Lender in excess of those lawfully collectible as interest shall be
applied against the principal of this Note immediately upon the
Lender’s receipt thereof, with the same force and effect as
though the Company had specifically designated such extra sums to
be so applied to principal and the Lender had agreed to accept such
extra payment(s) as a premium-free prepayment or
prepayments.
10.
Representations, Warranties, and Covenants of the
Company .
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(a)
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Organization and Qualification .
The Company and its subsidiaries are corporations duly organized
and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
nature of the
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