Exhibit 4.3
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE
AGREEMENT, DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM
THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL
AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS
WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY
AND MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION RIGHTS AND OBLIGATIONS
AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE
AND OWING HEREUNDER MAY BE ACCELERATED.
No. 1 $550,000
6% CONVERTIBLE DEBENTURE
of
Dial-Thru International Corporation, a Delaware corporation (together
with its successors, the "Company"), for value received hereby promises to
pay to:
GCA Strategic Investment Fund Limited
(the "Holder") and registered assigns, the principal sum of Five Hundred
Fifty Thousand ($550,000) or, if less, the principal amount of this
Debenture then outstanding, on the Maturity Date by wire transfer of
immediately available funds to the Holder in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, and to pay interest, which shall
begin to accrue on the date of this Debenture, quarterly in arrears, on (i)
the last day of March, June, September and December of each year until the
Maturity Date, commencing March 31, 2002 (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each an "Interest
Payment Date"), (ii) the Maturity Date, (iii) each Conversion Date, as
hereafter defined, and (iv) the date the principal amount of the Convertible
Debentures shall be declared to be or shall automatically become due and
payable, on the principal sum hereof outstanding in like coin or currency,
at the rates per annum set forth below, from the most recent Interest
Payment Date to which interest has been paid on this Convertible Debenture,
or if no interest has been paid on this Convertible Debenture, from the date
of this Convertible Debenture until payment in full of the principal sum
hereof has been made. The Maturity Date is January 28, 2003.
The interest rate shall be six percent (6%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also
accrue interest at the Interest Rate plus 7% per annum or, if less, the
maximum rate permitted by applicable law, and will be payable on demand
("Default Interest"). Interest on this Convertible Debenture will be
calculated on the basis of a 360-day year of twelve 30 day months. All
payments of principal and interest hereunder shall be made for the benefit
of the Holder pursuant to the terms of the Agreement (hereafter defined).
At the option of the Company, interest may be paid in cash or in shares of
Common Stock. If the Company determines to pay interest in shares of Common
Stock, it shall be required to notify the Holder of such election on the
Closing Date. On each Conversion Date, interest shall be paid in shares of
Common Stock on the portion of the principal balance of the Convertible
Debenture then being converted. The number of shares of Common Stock issued
as interest shall be determined by dividing the dollar amount of interest
due on the applicable Interest Payment Date by the Conversion Price then in
effect.
This Convertible Debenture (this "Convertible Debenture") is one of a
duly authorized issuance of $550,000 aggregate principal amount of
Convertible Debentures of the Company referred to in that certain Securities
Purchase Agreement dated as of the date hereof between the Company and the
Purchaser named therein (the "Agreement"). The Agreement contains certain
additional agreements among the parties with respect to the terms of this
Convertible Debenture, including, without limitation, provisions which (A)
limit the conversion rights of the Holder, (B) specify voluntary and
mandatory repayment, prepayment and redemption rights and obligations and
(C) specify Events of Default following which the remaining balance due and
owing hereunder may be accelerated. All such provisions are an integral
part of this Convertible Debenture and are incorporated herein by reference.
This Convertible Debenture is transferable and assignable to one or more
Persons, in accordance with the limitations set forth in the Agreement.
This Convertible Debenture is secured by a Security Agreement (the
"Security Agreement") of even date herewith made by the Company and Holder
creating a security interest in favor of the Holder in certain of the
Company's assets described in the Security Agreement.
The Company shall keep a register (the "Register") in which shall be
entered the names and addresses of the registered holder of this Convertible
Debenture and particulars of this Convertible Debenture held by such holder
and of all transfers of this Convertible Debenture. References to the
"Holder" or "Holders" shall mean the Person listed in the Register as
registered holder of such Convertible Debentures. The ownership of this
Convertible Debenture shall be proven by the Register.
1. Certain Terms Defined. All terms defined in the Agreement and not
otherwise defined herein shall have for purposes hereof the meanings
provided for in the Agreement.
2. Covenants. The Company covenants and agrees to observe and
perform each of its covenants, obligations and undertakings contained in the
Agreement, which obligations and undertakings are expressly assumed herein
by the Company and made for the benefit of the holder hereof.
3. Reserved.
4. Conversion.
4.1 Conversion of Convertible Debenture. Subject to Section 5
hereof, the Holder shall have the right, at its option, at any time
from and after the date of issuance of this Convertible Debenture,
convert the principal amount of this Convertible Debenture, or any
portion of such principal amount, into that number of fully paid and
nonassessable shares of Common Stock (as such shares shall then be
constituted) determined pursuant to this Section 4.1. The number of
shares of Common Stock to be issued upon each conversion of this
Convertible Debenture shall be determined by dividing the Conversion
Amount (as defined below) by the Conversion Price in effect on the date
(the "Conversion Date") a Notice of Conversion is delivered to the
Company, as applicable, by the Holder by facsimile or other reasonable
means of communication dispatched prior to 5:00 p.m., E.S.T. The term
"Conversion Amount" means, with respect to any conversion of this
Convertible Debenture, the sum of (1) the principal amount of this
Convertible Debenture to be converted in such conversion plus (2)
accrued and unpaid interest, if any, on such principal amount at the
interest rates provided in this Convertible Debenture to the Conversion
Date plus (3) Default Interest, if any, on the interest referred to in
the immediately preceding clause (2) plus (4) at the Holder's option,
any amounts owed to the Holder pursuant to Section 4.3 hereof, Section
10.1 of the Agreement or Section 10.4 of the Agreement.
4.2 Conversion Price and Limitation. At the option of the Holder, any
portion or all of the outstanding principal amount of this Convertible
Debenture shall be converted into a number of shares of Common Stock at
the conversion price (the "Conversion Price") equal to the lesser of
(i)100% of the volume weighted average sales price as reported by
Bloomberg L.P. of the Common Stock on the last Trading Day immediately
preceding the Closing Date (the "Fixed Conversion Price") and (ii) 85%
of the average of the three (3) lowest volume weighted average sales
prices as reported by Bloomberg L.P. during the twenty (20) Trading
Days immediately preceding but not including the date of the related
Notice of Conversion (the "Formula Conversion Price").
4.3 Authorized Shares.
(a) Consistent with Section 7.11 of the Agreement, the Company
(i) shall promptly irrevocably instruct the Company's transfer agent
to issue certificates for the Common Stock issuable upon conversion of
this Convertible Debenture and (ii) agrees that its issuance of this
Convertible Debenture shall constitute full authority to its officers
and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares
of Common Stock in accordance with the terms and conditions of this
Convertible Debenture.
(b) If at any time a Holder of this Convertible Debenture submits
a Notice of Conversion (x) the Company does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in full in accordance with the provisions of this Article 4
or (y) the Company is prohibited by the applicable rules of the OTC
Bulletin Board or the National Market on which the Common Shares are
listed and traded at that time to effect such conversion in full as
provided in subsection (d) below, without stockholder approval (each, a
"Conversion Default"), the Company shall issue to the Holder all of the
shares of Common Stock which are then available to effect such
conversion. The portion of this Convertible Debenture which the Holder
included in its Conversion Notice and which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess
Amount") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the
terms hereof until (and at the Holder's option at any time after) the
date additional shares of Common Stock are authorized by the Company,
or its stockholders, as applicable, at which time the Conversion Price
in respect thereof shall be the lower of (i) the Conversion Price on
the Conversion Default Date (as defined below) and (ii) the Conversion
Price on the Conversion Date thereafter elected by the Holder in
respect thereof. The Company shall pay to the Holder payments pursuant
to Section 10.1(b) of the Agreement ("Conversion Default Payments")
until the Conversion Default is cured. The Company shall use its best
efforts to authorize, or cause its stockholders to authorize within 90
days of the occurrence of a Conversion Default, as applicable, a
sufficient number of shares of Common Stock as soon as practicable
following the earlier of (i) such time that the Holder notifies the
Company or that the Company otherwise becomes aware that there are or
likely will be insufficient shares to allow full conversion thereof and
(ii) a Conversion Default. The Company shall send notice to the Holder
of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion
Default Payments. The accrued Conversion Default Payments for each
calendar month shall be paid in cash or shall be convertible into
Common Stock (at such time as there are sufficient authorized shares of
Common Stock) at the Market Price, at the Holder's option, as follows:
(i) In the event the Holder elects to take such payment in
cash, cash payment shall be made to Holder by the fifth Business
Day of the month following the month in which it has accrued; and
(ii) In the event the Holder elects to take such payment in
Common Stock, the Holder may convert such payment amount into
Common Stock at the Conversion Price (as in effect at the time of
conversion) at any time after the fifth Business Day of the month
following the month in which it has accrued (at such time as there
are sufficient authorized shares of Common Stock) in accordance
with the terms of this Article 4.
(c) The Holder's election pursuant to this Section 4.3 shall be
made in writing to the Company at any time prior to 5:00 p.m., E.S.T.,
on the third Business Day of the month following the month in which
Conversion Default payments have accrued. If no election is made, the
Holder shall be deemed to have elected to receive cash. Nothing herein
shall limit the Holders right to pursue actual damages (to the extent
in excess of the Conversion Default Payments) due to the Company's
failure to maintain a sufficient number of authorized shares of Common
Stock.
(d) In no event shall the Company issue more than the Maximum
Number of Shares upon conversion of this Convertible Debenture, unless
the Company shall have obtained approval by the stockholders of the
Company ("Stockholder Approval") or a waiver of such requirement by the
OTC Bulletin Board or the National Market on which the Common Shares
are listed and traded at that time. Once the Maximum Number of Shares
has been issued (the date of which is hereinafter referred to as the
"Maximum Conversion Date"), unless the Company shall have obtained
Stockholder Approval or a waiver of such requirement by the OTC
Bulletin Board or the National Market on which the Common Shares are
listed and traded at that time within 90 days of the Maximum Conversion
Date, the Company shall pay to the Holder upon the earlier of (x) 90
days following the Maximum Conversion Date, and (y) such date that it
becomes reasonably apparent that Stockholder Approval will not be
obtained within such 90 day period, the Redemption Price. The Maximum
Number of Shares shall be subject to adjustment from time to time for
stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the
date hereof as contemplated by Article XI of the Agreement. With
respect to each Holder of Convertible Debentures, the Maximum Number of
Shares shall refer to such Holder's pro rata share thereof based upon
the aggregate principal balance of the Convertible Debentures then
outstanding. In the event that the Company obtains Stockholder
Approval, approval of the OTC Bulletin Board or the National Market on
which the Common Shares are listed and traded at that time, or
otherwise is able to increase the number of shares to be issued above
the Maximum Number of Shares (such increased number being the "New
Maximum Number of Shares"), the references to Maximum Number of Shares
above shall be deemed to be, instead, references to the New Maximum
Number of Shares.
4.4 Method of Conversion.
(a) Notwithstanding anything to the contrary set forth herein,
upon conversion of this Convertible Debenture in accordance with the
terms hereof, the Holder shall not be required to physically surrender
this Convertible Debenture to the Company unless the entire unpaid
principal amount of this Convertible Debenture is so converted.
Rather, records showing the principal amount converted (or otherwise
repaid) and the date of such conversion or repayment shall be
maintained on a ledger substantially in the form of Annex A attached
hereto (a copy of which shall be delivered to the Company or transfer
agent with each Notice of Conversion). It is specifically contemplated
that the Holder hereof shall act as the calculation agent for
conversions and repayments. In the event of any dispute or
discrepancies, such records maintained by the Holder shall be
controlling and determinative in the absence of manifest error or
failure of Holder to record the principal amount converted (or
otherwise repaid) from time to time, in which events the record of the
Company shall be controlling and determinative. The Holder and any
assignee, by acceptance of this Convertible Debenture, acknowledge and
agree that, by reason of the provisions of this paragraph, following a
conversion of a portion of this Convertible Debenture, the principal
amount represented by this Convertible Debenture will be the amount
indicated on Annex A attached hereto (which may be less than the amount
stated on the face hereof).
(b) The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property on
conversion of this Convertible Debenture in a name other than that of
the Holder (or in street name), and the Company shall not be required
to issue or deliver any such shares or other securities or property
unless and until the person or persons (other than the Holder or the
custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have paid to
the Company the amount of any such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(c) Subject to Section 5 hereof, upon receipt by the Company of a
Notice of Conversion, the Holder shall be deemed to be the holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid
interest on this Convertible Debenture shall be deemed reduced to
reflect such conversion, and, unless the Company defaults on its
obligations under this Article 4, all rights with respect to the
portion of this Convertible Debenture being so converted shall
forthwith terminate except the right to receive the Common Stock or
other securities, cash or other assets, as herein provided, on such
conversion. Subject to Section 5 hereof, if the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of Common
Stock shall be absolute and unconditional, irrespective of the absence
of any action by the Holder to enforce the same, any waiver or consent
with respect to any provisions thereof, the recovery of any judgment
against any person or any action by the Holder to enforce the same, any
failure or delay in the enforcement of any other obligation of the
Company to the Holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach
by the Holder of any obligation to the Company, and subject to Section
4.4(a) irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with
such conversion. The date of receipt (including receipt via telecopy)
of such Notice of Conversion shall be the Conversion Date so long as it
is received before 5:00 p.m., E.S.T., on such date.
(d) Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the expiration of
the Deadline with respect to a conversion of any portion of this
Convertible Debenture for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying
the Company), the Holder shall regain the rights of a Holder of this
Convertible Debenture with respect to such unconverted portions of this
Convertible Debenture and the Company shall, as soon as practicable,
return such unconverted Convertible Debenture to the holder or, if the
Convertible Debenture has not been surrendered, adjust its records to
reflect that such portion of this Convertible Debenture not been
converted. In all cases, the Holder shall retain all of its rights and
remedies (including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the
right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 4.3 for the Company's
failure to convert this Convertible Debenture.
(e) In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and
its compliance with the provisions contained in Section 4.1 and in this
Section 4.4, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Holder by crediting the account of Holder's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission
System.
5. Redemption.
5.1 Required Redemption. In accordance with the provisions of the
Purchase Agreement and this Convertible Debenture, the Company may
elect or be required under certain circumstances, to redeem in whole or
in part, the remaining unpaid principal amount of this Convertible
Debenture, for cash at a redemption price (the "Redemption Price")
equal to (x) the number of shares of Common Stock into which this
Convertible Debenture is then convertible, times (y) the average
Closing Bid Price of Common Stock for the five (5) Trading Days as
reported by Bloomberg L.P. immediately preceding the date that this
Convertible Debenture is called for redemption, plus accrued and unpaid
interest.
5.2 Mechanics of Redemption. The Company shall effect each such
redemption within 10 business days of giving notice of its election to
redeem by facsimile with a copy by either overnight or 2-day courier to
the Holder of this Convertible Debenture to be redeemed at the address
and facsimile number of such Holder appearing in the Company's register
for the Convertible Debentures. Such redemption notice shall indicate
whether the Company will redeem all or part of such portion of the
Convertible Debenture to be redeemed and the applicable Redemption
Price. The Company shall not be entitled to send any notice of
redemption and begin the redemption procedure unless it has (i) the
full amount of the Redemption Price, in cash, available in a demand or
other immediately available account in a bank or similar financial
institution or (ii) immediately available credit facilities, in the
full amount of the Redemption Price, with a bank or similar financial
institution on the date the redemption notice is sent to the Holders of
this Convertible Debenture. Provided, however, the Company will
process any Notice of Conversion received prior to the issuance of a
notice of redemption; and further provided that, after a notice of
redemption has been issued, the Holder may issue a Notice of Conversion
which will not be honored unless the Company fails to make the
redemption payment when due. In the event of such failure, the Notice
of Conversion will be honored as of the date of the Notice of
Conversion. Additionally, if the Company fails to make full payments
of the Redemption Price of this Convertible Debenture being redeemed by
the tenth day following the notice or redemption, then the Company
waives its right to redeem any of the remaining then outstanding
Debentures, unless approved by the Holder.
5.3 Payment of Redemption Price. The Redemption Price shall be paid
to the Holder of this Convertible Debenture within 10 business days of
the delivery of the notice of such redemption to such Holder.
6. Holder's Right to Advance Notice of Election Redeem.
6.1 Holder's Right to Elect to Receive Notice of Cash Redemption by
Company. The Holder of this Convertible Debenture shall have the right
to require Company to provide advance notice stating whether the
Company will elect to redeem all or part of the redeemable portion in
cash, pursuant to the Company's redemption rights discussed in Section
5.1 above.
6.2 Mechanics of Holder's Election Notice. Holder shall give notice
to the Company by facsimile (the "Election Notice"), requiring that the
Company disclose whether the Company would elect to redeem the
redeemable portion of this Convertible Debenture (in whole or in part)
if the Holder were to provide a Notice of Conversion and sought to
convert the Convertible Debenture in such principal amount as is
specified in the Notice of Election.
6.3 Company's Response. Company must respond, disclosing its
election, within two (2) business days of receipt of Holder's Election
Notice via facsimile. If Company does not respond to Holder within two
(2) business days (by 12:00 noon, if required above) via facsimile,
Company shall be deemed to have forfeited its right to exercise
redemption pursuant to Section 5(a) upon its receipt of (but only with
respect to) that Notice of Conversion.
7. Miscellaneous. This Convertible Debenture shall be deemed to be a
contract made under the laws of the State of Delaware, and for all purposes
shall be governed by and construed in accordance with the laws of said
State. The parties hereto, including all guarantors or endorsers, hereby
waive presentment, demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance and enforcement of
this Convertible Debenture, except as specifically provided herein, and
asset to extensions of the time of payment, or forbearance or other
indulgence without notice. The Company hereby submits to the exclusive
jurisdiction of the United States District Court for Delaware and of any
state court sitting in Delaware for purposes of all legal proceedings
arising out of or relating to this Convertible Debenture. The Company
irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The
Company hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Convertible Debenture.
The Holder of this Convertible Debenture by acceptance of this
Convertible Debenture agrees to be bound by the provisions of this
Convertible Debenture which are expressly binding on such Holder.
Signature Page Follows
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: January 28, 2002
Dial-Thru International Corporation
By:_________________________________
Name:_______________________________
Title:______________________________
Convertible Debenture
ANNEX A
CONVERSION AND REPAYMENT LEDGER
Interest Principal
Date Principal Converted Converted or New Principal Issuer Holder
Balance or Paid Paid Balance Initials Initials
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FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL INSTRUCTIONS: ______________________________________________________
______________________________________________________
______________________________________________________
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Debenture)
The undersigned hereby irrevocably elects to convert $________ of
the principal balance of the Convertible Debenture into shares of Common
Stock, ____ par value per share (the "Common Stock"), of Dial-Thru
International Corporation (the "Company") according to the conditions
hereof, as of the date written below. No fee will be charged to the Holder
for any conversion, except for transfer taxes, if any. The undersigned, as
contemplated by Section 5.1 of the Securities Purchase Agreement pursuant to
which the Convertible Debenture was issued, hereby states that the
representations and warranties of the undersigned set forth therein are true
and correct in all material respects as of the date hereof (provided, the
undersigned makes no representations concerning its investment intent with
respect to the Common Stock received upon this conversion).
Conversion calculations:
___________________________________________________
Date of Conversion
___________________________________________________
Applicable Conversion Price
___________________________________________________
Number of Shares
___________________________________________________
Name/Signature
Address:
___________________________________________________
___________________________________________________