Exhibit 10(ax)
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") is entered into as of April
12, 2001, by and between NCT Video Displays, Inc., a Delaware corporation
("NCTV" or the "Company"), and Xxxxxxx Road LLC, a company organized and
existing under the laws of the Cayman Islands (the "Subscriber").
WHEREAS, the Company and the Subscriber are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act")
and/or Regulation D ("Regulation D"), as promulgated by the U.S. Securities and
Exchange Commission (the "SEC") under the 1933 Act;
WHEREAS, the Subscriber desires to purchase, and the Company desires to
issue and sell to the Subscriber, an 8% Convertible Note, annexed hereto as
Exhibit A (the "Note"), convertible in accordance with the terms thereof into
shares of the Company's common stock, par value $0.01 per share (the "Company
Shares") for an aggregate consideration of $500,000; and
WHEREAS, NCT Group, Inc., a Delaware corporation and the parent of NCTV
("NCT Group"), is granting to the Subscriber, pursuant to that certain Exchange
Rights Agreement of even date herewith, between NCT Group and the Subscriber
(the "Exchange Rights Agreement"), supplemental exchange rights whereby the
Subscriber may, in lieu of conversion into the Company Shares, exchange the Note
for shares of NCT Group's common stock, the terms of which are set forth in the
Exchange Rights Agreement.
The Company Shares included in the Securities (as hereinafter defined) are
sometimes referred to herein as the "Shares" or "Common Stock". The Note and the
Company Shares are collectively referred to herein as, the "Securities".
NOW THEREFORE, in consideration of the premises hereof and the mutual
covenants, representations and warranties contained herein, the Company and the
Subscriber hereby agree as follows:
1. PURCHASE AND SALE OF THE NOTE.
a. Purchase of the Note. On the Closing Date (as defined below), the
Company shall issue and sell to the Subscriber, and the Subscriber agrees to
purchase from the Company, the Note, in consideration for $500,000 cash
("Purchase Price").
b. Closing Date. Subject to the conditions to Closing (as defined below) as
set for this Agreement, the date and time of the sale of the Note pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon Eastern Standard Time on
April 12, 2001 or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall occur on the
Closing Date at the offices of Xxxxxxx & Prager, 00 Xxxxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx or at such other location as may be agreed to by the parties.
c. Form of Payment. On the Closing Date, (i) the Subscriber shall pay the
Purchase Price in United States dollars by wire transfer of immediately
available funds to an account designated in writing by the Company for such
purpose, against delivery of the Note, and (ii) the Company shall deliver to the
Subscriber the Note, which the Subscriber is then purchasing, duly executed on
behalf of the Company, against delivery of the Purchase Price.
2. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES. The Subscriber hereby
represents and warrants to and agrees with the Company that:
a. Investment Purpose. The Subscriber is acquiring the Note, and upon
conversion of the Note, will acquire the Company Shares then issuable, for its
own account for investment purposes only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, the Subscriber does not agree to hold
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to an
effective registration statement under the 1933 Act and in compliance with
applicable state securities laws or an exemption from such registration.
b. Information on the Company. The Subscriber, and its advisors, if any,
have been furnished with written information relating to the business of the
Company and such other information concerning its operations, financial
condition and other matters as the Subscriber has requested. The Subscriber and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by the Subscriber or its advisors, if any, or their representatives
shall modify, amend or affect the Subscriber's right to rely on the Company's
representations and warranties contained in Section 2 below, respectively. The
Subscriber understands that its investment in the Note and the Company Shares
involves a high degree of risk. The Subscriber has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Note and the Shares. The
Subscriber has considered all factors the Subscriber deems material in deciding
on the advisability of investing in the Securities (such information in writing
is collectively, the "Written Information").
c. Information on Subscriber; Accredited Investor Status. The Subscriber is
an "accredited investor", as such term is defined in Regulation D, is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States privately-held
and publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable the Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment. The Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to afford
a complete loss thereof.
d. Compliance with Securities Act. The Subscriber understands and agrees
that the Securities are being offered and sold to it in a private placement in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and the Subscriber's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Subscriber set forth herein in order to determine the availability of such
exemptions and the eligibility of such Subscriber to acquire such securities.
e. No Governmental Review. The Subscriber understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities, or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. No Broker Commissions or Finder Fees. To the best of its knowledge, the
Subscriber has taken no action which would give rise to any claim by any person
for brokerage commissions, finders' fees or the like relating to this Agreement
or the transactions contemplated hereby.
g. Buyer Liquidity. The Subscriber has adequate means of providing for its
current needs and foreseeable financial contingencies.
h. Transfer or Resale of Securities. The Subscriber understands that except
as provided herein (i) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned, transferred or otherwise disposed of by the Subscriber
unless (a) subsequently registered under the 1933 Act and state securities laws,
if applicable, (b) the Subscriber shall have delivered to the Company an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such securities to be sold, assigned, transferred or otherwise
disposed of may be sold, assigned, transferred or otherwise disposed of pursuant
to an exemption from such registration, or (c) the Subscriber provides the
Company with written customary assurance that such securities can be sold,
assigned, transferred or otherwise disposed of pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("Rule 144"); and (ii) any sale
of such securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder.
i. Company Shares Legend. The Company Shares shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO NCT
GROUP, INC., THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. "
j. Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO NCT GROUP, INC.,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
k. Communication of Offer. The offer to sell the Securities was directly
communicated to the Subscriber. At no time was the Subscriber presented with or
solicited by any leaflet, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or solicited or invited
to attend a promotional meeting otherwise than in connection and concurrently
with such communicated offer.
x. Xxxxxx; Authorization; Enforceability. The Subscriber has all corporate
or company power and authority to enter into and perform this Agreement. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Subscriber and is a valid and binding agreement of the Subscriber
enforceable in accordance with its terms, except as such enforceability may be
limited by general principles of equity and bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally the enforcement of, applicable creditors' rights and
remedies.
m. Conflicts. To the best knowledge of Subscriber, the execution, delivery
and performance of this Agreement by the Subscriber and the consummation by the
Subscriber of the transactions contemplated hereby will not (i) conflict with or
violate its certificate of formation, LLC operating agreement, by-laws or other
organizational documents, or (ii) conflict with or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Subscriber
is a party.
n. Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall be true and correct as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
3. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with the Subscriber that:
a. Due Incorporation. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdictions of
incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company. The Company
has no subsidiaries.
b. Outstanding Stock. All issued and outstanding shares of capital stock of
the Company has been duly authorized and validly issued and are fully paid and
non-assessable.
c. Authority; Enforceability. This Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
d. Additional Issuances. There are no outstanding agreements or preemptive
or similar rights affecting the Company's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of the Company.
e. Consents. Except as specifically contemplated by the Agreement and as
required under the 1933 Act, applicable state securities laws and applicable
laws of foreign jurisdictions, no consent, approval, authorization or order of
any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the NASD, NASDAQ or the Company's
shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
f. No Violation or Conflict. Assuming the representations and warranties of
the Subscriber in Section 2 are true and correct and the Subscriber complies
with its obligations under this Agreement, neither the issuance and sale of the
Securities nor the performance of its obligations under this Agreement and all
other agreements entered into by the Company relating thereto by the Company
will:
(i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) under (A) the certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or assets
of the Company, (C) the terms of any bond, debenture, note or any other evidence
of indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which the
Company is a party, by which the Company is bound, or to which any of the
properties of the Company is subject, or (D) the terms of any "lock-up" or
similar provision of any underwriting or similar agreement to which the Company
is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company.
g. The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under the
1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on the date of
issuance and on the Closing Date, as hereinafter defined, and the date the Note
is converted, the Shares will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold pursuant
to an effective registration statement, the Shares will be free trading and
unrestricted, provided that the Subscriber complies with the prospectus delivery
requirements under the 1933 Act);
(iii) will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company; and
(iv) will not subject the holders thereof to personal liability by reason
of being such holders.
h. Litigation. Except as disclosed on Schedule 3(h) attached hereto or in
the SEC Documents (as defined below) filed prior to the date of this Agreement,
there is no pending or, to the best knowledge of the Company, threatened action,
suit, proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over the Company, or any of its affiliates,
that would affect the execution by the Company or the performance by the Company
of its obligations under this Agreement, and all other agreements entered into
by the Company relating hereto. Except as disclosed in the SEC Documents or the
Written Information, there is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates, relating to the Company or any of its directors or
officers. "SEC Documents" shall mean all reports, schedules, forms, statements
and other documents required to be filed by NCT Group, as the Company's parent,
with the Securities and Exchange Commission (the "SEC") pursuant to the
reporting requirements of the 1934 Act (including all exhibits included therein
and financial statements, schedules and documents incorporated by reference
therein), and any registration statement filed by NCT Group with the SEC under
the 1933 Act (including all amendments thereto and exhibits, financial
statements and schedules therein) since the filing of NCT Group's last annual
report on Form 10-K.
i. Information Concerning Company. The Written Information (including the
SEC Documents of NCT Group) contain all material information relating to the
Company and its operations and financial condition as of their respective dates
which information is required to be disclosed therein. Since the date of the
Written Information, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the SEC Documents. The
Written Information does 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 not misleading.
j. Dilution. The number of Shares issuable upon conversion of the Note may
increase substantially in certain circumstances, including, but not necessarily
limited to, the circumstance wherein the Closing Bid Price (as defined in the
Note) of the Common Stock declines prior to conversion of the Note. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Note is binding upon the Company and
enforceable, except as otherwise described in this Subscription Agreement or the
Note, regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
k. Stop Transfer. The Securities are restricted securities as of the date
of this Agreement. The Company will not issue any stop transfer order or other
order impeding the sale and delivery of the Securities, except as may be
required by federal securities laws.
l. Defaults. Neither the Company nor any of its affiliates is in violation
of its Certificate of Incorporation or By-Laws. The Company is not (i) in
default under or in violation of any other material agreement or instrument to
which it is a party or by which it or any of its properties are bound or
affected, which default or violation would have a material adverse effect on the
Company, (ii) in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge in violation of any
statute, rule or regulation of any governmental authority which violation would
have a material adverse effect on the Company.
m. No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, as
applicable, nor will the Company or any of its affiliates take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.
n. No General Solicitation. Neither the Company, nor to its knowledge, any
person acting on its behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) in
connection with the offer or sale of the Securities.
o. No Undisclosed Liabilities. To the Company's knowledge, the Company has
no liabilities or obligations which are material, individually or in the
aggregate, which are not disclosed in the Written Information or the SEC
Documents, other than those incurred in the ordinary course of the Company's
businesses since the date of incorporation of the Company and which,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company's financial condition.
p. No Undisclosed Events or Circumstances. Since the date of incorporation
of the Company, no event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the Reports.
q. Reporting Company. NCT Group, the Company's parent, is a publicly-held
company subject to reporting obligations pursuant to Sections 15(d) or 13 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and has a class of
common shares registered pursuant to Section 12(g) of the 1934 Act. NCT Group's
common stock is trading on the NASD OTC Bulletin Board ("Bulletin Board"). To
the best of the Company's knowledge, pursuant to the provisions of the 1934 Act,
NCT Group has filed all reports and other materials required to be filed
thereunder with the SEC during the preceding twelve months.
r. Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 100,000 shares of Common Stock, (par value $0.01 per
share), of which 26,500 shares of Common Stock were issued and outstanding as of
March 26, 2001 and as of the Closing Date. The Company's Board of Directors is
currently authorized to issue 10,000 shares of preferred stock, par value $010
per share (the "Preferred Stock"), of which as of March 26, 2001 and as of the
Closing Date, there are no shares of Preferred Stock issued or outstanding.
Except as set forth in the Written Information or NCT Group's SEC Documents,
there are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable.
s. Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing
Date, and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct in all material respects as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
4. REISSUANCE OF SECURITIES. The Company agrees to cause its transfer
agent, if any, to reissue certificates representing the Securities without the
legends set forth in Sections 2(i) and 2(j) above (a) at such time as the holder
thereof is permitted to and disposes of such Securities pursuant to Rule 144(d)
and/or Rule 144(k) under the 1933 Act in the opinion of counsel reasonably
satisfactory to the Company, or (b) upon resale subject to an effective
registration statement after the Securities are registered under the 0000 Xxx.
The Company agrees to cooperate with the Subscriber in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive all
reasonably requested representations from the Subscriber and selling broker, if
any.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Subscriber as follows:
a. The Company shall use its reasonable commercial efforts to secure the
listing of the Company Shares upon a domestic or foreign securities exchange, or
quotation or listing system, and shall maintain such listing so long as any
other shares of Common Stock shall be so listed. After becoming listed for
quotation or trading, the Company will maintain the listing of its Common Stock
on the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market
System, American Stock Exchange, or New York Stock Exchange, whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock, or such other principal market or exchange where the Common Stock is
listed or traded (the "Principal Market"), and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market, as applicable. The Company will provide the Subscriber
copies of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market.
b. Once the Company Shares are listed on a Principal Market, the Company
will advise the Subscriber, promptly after it receives notice of issuance by the
Securities and Exchange Commission, any state securities commission or any other
domestic or foreign regulatory authority or Principal Market of any stop order
or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose
c. The Company shall notify the SEC, NASD and applicable state authorities,
in accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to the Subscriber and promptly provide copies
thereof to Subscriber.
d. Until at least two (2) years after the listing of the Common Stock on a
Principal Market, the Company will comply in all respects with its reporting and
filing obligations which are necessary to maintain such listing. The Company
will not take any action or file any document (whether or not permitted by the
1933 Act or the 1934 Act or the rules thereunder) or any other rule or law to
terminate or suspend its listing on a Principal Market or to terminate or
suspend its reporting and filing obligations under said Acts or rule or law
until two (2) years after the sale by the Subscriber of all the Company Shares
and Securities issuable by the Company pursuant to this Agreement.
e. The Company undertakes to reserve from its authorized but unissued
Common Stock, at all times that the Note remains outstanding, a number of Common
Shares equal to not less than 125% of the amount of Common Shares necessary to
allow the Subscriber to be able to convert the Note, at the then applicable
Conversion Price. The Company further agrees that Common Shares once reserved,
will continue to be reserved until the Note has been fully converted.
6. COVENANTS OF THE COMPANY AND SUBSCRIBER REGARDING INDEMNIFICATION.
a. The Company agrees to indemnify, hold harmless, reimburse and defend the
Subscriber, the Subscriber's officers, directors, agents, affiliates, control
persons, and members, against any claim, cost, expense, liability, obligation,
loss or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon Subscriber or any such person which results, arises out of or is
based upon (i) any misrepresentation by the Company or breach of any warranty by
the Company in this Agreement or in any Exhibits or Schedules attached hereto,
or other agreement delivered pursuant hereto; or (ii) after any applicable
notice and/or cure periods, any breach or default in performance by the Company
of any covenant or undertaking to be performed by the Company hereunder, or any
other agreement entered into by the Company and the Subscriber relating hereto.
b. The Subscriber agrees to indemnify, hold harmless, reimburse and defend
the Company and the Company's officers and directors against any claim, cost,
expense, liability, obligation, loss or damage (including reasonable legal fees)
of any nature, incurred by or imposed upon the Company or any such person which
results, arises out of or is based upon (i) any misrepresentation by the
Subscriber or breach by the Subscriber of any warranty in this Agreement or in
any Exhibits or Schedules attached hereto or other agreement delivered pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by the Subscriber of any covenant or undertaking to be
performed by Subscriber hereunder, or any other agreement entered into by the
Company and the Subscriber relating hereto.
7. CONVERSION; REDEMPTION.
a. Conversion of Note. (i) Upon the conversion of the Note or part thereof,
the Company shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that the Company, or
the Company's transfer agent, if any, shall issue stock certificates in the name
of Subscriber (or its nominee) or such other persons as designated by Subscriber
and in such denominations to be specified at conversion representing the number
of shares of common stock issuable upon such conversion. The Company warrants
that no instructions other than these instructions will be given to such
transfer agent, if any, of the Company's common stock and that the Shares will
be unlegended, free-trading, and freely transferable, and will not contain a
legend restricting the resale or transferability of the Company Shares provided
the Shares have been sold pursuant to an effective registration statement
covering the Shares to be sold.
(ii) Subscriber will give notice of its decision to exercise its right to
convert the Note or part thereof by telecopying an executed and completed Notice
of Conversion (as defined in the Note) to the Company. The Subscriber will not
be required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Company will or cause the transfer agent, if any, to transmit the
Company's Common Stock certificates representing the Shares issuable upon
conversion of the Note (and a Note representing the balance of the Note not so
converted, if requested by Subscriber) to the Subscriber via express courier for
receipt by such Subscriber within five (5) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion, the Subscriber hereby indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
(iii) The Company understands that a delay in the delivery of the Shares in
the form required pursuant to Section 7 hereof, or the Mandatory Redemption
Amount described in Section 7(b) hereof, beyond the Delivery Date or Mandatory
Redemption Payment Date (as hereinafter defined) could result in economic loss
to the Subscriber. As compensation to the Subscriber for such loss, the Company
agrees to pay late payments to the Subscriber for late issuance of Shares in the
form required pursuant to Section 8 hereof upon Conversion of the Note or late
payment of the Mandatory Redemption Amount, in the amount of $10 per business
day after the Delivery Date or Mandatory Redemption Payment Date, as the case
may be, for each $10,000 of Note principal amount being converted or redeemed.
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Subscriber, in the event that the Company fails
for any reason to effect delivery of the Shares by the Delivery Date or make
payment by the Mandatory Redemption Payment Date, the Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion or rescind
all or part of the notice of Mandatory Redemption by delivery of a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to the delivery of
such notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(iv) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscriber and thus refunded to the Company.
b. Mandatory Redemption. In the event the Company is prohibited from
issuing Shares or fails to timely deliver Shares on a Delivery Date; or upon the
occurrence of an Event of Default (as defined in the Note) after cure periods,
if any, or for any reason other than pursuant to the limitations set forth in
Section 7(c) hereof, then at the Subscriber's election, the Company must pay to
the Subscriber five (5) business days after request by the Subscriber or on the
Delivery Date (if requested by the Subscriber) the 110% of the principal amount
of the Note designated by the Subscriber, together with accrued but unpaid
interest thereon ("Mandatory Redemption Payment"). The Mandatory Redemption
Payment must be received by the Subscriber on the same date as the Company
Shares otherwise deliverable or within five (5) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the
Mandatory Redemption Payment, the corresponding Note principal and interest will
be deemed paid and no longer outstanding, and any obligation to deliver Shares
with respect to conversion of the redeemed portion of the Note shall be
extinguished.
c. Maximum Conversion. If the Company has registered with the Securities
and Exchange Commission as a reporting company under Section 12 of the
Securities Exchange Act of 1934, as amended, or is otherwise required to so
report, then the Subscriber shall not be entitled to convert on a Conversion
Date that amount of the Note in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Subscriber and its affiliates on a Conversion
Date (other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Note), and (ii) the
number of shares of Common Stock issuable upon the conversion of the Note with
respect to which the determination of this proviso is being made on a Conversion
Date, which would result in beneficial ownership by the Subscriber and its
affiliates of more than 9.99% of the outstanding shares of Common Stock of the
Company on such Conversion Date. For the purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99%. The Subscriber may void the conversion limitation
described in this Section 7(c) upon 75 days prior notice to the Company. The
Subscriber may allocate which of the equity of the Company deemed beneficially
owned by the Subscriber shall be included in the 9.99% amount described above
and which shall be allocated to the excess above 9.99%.
d. Optional Redemption. The Company will have the option of redeeming any
outstanding Note ("Optional Redemption") prior to the Maturity Date (as defined
in such Note) by paying to the Subscriber a sum of money equal to 110% of the
principal amount of the portion of the Note described below together with
accrued but unpaid interest thereon and any and all other sums due, accrued or
payable to the Subscriber arising under this Subscription Agreement, Note or any
other document delivered herewith ("Redemption Amount") outstanding on the day
notice of redemption ("Notice of Redemption) is given to the Subscriber ("Notice
of Redemption Date"). A Notice of Redemption may not be given in connection with
a portion of the Note for which notice of conversion has been given by the
Subscriber. A Notice of Redemption must be accompanied by a certificate signed
by the chief executive officer, chief financial officer, or treasurer of the
Company stating that the Company has on deposit and segregated ready funds equal
to the Redemption Amount. The Redemption Amount must be paid in good funds to
the Subscriber at least five (5) but no later than the tenth (10th) business day
after the Notice of Redemption Date ("Optional Redemption Payment Date"), except
that, with respect to any outstanding principal amount of this Note, for which a
Notice of Redemption is given, the Subscriber shall have the right, exercisable
by giving a Notice of Conversion submitted to the Company, as the case may be,
within five (5) business days of the Subscriber's receipt of the Company's
Notice of Redemption, to convert any or all of the outstanding principal amount
of the Note sought to be redeemed (a "Redemption Notice of Conversion") and the
Redemption Notice of Conversion shall take precedence over the redemption
contemplated by the Notice of Redemption. Such Note shall then be converted in
accordance with the terms hereof. In the event the Company fails to pay the
Redemption Amount by the Optional Redemption Payment Date, then the Redemption
Notice will be null and void and the Company will thereafter have no further
right to effect an Optional Redemption.
8. MISCELLANEOUS.
a. Notices. All notices or other communications given or made hereunder
shall be in writing and shall be personally delivered or deemed delivered the
first business day after being telecopied (provided that a copy is delivered by
first class mail) to the party to receive the same at its address set forth
below or to such other address as either party shall hereafter give to the other
by notice duly made under this Section: (i) if to the Company, to NCT Video
Displays, Inc., 00 Xxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, telecopier number: (203)
226-4338, with a copy by telecopier only to: Xxxxxx & Xxxxxxx, 000 Xxxxxxxx
Xxxxxx, X.X., Xxxxx 0000, Xxxxxxxxxx, X.X. 00000, Attn: Xxxxxxx X. X'Xxxxx,
Esq., telecopier number: 000-000-0000, and (ii) if to the Subscriber, to Xxxxxxx
Road LLC, Corporate Center, West Bay Road, Grand Cayman, telecopier number:
000-000-000-0000, with a copy by telecopier only to Xxxxxxx & Prager LLP, 00
Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, Attn.: Xxx Xxxxxxx, Esq., telecopier
number: (000) 000-0000.
b. Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by both parties. No right or
obligation of either party shall be assigned by that party without prior notice
to and the written consent of the other party.
c. Execution. This Agreement may be executed by facsimile transmission, and
in counterparts, each of which will be deemed an original.
d. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive a trial by jury in any action, proceeding
or counterclaim brought by either of the parties hereto against the other in
respect of any matter arising out of or in connection with this Agreement. In
the event that any provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.
e. Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 8(d) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
f. Confidentiality. The Company agrees that it will not disclose publicly
or privately the identity of the Subscriber unless expressly agreed to in
writing by the Subscriber or only to the extent required by law.
g. Automatic Termination. This Agreement shall automatically terminate
without any further action of either party hereto if the Closing shall not have
occurred by the tenth (10th) business day following the date this Agreement is
accepted by the Subscriber.
[Signature Page Follows]
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
XXXXXXX ROAD LLC -- Subscriber NCT VIDEO DISPLAYS, INC.
A Cayman Islands Company A Delaware Corporation
By:_________________________________ By:_________________________________
Name: Name:
Title: Title:
