Exhibit 10(az)
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
NCT GROUP, INC.
AND
XXXXXXX ROAD LLC
Dated as of April 12, 2001
THIS PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 12th day of
April, 2001 (this "AGREEMENT"), by and between XXXXXXX ROAD LLC, an entity
organized and existing under the laws of The Cayman Islands ("INVESTOR"), and
NCT GROUP, INC., a corporation organized and existing under the laws of the
State of Delaware (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, up to Fifty
Million Dollars ($50,000,000) of the Common Stock (as defined below)of the
Company; and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933 and the rules and
regulations promulgated thereunder (the "SECURITIES ACT"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings specified or indicated (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
"ADJUSTMENT PERIOD" shall have the meaning specified in Section 2.4(b).
"ADJUSTMENT PERIOD NOTICE" shall have the meaning specified in Section
2.4(a).
"AGREEMENT" shall have the meaning specified in the preamble hereof.
"BID PRICE" shall mean the closing bid price of the Common Stock on the
Principal Market.
"BLACKOUT NOTICE" shall have the meaning specified in the Registration
Rights Agreement.
"BLACKOUT SHARES" shall have the meaning specified in Section 2.6
"BY-LAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section4.8.
"CLAIM NOTICE" shall have the meaning specified in Section9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of shares
of Common Stock pursuant to Section 2.1.
"CLOSING DATE" shall mean, with respect to a Closing, the eleventh (11th)
Day following the Put Date related to such Closing, or such earlier date as the
Company and Investor shall agree, provided all conditions to such Closing have
been satisfied on or before such Closing.
"COMMITMENT PERIOD" shall mean the period commencing on the earlier to
occur of (a) the Effective Date or (b) such earlier date as the Company and
Investor shall agree, and expiring on the earlier to occur of (i)the date on
which Investor shall have purchased Put Shares pursuant to this Agreement for an
aggregate Purchase Price of the Maximum Commitment Amount, (ii)the date this
Agreement is terminated pursuant to Section 2.5, or (iii) the date occurring
eighteen (18) months from the date of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, par value $.01 per
share, and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are convertible
into or exchangeable for Common Stock or any warrants, options or other rights
to subscribe for or purchase Common Stock or any such convertible or
exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified in Section
7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements and
costs and expenses of expert witnesses and investigation) but excluding lost
profits, opportunity costs, punitive damages, penalties or fines.
"DRAW DOWN PRICING PERIOD" shall mean the ten (10) trading day period
immediately following the Put Date.
"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).
"DTC" shall the meaning specified in Section 2.3. "DWAC" shall the meaning
specified in Section 2.3. "EFFECTIVE DATE" shall mean the date on which the SEC
first declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
"ESCROW AGENT" shall mean Xxxxxxx & Xxxxxx, LLP.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder.
"FAST" shall the meaning specified in Section 2.3.
"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).
"INITIAL DISCOUNT" shall mean twelve and one-half percent (12 1/2%)until
May 27, 2001, increasing by two percent (2%) on May 27, 2001 and an additional
two percent (2%) on the 27th day of each month thereafter.
"INITIAL PURCHASE PRICE" shall mean, the product of [1 minus the Initial
Discount] and the Market Price with respect to a Put, which when, aggregated
with all other Puts, relating to the acquisition by Investor of Common Stock
having an aggregate Investment Amount equal to Twelve Million (12,000,000)
Dollars.
"INITIAL REGISTRABLE SECURITIES" shall have the meaning specified in the
Registration Rights Agreement.
"INITIAL REGISTRATION STATEMENT" shall have the meaning specified in the
Registration Rights Agreement.
"INVESTMENT AMOUNT" shall mean the dollar amount (within the range
specified in Section 2.2) to be invested by Investor to purchase Put Shares with
respect to any Put Date as notified by the Company to Investor in accordance
with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this
Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MANDATORY PUT AMOUNT" shall mean the lesser of (a)$2,500,000 or (b) one
hundred fifty (150%) percent of the Weighted Average Volume for the twenty (20)
trading days immediately preceding the Put Date and the Closing Date.
"MANDATORY PUT NOTICE" shall mean a Put Notice for a Mandatory Put Amount,
which shall be deemed given on the first trading day of each month after the
Registration Statement has been declared effective until Put Notices equal to
the Minimum Commitment Amount shall have been given.
"MARKET PRICE" on any given date shall mean the average of the lowest Bid
Prices (not necessarily consecutive) for any three (3) Trading Days during the
ten (10) trading days period immediately following the Put Date.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement and (b) the Registration Rights
Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean Fifty Million Dollars ($50,000,000),
subject to increase as agreed to by the Company and Investor.
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the lesser of (a)
Two Million Dollars ($2,000,000), or (b) one hundred fifty (150%) percent of the
Weighted Average Volume for the twenty (20) trading days immediately preceding
the Put Date and the Closing Date.
"MINIMUM COMMITMENT AMOUNT" shall mean Seventeen Million ($17,000,000)
Dollars.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc
"NEW BID PRICE" shall have the meaning specified in Section 2.6.
"OLD BID PRICE" shall have the meaning specified in Section2.6.
"OTHER CONSIDERATION" shall mean 12,000 shares of the Common Stock of DMC
New York, Inc., having an aggregate valuation of $12,000,000.
"OUTSTANDING" shall mean, with respect to the Common Stock, at any date as
of which the number of shares of Common Stock is to be determined, all issued
and outstanding shares of Common Stock, including all shares of Common Stock
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock; provided, however, that
Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the market or exchange whichever is at the
time the principal trading exchange or market for the Common Stock.
"PUT" shall mean each Mandatory Put Notice and/or each occasion that the
Company issues a Put Notice to Investor requiring Investor to buy Common Stock
subject to the terms and conditions of this Agreement. "PUT DATE" shall mean,
with respect to the Minimum Commitment Amount, the first Trading Day of each
month, and thereafter the Trading Day during the Commitment Period that a Put
Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form of
Exhibit B hereto, to the Investor, as may be applicable, setting forth the
Investment Amount pursuant to the terms of this Agreement, and specifying the
consideration to be delivered in connection therewith. "PUT SHARES" shall mean
all shares of Common Stock issued or issuable pursuant to a Put that has been
exercised or may be exercised in accordance with the terms and conditions of
this Agreement.
"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b)the Blackout
Shares and (c) any securities issued or issuable with respect to any of the
foregoing by way of exchange, stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to Investor, such
Registrable Securities may be sold without registration under the Securities
Actor the need for an exemption from any such registration requirements and
without any time, volume or manner limitations pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act. "REGISTRATION RIGHTS
AGREEMENT" shall mean the registration rights agreement in the form of Exhibit A
hereto.
"REGISTRATION STATEMENT" shall mean a registration statement on Form S-1
(if use of such form is then available to the Company pursuant to the rules of
the SEC and, if not, on such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement
and the Registration Rights Agreement and in accordance with the intended method
of distribution of such securities), for the registration of the resale by
Investor of the Registrable Securities under the Securities Act.
"REMAINING PUT SHARES" shall have the meaning specified in Section 2.6.
"RULE 144" shall mean Rule 144 under the Securities Act or any similar
provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the recitals of this
Agreement.
"SECURITIES ACT" shall have the meaning specified in the recitals of this
Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and other
documents file by the Company pursuant to Section 13(a) or 15(d) of the Exchange
Act since the beginning of the Company's then most recently completed fiscal
year as of the time in question (provided that if the date in question is within
ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed
and delivered by the Company and Investor.
"SUBSEQUENT DISCOUNT" shall mean ten percent (10%).
"SUBSEQUENT PURCHASE PRICE" shall mean, the product of[1 minus the
Subsequent Discount] and the Market Price. with respect to a Put, when,
aggregated with all other Puts, concern the acquisition by Investor of Common
Stock at any time after Investor shall have previously acquired Common Stock
having an aggregate Investment Amountexceeding Twelve Million ($12,000,000)
Dollars.
"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
"TRADING CUSHION" shall mean a minimum of ten (10)Trading Days between Put
Dates, unless a shorter period is agreed to by the Company and Investor.
"TRADING DAY" shall mean any day during which the Principal Market shall be
open for business.
"TRANSACTION DOCUMENTS" means this Private Equity Credit Agreement, the
Registration Rights Agreement, the Warrant, Closing Certificate, and the
Transfer Agent Instructions.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to
any substitute or replacement transfer agent for the Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER" shall mean any underwriter participating in any disposition
of the Registrable Securities on behalf of Investor pursuant to a Registration
Statement.
"VALUATION EVENT" shall mean an event in which the Company at any time
during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or makes any other
distribution of shares of Common Stock, except for dividends paid
with respect to the Preferred Stock;
(c) issues any warrants, options or other rights to subscribe for or
purchase shares of Common Stock and the price per share for which
shares of Common Stock may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less
than the Bid Price in effect immediately prior to such issuance
(d) issues any securities convertible into or exchangeable for shares
of Common Stock and the consideration per share for which shares
of Common Stock may at any time thereafter be issuable pursuant
to the terms of such convertible or exchangeable securities shall
be less than the Bid Price in effect immediately prior to such
issuance;
(e) issue shares of Common Stock otherwise than as provided in the
foregoing subsections (a) through (d), at a price per share less,
or for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of Common Stock as a dividend in liquidation or by
way of return of capital or other than as a dividend payable out
of earnings or surplus legally available for dividends under
applicable law or any distribution to such holders made in
respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances provided for in the
foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Common
Stock, other than an action described in any of the foregoing
subsections (a) through (f) hereof, inclusive, which in the
opinion of the Company's Board of Directors, determined in good
faith, would have a materially adverse effect upon the rights of
Investor at the time of a Put.
"VALUATION PERIOD" shall mean the period of ten (10) Trading Days
immediately following the date on which the applicable Put Notice is deemed to
be delivered and during which the Purchase Price of the Common Stock is valued;
provided, however, that if a Valuation Event occurs during any Valuation Period,
a new Valuation Period shall begin on the Trading Day immediately after the
occurrence of such Valuation Event and end on the ten (10th) Trading Day
thereafter.
"WEIGHTED AVERAGE VOLUME" shall mean the average of the product of (a) the
Bid Price times (b) the volume on the Principal Market for the relevant days.
"WEIGHTED VOLUME" shall mean the product of (a) the Bid Price times (b) the
volume on the Principal Market.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII), on any Put Date during the
Commitment Period the Company may call a Put by the delivery of a Put Notice.
The number of Put Shares that Investor shall receive pursuant to such Put shall
be determined by dividing the Investment Amount specified in the Put Notice by
the Initial Purchase Price or Subsequent Purchase Price, as applicable with
respect to such Put Date.
(b) MINIMUM AMOUNT OF PUTS. The Company shall, in accordance with Section
2.2(a), deliver to Investor during the Commitment Period, Put Notices for the
Mandatory Put Amount with an aggregate Investment Amount at least equal to the
Minimum Commitment Amount. If the Company for any reason, notwithstanding
Section 6.2 hereof, fails to have sufficient authorized shares of Common Stock
which are neither outstanding nor reserved for issuance upon the exercise of
outstanding options and warrants, or fails to issue and deliver such Put Shares
for the Minimum Commitment Amount during the Commitment Period, on the first
Trading Day after the expiration of the Commitment Period, the Company shall
wire to Investor a sum in immediately available funds equal to the product of
(i) the Minimum Commitment Amount minus the aggregate Investment Amounts of the
Put Notices delivered to Investor hereunder and (ii) the then applicable
Discount.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period, the Company may
deliver a Put Notice to the Investor, subject to the conditions set forth in
Section 7.2; provided, however, the Investment Amount for each Put in the
applicable Put Notice shall be stated in increments of no less than $100,000,
nor more than the Maximum Put Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered
on (i) the Trading Day it is received by facsimile or otherwise by Investor if
such notice is received on or prior to 12:00 noon New York time, or (ii) the
immediately succeeding Trading Day if it is received by facsimile or otherwise
after 12:00 noon New York time on a Trading Day or at anytime on a day which is
not a Trading Day. A Put Notice for the Mandatory Put Amount shall be deemed to
have been delivered on the first Trading Day of each month.
Section 2.3 CLOSINGS. On or prior to each Closing Date for a Put, (a) the
Company shall deliver to Escrow Agent one or more certificates, at Investor's
option, representing the Put Shares to be purchased by Investor pursuant to
Section 2.1 herein, registered in the name of Investor and (b) Investor shall
deliver to the Escrow Agent (i) with respect to the first Fifteen Million
Dollars in Investment Amount under the Minimum Commitment Amount, eighty (80%)
percent of the Investment Amount in Other Consideration and twenty (20%) percent
in cash,(ii) with respect the balance of the Minimum Commitment Amount by the
payment of an aggregate of $ 100(One Hundred Dollars) in cash and (iii) with
respect to other Put Notices by wire transfer of immediately available funds to
an account designated by the Escrow Agent on or before the Closing Date. In lieu
of delivering physical certificates representing the Common Stock issuable in
accordance with clause (a) of this Section 2.3, and provided that the Transfer
Agent then is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST")program, upon request of Investor, the
Company shall use its commercially reasonable efforts to cause the Transfer
Agent to electronically transmit, prior to the Closing Date, the Put Shares by
crediting the account of the Investor's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system, and provide proof
satisfactory to the Escrow Agent of such delivery. In addition, on or prior to
such Closing Date, each of the Company and Investor shall deliver to the Escrow
Agent all documents, instruments and writings required to be delivered or
reasonably requested by either of them pursuant to this Agreement in order to
implement and effect the transactions contemplated herein. On the Closing Date
and provided all conditions to Closing have been satisfied by the Company, the
Escrow agent shall wire transfer to the Company, the Investment Amount, less any
applicable fees and expenses.
Section 2.4 WARRANTS. The Company agrees to issue to Investor transferable
divisible warrants (the "Warrants"), (i)upon execution hereof, to purchase
250,000 shares of Common Stock at an exercise price per share of the average Bid
Price for the five Trading Days immediately prior to the date of this Agreement,
and, (ii) to purchase 1,000 shares of Common Stock for each $100,000 in Put
Notices submitted at an exercise price per share of the average Bid Price for
the Five Trading Days immediately prior to the Closing Date for the relevant Put
Notice. Such Warrants (substantially in the form of Exhibit F), shall be
exercisable immediately upon issuance, and for a period of five (5) years
thereafter, together with cashless exercise and registration rights under the
Registration Rights Agreement.
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor to purchase shares of Common Stock other than as to the Mandatory Put
Amount shall terminate permanently (including with respect to a Closing Date
that has not yet occurred)in the event that (a) there shall occur any stop order
or suspension of the effectiveness of any Registration Statement for an
aggregate of thirty (30)Trading Days during the Commitment Period, for any
reason other than deferrals or suspension during a Blackout Period in accordance
with the Registration Rights Agreement, as a result of corporate developments
subsequent to the Subscription Date that would require such Registration
Statement to be amended to reflect such event in order to maintain its
compliance with the disclosure requirements of the Securities Act or (b) the
Company shall at any time fail to comply with the requirements of Section 6.3,
6.4, or 6.6 and such failure shall continue for more than thirty (30) days.
Section 2.6 BLACKOUT SHARES. Subject to Section 6.2 herein, in the event
that, (a) within fifteen (15) Trading Days following any Closing Date, the
Company gives a Blackout Notice to Investor of a Blackout Period in accordance
with the Registration Rights Agreement, and (b) the Bid Price on the Trading Day
immediately preceding such Blackout Period ("OLD BID PRICE") is greater than the
Bid Price on the first Trading Day following such Blackout Period that Investor
may sell its Registrable Securities pursuant to an effective Registration
Statement ("NEW BID PRICE"), then the Company shall issue to Investor the number
of additional shares of Registrable Securities (the "BLACKOUT SHARES") equal to
the difference between (i) the product of the number of Put Shares held by
Investor immediately prior to the Blackout Period that were issued on the most
recent Closing Date(the "REMAINING PUT SHARES") multiplied by the Old Bid Price,
divided by the New Bid Price, and (ii) the Remaining Put Shares.
Section 2.7 MINIMUM COMMITMENT. Subject to Section 6.2 herein, if the
Company for any reason fails to issue and deliver such Put Shares equal to or
exceeding the Minimum Commitment Amount during the Commitment Period, then on
the first business day after the expiration of the Commitment Period, the
Company shall issue to the investor warrants to purchase a number of shares
equal to the minimum commitment amount divided by the bid price. Such warrants
shall be for the period of four (4) four years, shall have cashless exercise
provisions, and shall be deemed shares under the Registration Rights Agreement
annexed hereto, and shall be exercisable at a price equal to sixty (60%) percent
of the Bid Price.
Section 2.8 LIQUIDATED DAMAGES. Subject to Section 6.2 herein, each of the
Company and Investor acknowledge and agree that the sum payable under Section
2.7 and the requirement to issue Blackout Shares under Section 2.6 shall give
rise to liquidated damages and not penalties. Each of the Company and Investor
further acknowledge that (a) the amount of loss or damages likely to be incurred
is incapable or is difficult to precisely estimate, (b) the amounts specified in
such Sections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred by Investor in
connection with the failure by the Company to make Puts with aggregate Purchase
Prices totaling at least the Minimum Commitment Amount or in connection with a
Blackout Period under the Registration Rights Agreement, and (c) each of the
Company and Investor are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its own
account and Investor has no present arrangement (whether or not legally binding)
at any time to sell the Common Stock to or through any person or entity;
provided, however, that by making the representations herein, Investor does not
agree to hold the Common Stock for any minimum or other specific term and
reserves the right to dispose of the Common Stock at any time in accordance with
federal and state securities laws applicable to such disposition.
Section 3.2 SOPHISTICATED INVESTOR. Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in Common Stock. Investor acknowledges that an investment
in the Common Stock is speculative and involves a high degree of risk.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and authority
to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby in accordance with its terms; (b) the execution
and delivery of this Agreement and the Registration Rights Agreement, and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action and no further consent or authorization
of Investor or its partners is required; and (c) this Agreement has been duly
authorized and validly executed and delivered by Investor and is a valid and
binding agreement of Investor enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 ORGANIZATION AND STANDING. Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the Cayman Islands, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Investor is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a material adverse
effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not (a) violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Investor, (b) violate any provision of Investor's Memorandum of Association or
Articles of Association or other applicable charter document, any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound, or conflict with or constitute a
material default thereunder, (c) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Investor to any third party,
or (d) require the approval of any third-party (that has not been obtained)
pursuant to any material contract, instrument, agreement, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial
capacity and the necessary capital to perform its obligations hereunder and
shall and has provided to the Company such financial and other information that
the Company has requested to demonstrate such capacity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Put Shares and the Blackout
Shares, if any; (b) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (c) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 4.3 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of the Company consisted of 450,000,000 shares of
Common Stock, par value $.01 of which as of March 26, 2001 340,588,078 shares
were issued and outstanding, and 10,000,000shares of Preferred stock, par value
$.10 of which shares designated as Series _ Preferred Stock were issued and
outstanding. Except for (a) options to purchase 47,320,695 shares of Common
Stock; (b) warrants and exchange rights to purchase 77,763,900 shares of Common
Stock; (c) 583 shares of Series G Convertible Preferred Stock, there were no
options, warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for any
shares of capital stock of the Company. All of the outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued and are
fully paid and non assessable.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of the Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date of this Agreement, the Principal Market is the NASD OTC
Bulletin Board.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available to
Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to Investor any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. The sale and
issuance of the Put Shares and the Blackout Shares, if any, in accordance with
the terms and on the bases of the representations and warranties set forth in
this Agreement, may and shall be properly issued by the Company to Investor
pursuant to Section 4(2), Regulation D and/or any applicable state law. When
issued and paid for as herein provided, the Put Shares, and the Blackout Shares,
if any, shall be duly and validly issued, fully paid, and non-assessable.
Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to,
nor the Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement shall (a) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Put Shares or the
Blackout Shares, if any, or any of the assets of the Company, or (b) entitle the
holders of Outstanding Common Stock to preemptive or other rights to subscribe
to or acquire the Common Stock or other securities of the Company. The Put
Shares and the Blackout Shares, if any, shall not subject Investor to personal
liability by reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Put Shares or the Blackout Shares, if
any, or (b) made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the"CERTIFICATE"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"BY-LAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put Shares
and the Blackout Shares, if any, do not and will not(a) result in a violation of
the Certificate or By-Laws or (b) conflict with, or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up" or similar provision of any underwriting or similar agreement
to which the Company is a party, or (c) result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)applicable to the
Company or by which any property or asset of the Company is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect) nor is the Company otherwise in violation of,
conflict with or in default under any of the foregoing; provided, however, that
for purposes of the Company's representations and warranties as to violations of
foreign law, rule or regulation referenced in clause (c), such representations
and warranties are made only to the best of the Company's knowledge insofar as
the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby are or may
be affected by the status of Investor under or pursuant to any such foreign law,
rule or regulation. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock in accordance with the
terms hereof(other than any SEC, NASD or state securities filings that may be
required to be made by the Company subsequent to any Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Nasdaq National Market); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Since July 1, 1999, no event has
occurred that would have a Material Adverse Effect on the Company, except as
disclosed in the SEC Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses since July 1,
1999 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since July 1, 1999, no
event or circumstance has occurred or exists with respect to the 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 SEC Documents. Section 4.13 NO INTEGRATED
OFFERING. Neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, other than pursuant to
this Agreement, under circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may be set forth
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company, threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would have a Material Adverse Effect. Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which would have a Material Adverse
Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any Person
representing the Company in connection with the transactions contemplated by
this Agreement, have not made, at any time, any oral communication in connection
with the offer or sale of the same which contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
Section 4.16 MATERIAL NON-PUBLIC INFORMATION. The Company is not in
possession of, nor has the Company or its agents disclosed to Investor, any
material non-public information that (a) if disclosed, would reasonably be
expected to have a materially adverse effect on the price of the Common Stock
or(b) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with respect
to shares of the Common Stock will be in compliance with all applicable state
and federal securities laws, rules and regulations and the rules and regulations
of the NASD and the Principal Market on which the Common stock is listed.
Section 5.2 LIMITATIONS ON SHORT SALES. The Investor has the right to sell
shares of the Company's Common Stock during the Draw Down Pricing Period equal
in number to the number of Shares reasonably expected to be purchased pursuant
to a Put Notice. The Investor covenants, however, that except during a Draw Down
Pricing Period, neither the Investor nor any of its affiliates nor any entity
managed by the Investor will ever be in a net short position solely with respect
to shares of the Common Stock of the Company issuable under this Agreement in
any account directly or indirectly managed by the Investor or any affiliate of
the Investor or any entity managed by the Investor.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date of the
effectiveness of the Registration Statement, the Company shall reserve and keep
available at all times, free of preemptive rights, 125% of the number of shares
of Common Stock necessary to enable the Company to satisfy any obligation to
issue the Put Shares and the Blackout Shares, if any, and to issue shares of
Common Stock in connection with the exercise of the Warrants. If at any time the
Company is obligated to deliver Blackout Shares to Investor under Section 2.6
and the Company does not have a sufficient number of authorized but unissued and
unreserved shares to deliver the requisite number of Blackout Shares, the
Company shall deliver to Investor such number of Blackout Shares that the
Company has authorized but unissued and unreserved. In either case, the Company
shall, at its expense, promptly seek and use its best efforts to obtain
shareholder approval as required under the Delaware General Corporation Law to
increase the number of shares of Common Stock it is authorized to issue, in
order to meet all of its obligations to issue Put Shares and Blackout Shares (if
any) under this Agreement, such that the Company shall have reserved for
issuance under this Agreement at least 125% of the shares required for issuance
under the Minimum Commitment Amount, based upon the then applicable Market Price
as if a Put Date occurred within five days prior to the date of the proxy
statement prepared by the Company in connection with such authorization, less
twice the number of Put Shares that may have been issued under this Agreement.
In no circumstances shall the Company issue a Put Notice requiring Investor to
purchase more shares of Common Stock than the Company has authority to issue
based upon the then number of shares of Common Stock outstanding or reserved for
issuance. So long as the Company promptly and in good faith uses its best
efforts to obtain shareholder approval for an increase in the authorized number
of shares of Common Stock as required hereby, and if the Company either (a)
obtains such authority and issues to Investor such number of Put Shares and
Blackout Shares to Investor as required by this Agreement, or (b) fails, after
good faith attempt, to obtain such authority from its shareholders, the Company
shall not owe any payments or other obligations to Investor in respect of
Sections 2.1(b), 2.6, 2.7 or 2.8 hereof. The number of shares so reserved from
time to time, as theretofore increased or reduced as hereinafter provided, may
be reduced by the number of shares actually delivered hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the listing
of the Common Stock on a Principal Market, and will cause the Put Shares and the
Blackout Shares, if any, to be listed on the Principal Market. The Company
further shall, if the Company applies to have the Common Stock traded on any
other Principal Market, include in such application the Put Shares and the
Blackout Shares, if any, and shall take such other action as is necessary or
desirable in the reasonable opinion of Investor to cause the Common Stock to be
listed on such other Principal Market as promptly as possible. The Company shall
use its commercially reasonable efforts to continue the listing and trading of
the Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action or
file any document (whether or not permitted by said Act or the rules
thereunder)to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Put Shares and the
Blackout Shares, if any, shall be free of legends, except as provided for in
Article VIII.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all commercially
reasonable steps necessary to preserve and continue the corporate existence of
the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver or make
available to Investor, promptly after the originals thereof are submitted to the
SEC for filing, copies of all SEC Documents so furnished or submitted to the
SEC.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A PUT. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (a)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the registration statement for amendments or supplements to the registration
statement or related prospectus; (b) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (c) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (e) the Company's reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events.
Section 6.9 CONSOLIDATION; MERGER. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.
Section 6.10 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of the
Put Shares, the issuance of the Blackout Shares, if any, shall be made in
accordance with the provisions and requirements of Regulation D and any
applicable state law.
Section 6.11 REIMBURSEMENT. If (i) Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, or (ii) Investor, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse Investor for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this section shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such affiliate and
any such person.
Section 6.12 DILUTION. The number of shares of Common Stock issuable as Put
Shares may increase substantially in certain circumstances, including, but not
necessarily limited to, the circumstance wherein the trading price of the Common
Stock declines during the period between the Effective Date and the end of the
Commitment Period. The Company's executive officers and directors have studied
and fully understand the nature of the transactions contemplated by this
Agreement 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 Put Shares is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
Section 6.13 USE OF PROCEEDS. Except for Mandatory Put Amounts, the Company
will use the proceeds received hereunder (excluding amounts paid by the Company
for legal fees, and escrow fees in connection with the sale of the Common Stock)
for the purposes and the amounts specified in Schedule 6.13 hereto, and the
Company shall not vary such purpose or amount without the prior written consent
of the Investor in each instance. [Unless specifically consented to in advance
in each instance by the Investor, the Company shall not, directly or indirectly,
use such proceeds for the repayment of any outstanding loan by the Company to
any affiliate or control person.
Section 6.14 CERTAIN AGREEMENTS. (i) The Company covenants and agrees that
it will not, without the prior written consent of the Investor, enter into any
subsequent or further offer or sale of Common Stock or Common Stock Equivalents
(collectively, "New Common Stock") with any third party pursuant to a
transaction which in any manner permits the sale of the New Common Stock on any
date which is prior or subsequent to thirty (30) days prior to or following each
Closing Date.
(ii) In the event the Company breaches the provisions of this Section , the
Discount (as defined herein) shall be amended to be equal to (x)110% of the
Discount set forth herein for all shares held of record and (y) the Investor may
terminate his obligations under this Agreement and demand such amounts as may be
owing under Section 2.1.
(iii) The provisions of this subparagraph shall not apply with respect to
Put Notices delivered subsequent to the tender under prior Put Notices of at
least 9,000 shares of DMC New York Inc. but less than the Minimum Commitment
Amount.
Section 6.15 RIGHT OF FIRST REFUSAL, SPECIAL DILUTION PROTECTION.
(i) The Company covenants and agrees that if during the period from the
date hereof through and including the date which is thirty (30) days after the
Effective Date, the Company offers to enter into any transaction (a _New
Transaction_) for the sale of Common Stock (other than in connection with an
acquisition, merger or other business combination), the Company shall notify the
Investor in writing of all of the terms of such offer (a _New Transaction
Offer_). The Investor shall have the right (the _Right of First Refusal_),
exercisable by written notice given to the Company by the close of business on
the fifth business day after the Investor_s receipt of the New Transaction Offer
(the _Right of First Refusal Expiration Date_), to participate in all or any
part of the New Transaction Offer on the terms so specified.
(ii) If, and only if, the Investor does not exercise the Right of First
Refusal in full, the Company may consummate the remaining portion of the New
Transaction with any New Investor on the terms specified in the New Transaction
Offer within ninety (90) days of the Right of First Refusal Expiration Date.
(iii) If the terms of the New Transaction to be consummated with such other
party differ from the terms specified in the New Transaction Offer so that the
terms are more beneficial in any respect to the New Investor, the Company shall
give the Investor a New Transaction Offer relating to the terms of the New
Transaction, as so changed, and the Investor_s Right of First Refusal and the
preceding terms of this paragraph shall apply with respect to such changed
terms.
(iv) In the event the New Transaction is consummated with such other third
party on terms providing for (x) either a sale price equal to or computed based
on, or a determination of a conversion price based on, a lower percentage of the
then current market price (howsoever defined or computed) or a lower market
price (howsoever defined or computed) and/or (y) the issuance of warrants at an
exercise price lower than that provided in the Warrants, or any unissued or
unexercised Warrants shall be modified to reduce the relevant Conversion Rate,
Base Price or Warrant exercise price to be equal to that provided in the New
Transaction as so consummated.
Section 6.16 CHANGE OF CONTROL. The Company shall not enter into any
agreement or understanding which may, directly or indirectly, cause or effect a
change in "control" as defined in Rule 405 under the Securities Act of 1933,
without the prior written consent of the Investor.
Section 6.17 RELEASE. Effective upon the mutual execution hereof, the
Company, for itself and on behalf of all affiliated persons and entities,
representatives, and all predecessors in interest, successors and assigns
(collectively, the "Releasing Parties"), hereby releases and forever discharges
each of Investor, and Investor's direct and indirect partners, officers,
directors, employees, affiliates, representatives, agents, trustees,
beneficiaries, predecessors in interest, successors in interest and nominees of
and from any and all claims, demands, actions and causes of action, whether
known or unknown, fixed or contingent, arising prior to the date of execution of
this Agreement, that the Company may have had, may now have or may hereafter
acquire with respect to any matters whatsoever under, relating to or arising
from any prior Purchase Agreement, Registration Statement, and the agreements
entered into in connection therewith (sometimes collectively referred to as the
"Prior Agreements"). The Company also fully waives any offsets it may have with
respect to the amounts owed under the Prior Agreements. Additionally, the
Company represents, warrants and covenants that it has not, and at the time this
release becomes effective will not have, sold, assigned, transferred, or
otherwise conveyed to any other person or entity all or any portion of its
rights, claims, demands, actions, or causes of action herein released.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell
the Put Shares to Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATION AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time, except for changes which have not
had a Material Adverse Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by Investor at or
prior to such Closing.
(c) AUTHORIZED SHARES. A proposal to increase the number of authorized
shares of Common Stock from 450,000,000 to _645,000,000_____________ shall have
been approved and adopted at the Company annual shareholder meeting in 2001.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A
PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of
the Company to deliver a Put Notice and the obligation of Investor hereunder to
acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the
following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As set forth in
the Registration Rights Agreement, the Company shall have filed with the SEC the
Initial Registration Statement with respect to the resale of the Initial
Registrable Securities by Investor, and the Company shall use its best efforts
to cause such Registration Statement to be declared effective by the SEC prior
to the first Put Date, (and in any event no later than ninety (90) days after
filing of the Initial Registration Statement). For the purposes of any Put
Notice with respect to the Registrable Securities other than the Initial
Registrable Securities, the Company shall have filed with the SEC a Registration
Statement with respect to the resale of such Registrable Securities by Investor
which shall have been declared effective by the SEC prior to the Put Date
therefor.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration
Rights Agreement, a Registration Statement shall have previously become
effective for the resale by Investor of the Registrable Securities subject to
such Put Notice and such Registration Statement shall remain effective on each
Condition Satisfaction Date and (i) neither the Company nor Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to such Registration Statement or that the SEC otherwise has suspended
or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action),and (ii) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date. (e) NO INJUNCTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits or directly and materially adversely affects any of
the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's most recent
SEC Document, no event that had or is reasonably likely to have a Material
Adverse Effect has occurred.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading
of the Common Stock shall not have been suspended by the SEC, the Principal
Market or the NASD and the Common Stock shall have been approved for listing or
quotation on and shall not have been delisted from the Principal Market.
(h) LEGAL OPINION. The Company shall have caused to be delivered to
Investor, within five (5) Trading Days of the effective date of the Initial Put
Notice and each subsequent Put Notice, an opinion of the Company's legal counsel
in the form of Exhibit C-1 and C-2 hereto, addressed to Investor.
(i) DUE DILIGENCE. No dispute between the Company and Investor shall exist
pursuant to Section 7.3 as to the adequacy of the disclosure contained in any
Registration Statement.
(j) TEN PERCENT LIMITATION. On each Closing Date, the number of Put Shares
then to be purchased by Investor shall not exceed the number of such shares
that, when aggregated with all other shares of Registrable Securities then owned
by Investor beneficially or deemed beneficially owned by Investor, would result
in Investor owning no more than 9.9% of all of such Common Stock as would be
outstanding on such Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the regulations promulgated thereunder. For purposes of
this Section 7.2(j), in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon which
the Put Notice associated with such Closing Date is given, the amount of Common
Stock outstanding on such Closing Date shall govern for purposes of determining
whether Investor, when aggregating all purchases of Common Stock made pursuant
to this Agreement and Blackout Shares, if any, would own more than 9.9% of the
Common Stock following such Closing Date.
(k) NO KNOWLEDGE. The Company shall have no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the fifteen Trading Days following the Trading Day on which such Notice
is deemed delivered).
(l) OTHER CONSIDERATION. The Investor shall have delivered in executed
form, all necessary documentation to vest title in the Other Consideration in
the Company.
(m) TRADING CUSHION. The Trading Cushion shall have elapsed since the
immediately preceding Put Date.
(n) SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect
to the applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(o) NO VALUATION EVENT. No Valuation Event shall have occurred since the
Put Date.
(p) OTHER. On each Condition Satisfaction Date, Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by Investor in order for
Investor to confirm the Company's satisfaction of the conditions set forth in
this Section 7.2., including, without limitation, a certificate in substantially
the form and substance of Exhibit D hereto, executed by an executive officer of
the Company and to the effect that all the conditions to such Closing shall have
been satisfied as at the date of each such certificate.
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall make available for inspection and review by Investor,
advisors to and representatives of Investor (who may or may not be affiliated
with Investor and who are reasonably acceptable to the Company), any
Underwriter, any Registration Statement or amendment or supplement thereto or
any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company's officers, directors and employees to supply all
such information reasonably requested by Investor or any such representative,
advisor or Underwriter in connection with such Registration Statement, at the
Investor's expense (including, without limitation, in response to all questions
and other inquiries reasonably made or submitted by any of them), prior to and
from time to time after the filing and effectiveness of such Registration
Statement for the sole purpose of enabling Investor and such representatives,
advisors and Underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the Company and the
accuracy of such Registration Statement.
(b) Each of the Company, its officers, directors, employees and agents
shall in no event disclose non-public information to Investor, advisors to or
representatives of Investor, unless prior to disclosure of such information, the
Company identifies such information as being non-public information and provides
Investor, such advisors and representatives with the opportunity to accept or
refuse to accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require Investor's
advisors and representatives to enter into a confidentiality agreement in form
and substance reasonably satisfactory to the Company and Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts; provided, however, that notwithstanding anything herein to
the contrary, the Company shall, as hereinabove provided, immediately notify the
advisors and representatives of Investor and any Underwriters of any event or
the existence of any circumstance(without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in a Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 7.3 shall be construed to mean that such
persons or entities other than Investor (without the written consent of Investor
prior to disclosure of such information) may not obtain non-public information
in the course of conducting due diligence in accordance with the terms and
conditions of this Agreement and nothing herein shall prevent any such persons
or entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, any Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in such Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. As soon as practicable after the execution and
delivery hereof, the Company shall issue to the Transfer Agent Instructions in
substantially the form of Exhibit E hereto. Such instructions shall be
irrevocable by the Company from and after the date thereof or from and after the
issuance thereof except as otherwise expressly provided in the Registration
Rights Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the Transfer Agent to issue to Investor certificates
evidencing shares of Common Stock incident to a Closing (free of the Legend,
without consultation by the transfer agent with the Company or its counsel and
without the need for any further advice or instruction or documentation to the
Transfer Agent by or from the Company or its counsel or Investor; provided that
(a) a Registration Statement shall then be effective, (b) Investor confirms to
the Transfer Agent and the Company that it has or intends to sell such Common
Stock to a third party which is not an affiliate of Investor or the Company and
Investor agrees to redeliver the certificate representing such shares of Common
Stock to the Transfer Agent to add the Legend in the event the Common Stock is
not sold, and (c) if reasonably requested by the transfer agent or the Company,
Investor confirms to the transfer agent and the Company that Investor has
complied with the prospectus delivery requirement under the Securities Act. At
any time after the Effective Date, upon surrender of one or more certificates
evidencing Common Stock that bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered).
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 8.1 has been or shall be placed on the share
certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall
affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
Section 8.4 COVER. If the Company fails for any reason to deliver the Put
Shares on such Closing Date and the holder of the Put Shares (a "Investor")
purchases, in an open market transaction or otherwise, shares of Common Stock
(the "Covering Shares") in order to make delivery in satisfaction of a sale of
Common Stock by such Investor (the "Sold Shares"), which delivery such Investor
anticipated to make using the Put Shares (a "Buy-In"), then the Company shall
pay to such Investor, in addition to all other amounts contemplated in other
provisions of the Transaction Documents, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) such Investor"s total purchase price
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds (after brokerage commissions, if any) received by such Investor
from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment
Amount to such Investor in immediately available funds immediately upon demand
by such Investor. By way of illustration and not in limitation of the foregoing,
if such Investor purchases Covering Shares having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock that it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount that the Company will be required to pay to such Investor will
be $1,000.
Section 8.5 DELAY. The Company understands that a delay in the issuance of
the Put Shares beyond the Closing Date could result in economic loss to
Investor. On and after the Effective Date as compensation to Investor for such
loss, the Company agrees to pay late payments to Investor for late issuance of
Put Shares in accordance with the following schedule (where "No. of Days Late"
is defined as the number of days beyond the Closing Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
---------------- -----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section 8.5 in
immediately available funds upon demand. Nothing herein shall limit Investor's
right to pursue actual damages for the Company's failure to issue and deliver
the Put Shares to Investor, except to the extent that such late payments shall
constitute payment for and offset any such actual damages alleged by Investor,
and any Buy In Adjustment Amount (as defined below).
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (a) personally served,(b)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company:
NCT Group, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. X'Xxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
if to Investor:
Xxxxxxx Road LLC
Corporate Center
West Bay Road
Grand Cayman
Telephone No.:
Telecopier No.: (000) 000-0000
with a copy to (which shall not constitute notice:
Xxxxxxx & Prager, LLP
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 9.2 INDEMNIFICATION.
The Company agrees to indemnify and hold harmless Investor and its
officers, directors, employees, and agents, and each Person or entity, if any,
who controls Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent such Damages result primarily from Investor's failure to perform any
covenant or agreement contained in this Agreement or Investor's or its officers,
directors, employees, agents or Controlling Persons negligence, recklessness or
bad faith in performing its obligations under this Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.2 (an "INDEMNIFIED
PARTY") might seek indemnity under Section 9.2 is asserted against or sought to
be collected from such Indemnified Party by a person other than a party hereto
or an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under any
provision of Section 9.2 against any person (the"INDEMNIFYING PARTY"), together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with
reasonable promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such Third
Party Claim to the extent that the Indemnifying Party's ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying Party
shall notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying Party of
either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE
PERIOD") whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party under Section 9.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.(i)If the Indemnifying Party
notifies the Indemnified Party within the Dispute Period that the Indemnifying
Party desires to defend the Indemnified Party with respect to the Third Party
Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have
the right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings shall be vigorously and
diligently prosecuted by the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only with the consent
of the Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified Party shall not be
indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to be necessary or
appropriate protect its interests; and provided further, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (i), and except as provided in the preceding sentence,
the Indemnified Party shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party may takeover
the control of the defense or settlement of a Third Party Claim at any time if
it irrevocably waives its right to indemnity under Section 9.2 with respect to
such Third Party Claim. (ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 9.3(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the Indemnified
Party(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
clause(iii) below, the Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to this clause (ii) or
of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation. (iii) If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability or
the amount of its liability to the Indemnified Party with respect to the Third
Party Claim under Section 9.2 or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party with respect to such Third
Party Claim, the amount of Damages specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying Party under Section 9.2 and
the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or
the amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a resolution
of such dispute; provided, however, that it the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be
enlisted to institute such legal action as it deems appropriate.
(b) In the event any Indemnified Party should have a claim under Section
9.2 against the Indemnifying Party that does not involve a Third Party Claim,
the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 9.2 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "INDEMNITY NOTICE") with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that it the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be enlisted to institute
such legal action as it deems appropriate.
(c) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to. ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York without
regard to the principles of conflicts of law. Each of the Company and Investor
hereby submit to the exclusive jurisdiction of the United States Federal and
state courts located in New York with respect to any dispute arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
Section 10.2 SPECIFIC ENFORCEMENT. The Company and the Investor acknowledge
and agree that irreparable damage would occur to the Investor 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 Investor 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. Section 10.3
ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the
Company and Investor and their respective successors and permitted assigns.
Neither this Agreement nor any rights of Investor or the Company hereunder may
be assigned by either party to any other person. Notwithstanding the foregoing,
the provisions of this Agreement shall inure to the benefit of, and be
enforceable by, any affiliate of Investor which is a transferee of any of the
Common Stock purchased or acquired by Investor hereunder with respect to the
Common Stock held by such person.
Section 10.4 THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the Company and Investor and their respective successors and
permitted assigns, and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
Section 10.5 TERMINATION. This Agreement shall terminate at the termination
of the Commitment Period (unless extended by the agreement of the Company and
Investor); provided, however, that the provisions of Article VI, VIII, and
Sections 10.1, 10.2, and 10.4 shall survive the termination of this Agreement.
Section 10.6 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and the
instruments referenced herein contain the entire understanding of the Company
and Investor with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
Section 10.7 FEES AND EXPENSES; TERMINATION OF PRIOR AGREEMENTS. Each of
the Company and Investor agrees to pay its own expenses in connection with the
preparation of this Agreement and performance of its obligations hereunder,
except that the Company shall pay Xxxxxxx & Xxxxxx, LLP the fee of $35,000 at
the Initial Closing and $2,750 at each subsequent Closing at which the Company
receives cash and not solely Other Consideration, plus $6,500 at the first such
Subsequent Closing the Company receives cash; provided that at any Subsequent
Closing where the Company receives cash it shall also pay such counsel $2,750 in
arrears for any Subsequent Closing at which the Company received solely Other
Consideration and no cash. In addition, the Company shall pay all reasonable
fees and expenses incurred by the Investor in connection with any amendments,
modifications or waivers of this Agreement or the Registration Rights Agreement
or incurred in connection with the enforcement of this Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys fees and expenses. The Company shall pay all stamp or other similar
taxes and duties levied in connection with issuance of the Shares pursuant
hereto. This Agreement supercedes the Private Equity Credit Agreement by and
between the parties hereto dated as of September 27, 2000, which is hereby
deemed terminated and the Warrants issued thereunder shall be deemed cancelled.
Section 10.8 NO BROKERS. Each of the Company and Investor represents that
it has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 10.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the Company and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.10 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the Company hereto shall survive each Closing
hereunder for a period of one (1) year thereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.
Section 10.11 FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.12 NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 10.13 EQUITABLE RELIEF. The Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief to
Investor. The Company therefore agrees that Investor shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
Section 10.14 TITLE AND SUBTITLES. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.15 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity
relied upon for the determination of the Bid Price and the trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg L.P. or any successor thereto. The written mutual consent of
Investor and the Company shall be required to employ any other reporting entity.
Section 10.16 PUBLICITY. The Company and Investor shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Investor without the prior written consent of such Investor, except to the
extent required by law. Investor acknowledges that this Agreement and all or
part of the Transaction Documents may be deemed to be "material contracts" as
that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company
may therefore be required to file such documents as exhibits to reports or
registration statements filed under the Securities Act or the Exchange Act.
Investor further agrees that the status of such documents and materials as
material contracts shall be determined solely by the Company, in consultation
with its counsel.
Section 10.17 JURY TRIAL WAIVER. The Company and the Investor hereby 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 the Transaction Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
NCT GROUP, INC.
By:________________________________
Name:
Title:
XXXXXXX ROAD LLC
By: ___________________________________
Name:
Title:
EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
EXHIBIT F Warrant
