Exhibit 4(eg)
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED
FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
WARRANT UNDER SAID ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO NCT GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.
-----------------
NCT GROUP, INC.
(Incorporated under the laws of the State of Delaware)
Void after 5:00 p.m., New York City time, on July ___, 2009
Warrant to Purchase
6,944,445 Shares of
Common Stock
Warrant for the Purchase of Shares of Common Stock
No. LFL-1
---------
FOR VALUE RECEIVED, NCT GROUP, INC. (the "Company"), a Delaware
corporation, on this 23rd day of July, 2004 (the "Grant Date") hereby issues
this warrant (the "Warrant") and certifies that Longview Fund LP (the "Holder")
is granted the right, subject to the provisions of the Warrant, to purchase from
the Company, at any time, or from time to time during the period commencing at
9:00 a.m. New York City local time on the Grant Date and expiring, unless
earlier terminated as hereinafter provided, at 5:00 p.m. New York City local
time on July 23, 2009 (the "Expiration Date") up to Six Million Nine Hundred
Forty-Four Thousand Four Hundred Forty-Five (6,944,445) fully paid and
nonassessable shares of Common Stock, $.01 par value, of the Company at a per
share price equal to the lesser of (i) $0.0232 or (ii) 80% of the average of the
closing bid prices of the Common Stock as reported by Bloomberg Financial
Markets ("Bloomberg") for the OTC Bulletin Board for the five trading days
preceding the date of exercise hereof (such lesser amount, the "Exercise
Price"), and subject to further adjustment as set forth herein.
The term "Common Stock" means the shares of Common Stock, $.01 par value,
of the Company as constituted on the Grant Date of this Warrant, together with
any other equity securities that may be issued by the Company in addition
thereto or in substitution therefor. The number of shares of Common Stock to be
received upon the exercise of this Warrant may be
1
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Stock".
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all the
rights hereunder shall be held, subject to all of the conditions, limitations
and provisions set forth herein.
1. Exercise of Warrant.
1.1. Period of Exercise. Subject to Section 3 hereof, this Warrant may
be exercised in whole or in part at any time, or from time to time, during
the period commencing at 9:00 a.m., New York City local time, on the Grant
Date, and expiring at 5:00 p.m., New York City local time, on the
Expiration Date, or, if such day is a day on which banking institutions in
the City of New York are authorized by law to close, then on the next
succeeding day that shall not be such a day.
1.2 Exercise For Payment. Subject to the restrictions and limitations
set forth above, this Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office with the Warrant
Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check, payable to the
order of the Company) of the Exercise Price for the number of shares
specified in such Form and instruments of transfer, if appropriate, duly
executed by the Holder.
1.3 Cashless Exercise. This Section 1.3 shall apply only if both (a)
there is no registration statement then in effect covering the Warrant
Stock as to which an exercise under this Section 1.3 is being effected and
(b) the method of exercise described in this Section 1.3 would be necessary
for the Holder lawfully to sell the Warrant Stock acquired pursuant to this
Section 1.3 immediately after such acquisition in accordance with Rule 144
under the Securities Act of 1933, as amended (the "1933 Act"). As the
alternative to the payment method of exercise described in Section 1.2
above, the Holder may exercise this Warrant by surrendering this Warrant in
exchange for the number of shares of Warrant Stock equal to the product of
(x) the number of shares of Warrant Stock as to which the Warrant is being
exercised, multiplied by (y) a fraction, the numerator of which is the
Market Price (as defined below) of the Common Stock less the Exercise Price
of the Warrant Stock and the denominator of which is the Market Price of
Common Stock. Solely for the purposes of the foregoing calculation, the
"Market Price" of the Common Stock shall be based on the date on which the
Warrant Exercise Form attached hereto is deemed to have been sent to the
Company pursuant to Section 12 hereof, and shall be equal to
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the last sale price of the Common Stock on the Nasdaq National Market
System (the "Nasdaq-NM") as reported by Bloomberg , or, if the Nasdaq-NM is
not the principal trading market for such security, then on the principal
securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, then in
the over-the-counter market on the pink sheets or bulletin board for such
security as reported by Bloomberg (as applicable, the "Principal Market").
For purposes of this Warrant, the method of exercise described in this
Section 1.3 shall be known as "Cashless Exercise."
1.4 Partial Exercise. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
1.5 Transfer Books and Certificates. Upon receipt by the Company of
this Warrant, together with the Warrant Exercise Form and the Exercise
Price, at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder.
1.6 Certain Taxes. The Company shall pay any and all documentary stamp
or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on exercise of this Warrant.
1.7 Failure to Deliver Shares. In addition to any other remedies which
may be available to the Holder, in the event that the Company fails for any
reason to effect timely delivery of shares of Common Stock upon exercise of
this Warrant, the Holder will be entitled to revoke all or part of the
relevant exercise by delivery of a notice to such effect to the Company.
1.8 Certain Beneficial Ownership. The Holder shall not be entitled to
exercise this Warrant to the extent that (a) the number of shares of Common
Stock issuable upon such exercise and (b) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on the date of
such exercise would result in beneficial ownership by the Holder and its
affiliates of more than 9.99% of the outstanding shares of Common Stock on
the date of such exercise. For the purposes of 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 Rule
13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited
to aggregate exercises of only 9.99%. The Holder may void the exercise
limitation described in this paragraph upon 61 days' prior written notice
to the Company. The Holder may allocate which of the equity of the Company
deemed beneficially owned by the Holder shall be included in the 9.99%
amount described above and which shall be allocated to the excess above
9.99%.
2. Share Issuance. Until one year after the Company's current S-1
registration statement under review by the Securities and Exchange Commission
(the "SEC") with file number 333-60574 (the "Current Registration Statement")
becomes effective (the "Price Protection Date"), if the Company shall issue any
Common Stock prior to the complete exercise
3
of this Warrant for a consideration less than the Exercise Price that would be
in effect at the time of such issue, then, and thereafter successively upon each
such issue prior to the Price Protection Date, the Purchase Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Company carrying the right to
convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Exercise Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option. The reduction of the Exercise Price as
described in this Section 2 is in addition to the other rights of the Holder
described in the Subscription Agreement, dated as of the date hereof, between
the Company and the Holder (the "Subscription Agreement").
3. Reservation of Shares. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
of the Company from time to time receivable upon exercise of this Warrant. All
such shares shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and nonassessable and free of all preemptive
rights. Notwithstanding the foregoing, a default shall not exist and penalties
shall not accrue for a failure by the Company either to have a sufficient number
of shares of Common Stock reserved for issuance and delivery of this Warrant or
to issue shares of Common Stock upon proffer of exercise demand by the holder of
this Warrant if, at the time, the Company does not have a sufficient number of
authorized but unissued shares of Common Stock to perform the applicable act;
provided, however, that this sentence shall apply only until the earlier of (a)
three months after the Current Registration Statement becomes effective or is
abandoned or (b) August 30, 2004.
4. Warrant Stock Registration and Transfer.
4.1 Registration. The shares of Common Stock issuable upon exercise of
this Warrant shall be registered for sale to the public under the 1933 Act
as described in Section 11 of the Subscription Agreement.
4.2 Transfer. The Warrant Stock may not be sold or otherwise disposed
of unless registered pursuant to the provisions of the 1933 Act, or an
opinion of counsel in form and content satisfactory to the Company is
obtained stating that such sale or other disposition is made in compliance
with an available exemption from such registration. Any sale or other
disposition of the Warrant Stock must also comply with all applicable state
securities laws and regulations.
5. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but
the Company shall issue one additional share of its Common Stock in lieu of
each fraction of a share otherwise called for upon any exercise of this
Warrant.
6. Exchange, Transfer, Assignment of Loss of Warrant. This Warrant is
not registered under the 1933 Act nor under any applicable state securities
law or regulation. This Warrant cannot be sold, exchanged, transferred,
assigned or otherwise disposed of unless registered pursuant to the
provisions of the 1933 Act or an opinion of counsel in form and content
satisfactory to the Company is obtained stating that such disposition is in
compliance
4
with an available exemption from registration. Any such disposition must
also comply with applicable state securities laws and regulations.
7. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
8. Redemption. This Warrant is not redeemable by the Company.
9. Anti-Dilution Provisions.
9.1 Adjustment for Dividends in Other Securities, Property, Etc.:
Reclassification, Etc. In case at any time or from time to time after the Grant
Date the holders of Common Stock (or any other securities at the time receivable
upon the exercise of this Warrant) shall have received, or on or after the
record date fixed for the determination of eligible stockholders, shall have
become entitled to receive without payment therefor: (a) other or additional
securities or property (other than cash) by way of dividend, (b) any cash paid
or payable except out of earned surplus of the Company at the Grant Date as
increased (decreased) by subsequent credits (charges) thereto (other than
credits in respect of any capital or paid-in surplus or surplus created as a
result of a revaluation of property) or (c) other or additional (or less)
securities or property (including cash) by way of stock-split, spin-off,
split-up, reclassification, combination of shares or similar corporate
rearrangement, then, and in each such case, the Holder of this Warrant, upon the
exercise thereof as provided in Section 1, shall be entitled to receive, subject
to the limitations and restrictions set forth above, the amount of securities
and property (including cash in the cases referred to in clauses (b) and (c)
above) which such Holder would hold on the date of such exercise if on the Grant
Date it had been the holder of record of the number of shares of Common Stock
(as constituted on the Grant Date) subscribed for upon such exercise as provided
in Section 1 and had thereafter, during the period from the Grant Date to and
including the date of such exercise, retained such shares and/or all other
additional (or less) securities and property (including cash in the cases
referred to in clauses (b) and (c) above) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period by
Section 9.2.
9.2 Adjustment for Reorganization, Consolidation, Merger, Etc. In case of
any reorganization of the Company (or any other corporation, the securities of
which are at the time receivable on the exercise of this Warrant) after the
Grant Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in
Section 9.1; in each such case, the terms of this Warrant shall be applicable to
the securities or property receivable upon the exercise of this Warrant after
such consummation.
5
9.3 Certificate as to Adjustments. In each case of an adjustment in the
number of shares of Common Stock (or other securities or property) receivable on
the exercise of the Warrant, the Company at its expense will promptly compute
such adjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of (a) the consideration
received or to be received by the Company for any additional shares of Common
Stock issued or sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock outstanding or deemed to be outstanding, and (c) the pro
forma adjusted Exercise Price. The Company will forthwith mail a copy of each
such certificate to the holder of this Warrant.
9.4 Notices of Record Date, Etc.
In case:
(a) the Company shall take a record of the holders of its Common Stock (or
other securities at the time receivable upon the exercise of the Warrant) for
the purpose of entitling them to receive any dividend (other than a cash
dividend) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities, or
to receive any other right; or
(b) of any capital reorganization of the Company (other than a stock split
or reverse stock split), any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation (other than a merger for purposes of change of domicile) or any
conveyance of all or substantially all of the assets of the Company to another
corporation; or
(c) of any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
then, and in each such case, the Company shall mail or cause to be mailed to
each holder of the Warrant at the time outstanding a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any,
is to be fixed, as to which the holders of record of Common Stock (or such other
securities at the time receivable upon the exercise of the Warrant) shall be
entitled to exchange their shares of Common Stock (or such other securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
date therein specified and the Warrant may be exercised prior to said date
during the term of the Warrant no later than five (5) days prior to said date.
10. Legend. In the event of the exercise of this Warrant and the issuance
of any of the Warrant Stock hereunder, all certificates representing Warrant
Stock not then registered for
6
sale to the public under the 1933 Act shall bear on the face thereof
substantially the following legend, insofar as is consistent with Delaware law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY
AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO NCT GROUP, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
11. Applicable Law. This Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the State of
Delaware and of the United States of America.
12. Notice. Notices and other communications to be given to the Holder of
the Warrant evidenced by this certificate shall be deemed to have been
sufficiently given, if delivered or mailed, addressed in the name and at the
address of such owner appearing on the records of the Company, and if mailed,
sent registered or certified mail, postage prepaid. Notices or other
communications to the Company shall be deemed to have been sufficiently given if
delivered by hand or mailed, by registered or certified mail, postage prepaid,
to the Company at 00 Xxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, Attn: Chief Financial
Officer, or at such other address as the Company shall have designated by
written notice to such registered owner as herein provided, Notice by mail shall
be deemed given when deposited in the United States mail as herein provided.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, all as of the day
and year set forth below.
Dated: July 23, 2004
NCT GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman & Chief Executive Officer
7
WARRANT EXERCISE FORM
(to be executed by the Holder in order to exercise the Warrant)
TO: NCT Group, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xx X. Xxxxxxx
Senior Vice President, Chief Financial Officer
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing ______________ shares of Common Stock of NCT Group,
Inc.
The undersigned hereby makes payment for the foregoing shares of Common Stock at
the rate of $.___ per share, or an aggregate of $___________. In the
alternative, if "Cashless Exercise" as described in Section 1.3 of the within
Warrant is available and is desired, then check the following: __________ (If
checked, the number of shares of Common Stock will be calculated per Section 1.3
of the within Warrant.)
The undersigned represents, warrants and certifies that all offers and sales of
the Warrant Stock shall be made: (i) pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"), or
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the 1993 Act; and (ii) in compliance with
applicable state securities laws and those of any other applicable jurisdiction.
Dated:
------------------------
--------------------------------
Name of Warrant Holder
--------------------------------
Signature
8
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered Holder of the within Warrant)
Name: ________________________________________________________
(Please type or print in block letters)
Address: ________________________________________________________
Social Security or Taxpayer Identification Number: ______________________
9
