REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 30,
2000, by and between GLOBAL TELEPHONE COMMUNICATION, INC., a Nevada corporation,
with headquarters located at 00 Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxx, 00000 (the "COMPANY"), and PINEHURST/L.O.F., LLC, a Cayman Islands
limited liability company (the "BUYER").
RECITALS
WHEREAS, in connection with the Securities Purchase Agreement by and
among the parties hereto dated as of June 30, 2000 (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to (i) issue and sell to the
Buyer a 9.0% Subordinated Convertible Debenture (the "DEBENTURE"), which will be
convertible into shares of the Company's common stock, $.001 par value per share
(the "COMMON STOCK") (as converted, the "CONVERSION SHARES") in accordance with
the terms of such Debenture, and (ii) issue Warrants (the "WARRANTS") which will
be exercisable to purchase shares of Common Stock (the "WARRANT SHARES"); and
WHEREAS, to induce the Buyer to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "INVESTOR" means the Buyer, any transferee or assignee thereof
to whom Buyer assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with SECTION 9
and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with SECTION 9.
(b) "PERSON" means a natural person, a partnership, corporation,
a limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization or a governmental agency or
any department, agency or political subdivision thereof.
(c) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or
ordering of
effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
(d) "REGISTRABLE SECURITIES" means the Conversion Shares and the
Warrant Shares issued or issuable upon conversion of the Debenture and
exercise of the Warrants, respectively, and any shares of capital stock
issued or issuable with respect to the Conversion Shares, the Warrant Shares,
the Warrants or the Debenture as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to
any limitation on conversion of the Debenture or the exercise of the Warrants.
(e) "REGISTRATION STATEMENT" means a registration statement of
the Company filed under the 1933 Act.
(f) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare, and,
as soon as practicable but in no event later than 60 days after the date of
issuance of the Debenture (the "FILING DEADLINE"), file with the SEC a
Registration Statement or Registration Statements (as is necessary) on Form
S-1 (or other available form) covering the resale of all of the Registrable
Securities. The initial Registration Statement prepared pursuant hereto shall
register for resale at least that number of shares of Common Stock equal to
the product of (x) 1.5 and (y) the number of Registrable Securities as of the
date immediately preceding the date the Registration Statement is initially
filed with the SEC, subject to adjustment as provided in SECTION 3(B). The
Company shall use its best efforts to have the Registration Statement
declared effective by the SEC as soon as practicable, but in no event later
than 180 days after the Issuance Date (as defined in the Debenture).
(b) ALLOCATION OF REGISTRABLE SECURITIES. The initial number
of Registrable Securities included in any Registration Statement and each
increase in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement
covering such initial number of Registrable Securities or increase thereof is
declared effective by the SEC. In the event that an Investor sells or
otherwise transfers any of such Person's Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such
transferor. Any shares of Common Stock included in a Registration Statement
and which remain allocated to any Person which ceases to hold any Registrable
Securities shall be allocated to the remaining Investors, pro rata based on
the number of Registrable Securities then held by such Investors.
(c) LEGAL COUNSEL. Subject to SECTION 5 hereof, the Buyer
shall have the right to select one legal counsel to review any offering
pursuant to this SECTION 2 ("LEGAL COUNSEL"), which shall be Xxxxxxxx & Xxxxx
or such other counsel as thereafter designated by the holders of a majority
of Registrable Securities. The Company shall reasonably cooperate with Legal
Counsel in performing the Company's obligations under this Agreement.
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(d) FORM S-1. The Company shall register the sale of the
Registrable Securities on Form S-1 (or other available form).
(e) SUFFICIENT NUMBER OF SHARES REGISTERED. Following the
filing of the initial Registration Statement pursuant to SECTION 2(A), in the
event the number of shares available under a Registration Statement filed
pursuant to SECTION 2(A)is insufficient to cover all of the Registrable
Securities or an Investor's allocated portion of the Registrable Securities
pursuant to SECTION 2(B), the Company shall amend the Registration Statement,
or file a new Registration Statement (on the short form available therefor,
if applicable), or both, so as to cover at least 130% of such Registrable
Securities (based on the market price of the Common Stock), in each case, as
soon as practicable, but in any event not later than fifteen (15) days after
the necessity therefor arises. The Company shall use it best efforts to cause
such amendment and/or new Registration Statement to become effective as soon
as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement
shall be deemed "insufficient to cover all of the Registrable Securities" if
at any time the number of Registrable Securities issued or issuable upon
conversion of the Debenture and exercise of the Warrants is greater than the
quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.3. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Debenture or exerciseability of the
Warrants shall be disregarded and such calculation shall assume that the
Debenture and the Warrants are then convertible and exercisable,
respectively, into shares of Common Stock at the then prevailing Conversion
Rate (as defined in the Debenture) and Warrant Exercise Price (as defined in
the Warrant), respectively, if applicable.
(f) PENALTY FOR NO EFFECTIVE REGISTRATION STATEMENT. In the
event the initial Registration Statement has not been declared effective by
the SEC on the one hundred fiftieth (150th) day following the Issuance Date
(the "EFFECTIVENESS DEADLINE"), the Company shall pay to the Investor a
penalty equal to two and one-quarter percent (2.25%) of the outstanding
principal amount of the Debenture, and shall continue to accrue, and pay in
cash on each monthly anniversary thereafter until the earlier of (i) the date
the Registration Statement is declared effective by the SEC and (ii) the one
hundred eightieth (180th) day following the Issuance Date, an additional two
and one-quarter percent (2.25 per month (prorated for partial months) of the
outstanding principal amount of the Debenture.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to SECTION 2(A) or SECTION 2(E), the Company
will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the
SEC a Registration Statement with respect to the Registrable Securities (on
or prior to the sixtieth (60th) day after the date of issuance of the
Debenture for the registration of Registrable Securities pursuant to SECTION
2(A)) and use its best efforts to cause such Registration Statement relating
to the Registrable Securities to become effective as soon as possible after
such filing (but in no event later than 150 days after the Issuance Date, and
keep such Registration Statement effective
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pursuant to Rule 415 at all times until the earlier of (i) the date as of
which the Investors may sell all of the Registrable Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto) or (ii) the date on which (A) the Investors shall have
sold all the Registrable Securities and (B) none of the Debenture or Warrants
is outstanding (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any 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, in light of the circumstances in which they were made,
not misleading. The term "best efforts" as used in the first sentence of this
SECTION 3(A) shall mean, among other things, that the Company shall submit to
the SEC, within two business days after the Company learns that no review of
a particular Registration Statement will be made by the staff of the SEC or
that the staff has no further comments on the Registration Statement, as the
case may be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than 48 hours after the submission of
such request.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this SECTION 3(B)) by reason of the Company
filing a report on Form 10-KSB, Form 10-QSB or Form 8-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the "1934
ACT"), the Company shall file such amendments or supplements with the SEC on
the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.
(c) The Company shall permit Legal Counsel to review and
comment upon a Registration Statement and all amendments and supplements
thereto at least seven (7) days prior to their filing with the SEC, and not
file any document in a form to which Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the
prior approval of Legal Counsel, which consent shall not be unreasonably
withheld. The Company shall furnish to Legal Counsel, without charge, (i) any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after
the same is prepared and filed with the SEC, one copy of any Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference and all exhibits
and (iii) upon the effectiveness of any Registration Statement, one copy of
the prospectus included in such Registration Statement and all amendments and
supplements thereto.
(d) The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared
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and filed with the SEC, at least one copy of such Registration Statement and
any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
(e) The Company shall (i) register and qualify the
Registrable Securities covered by a Registration Statement under such other
securities or "blue sky" laws of such jurisdictions in the United States as
Legal Counsel or any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Registration Period, (iii)
take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions. The Company shall
promptly notify Legal Counsel and Buyer who holds Registrable Securities of
the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the
United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(f) As promptly as practicable after becoming aware of such
event (but in no event later than one business day thereafter), the Company
shall notify Legal Counsel and Buyer in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and
deliver one (1) copy of such supplement or amendment to Legal Counsel and
each Investor (or such other number of copies as Legal Counsel or Buyer may
reasonably request). The Company shall also promptly notify Legal Counsel and
Buyer in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and Buyer by facsimile on
the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
(g) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and Buyer who holds
Registrable Securities being
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sold of the issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding for such
purpose.
(h) At the request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the Investors,
and (ii) an opinion, dated as of such date, of counsel representing the
Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering,
addressed to the Investors.
(i) The Company shall make available for inspection by (i)
any Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
agents retained by the Investors (collectively, the "INSPECTORS") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector, and cause the Company's
officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector
shall hold in strict confidence and shall not make any disclosure (except to
an Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of
such Records is ordered pursuant to a final, non-appealable subpoena or order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
(j) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental
body of competent jurisdiction, or (iv) such information has been made
generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at the Investor's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.
(k) The Company shall cause all the Registrable Securities
covered by a Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable
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Securities is then permitted under the rules of such exchange. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this SECTION 3(K).
(l) The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration Statement
and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such
names as the Investors may request.
(m) The Company shall provide a transfer agent and
registrar of all such Registrable Securities not later than the effective
date of such Registration Statement.
(n) If requested by an Investor, the Company shall (i)
immediately incorporate in a prospectus supplement or post-effective
amendment such information as an Investor requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and
any other terms of the offering of the Registrable Securities; (ii) make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if requested by a holder of such
Registrable Securities.
(o) The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
(p) The Company shall make generally available to its
security holders as soon as practical, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 0000 Xxx) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
(q) The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
(r) Within two (2) business days after the Registration
Statement which includes the Registrable Securities is declared effective by
the SEC, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in
such Registration Statement) confirmation that the Registration Statement has
been declared effective by the SEC in the form attached hereto as EXHIBIT A.
(s) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
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4. OBLIGATIONS OF THE INVESTORS.
(a) At least seven (7) business days prior to the first
anticipated filing date of the Registration Statement, the Company shall
notify each Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held
by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with
such registration as the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
SECTION 3(G) or the first sentence of SECTION 3(F), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by SECTION 3(G) or the first sentence of SECTION 3(F).
Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee
of an Investor in accordance with the terms of the Debenture and the Warrants
in connection with any sale of Registrable Securities with respect to which
an Investor has entered into a contract for sale prior to the Investor's
receipt of a notice from the Company of the happening of any event of the
kind described in SECTION 3(G) or the first sentence of SECTION 3(F) and for
which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
brokerage commissions, incurred in connection with registrations, filings or
qualifications pursuant to SECTION 2 and SECTION 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, and fees and disbursements of counsel for the Company, and
all fees and disbursements of Legal Counsel, shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company
will, and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents, representatives of, and each Person, if any, who
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controls any Investor within the meaning of the 1933 Act or the 1934 Act
(each, an "INDEMNIFIED PERSON"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several, (collectively,
"CLAIMS") incurred in investigating, preparing or defending any action,
claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue sky" laws
of any jurisdiction in which Registrable Securities are offered ("BLUE SKY
FILING"), or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading, (iii) any violation or alleged violation
by the Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement or (iv) any material violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS"). The Company shall reimburse the Indemnified
Persons, promptly as such expenses are incurred and are due and payable, for
any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in
this SECTION 6(A) (i) shall not apply to a Claim by an Indemnified Person
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant
to SECTION 3(D); (ii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be delivered the
prospectus or any amendment or supplement thereto made available by the
Company, if such prospectus was timely made available by the Company pursuant
to SECTION 3(D); and (iii) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to SECTION 9.
(b) In connection with any Registration Statement in which
an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the
same manner as is set forth in SECTION 6(A), the Company, each of its
directors, each of its officers who signs the Registration Statement, each
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Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon
any Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection
with such Registration Statement; and, subject to SECTION 6(D), such Investor
will reimburse any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this SECTION 6(B) and the agreement
with respect to contribution contained in SECTION 7 shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not
be unreasonably withheld; provided, further, however, that the Investor shall
be liable under this SECTION 6(B) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to SECTION 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this SECTION 6(B) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact contained in the prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party under
this SECTION 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this SECTION 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No
10
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into
any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to
such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this SECTION 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
(d) The indemnification required by this SECTION 6 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 Indemnified
Damages are incurred.
(e) The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under SECTION 6 to the fullest extent permitted by law; provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any seller of Registrable Securities who was
not guilty of fraudulent misrepresentation; and (ii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount
of proceeds received by such seller from the sale of such Registrable
Securities pursuant to the Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"),
the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains
11
subject to such requirements (it being understood that nothing herein shall
limit the Company's obligations under Section 4.3 of the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable
Securities if the Investor agrees in writing with the transferee or assignee
to assign such rights and the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, provided
that further disposition of such securities by the transferee or assignee
shall be restricted under the 1933 Act and applicable state securities laws,
and the transferee or assignee shall be bound by all of the provisions
contained herein. Notwithstanding the foregoing, the rights under this
Agreement shall not be assignable if the amount of Registrable Securities to
be assigned is less than $1,000,000based on the Conversion Price or Warrant
Exercise Price of such securities (as applicable) at the time of such
assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and Investors who then hold two-thirds (66-2/3%) of the voting power
of the Registrable Securities. Any amendment or waiver effected in accordance
with this SECTION 10 shall be binding upon each Investor and the Company. No
such amendment shall be effective to the extent that it applies to less than
all of the holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of this Agreement unless the same consideration also
is offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
(a) A Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed
12
to have been delivered: (i) upon actual receipt, when delivered personally;
(ii) upon actual receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one business day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Global Telephone Communication, Inc.
00 Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xx. Xxxxxx Xxxxxxxxxxx
With a copy to:
Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
Telephone: 212-735-8600
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx, Esq.
If to the Buyer:
PINEHURST/L.O.F., LLC
C/O JE Xxxxxxx, LLC
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Telephone: (000)000-0000
Facsimile: (000)000-0000
Attention: Xxxxxx Xxxxxxx
With a copy to:
Xxxxxxxx & Xxxxx
000 X Xxxxx Xx.
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Telephone: (312) 261 - 2112
Facsimile: (000) 000-0000
13
Attention: Xxxx Xxxxxxxxxx, Esq.
or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice
given to each other party five days prior to the effectiveness of such change.
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(d) The corporate laws of the State of Illinois shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Illinois
or any other jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of Illinois. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting within the City of Chicago, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. Each party hereby irrevocably waives any right it may have, and
agrees not to request, a jury trial for the adjudication of any dispute
hereunder or in connection herewith or arising out of this Agreement or any
transaction contemplated hereby.
(e) This Agreement, the Securities Purchase Agreement, the
Warrant, the Debenture, the Security Agreement and the documents executed and
delivered in connection therewith constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein and therein. This Agreement, the Securities
Purchase Agreement, the Warrant, the Debenture, the Security Agreement and
the documents executed and delivered in connection therewith supersede all
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.
(f) Subject to the requirements of SECTION 9, this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
14
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement. (i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(j) All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding a majority of the
Registrable Securities, determined as if the principal amount of the
Debenture then outstanding and all of the Warrants issuable, have been
converted into or exercised for Registrable Securities without regard to any
limitation on conversion of the Debenture or the exercise of the Warrants.
(k) The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
(l) This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any
other Person.
* * * * * *
15
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed and delivered as of day and year first above
written.
COMPANY:
GLOBAL TELEPHONE COMMUNICATION,
INC.
By: __________________________________
Name:
Its:
BUYER:
PINEHURST/L.O.F., LLC
By: __________________________________
Name:
Its:
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:
RE: GLOBAL TELEPHONE COMMUNICATION, INC.
Ladies and Gentlemen:
We are counsel to GLOBAL TELEPHONE COMMUNICATION, INC., a
Nevada corporation (the "COMPANY"), and have represented the Company in
connection with that certain Securities Purchase Agreement (the "PURCHASE
AGREEMENT") entered into by and among the Company and the Buyer named therein
(the "HOLDER") pursuant to which the Company issued to the Holder a
Subordinated Convertible Debenture (the "DEBENTURE") convertible into shares
of the Company's common stock, no par value per share (the "COMMON STOCK"),
and warrants to purchase an aggregate of 150,000 shares of the Common Stock,
subject to adjustment (the "WARRANTS"). Pursuant to the Purchase Agreement,
the Company also has entered into a Registration Rights Agreement with the
Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common
Stock issuable upon conversion of the Debenture and exercise of the Warrants,
under the Securities Act of 1933, as amended (the "1933 ACT"). In connection
with the Company's obligations under the Registration Rights Agreement, on
____________, 2000, the Company filed a Registration Statement on Form ___
(File No. 333-_____________) (the "REGISTRATION STATEMENT") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder
thereunder.
In connection with the foregoing, we advise you that a
member of the SEC's staff has advised us by telephone that the SEC has
entered an order declaring the Registration Statement effective under the
1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS]
and we have no knowledge, after telephonic inquiry of a member of the SEC's
staff, that any stop order suspending its effectiveness has been issued or
that any proceedings for that purpose are pending before, or threatened by,
the SEC and the Registrable Securities are available for resale under the
1933 Act pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:
cc: [HOLDER]
