SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Artera Group, Inc., a
Delaware corporation (the "Company") hereby agrees to issue and to sell to the
Subscriber, 6% Convertible Notes (the "Notes") convertible in accordance with
the terms thereof into shares of the Company's $0.001 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 principal amount of the Notes will be equal to
125% of the Purchase Price. 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. 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, the Company Shares and the
Exchange 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 ARTERA 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 ARTERA 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, the Alternative
Investment Market of the London Stock Exchange ("AIM") 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 articles 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 Securities 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 will be free trading and unrestricted,
provided that the Subscriber complies with the Prospectus delivery
requirements);
(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, including its corporate parent, NCT
Group, Inc., a Delaware corporation, 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, subsidiaries, or
NCTGroup, Inc., relating to the Company or any of its directors or officers.
"SEC Documents" shall mean all reports, schedules, forms, statements and other
documents required to be filed by NCT Group, Inc. 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).
(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 contains 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, affiliates
or NCT Group, Inc., is in violation of its Articles 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,
subsidiaries nor NCT Group, Inc., 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, subsidiaries or NCT Group, Inc. 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) Disability. The Company has no knowledge of any impediment which would
or could prevent the Common Stock from becoming publicly tradable on the AIM.
(s) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, will be true and correct as of the Closing
Date, and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct in all material respects as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
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 B. 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 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 120%
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
$7,500 for services rendered to Subscribers in connection with this Agreement
and the other Subscription Agreements for aggregate subscription amounts of up
to $1,000,000 of Purchase Price (the "Offering"). The legal fees for the
Offering must be paid on the Closing Date with respect to the Notes issued on
such date. The Company will pay the finders identified on Schedule C ("Finders")
a cash finder's fee in the amount of 7% of the Purchase Price ("Finder's Fee").
The Finder's Fee must be paid on the Closing Date. The Company's failure to
timely pay the Finder's Fee will be deemed an Event of Default under Article III
of the Note.
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, New York Stock Exchange or the AIM, 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
Act or the Exchange 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.
(e) The Company undertakes to use the cash proceeds of the Subscriber's
funds for general working capital. The Purchase Price may not and will not be
used to pay debt or non-trade obligations outstanding on or after the Closing
Date.
(f) Subject to there being sufficient authorized but unissued shares of
Common Stock, the Company undertakes to reserve 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
130% 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.
(g) The Company undertakes to use its best efforts to arrange for the
Common Stock to be tradable on the AIM no later than November 30, 2001.
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 are being 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 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 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 Securities
Exchange Act of 1934, as amended, 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.
10. 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 Artera 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, 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").
(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 10(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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $664,300.00
-----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
ALPHA CAPITAL AKTIENGESELLSCHAFT - Subscriber A Lichtenstein corporation
Xxxxxxxxx 0, 0000 Xxxxxxxxxxx Vaduz, Lichtenstein
Fax: 000-00-00000000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $135,302.00
-----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
AMRO INTERNATIONAL, S.A. - Subscriber
X/x Xxxxx Xxxxxx
Xxxxxxxxxxxxx Xxxxx 0
Xxxxxx, Xxxxxxxxxxx CH8022
Fax: 000-000-000-0000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $21,556.00
----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
THE GROSS FOUNDATION, INC. - Subscriber
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx
Fax: 000-000-0000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $103,561.00
-----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
LEVAL TRADING, INC. - Subscriber
X/x Xxxxxxx Xxxxxx
00 xxx xx Xxxxxxx-Xxxxxxx
XX-0000, Xxxxxx, Xxxxxxxxxxx
Fax: 000-0000-000-0000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $37,640.50
----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
NESHER LTD. - Subscriber
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0 0X0, Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
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.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Dated: June 29, 2001
Purchase Price: $37,640.50
----------
Note Principal: One Hundred and Twenty-Five Percent (125%) of Purchase Price
------------------------------------------------------------
ACCEPTED: Dated as of June 29, 2001
TALBIYA B. INVESTMENTS LTD. - Subscriber
Ragnall House
00 Xxxx Xxxx
Xxxxxxx, Xxxx xx Xxx
0X0 0X0, Xxxxxx Xxxxxxx
Fax: 000-00-0000-000000
By:______________________________
ACKNOWLEDGED:
By:____________________________________
NCT GROUP, INC.
SCHEDULE C
FINDER'S FEES
--------------------------------------------------------------------------------
FINDER 7% OF PURCHASE PRICE - CASH FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LIBRA FINANCE, S.A. Fee payable in connection with
X.X. Xxx 0000 investment by Alpha Capital
Zurich, Switzerland Aktiengesellschaft, The Gross
Fax: 000-000-000-0000 Foundation, Inc. and Leval Trading,
Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AMRO INTERNATIONAL, S.A. Fee payable in connection with
C/o Ultra Finanz investment by Amro International, S.A.
Grossmuenster Xxxxx 0
Xxxxxx, Xxxxxxxxxxx CH8022
Fax: 000-000-000-0000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ALON ENTERPRISES LTD. Fee payable in connection with
Xxxxxxx Xxxxx, 00 Xxxx Xxxx investment by Nesher Ltd. and Talbiya
Douglas, Isle of Man B. Investments Ltd.
1M1 4L2, United Kingdom
Fax: 000-00-0000-000000
--------------------------------------------------------------------------------
