FLINTTELECOM GROUP, INC. ConvertiblePromissory Note dueDecember 31, 2010 Reference:

Convertible Promissory Note

due December 31, 2010

Date: May 13, 2009                                                                                                                                                                                                 US$ 1,516,000

For value received, Flint Telecom Group, Inc., a Nevada corporation whose principal office is located at 327 Plaza Real, Suite 319, Boca Raton, FL 33432 (the “Maker”), hereby promises to pay to the order of Michael Butler, (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

 

 

 

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

 

 

(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

 

 

 

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

 

 

 

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.

By:    /s/ Vincent Browne

        Name: Vincent Browne

                Title:   Chief Executive Officer