Exhibit 10.2

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE, SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, IS AVAILABLE.

 

PROMISSORY NOTE

 

Principal Amount: US $1,000,000 Issuance Date: September 30, 2016

 

FOR VALUE RECEIVED, each of VSFT Holdings, Inc., a Delaware corporation (the
“Company”), and ValidSoft UK Limited, a company formed under the laws of England
and Wales (“ValidSoft UK”), jointly and severally promise to pay to Elephant
Talk Communications Corp. (“Holder”), the principal amount of One Million U.S.
Dollars ($1,000,000) (the “Principal”) together with interest thereon as
provided herein. The Principal together with all interest as set forth herein,
must be paid by the Obligors to Holder on or before the 30th of September 2018
(the “Maturity Date”). The Company and ValidSoft UK may each be referred to
herein as a “Payor” and collectively as the “Payors”. ValidSoft Limited, a
company formed under the laws of Ireland (“ValidSoft”), is a party to this
promissory note (the “Note”) for the purposes of being bound to Sections 6
through 13, inclusive. Company, ValidSoft and ValidSoft UK may each be referred
to herein as an “Obligor” and collectively as the “Obligors”.

 

WHEREAS, simultaneously with the execution and delivery of this promissory note
(the “Note”), each Obligor and the Holder entered into that certain Share
Purchase Agreement dated as of the date hereof (as amended and in effect, the
“Share Purchase Agreement”). This Note is the Promissory Note referred to in
Section 1.03 of the Share Purchase Agreement. Capitalized terms used herein
without definition shall have the meanings set forth for such terms in the Share
Purchase Agreement.

 

NOW THEREFORE, each Obligor hereby agrees as follows:

 

1.          Defined Terms. The following capitalized terms used herein shall
have the meaning set forth below:

 

“Business Day” means each day of the week except Saturdays, Sundays and days on
which banking institutions are authorized by law to close in the State of New
York.

 

“Indebtedness” of any Person means, without duplication, all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under any leases required to be capitalized in accordance with
U.S. generally accepted accounting principles, (v) any reimbursement obligation
with respect to letters of credit (including standby letters of credit to the
extent drawn upon), bankers’ acceptances of similar facilities issued for the
account of such Person, (vi) all obligations, contingent or otherwise, in
respect of swaps, hedging transactions and derivatives, and (vii) for any
guaranty of any of the obligations described in clauses (i) through (vi) above
of any other Person.

 

“Person” means any individual, partnership, joint venture, corporation, trust,
unincorporated organization, limited liability company, group, governmental
body, and any other person or entity.

 

“Subsidiary” means, as to any Person, (A) a corporation of which such Person
directly or indirectly owns securities or other equity interests representing
more than fifty percent (50%) of the aggregate voting power or (B) any other
entity in which such Person, directly or indirectly, has the power to direct the
policies, management and affairs thereof.

 

 

 

  

2.          Maturity. On the Maturity Date, all outstanding obligations under
this Note, including outstanding principal and accrued but unpaid interest,
shall be immediately due and payable.

 

3.          Interest Rate. Subject to Section 7(c), interest on the outstanding
obligations of the Payors under this Note shall accrue from the date hereof at a
simple interest rate per annum equal to five percent (5%), (the “Interest
Rate”). Interest shall be computed on the basis of a 365-day year, counting the
actual number of days elapsed.

 

4.          Payment Terms.

 

(a)          Each Payor shall pay five percent (5%) of each such Payor’s
quarterly gross revenues to Holder, on or before the twentieth (20th) day after
the end of each calendar quarter (each such payment a “Quarterly Payment” and
each such date, a “Payment Date”), starting with the calendar quarter in which
the Issuance Date falls, in partial repayment of the Principal, accrued interest
and all other obligations of the Obligors under this Note, and the remaining
balance and interest (if not satisfied thereby) will be due on the Maturity
Date. Each Payor shall calculate its quarterly gross revenues in accordance with
U.S. generally accepted accounting principles (“GAAP”). If, after a Quarterly
Payment is made for an applicable calendar quarter, a Payor increases or
decreases the amount of its quarterly gross revenue for that calendar quarter in
order to comply with and only as required by GAAP (the “Corrected Gross
Revenue”), such Payor shall make a corresponding adjustment to the next
Quarterly Payment to reflect the difference between the actual amount of the
last Quarterly Payment, and the amount that it should have been based on the
Corrected Gross Revenue.

 

(b)          The Payors shall cause Principal and interest payable to Holder on
a Payment Date to be paid in cash. All cash payments under this Note, including
payments of Principal and interest, shall be in lawful money of the United
States of America and paid by wire transfer of immediately available funds to an
account designed by Holder or in such other reasonable manner designated by
Holder from time to time. All payments shall be first applied toward the
interest due and other lawful charges then accrued pursuant to this Note, and
then toward the principal owed on this Note. Upon request by Holder, each
Obligor shall promptly provide all documentation reasonably necessary to
demonstrate and verify the quarterly gross revenues of each Payor and the amount
of each Quarterly Payment and any adjustment thereto, and Holder shall have the
right, at its own expense, to audit the books and records of each Obligor using
a third party auditor, subject to such auditor agreeing to reasonable
confidentiality restrictions, for the purpose of verifying the quarterly gross
revenues of each Obligor, the amount of each Quarterly Payment and enforcing
Holder’s rights under this Note.

 

5.          Prepayment.

 

(a)          The Payors shall have the right to prepay this Note in whole or in
part at any time without penalty or premium. Such prepayments shall be first
applied toward the interest due and other lawful charges then accrued on this
Note, and then toward the principal owed on this Note.

 

(b)          The Payors shall pay all outstanding principal, accrued interest
and any other obligations under this Note to Holder prior to or simultaneous
with the occurrence of a Sale Transaction (as defined in the Share Purchase
Agreement).

 

6.          Covenants. Except in connection with a New Purchaser Stock Issuance
as defined in and in accordance with Section 4.07(h)(1) of the Share Purchase
Agreement, during such time as any obligations under this Note are outstanding:

 

2 

 

  

(a)          No Obligor shall, and each Obligor shall not permit any of its
Subsidiaries to:

 

(i)          declare or pay any dividends or distributions to or for the benefit
of the holders of the Obligor’s capital stock;

 

(ii)         redeem or otherwise acquire outstanding shares of any Obligor’s
capital stock (or any rights to acquire or other securities convertible into any
Obligor’s capital stock);

 

(iii)        incur, create, issue, assume, guarantee or otherwise become
directly or indirectly liable for, contingently or otherwise, or permit any
liability of the Obligors or their Subsidiaries to exist with respect to, any
Indebtedness senior to this Note;

 

(iv)        create or permit to subsist any mortgage, charge, lien, pledge or
other security over the Secured Assets, or any of them;

 

(v)         part with, sell, transfer, lend or otherwise dispose of, whether by
means of one or of a number of transactions related or not and whether at one
time or over a period of time, the whole or any part of the shares or assets of
any of the Obligors, other than non-material amounts of their assets in
connection with the regular conduct of their businesses in the Ordinary Course
of Business consistent with past practice;

 

(vi)        allow any person other than Holder, to be registered as the owner of
a senior security interest in such Secured Assets;

 

(vii)       do or cause or permit to be done anything which may reasonably be
expected in any way to depreciate, jeopardize or otherwise prejudice the value
of the Secured Assets and any security interest created pursuant this Note or
the Share Purchase Agreement; or

 

(viii)      permit or authorize the issuance of any further shares or other
securities of any Obligor, without the prior written consent of Holder, such
consent not to be unreasonably withheld or delayed and provided that such shares
or securities become subject to the security created under Section 4.08 of the
Share Purchase Agreement, and shall bear the legend set forth in Section 4.08(c)
of the Share Purchase Agreement, provided further that this Section 6(a)(viii)
shall not apply to a New Purchaser Stock Issuance of the Company related to
which Holder receives payment in accordance with Section 4.07(h) of the Share
Purchase Agreement, provided that such shares or securities become subject to
the security created under Section 4.08 of the Share Purchase Agreement, and
shall bear the legend set forth in Section 4.08(c) of the Share Purchase
Agreement.

 

(b)          Each Obligor shall and shall cause its Subsidiaries to:

 

(i)           Take the necessary steps to preserve its corporate existence and
its right to conduct business in all states in which the nature of its business
requires qualification to do business.

 

(ii)         Keep its books of account in accordance with good accounting
practices.

 

(iii)        Maintain insurance with responsible and reputable insurance
companies or associations, as determined by the Holder in its sole but
reasonable discretion, in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Obligors operate.

 

3 

 

  

(iv)        Maintain and preserve all of their properties that are used or that
are useful in the conduct of its business in good working order and condition,
ordinary wear and tear excepted and comply with the charter and bylaws or other
organizational or governing documents of each Obligor, and any law, treaty, rule
or regulation, or determination of an arbitrator or a court or other
governmental authority, in each case applicable to or binding upon any Obligor
or any Obligor’s property or to which each Obligor or any of its property is
subject.

 

(v)         Duly pay and discharge all taxes or other claims, which might become
a lien upon any of its property except to the extent that any thereof are being
in good faith appropriately contested with adequate reserves provided therefor.

 

(vi)        Deliver or cause to be delivered to the Holder, quarterly financial
statements on each Payment Date, annual financial statements within 90 days
after the end of each calendar year, and, upon request, to the Holder and
auditor all documents reasonably requested by such auditor pursuant to Section 4
above.

 

(vii)       Permit the Holder and its representatives, with reasonable prior
notice, to discuss the affairs, finances and accounts of each Obligor and its
Subsidiaries with their respective officers and employees at least twice per
calendar year during normal business hours of each Obligor or its Subsidiaries,
as applicable, as may be reasonably requested by, and at the sole cost and
expense of, the Holder (unless an Event of Default has occurred and is
continuing, in which case, any reasonable out-of-pocket costs and expenses
incurred by or on behalf of the Holder will be borne by the Obligors and added
to the Obligor’s obligations under this Note); provided, that the Holder and its
representatives shall not unreasonably disturb the business of the Obligors and
their Subsidiaries.

 

(viii)      Notify the Holder in writing:

 

(A)          promptly (but in any event within five (5) Business Days) after
such Obligor makes or receives a Sale Offer (as defined in the Share Purchase
Agreement).

 

(B)         promptly (but in any event within five (5) Business Days) upon the
occurrence of an Event of Default under Sections 7(b)(iii) through 7(b)(v) of
this Note; and

 

(C)         prior to incurring or agreeing to incur any Indebtedness

 

(ix)         Prior to incurring any Indebtedness, each Obligor shall execute and
shall cause the proposed lender and any proposed holder of any such Indebtedness
to enter into a subordination agreement in form reasonably acceptable to Holder,
subordinating all such Indebtedness to this Note.

 

7.          Events of Default; Acceleration.

 

(a)         Time is of the essence in the performance of the obligations imposed
hereby.

 

(b)         The occurrence of an “Event of Default” shall mean:

 

(i)          the failure by any Payor to make any payment when due under this
Note;

 

(ii)         any breach or violation by any Obligor of any of its
representations, warranties, covenants, agreements or other obligations under
the Share Purchase Agreement or this Note, including, without limitation breach
or violation any covenant of an Obligor under Section 6 of this Note;

 

4 

 

  

(iii)        (a) a default occurs in the due observance or performance of any
covenant, condition or agreement on the part of an Obligor or any of its
Subsidiaries under any debt instrument to which the Obligor or any of its
Subsidiaries is subject which is not waived by the holder of such debt
instrument;

 

(iv)        any of the following with respect to an Obligor or any of its
Subsidiaries: (A) an assignment for the benefit of creditors, (B) bankruptcy,
(C) an admission by it of its inability to meet its debts as they become due or
(D) if a receiver, trustee, custodian, liquidator or like officer be appointed
to take custody, control or possession of any of its property; and/or

 

(v)         the winding up, liquidation or dissolution of any Obligor.

 

(c)          Upon any Event of Default, the entire indebtedness and obligations
evidenced by this Note shall be immediately due, payable and collectible, then
or thereafter as the Holder may elect, whereupon all of the unpaid Principal
amount due under this Note, all unpaid accrued interest due under this Note and
all such other amounts due under this Note shall become and be immediately due
and payable in full, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by each Obligor, and the
Holder may exercise any and all other rights and remedies which it may have
under this Note, the Share Purchase Agreement (including, without limitation,
Section 4.08 thereof) or under any other agreement, document or instrument
evidencing, securing or guaranteeing the payment of this Note or under
applicable law. The failure of Holder to exercise such option or any other right
to which it may be entitled shall not constitute a waiver of the right to
exercise such option or any other right in the event of any subsequent Event of
Default. Without limiting the foregoing, from and after the occurrence of an
Event of Default, interest shall accrue on the obligations under this Note at a
rate equal to the Interest Rate plus thirteen percent (13%).

 

8.          Collection. If this Note is not paid as required pursuant to the
terms hereof or an Obligor is otherwise in material breach of this Note and it
becomes necessary in the reasonable opinion of the Holder to employ counsel to
collect or enforce this Note, the Obligors shall jointly and severally pay to
the Holder and be liable to the Holder for, to the extent permitted by
applicable law, all costs, charges, disbursements and reasonable attorneys’ fees
incurred by the Holder in collecting payment or enforcing the provisions hereof
and thereof or in protecting the same, whether incurred in or out of court, or
in litigation, including probate proceedings, appeals and bankruptcy
proceedings.

 

9.          Obligor Representations and Warranties. Each Obligor represents and
warrants to the Holder the following as of the date of this Note: (a) such
Obligor is a corporation duly incorporated, validly existing, and in good
standing under the laws of the state or country of its incorporation or
formation, as applicable and has all requisite corporate power and authority to
carry on its business as now conducted; (b) all corporate action has been taken
on the part of such Obligor necessary for the authorization, execution, delivery
and performance of this Note; (c) this Note has been duly authorized, executed
and delivered by each such Obligor; and (d) this Note is a legal, valid and
binding obligation of each such Obligor, enforceable against each Obligor in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

 

5 

 

  

10.         Mutilated, Destroyed, Lost or Stolen Note. In case this Note shall
become mutilated or defaced, or be destroyed, lost or stolen, each Obligor shall
execute and deliver a new note of like principal amount in exchange and
substitution for the mutilated or defaced Note, or in lieu of and in
substitution for the destroyed, lost or stolen Note. In the case of a mutilated
or defaced Note, the Holder shall surrender such Note to the Company. In the
case where the Holder is unable to provide the original Note, Obligor may demand
that Holder provide an affidavit of loss therefor.

 

11.         Notice. All notices, demands, waivers and other communications
pertaining to this Note (a “Notice”) will be in writing addressed as follows:

 

If to the Holder, to:

 

Elephant Talk Communications Corp.
100 Park Avenue, Suite 1600
New York, NY 10017
Attention: Erik Kloots
Fax: (212) 880-6499 Attention: Elephant Talk

Email address: erik.kloots@elephanttalk.com

 

with a copy (which shall not constitute notice) to:

 

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

Attention: Barry I. Grossman

Fax Number: (212) 370-7889

Email address: bigrossman@egsllp.com

 

If to any Obligor, to:

 

VSFT Holdings, Inc.

c/o 94 Old Common

Weathersfield, CT 06109

Attn: Patrick Carroll

Fax No.: [Insert Fax Number]

Email address: pat.carroll@validsoft.com

 

with a copy (which shall not constitute notice) to:

 

Halket Weitz, LLP

1214 West Boston Post Road

N277

Mamaroneck, NY 10543

Attn: Theodore Weitz

Facsimile: (914) 993-1492

Email address: tweitz@halketweitz.com

 

Notices will be deemed given (i) on the first Business Day after being sent,
prepaid, by nationally recognized overnight courier that issues a receipt or
other confirmation of delivery, (ii) on the third Business Day after being sent
by U.S. mail as first class registered or certified mail, return receipt
requested, postage prepaid or (iii) when delivered in person or by facsimile
(with affirmative confirmation of receipt). Any party may change the address to
which Notices under this Note are to be sent to it by giving written notice of a
change of address in the manner provided in this Note for giving Notice.

 

6 

 

  

12.         Binding Effect; Assignment. The obligations of the Obligors under
this Note shall be jointly and severally binding upon the Obligors and their
successors and permitted assigns and shall inure to the benefit of Holder and
Holder’s successors and assigns. No rights or obligations of any Obligor under
this Note may be assigned or delegated without the prior written consent of the
Holder.

 

13.         Miscellaneous.

 

(a)          THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

(b)          Any suit, action or other Proceeding seeking to enforce any
provision of, or based upon any right arising out of, in connection with, or in
any way relating to, this Agreement or any of the Related Agreements shall be
commenced and litigated only in the state or federal courts located in New York
County, New York, and any appellate court thereof. Each Obligor hereby
irrevocably consents and submits to the jurisdiction and venue of such courts
and irrevocably waives any objection which it may now or hereafter have to the
laying of the venue of any suit, action or proceeding brought in such court and
any claim that such suit, action or proceeding brought in such court has been
brought in an inconvenient forum or that such court lacks jurisdiction. Each
Obligor irrevocably consents to service of process in the manner provided for
notices in Section 11, provided that such service results in the party being
served actually receiving process. In addition, each Obligor may be served in
accordance with the laws of the State in which such party may be found or
domiciled.

 

(c)          AS A SPECIFICALLY BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO
ENTER INTO THIS AGREEMENT (EACH PARTY HAVING HAD THE OPPORTUNITY TO CONSULT
COUNSEL), EACH PARTY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT
OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE
CONTEMPLATED TRANSACTIONS.

 

(d)          The parties hereto agree that they have been represented by counsel
during the negotiation, preparation and execution of this Agreement and,
therefore, waive the application of any Law of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.

 

(e)          Each Obligor and any endorsers, guarantors, sureties and all other
parties liable for the payment of any sum or sums due or to become due under the
terms of this Note, jointly and severally waive demand, presentment, demand for
payment, protest, notice of protest, nonpayment and dishonor except as
specifically provided herein, and consent that the time of payment of this Note
may be extended, renewed, or modified, from time to time, without notice to them
or their consent, without affecting the liability of any party liable or
becoming liable for the payment of this Note.

 

(f)          This Note is subject to the express condition that at no time shall
any Obligor be obligated or required to pay interest on the principal balance at
a rate which could subject Holder to either civil or criminal liability as a
result of being in excess of the maximum rate which such Obligor is permitted by
law to contract or agree to pay. If by the terms of this Note, an Obligor is at
any time required or obligated to pay interest on the principal balance at a
rate in excess of such maximum rate, the rate of interest under this Note shall
be deemed to be immediately reduced to such maximum rate and interest payable
hereunder shall be computed at such maximum rate.

 

7 

 

  

(g)          The invalidity or unenforceability of any provision of this Note in
any jurisdiction will not affect the validity or enforceability of the remainder
of the Note in that jurisdiction or the validity or enforceability of the Note,
including that provision, in any other jurisdiction. Any provision of this Note
held illegal, invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable. To the
extent legally permissible, any illegal, invalid or unenforceable portion of any
provision of the Note will be replaced by a valid provision which will implement
the purpose of the illegal, invalid or unenforceable provision.

 

(h)          This Note may not be terminated or amended orally, but only by a
termination in writing signed by Holder or an amendment in writing signed by
Holder and the Company.

 

(i)          No failure or delay by Holder in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. This Note may be waived only in
a writing signed by the party providing such waiver.

 

(j)          All rights and remedies of Holder under this Note are cumulative,
and are not exclusive of any rights and remedies provided by law or in equity,
and may be pursued singularly, successively, together, and may be exercised as
often as the occasion therefor arises.

 

(k)          ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, MAY NOT BE ENFORCEABLE. TO PROTECT THE OBLIGORS AND HOLDER FROM
MISUNDERSTANDING, ANY AGREEMENTS REACHED BY AN OBLIGOR AND HOLDER COVERING SUCH
MATTERS ARE CONTAINED IN THIS NOTE, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENTS BETWEEN THE OBLIGORS AND HOLDER WITH RESPECT TO THE
SUBJECT MATTER HEREOF.

 

(l)          EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO
THIS NOTE OR THE MATTERS CONTEMPLATED HEREBY.

 

(m)          The headings of the Sections and other subdivisions of this Note
are for convenience only and in no way modify, interpret or construe the meaning
of specific provisions of this Note. The definitions contained in this Note are
applicable to the singular as well as the plural forms of such terms. Whenever
required by the context, any pronoun used in this Note shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa. The words
“include” and “including” and other words of similar import when used herein
shall not be deemed to be terms of limitation but rather shall be deemed to be
followed in each case by the words “without limitation.” The word “if” and other
words of similar import when used herein shall be deemed in each case to be
followed by the phrase “and only if.” The words “herein,” “hereto,” and “hereby”
and other words of similar import in this Note shall be deemed in each case to
refer to this Note as a whole and not to any particular Section or other
subdivision of this Note. Any reference herein to “dollars” or “$” shall mean
United States dollars. The term “or” shall be deemed to mean “and/or.”

 

[remainder of page intentionally left blank; signature page follows]

 

8 

 

 

IN WITNESS WHEREOF, the undersigned parties have caused this Note to be executed
and delivered on the date set forth above.

 

  PAYOR AND OBLIGOR:       VSFT Holdings, Inc.         By:           Name:      
    Title:           PAYOR AND OBLIGOR:         ValidSoft UK Limited       By:  
        Name:           Title:           OBLIGOR:       ValidSoft Limited      
  By:           Name:           Title:  

 

[Signature Page to Promissory Note]