WARRANT EXERCISE CONSENT AGREEMENT

 

WARRANT EXERCISE CONSENT AGREEMENT (the “Agreement”), dated as of August 12,
2008, by and among i2 Telecom International, Inc., a Washington corporation,
with headquarters located at 5070 Old Ellis Pointe, Suite 110, Roswell, Georgia
30076 (the “Company”), and the other persons or entities named on signature
pages hereto (individually, a “Investor” and collectively, the “Investors”).

 

WHEREAS:

A.The Company and the Investors are parties to those certain Warrant Agreements,
as described in Section 2 below (the “Warrant Agreements”), pursuant to which
the Company will issue shares of its Common Stock (the “Common Shares”) upon
exercise of the Warrant Agreement on an unrestricted basis provided that the
Warrant Agreement is dated at least six months ago and the Company will
otherwise issue restricted Common Shares.

B.        The Company and Investor desire to consent to certain rights of the
Investor as set forth herein.

C.        Each capitalized term that is used but not otherwise defined herein
shall have the meaning assigned to it in the Warrant Agreement, as applicable.

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

Conditions. The Investor hereby agrees that they will exercise 72,180,357
warrants provided that the following conditions are met: 1) The shares of Common
Stock shall be valued at $0.15 each; 2) There must be an aggregate of
140,000,000 warrants in aggregate at minimum exercising by the Investor and
other cashless warrant holders the Company; 3) the Company agrees to file a
registration statement for approximately 50,000,000 shares in total; 4) the
Buyer agrees to a Lock-up Agreement dated August 12, 2008, whereby they would
restrict their first twelve months sales (from the date of effective
registration) to approximately 1/3rd of their holdings to be spread out equally
over 12 months (limited to 1,400,000 per 30 day period with the carry over
provision that if 1,400,000 shares are not sold in a certain month, that such
shares can be subsequently sold and that the aggregate amount of shares shall
not exceed 16,800,000 in the first twelve months) and then be free to sell at
their will thereafter unless the market capitalization of the company is in
excess of $100 million, in which case, they would agree to restrict their sales
to a second approximate 1/3rd of their holdings to be spread out equally over an
additional 12 months (limited to 1,400,000 per 30 day period with the carry over
provision that if 1,400,000 shares are not sold in a certain month, that such
shares can be subsequently sold and that the aggregate amount of shares shall
not exceed 16,800,000 in the second twelve months) and then be free to sell at
their will thereafter under the terms of this Agreement.

 

512167

 

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As a further condition, the Company is required to file the registration
statement with the SEC no later than 120 days from the date of this agreement
and the registration needs to be declared effective within 180 days or the
warrant exercise becomes reversible.

 

Consent to Cashless Exercise Warrant to Common Stock. The Investor hereby
consents pursuant to Section 3(c) of the Warrant Agreement:

Warrant #1, dated Feb. 28, 2007-

17,142,857 warrants exercisable @ $0.07 each for a total of

9,142,857 common shares

Warrant #2, dated Oct. 30, 2007-

3,000,000 warrants exercisable @ $0.07 each for a total of

1,600,000 common shares

Warrant #3, dated Aug. 6, 2007-

600,000 warrants exercisable @ $0.10 each for a total of

200,000 common shares

Warrant #4, dated Aug. 31, 2007-

1,750,000 warrants exercisable @ $0.05 each for a total of

1,166,667 common shares

Warrant #5, dated Sept. 28, 2007-

2,500,000 warrants exercisable @ $0.05 each for a total of 1,666,667 common
shares

Warrant #6, dated July 9, 2007-

2,600,000 warrants exercisable @ $0.10 each for a total of

866,667 common shares

Warrant #7, dated Sept 9, 2007-

3,900,000 warrants exercisable @ $0.10 each for a total of 1,300,000 common
shares

Warrant #8, dated Nov. 9, 2007 -

3,900,000 warrants exercisable @ $0.10 each for a total of 1,300,000 common
shares

Warrant #9, dated Nov. 9, 2007 -

3,600,000 warrants exercisable @ $0.10 each for a total of 1,200,000 common
shares

Warrant #10, dated Nov. 9, 2007 - 1,250,000 warrants exercisable @ $0.08 each
for a total of

583,333 common shares

Warrant #11, dated Dec. 24, 2007- 3,600,000 warrants exercisable @ $0.10 each
for a total of 1,200,000 common shares

Warrant #12, dated Dec. 24, 2007- 3,900,000 warrants exercisable @ $0.10 each
for a total of 1,300,000 common shares

Warrant #13, dated Feb. 8, 2008-

1,800,000 warrants exercisable @ $0.10 each for a total of

600,000 common shares

Warrant #14, dated Feb. 8, 2008-

1,950,000 warrants exercisable @ $0.10 each for a total of

650,000 common shares

Warrant #15, dated Feb. 9, 2008-

1,250,000 warrants exercisable @ $0.10 each for a total of

416,667 common shares

Warrant #16, dated Mar. 3, 2008-

1,800,000 warrants exercisable @ $0.10 each for a total of

600,000 common shares

Warrant #17, dated Mar. 3, 2008-

1,950,000 warrants exercisable @ $0.10 each for a total of

650,000 common shares

Warrant #18, dated Mar. 25, 2008- 3,900,000 warrants exercisable @ $0.10 each
for a total of 1,300,000 common shares

Warrant #19, dated Mar. 25, 2008- 3,600,000 warrants exercisable @ $0.10 each
for a total of 1,200,000 common shares

Warrant #20, dated Mar. 25, 2008- 2,500,000 warrants exercisable @ $0.10 each
for a total of

833,333 common shares

Warrant #21, dated May 22, 2008- 1,000,000 warrants exercisable @ $0.10 each for
a total of

333,333 common shares

Warrant #22, dated Jun. 5, 2008-

600,000 warrants exercisable @ $0.10 each for a total of

200,000 common shares

Warrant #23, dated Jun. 5, 2008-

650,000 warrants exercisable @ $0.10 each for a total of

216,667 common shares

Warrant #24, dated Jun. 2, 2008-

1,350,000 warrants exercisable @ $0.10 each for a total of

450,000 common shares

Warrant #25, dated Jun. 2, 2008-

1,462,500 warrants exercisable @ $0.10 each for a total of

487,500 common shares

 

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Warrant #26, dated Jun. 2, 2008-

625,000 warrants exercisable @ $0.08 each for a total of

291,667 common shares

(as described below in Section 3), to the exercise of such warrants into shares
of Common Stock using a fixed price of $0.15 per share of common stock of the
Company.

3.

Exercise of Warrant.

(a)       Exercise of the purchase rights represented by this Warrant may be
made at any time or times on or after the Initial Exercise Date and on or before
the Termination Date by delivery to the Company (or such other office or agency
of the Company as it may designate by notice in writing to the registered Holder
at the address of such Holder appearing on the books of the Company) of a duly
executed facsimile copy of the Notice of Exercise in the form attached hereto as
Exhibit B (the “Notice of Exercise”); provided, however, within three (3)
Business Days of the date said Notice of Exercise is delivered to the Company,
the Holder shall have surrendered this Warrant to the Company, and, if the
Holder has not elected to make a cashless exercise as provided below, the
Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank. Certificates for Warrant Shares purchased hereunder shall be
delivered to the Holder no later than three (3) Business Days after the delivery
to the Company of the Notice of Exercise, surrender of this Warrant and, if the
Holder has not elected to make a cashless exercise as provided below, payment of
the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).
Prior to the issuance of such Warrant Shares, if the Company fails to deliver to
the Holder a certificate or certificates representing the Warrant Shares
pursuant to this Section 3(a) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise. Nothing herein shall limit
a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity, including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver
certificates representing Warrant Shares as required pursuant to the terms
hereof.

If this Warrant shall have been exercised in part, then the Company shall, at
the time of delivery of the certificate or certificates representing the Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.

(c)       In the event that the Holder elects to make a cashless exercise as
provided above, the Company shall issue to the Holder the number of shares of
Common Stock equal to the result obtained by (i) subtracting B from A,
(ii) multiplying the difference by C, and (iii) dividing the product by A, as
set forth in the following equation:

 

X

=

(A - B) x C where:

A

 

X

=     the number of shares of Common Stock issuable upon a cashless exercise of
the Warrant pursuant to the provisions of this Section 3.

 

A

=     the Fair Market Value (as defined below) of one share of Common Stock on
the date of net issuance exercise.

 

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B

=

the Exercise Price for one share of Common Stock under this Warrant.

 

C

=     the number of shares of Common Stock as to which this Warrant is
exercisable.

If the foregoing calculation results in a negative number, then no shares of
Common Stock shall be issued upon a cashless exercise.

 

(d)       The execution and delivery of this Agreement by the Investor shall
constitute a valid action of the holders of the Warrant Agreements in accordance
with the Washington Business Corporation Act. The Company is hereby authorized
to make, execute, file, and deliver the appropriate instructions to the
Company’s transfer agent for the issuance of the Common Shares to the Investor.

4.

Miscellaneous.

(a)       All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Georgia, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Georgia or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Georgia.

(b)       This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.

(c)       The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

(d)       This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns.

(e)       This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

(f)        Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, including Exhibit A
attached, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

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(g)       The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each Investor and the Company have executed this Agreement
as of the date first written above.

 

 

COMPANY:

 

 

i2 TELECOM INTERNATIONAL, INC.

 

By:
       Name: Paul R. Arena
       Title:   Chief Executive Officer

 

 

 

 

BUYER: VESTAL VENTURE CAPITAL

 

 

21st Century Strategic Investment Planning, LC - GP

 

By:___________________________

Name:
       Title:

 

 

 

 

512167

 

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EXHIBIT A

 

NOTICE OF EXERCISE

To:

i2 Telecom International, Inc.

The undersigned, the Holder of the attached Warrant, hereby irrevocably elects
to exercise the purchase right represented by the Warrant for, and to purchase
thereunder, _______ shares of Common Stock (as such terms are defined in the
Warrant, dated ____________, 200_, issued by i2 Telecom International, Inc. to
_____________________________________).

 

 

(

(Cash Exercise) The undersigned has included with this Form of Subscription the
purchase price of such shares in full.

 

(

(Cashless Exercise) The undersigned elects to purchase such shares pursuant to
the net exercise provisions of such Warrant.

 

The undersigned hereby requests that the Certificate(s) for such securities be
issued in the name(s) and delivered to the address(es) as follows:

 

Name:

________________________________________________

Address:

________________________________________________

Social Security Number/TIN:

________________________________________________

Deliver to:

________________________________________________

Address:

________________________________________________

 

If the foregoing Subscription evidences an exercise of the Warrant to purchase
fewer than all of the Warrant Shares (or other securities or property) to which
the undersigned is entitled under such Warrant, please issue a new Warrant, of
like tenor, for the remaining portion of the Warrant (or other securities or
property) in the name(s), and deliver the same to the address(es) as follows:

 

Name:

________________________________________________

Address:

________________________________________________

 

DATED: ____________, 200_.

 

__________________________

(Name of Holder)

 

 

_____________________________________

________________________________

 

(Signature of Holder or Authorized Signatory)

(SS or TIN of Holder)

 

 

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