Exhibit 10(bh)
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and NCT Group, Inc., a
Delaware corporation (the "Company") hereby agrees to issue and to sell to the
Subscriber, 8% Convertible Notes (the "Notes") convertible in accordance with
the terms thereof into shares of the Company's $.01 par value common stock (the
"Company Shares") for the aggregate consideration set forth on the signature
page hereof ("Purchase Price"). The form of Convertible Note is annexed hereto
as Exhibit A. The Company Shares included in the Securities (as hereinafter
defined) are sometimes referred to herein as the "Shares" or "Common Stock".
(The Notes and the Company Shares are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver to the Subscriber the Note against payment of the
Purchase Price.
The following terms and conditions shall apply to this subscription.
1. 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 Notes, and upon
conversion of the Notes, 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 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 and has had access to the SEC
Documents (as defined below). 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. The Subscriber understands that its investment in
the Notes, the Company Shares and the Exchange 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 Notes 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 promulgated
by the Commission under the Securities Act of 1933, as amended (the "1933 Act"),
is experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States 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 except as described in Section 6 hereof.
(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.
(l) Powers; 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 organizational charters or by-laws, 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.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictions of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries 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.
(b) Outstanding Stock. All issued and outstanding shares of capital stock
of the Company and each of its subsidiaries 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 or other
equity interest in any of the subsidiaries of the Company, except as described
in the Written Information.
(e) Consents. Except as specifically contemplated by the Agreement and as
required under the 1933 Act, applicable state securities laws and applicable
laws of foriegn 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 1 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 or any of its subsidiaries, (B)
to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company or any of its subsidiaries
of any court, governmental agency or body, or arbitrator having jurisdiction
over the Company or any of its subsidiaries or over the properties or assets of
the Company or any of its subsidiaries, (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 or any of its subsidiaries is a party, by which
the Company or any of its subsidiaries is bound, or to which any of the
properties of the Company or any of its subsidiaries is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its subsidiaries 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, or any of
its subsidiaries.
(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 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 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, or subsidiaries
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 the Company 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 the
Company with the SEC under the 1933 Act (including all amendments thereto and
exhibits, financial statements and schedules therein) since the filing of the
Company's last annual report on Form 10-K.
(i) No Market Manipulation. The Company has not taken, and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued.
(j) Information Concerning Company. The Written Information (including the
SEC Documents) 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 Reports. 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.
(k) 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 trading price 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.
(l) 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.
(m) Defaults. Neither the Company nor any of its subsidiaries or affiliates
is in violation of its Certificate of Incorporation or By-Laws. Neither the
Company nor any of its subsidiaries is (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.
(n) No Integrated Offering. Neither the Company, nor any of its affiliates,
and subsidiaries 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, including, without limitation, under the rules and regulations of
the Bulletin Board, as applicable, nor will the Company or any of its
affiliates, or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.
(o) No General Solicitation. Neither the Company, nor any of its
subsidiaries, nor to its knowledge, any person acting on its or their 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.
(p) 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, 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.
(q) 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.
(r) Reporting Company. The Company 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. The Company's
common stock is trading on the NASD OTC Bulletin Board ("Bulletin Board").
Pursuant to the provisions of the 1934 Act, the Company has filed all reports
and other materials required to be filed thereunder with the Securities and
Exchange Commission during the preceding twelve months.
(s) Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 450,000,000 shares of Common Stock ($.01 par value), of
which 333,902,980 shares of Common Stock were issued and outstanding as of March
15, 2001 and as of the Closing Date. The Company's Board of Directors is
currently authorized to issue 10,000,000 shares of Preferred Stock. The Board of
Directors has authorized the issuance of 38,608 shares of Preferred Stock. As of
March 15, 2001 and as of the Closing Date, there are 767 shares of Preferred
Stock issued and outstanding. Except as set forth in the 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.
(t) 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.
3. Regulation D Offering; Opinion. This Offering is being made pursuant to
the exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Section 4(2) thereof and/or Rule 506 of Regulation D
promulgated thereunder. On the Closing Date, the Company will provide an opinion
acceptable to Subscriber from the Company's legal counsel opining on the
availability of the Regulation D exemption as it relates to the offer and
issuance of the Securities. A form of the legal opinion is annexed hereto as
Exhibit C. The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the conversion of the
Note.
4. Reissuance of Securities. The Company agrees to cause its transfer agent
to reissue certificates representing the Securities without the legends set
forth in Sections 1(i) and 1(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. If the Company
fails to remove any legend as required by this Section 4 (a "Legend Removal
Failure"), then beginning on the tenth (10th) day following such failure, the
Company continues to fail to remove such legend, the Company shall pay to each
Subscriber or assignee holding shares subject to a Legend Removal Failure an
amount equal to one percent (1%) of the Purchase Price of the shares subject to
a Legend Removal Failure per day that such failure continues. If during any
twelve (12) month period, the Company fails to remove any legend as required by
this Section 4 for an aggregate of thirty (30) days, each Subscriber or assignee
holding Securities subject to a Legend Removal Failure may, at its option,
require the Company to purchase all or any portion of the Securities subject to
a Legend Removal Failure held by such Subscriber or assignee at a price per
share equal to 130% of the applicable Purchase Price.
5. Redemption. The Company may not redeem the Securities without the
consent of the holder of the Securities except as otherwise described herein.
6. Fees. The Company shall pay to counsel to the Subscriber its fees of
$10,000 for services rendered to Subscribers in connection with this Agreement
for the aggregate subscription amount of $250,000 of Purchase Price (the
"Offering"). The Company will pay to Libra Finance, S.A., a finder's fee of
$17,500 ("Finder's Fee"). The Finder's Fee will be paid in the form of a
promissory note identical to the Note. Libra Finance, S.A. will receive all the
benefits, rights and advantages granted by the Company to the Subscriber
relating to the Notes including registration rights and indemnification. The
Finder's Fee and legal fees for the Offering must be paid on the Closing Date
with respect to the Notes issued on such date.
7. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) 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
trading or listing 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.
(b) The Company shall promptly secure the listing of the Company Shares
upon each domestic and foreign securities exchange, or quotation or listing
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) 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.
(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 the later of (y) two (2) years after the sale by the Subscribers of all
the Company Shares and Securities issuable by the Company pursuant to this
Agreement, or (z) two (2) years after the effective date of the registration
statement described in Section 10.1(iv) hereof.
(e) The Company undertakes to use the cash proceeds of the Subscriber's
funds for general working capital purposes. The Purchase Price may not and will
not be used to pay indebtedness for borrowed money or non-trade obligations
outstanding on or after the Closing Date.
(f) The Company undertakes to reserve no later than July 15, 2001 pro rata
on behalf of each holder of a Note from its authorized but unissued Common
Stock, at all times that Notes remain outstanding, a number of Common Shares
equal to not less than 125% of the amount of Common Shares necessary to allow
each such holder to be able to convert all such outstanding Notes, at the then
applicable Conversion Price. The Company further agrees that Common Shares once
reserved, will continue to be reserved until the Notes have been fully
converted.
8. Covenants of the Company and Subscriber Regarding Indemnification.
(a) The Company agrees to indemnify, hold harmless, reimburse and defend
Subscriber, Subscriber's officers, directors, agents, affiliates, control
persons, and principal shareholders, 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 Company or breach of
any warranty by 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 Subscribers
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 Subscriber
or breach by 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 Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
9.1. Conversion of Note.
(a) 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's transfer agent 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 have been or will be given to the transfer agent 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
or are otherwise exempt from registration when sold.
(b) 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 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.
(c) The Company understands that a delay in the delivery of the Shares in
the form required pursuant to Section 9 hereof, or the Mandatory Redemption
Amount described in Section 9.2 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 9 hereof upon Conversion of the Note or late
payment of the Mandatory Redemption Amount, in the amount of $100 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.
(d) 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.
9.2. 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 9.3 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 120% 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.
9.3. Maximum Conversion. 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, 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 9.3 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%.
9.4. Injunction - Posting of Bond. The Company may not refuse conversion of
a Note based on any claim that such Subscriber or any one associated or
affiliated with such Subscriber has been engaged in any violation of law, or for
any other reason, unless, an injunction from a court, on notice, restraining and
or enjoining conversion of all or part of said Note shall have been sought and
obtained and the Company posts a surety bond for the benefit of such Subscriber
in the amount of 130% of the amount of the Note, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.
9.5. Buy-In. In addition to any other rights available to the Subscriber,
if the Company fails to deliver to the Subscriber such shares issuable upon
conversion of a Note by the Delivery Date and if after the Delivery Date the
Subscriber purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Subscriber of the
Common Stock which the Subscriber anticipated receiving upon such conversion (a
"Buy-In"), then the Company shall pay in cash to the Subscriber (in addition to
any remedies available to or elected by the Subscriber) the amount by which (A)
the Subscriber's total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
Note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In.
9.6. Optional Redemption. The Company will have the option of redeeming any
outstanding Notes ("Optional Redemption") 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
a Subscriber ("Redemption Date"). A Notice of Redemption may not be given in
connection with a portion of a 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 or chief financial officer 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 no later than the fifth (5th) business day after the
Redemption Date ("Optional Redemption Payment Date"). 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, and at the Subscription's
election, the Redemption Amount will be deemed a Mandatory Redemption Payment
and the Optional Redemption Payment Date will be deemed a Mandatory Redemption
Payment Date.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 121 days after the Closing
Date, but not later than four years after the Closing Date ("Request Date"), the
Company, upon a written request therefor from any record holder or holders of
more than 50% of the aggregate of the Company's Shares issued and issuable upon
Conversion of the Notes issued hereunder (the Common Stock issued or issuable
upon conversion of the Notes and securities issued or issuable by virtue of
ownership of the Notes issued to the Subscriber and pursuant to Section 6 of the
Agreement being, the "Registrable Securities"), shall prepare and file with the
SEC a registration statement under the Act covering the Registrable Securities
which are the subject of such request, unless such Registrable Securities are
the subject of an effective registration statement. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of the Registrable Securities that such registration
statement is to be filed and shall include in such registration statement
Registrable Securities for which it has received written requests within 10 days
after the Company gives such written notice. Such other requesting record
holders shall be deemed to have exercised their demand registration right under
this Section 10.1(i). As a condition precedent to the inclusion of Registrable
Securities, the holder thereof shall provide the Company with such information
as the Company reasonably requests. The obligation of the Company under this
Section 10.1(i) shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any of its securities
under the Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms X-0, X-0 or another form not available for registering the
Registrable Securities for sale to the public, provided the Registrable
Securities are not otherwise registered for resale by the Subscriber or Holder
pursuant to an effective registration statement, each such time it will give at
least 30 days' prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of the Registrable Securities, the Company will
cause such Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to
permit the sale or other disposition of the Registrable Securities so registered
by the holder of such Registrable Securities (the "Seller"). In the event that
any registration pursuant to this Section 10.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 10.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 10.1(ii) without thereby incurring any
liability to the Seller.
(iii) If, at the time any written request for registration is received by
the Company pursuant to Section 10.1(i), the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for cash of any of its
securities for the Company's own account, such written request shall be deemed
to have been given pursuant to Section 10.1(ii) rather than Section 10.1(i), and
the rights of the holders of Registrable Securities covered by such written
request shall be governed by Section 10.1(ii).
(iv) The Company shall file with the Commission on or before July 15, 2001
(the "Filing Date"), and use its reasonable commercial efforts to cause to be
declared effective a Form S-1 registration statement (or such other form that it
is eligible to use) in order to register the Registrable Securities for resale
and distribution under the Act. The Company undertakes to use its best efforts
to cause the registration statement described in this paragraph to be declared
effective by the Commission on or before September 15, 2001 ("Effective Date").
The Company will register not less than a number of shares of Common Stock in
the aforedescribed registration statement that is equal to 125% of the Company
Shares issuable at the Conversion Price that would be in effect on the Closing
Date or the date of filing of such registration statement (employing the
Conversion Price which would result in the greater number of Shares), assuming
the conversion of 100% of the Notes employing the Conversion Price that would
result in the greater number of Shares. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of the Subscriber, and not
issued, employed or reserved for anyone other than the Subscriber. Such
registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as necessary to register
additional Company Shares to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable Securities.
10.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), and promptly provide to
the holders of Registrable Securities ("Sellers") copies of all filings;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the later
of twelve months after the Maturity Date of the Note, or two years after the
Closing Date, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Seller's intended method of disposition set
forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or their disposition of the securities
covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Seller and in the case of an underwritten
public offering, the managing underwriter shall reasonably request, provided,
however, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) list the Registrable Securities covered by such registration statement
with any Principal Market on which the common stock of the Company is then
listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for registration has
been made pursuant to Section 10.1(i) or a request for registration has been
made pursuant to Section 10.1(ii), the Registrable Securities will be included
in a registration statement filed pursuant to this Section 10.
(b) In connection with each registration hereunder, the Seller will furnish
to the Company in writing such information and representation letters with
respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws. In connection with each registration pursuant to Section
10.1(i) or 10.1(ii) covering an underwritten public offering, the Company and
the Seller agree to enter into a written agreement with the managing underwriter
in such form and containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and companies of the
Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree that
the Seller will suffer damages if the registration statement described in
Section 10.1(iv) is not filed by the Filing Date. Accordingly, if (i) the
Registration Statement described in Section 10.1(iv) is not filed on or before
the Filing Date (a "Non-Registration Event"), then, for so long as such
Non-Registration Event shall continue, the Company shall pay in cash as
Liquidated Damages to each holder of any Registrable Securities an amount equal
to one (1%) percent per thirty days for the first thirty (30) days or part
thereof and two (2%) percent for each thirty days or part thereof, thereafter,
during the pendency of such Non-Registration Event, of the principal of the
Notes issued in connection with the Offering, whether or not converted, owned of
record by such holder or issuable as of or subsequent to the occurrence of such
Non-Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable immediately upon demand in immediately available funds. In
the event a Mandatory Redemption Payment is demanded from the Company by the
Holder pursuant to Section 9.2 of this Subscription Agreement, then the
Liquidated Damages described in this Section 10.4 shall no longer accrue on the
portion of the Purchase Price underlying the Mandatory Redemption Payment, from
and after the date the Holder receives the Mandatory Redemption Payment.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, and costs of insurance are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities, including any fees and
disbursements of any special counsel to the Seller, are called "Selling
Expenses". The Seller shall pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10. All Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under the
Act pursuant to Section 10, the Company will indemnify and hold harmless the
Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other person, if
any, who controls such Seller or underwriter within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Seller, or such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities was registered under the Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be liable to the Seller to
the extent that any such damages arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) the Seller
failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable Securities
under the Act pursuant to Section 10, the Seller will indemnify and hold
harmless the Company, and each person, if any, who controls the Company within
the meaning of the Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Securities were registered under the Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Seller, as such, furnished in
writing to the Company by such Seller specifically for use in such registration
statement or prospectus, and provided, further, however, that the liability of
the Seller hereunder shall be limited to the gross proceeds received by the
Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties shall have the right to select one separate
counsel and to assume such legal defenses and otherwise to participate in the
defense of such action, with the reasonable expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the event of
joint liability under the Act in any case in which either (i) the Seller, or any
controlling person of the Seller, makes a claim for indemnification pursuant to
this Section 10.6 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
10.7. Underwriter Liability. Nothing contained in this Agreement or any
document delivered herewith shall require or imply that the Subscriber is or be
an Underwriter as defined in the 1933 Act or 1934 Act, nor a "statutory
underwriter." The Subscriber shall not be required to take any action or assume
any liability or obligation which would or could impose Underwriter or
"statutory underwriter" status or liability on the Subscriber. Subscriber
acknowledges that the Company may be required by the 1933 Act and the rules
promulgated thereunder to identify Subscriber or any holder of the Shares as a
potential underwriter in any registration statement filed in respect of the
resale of the Shares with the SEC.
11. 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 Group,
Inc., 00 Xxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, telecopier number: (000) 000-0000,
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 the name, address and
telecopy number set forth on the signature page hereto, with a copy by
telecopier only to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000. Any notice that may be
given pursuant to this Agreement, or any document delivered in connection with
the foregoing may be given by the Subscriber on the first business day after the
observance dates in the United States of America by Orthodox Jewry of Rosh
Hashanah, Yom Kippur, the first two days of the Feast of Tabernacles, Shemini
Atzeret, Simchat Torah, the first two and final two days of Passover and
Pentecost, with such notice to be deemed given and effective, at the election of
the Subscriber on a holiday date that precedes such notice. Any notice received
by the Subscriber on any of the aforedescribed holidays may be deemed by the
Subscriber to be received and effective as if such notice had been received on
the first business day after the holiday.
(b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date shall be the date that
subscriber funds representing the net amount due the Company from the Purchase
Price are transmitted by wire transfer to the Company (the "Closing Date"). The
conversion or redemption of the Note shall be deemed to take place at the
principal offices of the Company.
(c) 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.
(d) Execution. This Agreement may be executed by facsimile transmission,
and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. 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 trial by jury. The prevailing party shall
be entitled to recover from the other party its reasonable attorney's fees and
costs. 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.
(f) 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 11(e) 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.
(g) 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.
(h) 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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.
NCT GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: March _____, 2001
Purchase Price and Note Principal: $250,000.00
-----------
ACCEPTED: Dated as of March ____, 2001
ALPHA CAPITAL AKTIENGESELLSCHAFT - Subscriber
A Lichtenstein corporation
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Vaduz, Lichtenstein
Fax: 000-000-000-0000
By:______________________________________
