EXHIBIT 4.2
Registration Rights Agreement
dated as of
April 6, 2001
by and between
Dial-Thru International Corporation
and
Global Capital Funding Group, L.P.
Registration Rights Agreement
TABLE OF CONTENTS
1. Introduction...............................................2
1.1 Securities Purchase Agreement.........................2
1.2 Definition of Securities..............................2
2. Registration under Securities Act, etc.....................2
2.1 Mandatory Registration................................2
(a) Registration of Registrable Securities...........2
(b) Registration Statement Form......................2
(c) Expenses.........................................2
(d) Effective Registration Statement.................2
(e) Plan of Distribution.............................2
2.2 Incidental Registration...............................2
(a) Right to Include Registrable Securities..........2
(b) Priority in Incidental Registrations.............3
2.3 Registration Procedures...............................3
2.4 Underwritten Offerings................................7
(a) Incidental Underwritten Offerings................7
(b) Holdback Agreements..............................7
(c) Participation in Underwritten Offerings..........7
2.5 Preparation; Reasonable Investigation.................8
2.6 Registration Default Fee..............................8
2.7 Indemnification.......................................8
(a) Indemnification by the Company...................8
(b) Indemnification by the Sellers...................9
(c) Notices of Claims, etc...........................9
(d) Other Indemnification...........................10
(e) Indemnification Payments........................10
(f) Contribution....................................10
3. Definitions...............................................11
4. Rule 144..................................................13
5. Amendments and Waivers....................................13
6. Nominees for Beneficial Owners............................14
7. Notices...................................................14
8. Assignment................................................14
9. Descriptive Headings......................................14
10. Governing Law.............................................15
11. Counterparts..............................................15
12. Entire Agreement..........................................15
13. Severability..............................................15
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of April 11,
2001, between Dial-Thru International Corporation, a Delaware corporation
(the "Company") and Global Capital Funding Group, L.P. (the "Fund"), a
Delaware limited partnership.
1 Introduction.
1.1 Securities Purchase Agreement. The Company and the Fund
has today executed that certain Securities Purchase Agreement
(the "Securities Purchase Agreement"), pursuant to which the
Company has agreed, among other things, to issue One Million
Dollars ($1,000,000.00) (U.S.) principal amount of 6%
Convertible Debentures of the Company (the "Debentures") to
the Fund or its successors, assigns or transferees
(collectively, the "Holders"). The Debentures are
convertible into an indeterminable number of shares (the
"Debenture Conversion Shares") of the Company's common stock,
$.001 par value per share (the "Common Stock") pursuant to
the terms of the Debentures. In addition, pursuant to the
terms of the Securities Purchase Agreement and the
transactions contemplated thereby, the Company has agreed to
issue to the Fund, Common Stock Purchase Warrants exercisable
for 100,000 shares of the Company's Common Stock, (the
"Warrant Shares"). The number of Debenture Conversion Shares
and Warrant Shares is subject to adjustment upon the
occurrence of stock splits, recapitalizations and similar
events occurring after the date hereof.
1.2 Definition of Securities. The Debenture Conversion
Shares and the Warrant Shares are herein referred to as the
"Securities."
2 Registration under Securities Act, etc.
2.1 Mandatory Registration.
2.1.1 Registration of Registrable Securities. The
Company shall prepare and file within sixty (60) days
following the date hereof a registration statement (the
"Registration Statement") covering the resale of the
Registrable Securities. The Company shall use its best
efforts to cause the Registration Statement to be
declared effective by the Commission on the earlier of
(i) 180 days following the date hereof with respect to
the Registration Statement, (ii) ten (10) days following
the receipt of a "No Review" or similar letter from the
Commission or (iii) the first day following the day the
Commission determines the Registration Statement
eligible to be declared effective (the "Required
Effectiveness Date"). Nothing contained herein shall be
deemed to limit the number of Registrable Securities to
be registered by the Company hereunder. As a result,
should the Registration Statement not relate to the
maximum number of Registrable Securities acquired by (or
potentially acquirable by) the holders thereof upon
conversion of the Debentures, or exercise of the Common
Stock Purchase Warrants described in Section 1 above,
the Company shall be required to promptly file a
separate registration statement (utilizing Rule 462
promulgated under the Exchange Act, where applicable)
relating to such Registrable Securities which then
remain unregistered. The provisions of this Agreement
shall relate to any such separate registration statement
as if it were an amendment to the Registration
Statement.
2.1.2 Registration Statement Form. Registrations
under this Section 2.1 shall be on Form S-3 or such
other appropriate registration form of the Commission as
shall permit the disposition of such Registrable
Securities in accordance with the intended method or
methods of disposition specified by the Fund; provided,
however, such intended method of disposition shall not
include an underwritten offering of the Registrable
Securities.
2.1.3 Expenses. The Company will pay all
Registration Expenses in connection with any
registration required by this Section 2.1.
2.1.4 Effective Registration Statement. A
registration requested pursuant to this Section 2.1
shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become
effective within the time period specified herein,
provided that a registration which does not become
effective after the Company filed a registration
statement with respect thereto solely by reason of the
refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon
the advice of counsel in the form of a letter signed by
such counsel and provided to the Company relating to a
disclosure matter unrelated to such holder) shall be
deemed to have been effected by the Company unless the
holders of the Registrable Securities shall have elected
to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective,
such registration becomes subject to any stop order,
injunction or other order or extraordinary requirement
of the Commission or other governmental agency or court
for any reason or (iii) if, after it has become
effective, such registration ceases to be effective for
more than an aggregate of twenty (20) days.
2.1.5 Plan of Distribution. The Company hereby
agrees that the Registration Statement shall include a
plan of distribution section reasonably acceptable to
the Fund; provided, however, such plan of distribution
section shall be modified by the Company so as to not
provide for the disposition of the Registrable
Securities on the basis of an underwritten offering.
2.2 Incidental Registration.
2.2.1 Right to Include Registrable Securities. If
at any time after the date hereof but before the third
anniversary of the date hereof, the Company proposes to
register any of its securities under the Securities Act
(other than by a registration in connection with an
acquisition in a manner which would not permit
registration of Registrable Securities for sale to the
public, on Form S-8, or any successor form thereto, on
Form S-4, or any successor form thereto and other than
pursuant to Section 2.1), on an underwritten basis
(either best-efforts or firm-commitment), then, the
Company will each such time give prompt written notice
to all Holders of its intention to do so and of such
Holders' rights under this Section 2.2. Upon the
written request of any such Holder made within twenty
(20) days after the receipt of any such notice (which
request shall specify the Registrable Securities
intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, use its
commercially reasonable best efforts to effect the
registration under the Securities Act of the Registrable
Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods
thereof as aforesaid) of such Registrable Securities so
to be registered, by inclusion of such Registrable
Securities in the registration statement which covers
the securities which the Company proposes to register,
provided that if, at any time after written notice of
its intention to register any securities and prior to
the effective date of the registration statement filed
in connection with such registration, the Company shall
determine for any reason either not to register or to
delay registration of such securities, the Company may,
at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the
case of a determination not to register, shall be
relieved of this obligation to register any Registrable
Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable
Securities entitled to do so to request that such
registration be effected as a registration under Section
2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay
in registering such other securities. No registration
effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration
upon request under Section 2.1, nor shall any such
registration hereunder be deemed to have been effected
pursuant to Section 2.1. The Company will pay all
Registration Expenses in connection with each
registration of Registrable Securities requested
pursuant to this Section 2.2. The right provided the
Holders of the Registrable Securities pursuant to this
Section shall be exercisable at their sole discretion
and will in no way limit any of the Company's
obligations to pay the Securities according to their
terms.
2.2.2 Priority in Incidental Registrations. If the
managing underwriter of the underwritten offering
contemplated by this Section 2.2 shall inform the
Company and holders of the Registrable Securities
requesting such registration by letter of its belief
that the number of securities requested to be included
in such registration exceeds the number which can be
sold in such offering, then the Company will include in
such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i)
first securities proposed by the Company to be sold for
its own account, and (ii) second Registrable Securities
and securities of other selling security holders
requested to be included in such registration pro rata
on the basis of the number of shares of such securities
so proposed to be sold and so requested to be included;
provided, however, the holders of Registrable Securities
shall have priority to all shares sought to be included
by officers and directors of the Company as well as
holders of ten percent (10%) or more of the Company's
Common Stock.
2.3 Registration Procedures. If and whenever the Company is
required to effect the registration of any Registrable
Securities under the Securities Act as provided in Section
2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
2.3.0.1 prepare and file with the Commission the Registration
Statement, or amendments thereto, to effect such registration
(including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder) and
thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the Commission, as
soon as practicable, but in any event no later than the Required
Effectiveness Date (with respect to a registration pursuant to Section
2.1); provided, however, that before filing such registration statement
or any amendments thereto, the Company will furnish to the counsel
selected by the holders of Registrable Securities which are to be
included in such registration, copies of all such documents proposed to
be filed;
2.3.0.2 with respect to any registration statement pursuant to
Section 2.1, prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier to occur of
six (6) years after the date of this Agreement(subject to the right of
the Company to suspend the effectiveness thereof for not more than 10
consecutive days or an aggregate of 30 days in such six (6) years
period) or such time as all of the securities which are the subject of
such registration statement cease to be Registrable Securities (such
period, in each case, the "Registration Maintenance Period");
2.3.0.3 furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller and underwriter, if any, may reasonably request in order
to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
2.3.0.4 use its commercially reasonable best efforts to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws as any seller thereof shall reasonably request, to keep such
registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction;
2.3.0.5 use its commercially reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
2.3.0.6 furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, and the underwriters, if any,
of:
(A) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement),reasonably satisfactory in form
and substance to such seller) including that the prospectus and any
prospectus supplement forming a part of the Registration Statement does not
contain an untrue statement of a material fact or omits a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and
(B) a "comfort" letter (or, in the case of any Person
which does not satisfy the conditions for receipt of a "comfort" letter
specified in Statement on Auditing Standards No. 72, an "agreed upon
procedures" letter), dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a
letter of like kind dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have certified
the Company's financial statement included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities (with, in the case of an "agreed
upon procedures" letter, such modifications or deletions as may be required
under Statement on Auditing Standards No. 35) and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
2.3.0.7 notify the Sellers' Representative and its counsel promptly
and confirm such advice in writing promptly after the Company has
knowledge thereof:
2.3.0.7.1 when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to
the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when
the same has become effective;
2.3.0.7.2 of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for
additional information;
2.3.0.7.3 of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
2.3.0.7.4 of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such
purpose;
2.3.0.8 notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material facts required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller promptly prepare
and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing;
2.3.0.9 use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the
earliest possible moment;
2.3.0.10 otherwise use its commercially reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
2.3.0.11 enter into such agreements and take such other actions as the
Sellers' Representative shall reasonably request in writing (at the
expense of the requesting or benefiting sellers) in order to expedite
or facilitate the disposition of such Registrable Securities; and
2.3.0.12 use its commercially reasonable best efforts to list all
Registrable Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities are then
listed.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as
the Company may from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to
Section 2.1, or amendment thereto or any prospectus or any supplement
thereto (including such documents incorporated by reference and proposed to
be filed after the initial filing of the Registration Statement) to which
the Sellers' Representative shall reasonably object, provided that the
Company may file such documents in a form required by law or upon the advice
of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase
Agreement.
Each Fund agrees that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (viii) of
this Section 2.3, such Fund will forthwith discontinue such Fund's
disposition of Registrable Securities pursuant to the Registration Statement
relating to such Registrable Securities until such Fund's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(viii) of this Section 2.3 and, if so directed by the Company, will deliver
to the Company (at the Company's expense) all copies, other than permanent
file copies, then in such Fund's possession of the prospectus relating to
such Registrable Securities current at the time of receipt of such notice.
2.4 Underwritten Offerings.
2.4.1 Incidental Underwritten Offerings. If the
Company at any time proposes to register any of its
securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by
or through one or more underwriters, the Company will,
if requested by any holder of Registrable Securities as
provided in Section 2.2 and subject to the provisions of
Section 2.2(a), use its commercially reasonable best
efforts to arrange for such underwriters to include all
the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by
such underwriters.
2.4.2 Holdback Agreements. Subject to such other
reasonable requirements as may be imposed by the
underwriter as a condition of inclusion of the Fund's
Registrable Securities in the registration statement,
the Fund agrees by acquisition of Registrable
Securities, if so required by the managing underwriter,
not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or
distribution of or otherwise dispose of, except as part
of such underwritten registration, any equity securities
of the Company, during such reasonable period of time
requested by the underwriter; provided however, such
period shall not exceed the 120 day period commencing 30
days prior to the commencement of such underwritten
offering and ending 90 days following the completion of
such underwritten offering.
2.4.3 Participation in Underwritten Offerings. No
holder of Registrable Securities may participate in any
underwritten offering under Section 2.2 unless such
holder of Registrable Securities (i) agrees to sell such
Person's securities on the basis provided in any
underwriting arrangements approved, subject to the terms
and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such
underwritten offering and (ii) completes and executes
all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney)
required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, no
underwriting agreement (or other agreement in connection
with such offering) shall require any holder of
Registrable Securities to make an representations or
warranties to or agreements with the Company or the
underwriters other than representations and warranties
contained in a writing furnished by such holder
expressly for use in the related registration statement
or representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and
such holder's intended method of distribution and any
other representation required by law.
2.5 Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration
statement under the Securities Act pursuant to this
Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and
their respective counsel and accountants, the opportunity to
participate in the preparation of such registration
statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and
records and such opportunities to discuss the business of the
Company with its officers and the independent public
accountants who have certified its financial statements as
shall be necessary, in the reasonable opinion of such
holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Registration Default Fee. If the Registration Statement
contemplated in Section 2.1 is (x) not filed with the
Commission by the Filing Date, (y) not declared effective by
the Required Effectiveness Date or (z) such effectiveness is
not maintained for the Registration Maintenance Period, then
the Company shall pay to the Fund the fees specified in
Section 10.4 of the Securities Purchase Agreement.
2.7 Indemnification.
2.7.1 Indemnification by the Company. In the event
of any registration of any securities of the Company
under the Securities Act, the Company will, and hereby
does agree to indemnify and hold harmless the holder of
any Registrable Securities covered by such registration
statement, its directors and officers, each other Person
who participates as an underwriter in the offering or
sale of such securities and each other Person, if any,
who controls such holder or any such underwriter within
the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to
which such holder or any such director or officer or
underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in any registration statement under which
such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment
or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse
such holder and each such director, officer, underwriter
and controlling person for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim,
liability, action or proceeding, provided that the
Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability, (or
action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission
made in such registration statement, any such
preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the
Company by such holder or underwriter stating that it is
for use in the preparation thereof and, provided further
that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale
of Registrable Securities or to any other Person, if
any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that
any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented
or amended, within the time required by the Securities
Act to the Person asserting the existence of an untrue
statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation
of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final
prospectus or an amendment or supplement thereto. Such
indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of
such holder or any such director, officer, underwriter
or controlling person and shall survive the transfer of
such securities by such holder.
2.7.2 Indemnification by the Sellers. The Company
may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant
to this Agreement, that the Company shall have received
an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and
hold harmless (in the same manner and to the same extent
as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of
the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act,
with respect to any statement or alleged statement in or
omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written
information furnished to the Company through an
instrument duly executed by such seller specifically
stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement.
Any such indemnity shall remain in full force and
effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or
controlling person and shall survive the transfer of
such securities by such seller.
2.7.3 Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this
Section 2.7, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying
party, give written notice to the latter of the
commencement of such action, provided that the failure
of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this
Section 2.7, except to the extent that the indemnifying
party is actually prejudiced by such failure to give
notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party
similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the
indemnifying party to such indemnified party of its
election so to assume the defense thereof, the
indemnifying party shall not be liable to such
indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with
the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such
action which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability, or a
covenant not to sue, in respect to such claim or
litigation. No indemnified party shall consent to entry
of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an
indemnifying party without the consent of such
indemnifying party.
2.7.4 Other Indemnification. Indemnification
similar to that specified in the preceding subdivisions
of this Section 2.7 (with appropriate modifications)
shall be given by the Company and each seller of
Registrable Securities (but only if and to the extent
required pursuant to the terms of Section 2.7(b)) with
respect to any required registration or other
qualification of securities under any Federal or state
law or regulation of any governmental authority, other
than the Securities Act.
2.7.5 Indemnification Payments. The indemnification
required by this Section 2.7 shall be made by periodic
payments of the amount thereof during the course of the
investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
2.7.6 Contribution. If the indemnification provided
for in the preceding subdivision of this Section 2.7 is
unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as
a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on
the one hand and the holder or underwriter, as the case
may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the
Company on the one hand and of the holder or
underwriter, as the case may be, on the other in
connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as
well as any other relevant equitable considerations.
The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be,
on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the
Company from the initial sale of the Registrable
Securities by the Company to the purchasers bear to the
gain, if any, realized by all selling holders
participating in such offering or the underwriting
discounts and commissions received by the underwriter,
as the case may be. The relative fault of the Company
on the one hand and of the holder or underwriter, as the
case may be, on the other shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission
to state a material fact relates to information supplied
by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to
information supplied by the Company, by the holder or by
the underwriter and the parties' relative intent,
knowledge, access to information and opportunity to
correct or prevent such statement or omission, provided
that the foregoing contribution agreement shall not
inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified
party by reason of the provisions contained in the first
sentence of subdivision (a) of this Section 2.7, and in
no event shall the obligation of any indemnifying party
to contribute under this subdivision (f) exceed the
amount that such indemnifying party would have been
obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of
this Section 2.7 had been available under the
circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision
(f) were determined by pro rata allocation (even if the holders and any
underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
in the preceding sentence and subdivision (c) of this Section 2.7, any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which
the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any
damages that such holder or underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
3 Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective
meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this
Agreement.
"Conversion Shares": As defined in Section 1.
"Debentures": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Debentures.
"Exchange Act": The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"OTC Bulletin Board": As defined in Section 1.
"Person": A corporation, association, partnership, organization,
business, individual, governmental or political subdivision thereof or a
governmental agency.
"Registrable Securities": The Securities and any securities
issued or issuable with respect to such Securities by way of stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. Once issued such securities shall cease to be Registrable
Securities when (a) a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act,
(c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act or any
similar state law then in force, (d) they shall have ceased to be
outstanding, (e) on the expiration of the applicable Registration
Maintenance Period or (f) any and all legends restricting transfer thereof
have been removed in accordance with the provisions of Rule 144(k) (or any
successor provision) under the Securities Act.
"Registration Expenses": All expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all stock exchange and
OTC Bulletin Board or other NASD or stock exchange listing fees, all fees
and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance of the Company
against liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, provided
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of the
Company or other expenses for the preparation of financial statements or
other data normally prepared by the Company in the ordinary course of its
business or which the Company would have incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
"Sellers' Representative": Global Capital Advisors Ltd. or such
Person designated by Global Capital Advisors Ltd. as of the time of
disposition of the last of the Debentures held by the Fund (or subsequent
Sellers' Representative).
"Warrant Shares": As defined in Section 1.
4 Rule 144. The Company shall timely file the reports required
to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule
144 adopted by the Commission under the Securities Act) and the
rules and regulations adopted by the Commission thereunder (or, if
the Company is not required to file such reports, will, upon the
request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as
any holder of Registrable Securities may reasonably request, all
to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by
(a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with the
requirements of this Section 4.
5 Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment,
action or omission to act, of the holder or holders of the sum of
the 51% or more of the shares of (i) Registrable Securities issued
at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting
derivative securities (if such Securities were not fully exchanged
or converted in full as of the date such consent if sought). Each
holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have
been marked to indicate such consent.
6 Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial
owner thereof, the beneficial owner thereof may, at its election,
be treated as the holder of such Registrable Securities for
purposes of any request or other action by any holder or holders
of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable
Securities held by a holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's
beneficial ownership or such Registrable Securities.
7 Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided
for hereunder shall be in writing and shall be given to such
Person (a) in the case of a party hereto other than the Company,
addressed to such party in the manner set forth in the Securities
Purchase Agreement or at such other address as such party shall
have furnished to the Company in writing, or (b) in the case of
any other holder of Registrable Securities, at the address that
such holder shall have furnished to the Company in writing, or,
until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such
Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at the address set
forth on the signature page hereto, to the attention of its
President, or at such other address, or to the attention of such
other officer, as the Company shall have furnished to each holder
of Registrable Securities at the time outstanding. Each such
notice, request or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in
the mail with first class postage prepaid, addressed as aforesaid
or (ii) if given by any other means (including, without
limitation, by fax or air courier), when delivered at the address
specified above, provided that any such notice, request or
communication shall not be effective until received.
8 Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto. In
addition, and whether or not any express assignment shall have
been made, the provisions of this Agreement which are for the
benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the Holders of the Registrable
Securities agrees, by accepting any portion of the Registrable
Securities after the date hereof, to the provisions of this
Agreement including, without limitation, appointment of the
Sellers' Representative to act on behalf of such Holder pursuant
to the terms hereof which such actions shall be made in the good
faith discretion of the Sellers' Representative and be binding on
all persons for all purposes.
9 Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning
hereof.
10 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11 Counterparts. This Agreement may be executed by facsimile
and may be signed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same
instrument.
12 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Company and each other
party hereto relating to the subject matter hereof and supercedes
all prior agreements and understandings relating to such subject
matter.
13 Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the
application of such provision to Persons or circumstances other
than those to which it is held invalid, shall not be affected
thereby.
Signature Page Follows
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
DIAL-THRU INTERNATIONAL CORPORATION
By:
Name: _______________________________
Title: _______________________________
Address: 700 South Flower
Suite 2950
Los Angeles, CA 90017
Fax:
Tel.:
GLOBAL CAPITAL FUNDING GROUP, L.P.
By its General Partner, Global Capital
Management Services, Inc.
By:
Name: Lewis N. Lester
Title: President
Address: 106 Colony Park Drive
Suite 900
Cumming, Georgia 30040
Fax: 678-947-6499
Tel.: 678-947-0028