Exhibit 4.2
Registration Rights Agreement
dated as of
January 28, 2002
by and between
Dial-Thru International Corporation
and
GCA Strategic Investment Fund Limited
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 January
28, 2002, between Dial-Thru International Corporation, a Delaware
corporation (the "Company") and GCA Strategic Investment Fund Limited (the
"Fund"), a Bermuda corporation.
1. Introduction.
1.1 Securities Purchase Agreement. The Company and the Fund have
today executed that certain Securities Purchase Agreement (the "Securities
Purchase Agreement"), pursuant to which the Company has agreed, among other
things, to issue Five Hundred Fifty Thousand Dollars ($550,000.00) (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 50,000 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.
(a) Registration of Registrable Securities. The Company
shall prepare and file within fifteen (15) days following the date hereof
(the "Filing Date") 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) 60 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"); provided, however, in the event the Company is not
eligible to use Form S-3 for the Registration Statement, the Filing Date and
the Required Effectiveness Date shall each be extended by 30 calendar days
from the date on which the Commission notifies the Company of its
ineligibility to use Form S-3 and the Required Effectiveness Date shall be
extended for 60 calendar days from the date on which the Commission notifies
the Company of its ineligibility to use Form S-3. 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.
(b) 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.
(c) Expenses. The Company will pay all Registration
Expenses in connection with any registration required by this Section 2.1.
(d) 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.
(e) 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.
(a) 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.
(b) 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:
(i) 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;
(ii) 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");
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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;
(vii) notify the Sellers' Representative and its counsel
promptly and confirm such advice in writing promptly after the Company has
knowledge thereof:
(A) 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;
(B) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for
additional information;
(C) 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
(D) 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;
(viii) 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;
(ix) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(x) 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;
(xi) 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
(xii) 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.
(a) 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.
(b) 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.
(c) 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.
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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, LLC or such
Person designated by Global Capital Advisors, LLC 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.: _______________________
GCA STRATEGIC INVESTMENT FUND LIMITED
By: _____________________________________
Name: Lewis N. Lester
Title: Director
Address: c\o Prime Management
Mechanics Building
12 Church Street
Hamilton, Bermuda HM11
Fax: 441-295-3926
Tel.: 441-295-0329