Exhibit 10(at)
EXCHANGE AGREEMENT
THIS AGREEMENT made as of this 12th day of April, 2001, by and between
XXXXXXX ROAD LLC, a limited liability company organized under the laws of the
Cayman Islands ("Investor"), and NCT GROUP, INC., a Delaware corporation ("NCTI"
or the "Company").
The following terms shall have the specified definitions, unless the
context otherwise requires:
"Common Stock" shall mean the Common Stock of NCTI, $.01 par value.
"DMC-NY" shall mean DMC NEW YORK, INC., a Delaware corporation.
R E C I T A L S
A. The Investor is the owner of good and marketable title to 3,000
restricted shares of the Common Stock of DMC-NY, free and clear of all liens and
encumbrances (the "DMC Securities").
B. NCTI wishes to acquire the DMC Securities.
C. The Investor will receive, subject to the terms and conditions set forth
herein, shares of the Common Stock of the Company in exchange for the DMC
Securities.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreement contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. PURCHASE. Simultaneous with the execution of this agreement, NCTI agrees
to purchase from the Investor the DMC Securities.
2. THE CONSIDERATION. In consideration therefore, NCTI agrees to issue to
the Investor, (a) 13,333,333 shares of Common Stock of NCTI at an Initial Price
of $.15 per share(the "Initial Shares") and (b) the Convertible Note.
3. ADDITIONAL SHARES. Additionally, the Company agrees to issue to the
Investor,additional shares of Common Stock as follows:
(a) If the average Closing Bid Price for the five (5) Business Days prior
to final request for acceleration of the Registration Statement (the "Repricing
Price"), is not equal to or greater than Initial Price x 1.06666, then Investor
may request that all of the Initial Shares shall be repriced (the "Repriced
Shares"). The Company shall issue to Investor such number of additional Shares,
as determined according to the following formula: $2,000,000 x 1.06666 +
Registration Rights Penalty Amount - Number of Initial Shares Issued Repricing
Price
(b) To the extent that the Repricing Price exceeds the Initial Price x
1.06666, NCTI shall receive a credit as to the number of additional discount
shares to be issued, against its penalty obligations under the Registration
Rights Agreement, calculated pursuant to the following formula: $2,000,000 x
Repricing Price - Total Obligation to Xxxxxxx (i.e. 2,000,000 x 1.0666 +
Registration Rights Penalty Initial Price Amount)
In no event , except for shares issuable in fulfillment of the Registration
Rights Penalty
Amount and the Note, sshall the Company be obligated to issue to the
Investor in excess of 16,666,667 shares of Common Stock
REDEMPTION
(a) Notwithstanding any other provision hereof to the contrary, at any time
prior to the Effective Date, the Company shall have the right to redeem all or
any portion of the Common Stock issued hereunder and then held by the Investor
in cash for an amount (the "Redemption Amount") equal to the sum of (a) one
hundred six and 2/3 percent (106.66%) of the Initial Price of such Common Stock
plus (b) all accrued but unpaid Registration Rights Penalty Amounts.
(b) The Company shall give at least ten (10) business days' written notice
of such redemption to the Investor (the "Notice of Redemption"). The date so
specified in such Notice of Redemption shall be the Redemption Payment Date.
(c) In the event such Redemption Amount is not timely paid, then the
Investor shall have the right to effect either or both of the following
remedies: (i) the Notice of Redemption shall be null and void and (ii) any
rights of the Company to redeem outstanding Common Stock in the future shall
terminate.
5. MUTUAL DELIVERIES. (a) Upon the delivery by the Investor of the
Securities, NCTI shall deliver to the Investor:
(a) The Initial Shares, bearing substantially the following legend: THE
SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) The Registration Rights Agreement in the form annexed hereto as
Exhibit A.
(c) The Opinion in the form annexed hereto as Exhibit B.
(d) The Note in the form annexed hereto as Exhibit C.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Investor that:
(a) The Company has the corporate power and authority to enter into this
Agreement, and to perform its obligations hereunder. The execution and delivery
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Exchange Agreement has been
duly executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable against it in accordance with their
respective terms, subject to the effects of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and to the application of equitable principles in any
proceeding (legal or equitable).
(b) The execution, delivery and performance by the Company of this Exchange
Agreement, and the consummation of the transactions contemplated hereby, do not
and will not breach or constitute a default under any applicable law or
regulation or of any agreement, judgment, order, decree or other instrument
binding on the Company which breach or default could reasonably by expected to
have a material adverse effect on the Company taken as a whole.
(c) There is no pending, or to the knowledge of the Company, threatened,
judicial, administrative or arbitral action, claim, suit, proceeding or
investigation which might affect the validity or enforceability of this Exchange
Agreement or which involves the Company and which if adversely determined, could
reasonably be expected to have a material adverse effect on the Company.
(d) No consent or approval of, or exemption by, or filing with, any party
or governmental or public body or authority is required in connection with the
execution, delivery and performance under this Exchange Agreement or the taking
of any action contemplated hereunder or thereunder.
(e) 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 per share, of which as of March 26, 2001, 340,588,078 shares were
issued and outstanding, and 10,000,000 shares of Preferred stock, par value $.10
per share, of which 583 shares were issued and outstanding in Series G. There
are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and non assessable.
(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation.
(g) The execution, delivery and performance of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will not
(i) violate any provision of the Company's Certificate of Incorporation or
By-laws, (ii) violate, conflict with or result in the breach of any of the terms
of, result in a material modification of the effect of, otherwise, give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any contract or other
agreement to which the Company is a party or by or to which the Company or any
of the Company's assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which the Company, or the assets or
properties of the Company are bound, (iv) to the Company's knowledge, violate
any statute, law or regulation.
7. 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 any 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.
8. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to the Company that:
(a) The Investor has the corporate power and authority to enter into this
Exchange Agreement and to perform its obligations hereunder. The execution and
delivery by the Investor of this Exchange Agreement, and the consummation by the
Investor of the transactions contemplated hereby, have been duly authorized by
all necessary corporate action on the part of the Investor. This Exchange
Agreement has been duly executed and delivered by the Investor and constitute
valid and binding obligations of the Investor, enforceable against it in
accordance with their respective terms, subject to the effects of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and to the application of equitable principles in
any proceeding (legal or equitable).
(b) The execution, delivery and performance by the Investor of this
Exchange Agreement, and the consummation of the transactions contemplated
hereby, do not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or other
instrument binding on the Investor.
(c) 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.
(d) Investor has received all documents, records, books and other
information pertaining to Investor's investment in the Company that have been
requested by Investor.
(e) 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.
(f) 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.
(g) Except as specifically set forth herein, Investor makes no
representations or warranties with respect to DMC-NY, its financial status,
earnings, assets, liabilities, corporate status, or any other matters.
(h) The Investor is the owner of good and marketable title to the
Securities, free and clear of all liens, pledges, and encumbrances.
9. Nothing contained herein shall in any way limit Investor's right to sell
or transfer the shares of the Company to be issued to Investor.
10. GOVERNING LAW; MISCELLANEOUS
(a). Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York.
(b). 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.
(c). Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other parties.
(d). Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(e). Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(f). Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser.
(g). Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier, overnight delivery service or
by confirmed telecopy, and shall be effective five days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier, overnight delivery service or confirmed telecopy, in
each case addressed to a party. 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 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 the Investor:
Xxxxxxx Road LLC
Corporate Center
West Bay Road
Grand Cayman
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx & Prager, LLP
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Each party shall provide notice to the other parties of any change in
address.
(h). Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither the
Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
(i). Capitalized Terms. Capitalized Terms not otherwise defined herein
shall have the respective meaning set forth in the Registration Rights
Agreement.
11. Fees. NCTI agrees to assume the legal fees incurred by the Investor in
connection with the negotiation of the Exchange Agreement, and the preparation,
execution and implementation of this Agreement.
12. Further Assurances. Each party shall do and perform or cause to be done
and perform, 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.
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the date first written above.
NCT GROUP, INC.
By: ______________________________________
Name:
Title:
XXXXXXX ROAD LLC
By: ______________________________________
Name: ____________________________________
Title: _____________________________________
