Exhibit 10(aw)
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (the "Agreement") is dated as of April 12,
2001 by and between NCT Group, Inc., a Delaware corporation (the "Company"), and
Xxxxxxx Road LLC, a company organized and existing under the laws of the Cayman
Islands (the "Subscriber").
WHEREAS, NCT Video Displays, Inc., a Delaware corporation, is a wholly
owned subsidiary of the Company (the "Subsidiary");
WHEREAS, the Subscriber is purchasing pursuant to that certain Subscription
Agreement dated as of April 12, 2001, between the Subscriber and the Subsidiary
(the "Subscription Agreement"), a convertible note of the Subsidiary (the
"Note"), the terms of which are set forth in the Subscription Agreement and the
Note;
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, as promulgated by the U.S. Securities and Exchange
Commission (the "SEC") under the 1933 Act; and
WHEREAS, it is in the best interests of the Company for the Subscriber to
purchase the Note, and as an inducement therefore, and for other good and
valuable consideration, the receipt of which is hereby acknowledged by the
Company, the Company hereby grants the exchange rights described herein to the
Subscriber.
NOW THEREFORE, the parties agree as follows:
1. EXCHANGE INTO THE COMPANY'S COMMON STOCK.
(a) Right of Exchange. The Subscriber shall have the right (such a right an
"Exchange Right") from and after September 15, 2001, and at any time thereafter
as the Note is outstanding, to exchange any outstanding Note principal and
interest for fully paid and nonassessable shares of the Company's common stock,
par value $0.01 per share, as such stock exists on the date of issuance of the
Note, or any shares of capital stock of Company into which such stock shall
hereafter be changed or reclassified (the "Common Stock") at the exchange rate
as defined in Section 1(b) hereof (the "Exchange Rate"), determined as provided
herein.
(b) Exchange Rate. The number of shares of Common Stock to be issued upon
each exchange of the Note shall be determined by dividing that portion of the
outstanding principal and interest of the Note to be exchanged, by the Exchange
Price (as defined herein). Subject to adjustment as provided in Section 2
hereof, the exchange price per share (the "Exchange Price") shall be
ninety-three and seventy-five hundreths percent (93.75%) of the average of the
lowest Closing Bid Price (as defined below) for the Common Stock for each of the
five (5) trading days immediately prior to but not including the Exchange Date
(as defined in Section 1(c) below).
"Closing Bid Price" means, for any security as of any date, the last
closing bid price on the OTC Pink Sheets, NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New
York Stock Exchange, as applicable, or if not then trading on any of the
foregoing, such other principal market or exchange where the Common Stock is
listed or traded (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock, the "Principal Market") For
purposes of the NASD OTC Bulletin Board, closing bid price shall mean the last
closing bid price on the NASDAQ National Market System as reported by Bloomberg
Financial. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Bid Price of such security
on such date shall be the fair market value as reasonably determined in good
faith by the Board of Directors of the issuer of the security (all as
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period).
(c) Method of Exchange. In order for the Subscriber to exchange any
principal or interest portion of the Note, the Subscriber shall give written
notice of its decision to exchange the Note for Common Stock by delivering or
telecopying an executed and completed notice of exchange in the form annexed
hereto as Exhibit A (such notice a "Notice of Exchange") to the Company (the
date of giving such a Notice of Exchange, an "Exchange Date") and delivering
within three business days thereafter, the original Note to the Company. The
Company will transmit the certificates representing the shares of Common Stock
issuable upon exchange of Note (together with a Note representing the Note
principal and interest not exchanged) to the Subscriber via express courier, by
electronic transfer or otherwise for receipt by the Subscriber, within five (5)
business days after receipt by the Company of both the original or telecopied
Notice of Exchange and the Note to be exchanged (the "Delivery Date"). The
Subscriber of the Note so surrendered for exchange shall be entitled to receive
on or before the Delivery Date a certificate or certificates which shall be
fully paid and non-assessable for the number of shares of Common Stock to which
the Subscriber shall be entitled upon such exchange, registered in the name of
the Subscriber. In the case of any Note which is exchanged only in part, the
Subscriber shall, upon delivery by the Company of the certificate or
certificates representing Common Stock, also receive a new Note representing the
unexchanged portion of the Note.
(d) No Fractional Shares. The Company shall not be required, in connection
with any exchange of a Note, to issue a fraction of a share of its Common Stock
and shall instead deliver a stock certificate representing the next whole
number.
(e) Exchange Limitations.
A. The Subscriber may not exchange that amount of the Note on an Exchange
Date into amounts 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 such Exchange Date (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted and
unexchanged portion of the Note), and (ii) the number of shares of Common Stock
issuable upon the exchange of the Note with respect to which the determination
of this proviso is being made on such Exchange Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 4.99% of
the outstanding shares of Common Stock of the Company. For the purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Rule 13d-3 promulgated thereunder.
The Subscriber may revoke the exchange limitation described in this Paragraph
3(a) 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 4.99% amount described above and which shall be allocated to
the excess above 4.99%.
B. The Subscriber may not exchange the Note into amounts of Common Stock
would exceed the aggregate of the Purchase Price (as defined in the Subscription
Agreement) paid by such Subscriber for the Note and all accrued interest on the
Note as of such date.
(f) Reservation. So long as the Note shall remain outstanding and the
Subscriber thereof shall have the right to exchange same, the Company shall at
all times reserve from the authorized and unissued shares of its Common Stock a
sufficient number of shares to provide for such exchanges. To the extent that
the Company does not have sufficient authorized and unissued shares of Common
Stock available for such exchanges, the Company shall use its best efforts to
seek shareholder approval to increase the number of authorized shares of Common
Stock to provide for such exchanges.
(g) Taxes. The Company shall pay the amount of any and all issue taxes (but
not income taxes) which may be imposed in respect of any issue or delivery of
stock upon the exchange of the Note, but all transfer taxes and income taxes
that may be payable in respect of any change of ownership of the Note or any
rights represented thereby or of stock receivable upon exchange thereof shall be
paid by the person or persons surrendering such stock for exchange.
2. ADJUSTMENTS TO EXCHANGE PRICE.
(a) Merger. In case of any merger of the Company with or into any other
Company (other than a merger in which the Company is the surviving or continuing
Company and which does not result in any reclassification, exchange, or change
of the outstanding shares of Common Stock), then unless the right to exchange
the Note shall have terminated, as part of such merger provision shall be made
so that the Subscriber shall thereafter have the right to exchange the Note into
the kind and amount of shares of stock and/or other securities or property
receivable upon such merger by the Subscriber of the number of shares of Common
Stock into which such Note might have been exchanged immediately prior to such
consolidation or merger. The foregoing provisions of this Paragraph 2(a) shall
similarly apply to successive mergers.
(b) Sale of Assets. In case of any sale or conveyance to another person or
entity of the property of the Company as an entirety, or substantially as an
entirety, in connection with which shares or other securities or cash or other
property shall be issuable, distributable, payable, or deliverable for
outstanding shares of Common Stock, then, unless the right to exchange the Note
shall have terminated, lawful provision shall be made so that the Subscriber of
the Note shall thereafter have the right to exchange the Note into the kind and
amount of shares of stock or other securities or property that shall be
issuable, distributable, payable, or deliverable upon such sale or conveyance
with respect to each share of Common Stock immediately prior to such conveyance.
(c) Certificate of Adjustment. Whenever the number of shares to be issued
upon exchange of the Note is required to be adjusted as provided in this
Paragraph 2, the Company shall forthwith compute the adjusted number of shares
to be so issued and the adjusted Exchange Price and prepare a certificate (a
"Certificate of Adjustment") setting forth such adjusted exchange amount and the
facts upon which such adjustment is based, and such certificate shall forthwith
be delivered to the Subscriber.
(d) Dividends, Reclassification, Stock Splits, etc. In case at any time the
Company shall propose:
(i) to pay any dividend or distribution payable in shares upon its Common
Stock or make any distribution (other than cash dividends) to the holders of its
Common Stock; or
(ii) to offer for subscription to the holders of its Common Stock any
additional shares of any class or any other rights; or
(iii) any capital reorganization or reclassification of its shares or the
merger of the Company with another Company (other than a merger in which the
Company is the surviving or continuing Company and which does not result in any
reclassification, exchange, or change of the outstanding shares of Common
Stock);
(iv) the voluntary dissolution, liquidation or winding-up of the Company;
or
(v) the spin-off or divestiture of itself or a part of its business or
operations, or disposes all or substantially all or a part of its assets (a
"Spin Off") in a transaction in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
to be issued to security holders of the Company;
then, and in any one or more of said cases, the Company shall cause at least
fifteen (15) days prior notice of the date on which (A) the books of the Company
shall close or a record be taken for such stock dividend, distribution, or
subscription rights, or (B) such capital reorganization, reclassification,
merger, dissolution, liquidation, winding-up, or Spin-Off shall take place, as
the case may be, to be mailed to the Subscriber.
3. LIQUIDATED DAMAGES.
(a) Refusal to Exchange, Surety Bond. In the event the Subscriber shall
elect to exchange the Note as provided herein, the Company may not refuse
exchange based on any claim that the Subscriber or any one associated or
affiliated with the 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 exchange of all or part of said Note shall have been issued.
(b) Buy-In. In addition to any other rights available to the Subscriber, if
the Company fails to deliver to the Subscriber such certificate or certificates
pursuant to Section 1(c) 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 the Subscriber of the
Common Stock which the Subscriber anticipated receiving upon such exchange (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 principal and
accrued interest for which such exchange was not timely honored, together with
interest thereon at a rate of 8% 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 exchange of $9,500 of Note principal
and $500 of 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.
(c) Usury. 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.
4. REGISTRATION RIGHTS. The Subscriber has been granted certain
registration rights by the Company in connection with the Common Stock. These
registration rights are set forth in a Registration Rights Agreement entered
into by the Company and Subscriber at or about the date of this Agreement.
5. INDEMNIFICATION.
(a) Indemnification by the Company. The Company agrees to indemnify, hold
harmless, reimburse and defend the Subscriber, the Subscriber's officers,
directors, agents, affiliates, control persons, principal shareholders, and
members, against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
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) Indemnification by the Subscriber. 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 the Subscriber
hereunder, or any other agreement entered into by the Company and the Subscriber
relating hereto.
6. MISCELLANEOUS.
(a) Notices. All notices or other communications required or permitted to
be given shall be in writing and may be personally served or sent by fax
transmission (with a copy sent by regular, certified or registered mail or by
overnight courier). For purposes hereof, the address and fax number of the
Subscriber shall be Xxxxxxx Road LLC, Corporate Center, West Bay Road, Grand
Cayman, telecopier number: 000-000-000-0000, with a copy by telecopier only to
Xxxxxxx & Xxxxxx LLP, 00 Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attn.:
Xxx Xxxxxxx, Esq., telecopier number: (000) 000-0000. The address and fax number
of the Company shall be 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., Xxxxxxxxxx, X.X. 00000, Attn: Xxxxxxx X.
X'Xxxxx, 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 reasonable consent of the other party.
(c) Execution, Counterparts. 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 located in the city of New York, New York or in
the federal courts located in the city of New York, New York. The 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 the
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 6(d) hereof, each of the Company and the 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Exchange Rights
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
XXXXXXX ROAD LLC NCT GROUP, INC.
By: _______________________________ By: _______________________________
Name: Name:
Its: Its:
NCT Video Displays, Inc. acknowledges the foregoing Exchange Rights
Agreement and agrees to cooperate with all parties thereto to effectuate the
timely compliance with the terms thereof by NCT Group, Inc. and the Subscriber.
NCT VIDEO DISPLAYS, INC.
By:___________________________________
NOTICE OF EXCHANGE
(To be executed by the Registered Subscriber in order to exchange the Note)
The undersigned hereby elects to exchange $_________ of the principal and
$_________ of the interest due on the Note issued by NCT Video Displays. on
April 12, 2001 into Shares of Common Stock of NCT Group, Inc. (the "Company")
according to the conditions set forth in the Exchange Rights Agreement, dated as
of April 12, 2001, by and between the Company and the Subscriber.
Date of Exchange:__________________________________________
Exchange Price:____________________________________________
Shares To Be Delivered:_____________________________________
Signature:_________________________________________________
Print Name:_______________________________________________
Address:__________________________________________________
