Exhibit 10(av)
EXHIBIT A
TO
EXCHANGE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of April 12, 2001 (this
"Agreement"), is made by and between NCT GROUP, INC., a corporation organized
and existing under the laws of the State of Delaware (the "Company"), and
XXXXXXX ROAD LLC, a company organized and exiting under the laws of the Cayman
Islands (the "Subscriber").
RECITALS
WHEREAS, upon the terms and subject to the conditions of the Exchange
Agreement of even date herewith (the "Exchange Agreement"), between the
Subscriber, on the one hand, and the Company and certain of the Company's
subsidiaries, on the other hand, the Company has agreed to issue and sell to the
Subscriber (i) (x)shares (the "Basic Shares") of the Company's common stock, par
value $0.01 per share (the "Common Stock"), having a value of Two Million
Dollars ($2,000,000; the "Basic Shares Value"), and (y) certain additional
shares as contemplated by Section 3 of the Exchange Agreement (the "Reset
Shares") and (ii) certain convertible promissory notes having an aggregate
initial principal balance of One Million Five Hundred Thousand Dollars
($1,500,000; the "Aggregate Convertible Note Principal Value"), as listed in
Schedule 1 hereto (each, a "Convertible Note"), each of which Convertible Note
may be converted into or exchanged for, as the case may be, shares of the common
stock, par value $0.01 per share (the "Common Stock"), of the Company; the
shares of Common Stock issuable on such conversions or exchanges are referred to
as the "Conversion Shares" (which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest on the Convertible Notes through their respective Maturity Dates or
later payment) in accordance with its terms; and
WHEREAS, the Subscriber currently holds 2,810,304 shares (the "Owned
Shares") of unregistered Common Stock for which the Subscriber's purchase price
was $500,000 (the "Owned Shares Purchase Price"); and
WHEREAS, to induce the Subscriber to execute and deliver the Exchange
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, "Securities Act"),
and applicable state securities laws with respect to the Registrable Securities
(as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Subscriber
hereby agree as follows:
1. Definitions
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after the Required Filing Date, any relevant Required Effective
Date or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, such Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed (with respect to payments due as contemplated by Section
2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of
(1) thirty (30) days after the previous Computation Date or (2) the date after
the previous Computation Date on which the Registration Statement is filed (with
respect to payments due as contemplated by Section 2(b)(i) hereof) or is
declared effective or has its restrictions removed (with respect to payments due
as contemplated by Section 2(b)(ii) hereof), as the case may be.
(ii) "Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.
(iii) "First Effective Date" means the first Effective Date of the initial
Registration Statement (including any amendments thereto actually filed or
contemplated to be filed to comply with the terms of this Agreement).
(iv) "Held Shares Value" means, for shares of Common Stock acquired by the
Subscriber upon a conversion of a Convertible Note within the thirty (30) days
preceding the Restricted Sale Date, but not yet sold by the Subscriber, the
principal amount of the Convertible Notes converted into such Conversion Shares;
provided, however, that if the Subscriber effected more than one such conversion
during such thirty (30) day period and sold less than all of such shares, the
sold shares shall be deemed to be derived first from the conversions in the
sequence of such conversions (that is, for example, until the number of shares
from the first of such conversions have been sold, all shares shall be deemed to
be from the first conversion; thereafter, from the second conversion until all
such shares are sold); and provided, further, for purposes of this definition,
until five (5) trading days after the Subscriber shall have sold all Basic
Shares, all Reset Shares, all Owned Shares and all Periodic Amount Shares, (x)
conversions of a Convertible Note shall be deemed to have been made within
thirty (30) days preceding the Restricted Sale Date (but shall be valued based
on the principal amount of the Convertible Note actually converted) and (y) the
Subscriber shall not be deemed to have sold any Conversion Shares.
(v) "Initial Basic Value" means the aggregate of (x) the Basic Shares
Value, (y) the Owned Shares Purchase Price, plus (z) the Aggregate Convertible
Note Principal Value.
(vi) "Initial Registration Effectiveness Percentage" means, until the
Initial Required Effective Date, one percent (1%) and thereafter three percent
(3%).
(vii) "Later Basic Value" means the aggregate of (x) the Basic Shares
Value, (y) the Owned Shares Purchase Price, plus (z) the sum of the principal
amount of all Convertible Notes not yet converted and the Held Shares Value.
(viii) "Periodic Amount" has the meaning ascribed to it in Section 2(b)
below.
(ix) "Periodic Amount Shares" means any Initial Periodic Amount Shares and
any Other Periodic Amount Shares (as those terms are defined in Section 2(b)
below).
(x) "Potential Material Event" means any of the following: (x) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (y) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(xi) "Principal Trading Market" means the NASD/OTC Bulletin Board Market.
(xii) "Principal Value" means (x) prior to the Effective Date, the Initial
Basic Value, and (y) after the Effective Date, the Later Basic Value, less the
aggregate proceeds, but not more than the sum of the Basic Shares Value and the
Owned Shares Purchase Price, actually received by the Subscriber from the sale,
if any, after the Subscription Date and prior to the Restricted Sale Date, of
Basic Shares, Reset Shares and Owned Shares.
(xiii) "Register", "registered" and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a delayed or
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(xiv) "Registrable Securities" or "Registrable Shares" mean all of the
Owned Shares, the Basic Shares, the Reset Shares, if any, and the Periodic
Amount Shares, if any.
(xv) "Registration Percentage" means one hundred twenty-five percent
(125%).
(xvi) "Registration Statement" means a registration statement of the
Company under the Securities Act on Form S-1 (if use of such other 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 for the offering of the
Registrable Securities).
(xvii) "Required Effective Date" means the relevant Initial Required
Effective Date or Increased Required Effective Date (as those terms are defined
in Section 2(a) below).
(xviii) "Restricted Sale Date" means either (i) the first date, other than
during a Permitted Suspension Period (as defined below), on which the Investor
is restricted from making sales of Registrable Securities covered by any
previously effective Registration Statement or (ii) the date after the third
consecutive trading day on which the Company's shares are, for any reason, not
listed on the Principal Trading Market.
(xix) "Subscriber's Securities" means the Registrable Shares and the
Convertible Notes, or any of them.
(xx) "Subscription Date" means the date of this Agreement.
(xxi) "Transaction Agreements" means the Exchange Agreement and any
agreement, document, or other instrument contemplated thereby or, to the extent
it is binding on the Company, executed by the Company in connection with the
transactions contemplated thereby.
(b) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Exchange Agreement.
2. Registration.
(a) Mandatory Registration.
(i) The Company shall prepare and file with the SEC, as soon as possible
after the Subscription Date but no later than May 11, 2001("the "Required Filing
Date"), a Registration Statement registering for resale by the Subscriber a
sufficient number of shares of Common Stock for the Subscriber to sell the
Registrable Securities, but in no event less than the aggregate of (x) the
number of shares, determined as of the Effective Date, equal to the aggregate
number of the Owned Shares, the Basic Shares, the Reset Shares, if any, and the
Periodic Amount Shares, if any, plus (y) the number of shares equal to the
Registration Percentage of the aggregate number of shares into which the
principal of the Convertible Notes and all interest thereon through their
respective Maturity Dates would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that all Convertible Notes
had been eligible to be converted, and had been converted into Conversion Shares
in accordance with their terms, whether or not such accrual of interest,
eligibility or conversion had in fact occurred as of such date).. The
Registration Statement (W) shall include only the Registrable Securities and a
maximum of 16,000,000 shares of selling shareholders other than the Subscriber;
and (X) shall also state that, in accordance with Rule 416 and 457 under the
Securities Act, it also covers such indeterminate number of additional shares of
Common Stock as may become issuable to prevent dilution resulting from stock
splits, or stock dividends. The Company will use its reasonable best efforts to
cause such Registration Statement to be declared effective on a date (the
"Initial Required Effective Date") which is no later than the earlier of (Y)
five (5) days after oral or written notice by the SEC that it may be declared
effective or (Z) July 26, 2001.
(ii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Shares, issued or to be
issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, the Company shall either (X)
amend the Registration Statement filed by the Company pursuant to the preceding
provisions of this Section 2, if such Registration Statement has not been
declared effective by the SEC at that time, to register, in the aggregate, at
least the number of shares computed, as of the Increased Registered Shares Date,
in the manner contemplated by the immediately preceding subparagraph (i), or (Y)
if such Registration Statement has been declared effective by the SEC at that
time, file with the SEC an additional Registration Statement (an "Additional
Registration Statement") to register the excess of
(I) the sum of the aggregate of (x) the number of the Owned Shares, the
Basic Shares, the Reset Shares, if any, and the Periodic Amount Shares, if
any, plus (y) the number of shares equal to the Registration Percentage of
(A) the number of shares theretofore issued as Conversion Shares, plus (B)
the number of shares into which the unconverted Convertible Notes and all
interest thereon through their respective Maturity Dates would be
convertible at the Increased Registered Shares Date (assuming for such
purposes that all such Convertible Notes had been eligible to be converted,
and had been converted, into Conversion Shares in accordance with their
terms, whether or not such accrual of interest, eligibility or conversion
had in fact occurred as of such date), over
(II) the aggregate number of shares of Common Stock already registered
pursuant to this Registration Rights Agreement.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.
(b) Payments by the Company.
(i) If the Registration Statement covering the Registrable Securities is
not filed in proper form with the SEC by the Required Filing Date, the Company
will make payments of Periodic Amounts to the Initial Investor in such amounts
and at such times as shall be determined pursuant to this Section 2(b).
(ii) Commencing with the Periodic Amount Commencement Date and continuing
until the First Effective Date or if the Registration Statement covering the
Registrable Securities is not effective by the relevant Required Effective Date
or if the Subscriber is restricted from making sales of Registrable Securities
on a Restricted Sale Date, then the Company will make payments of Periodic
Amounts to the Subscriber in such amounts and at such times as shall be
determined pursuant to this Section 2(b).
(iii) The amount (the "Periodic Amount") to be paid by the Company to the
Subscriber shall be equal to:
(x) with respect to Periodic Amounts due as contemplated by Section 2(b)(i)
hereof, two percent (2%) of the Principal Value for (I) the period from the
date following the relevant Required Filing Date to the first relevant
Computation Date, and (II) thereafter, the period from the date following
the immediately preceding Computation Date to the next relevant Computation
Date;
(y) with respect to Periodic Amounts due as contemplated by Section
2(b)(ii) hereof until the First Effective Date, the Initial Registration
Effectiveness Percentage of the Principal Value multiplied by the fraction,
of which (A) the numerator is the number of days after May 27, 2001 (the
"Periodic Amount Commencement Date") to and including the First Effective
Date, and (B) the denominator is thirty (30); and
(z) with respect to Periodic Amounts due as contemplated by Section
2(b)(ii) hereof after the First Effective Date, two percent (2%) of the
Principal Value for (I) the period from the date following the relevant
Required Effective Date or Restricted Sale Date, as the case may be, to the
first relevant Computation Date thereafter, and (II) thereafter, the period
from the date following the immediately preceding Computation Date to the
next relevant Computation Date.
By way of illustration and not in limitation of the foregoing, if the
Registration Statement is not declared effective until one hundred five (105)
days after the Periodic Amount Commencement Date, the Periodic Amount will
aggregate six and one-half percent (6.5%) of the Principal Value (1% x (60/30) =
2%, for the sixty days from the Periodic Amount Commencement Date to the Initial
Required Effective Date, plus 3% x (45/30) = 4.5%, for the forty-five days
thereafter).
(iv) Each Periodic Amount will be payable by the Company, except as
provided in the other provisions of this Section 2(b), in cash or other
immediately available funds to the Subscriber on (x) with respect to the initial
Registration Statement, the day before the Effective Date, (y) with respect to
any Additional Registration Statement, the thirtieth day after the Increased
Required Effective Date and each thirtieth day thereafter or the earlier
Effective Date with respect to the Additional Registration Statement, and (z)
with respect to each Restricted Sale Date, the thirtieth day after such
Restricted Sale Date and each thirtieth day thereafter or, if earlier, the third
business day after the Registration Statement has its restrictions removed, in
each case without requiring demand therefor by the Subscriber.
(v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv), the Periodic Amount, if any, payable on the First Effective
Date contemplated by clause (y) of such subparagraph (iv) shall be payable in
shares of Common Stock ("Initial Periodic Amount Shares") determined in
accordance with the following relevant formula:
(x) if the Market Price is equal to or above the Issuance Price, and
(I) the First Effective Date occurs on or before the Initial Required
Effective Date,
IPAS = (PA + $133,333) - (IS x MP)
-------------------------------
MP
or
(II) the First Effective Date occurs after the Initial Required Effective
Date,
IPAS = EPA + (.5 x PA)
---------
MP
or
(y) if the Market Price is below the Issuance Price,
IPAS = PA/MP
in each case, where
IPAS = the number of Initial Periodic Amount Shares, which shall not
be less than zero
EPA = the amount equal to the following fraction, but not less than
zero:
((.5 x PA) + $133,333) - (IS x MP)
--------------------------------------
MP
PA = Periodic Amount as of the Effective Date, as determined by
subparagraph (iii) above
IS = The number of Basic Shares issued or issuable to Subscriber
as Basic Shares or Reset Shares on or before the Effective Date
MP = Market Price
(vi) Notwithstanding the provisions of the preceding subparagraph (iv), the
Periodic Amount, if any, payable pursuant to clause (x) or clause (z) of such
subparagraph (iv) shall, at the option of the Subscriber by written notice (a
"Periodic Amount Shares Notice") to the Company , be payable in shares of Common
Stock ("Other Periodic Amount Shares") determined in accordance with the
following formula:
OPAS = OPA/OMP
in each case, where
OPAS = the number of Other Periodic Amount Shares
OPA = Periodic Amount as of the date of the Periodic Amount
Shares Notice (the "Periodic Amount Shares Notice
Date"), as determined by subparagraph (iv) above
OMP = the average closing bid price for the Common Stock for
the five (5) trading days immediately before the
Periodic Amount Shares Notice Date
(vii) The parties acknowledge that the damages which may be incurred by the
Subscriber if the Registration Statement is not filed by the Required Filing
Date or the Registration Statement has not been declared effective by the
Periodic Amount Commencement Date or a Required Effective Date, as the case may
be, or if the right to sell Registrable Securities under a previously effective
Registration Statement is suspended, may be difficult to ascertain. The parties
agree that the Periodic Amounts represent a reasonable estimate on the part of
the parties, as of the date of this Agreement, of the amount of such damages.
(viii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
effectiveness of the Registration Statement occurs because of an act of, or a
failure to act or to act timely by the Subscriber or its counsel.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC a Registration Statement with
respect to not less than the number of Registrable Securities provided in
Section 2(a) above, and thereafter use its reasonable best efforts to cause such
Registration Statement relating to Registrable Securities to become effective by
the Required Effective Date and keep the Registration Statement effective at all
times during the period (the "Registration Period") continuing until the
earliest of (i) the date that is two (2) years after the last day of the
calendar month following the month in which the Effective Date occurs, (ii) the
date when the Subscriber may sell all Registrable Securities under Rule 144
without volume or other restrictions or limits or (iii) the date the Subscriber
no longer owns any of the Registrable Securities, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Permit a single firm of counsel designated by the Subscriber to review
the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than five (5) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects; it being understood that such review and objections
shall relate exclusively to matters in the Registration Statement or omitted
therefrom affecting any or all of the Exchange Agreement, the Subscriber and the
Registrable Securities or compliance with the terms of this Agreement or the
other Transaction Agreements.
(d) Notify each Subscriber, such Subscriber's legal counsel identified to
the Company (which, until further written notice, shall be deemed to be Xxxxxxx
& Xxxxxx LLP, Attn: Xxxxxx Xxxxxxx, Esq.; each, an "Subscriber's Counsel"), and
any managing underwriters immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Subscriber); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company 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; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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 light of the circumstances under which they were
made, not misleading;
(e) Furnish to each Subscriber and such Subscriber's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Subscriber may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Subscriber;
(f) As promptly as practicable after becoming aware thereof, notify each
Subscriber of the happening of any event of which the Company has knowledge, as
a result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Subscriber as such Subscriber may
reasonably request;
(g) As promptly as practicable after becoming aware thereof, notify each
Subscriber who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Subscriber in writing of the existence of a Potential Material
Event, the Subscriber shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Subscriber receives written notice from the Company
that such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during a
Permitted Suspension Period). The term "Permitted Suspension Period" means one
or more suspension periods during any consecutive 12-month period which
suspension periods, in the aggregate, do not exceed twenty (20) days, provided,
however, that no one such suspension period shall either (i) be for more than
fifteen (15) days or (ii) begin less than ten (10) business days after the last
day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period); provided further that the Company shall,
if lawful to do so, provide the Subscriber with at least two (2) business days'
notice of the existence (but not the substance of) a Potential Material Event;
(i) Use its reasonable efforts to maintain the quotation and trading of its
common stock and the quotation of the Registrable Securities on the Principal
Trading Market; and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than five (5) business days after the
Subscription Date;
(k) Cooperate with the Subscriber to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Subscriber may reasonably request; and
(l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Subscriber of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Subscriber. In connection with the registration of
the Registrable Securities, the Subscriber shall have the following obligations:
(a) Each Subscriber, by such Subscriber's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Subscriber has notified the Company in writing
of such Subscriber's election to exclude all of such Subscriber's Registrable
Securities from the Registration Statement; and
(b) Each Subscriber agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), above, such Subscriber will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Subscriber's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if
so directed by the Company, such Subscriber shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Subscriber's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions of the Subscriber) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company. In addition, a fee for a single counsel for the Subscriber equal to
$4,500 for the initial Registration Statement covering the Registrable
Securities and $2,500 for each subsequent Registration Statement or amendment
covering Registrable Securities, shall be borne by the Company.
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Subscriber in this Agreement or
otherwise conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Subscriber, the Company
shall not grant to any person the right to request the Company to register any
securities of the Company under the Securities Act unless the rights so granted
are subject in all respects to the prior rights in full of the Subscriber set
forth herein, and are not otherwise in conflict or inconsistent with the
provisions of this Agreement and the other Transaction Agreements.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Subscriber who holds such Registrable Securities, the directors,
if any, of such Subscriber, the officers, if any, of such Subscriber, each
person, if any, who controls any Subscriber within the meaning of the Securities
Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(each, an "Indemnified Person" or "Indemnified Party"), against any losses,
claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Subscriber, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (II) be available to the extent such Claim is based on a failure of
the Subscriber to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Subscriber will indemnify
the Company and its officers, directors and agents (each, an "Indemnified
Person" or "Indemnified Party") against any claims arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Subscriber,
expressly for use in connection with the preparation of the Registration
Statement, subject to such limitations and conditions as are applicable to the
indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any legal or other reasonable out-of-pocket expenses subsequently incurred by
such Indemnified Person or Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The Indemnified
Person or Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
reasonable out-of-pocket expenses of such counsel shall not be at the expense of
the indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Securities Act and Exchange Act. With a view to making
available to the Subscriber the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Subscriber to sell securities of the Company to the public
without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Subscriber so long as such Subscriber owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Subscriber to sell such securities pursuant to Rule 144 without registration.
(d) The Company will, at the request of any Holder of Registrable
Securities, upon receipt from such Holder of a certificate certifying (i) that
such Holder has held such Registrable Securities for a period of not less than
one (1) year, (ii) that such Holder has not been an affiliate (as defined in
Rule 144) of the Company for more than the ninety (90) preceding days, and (iii)
as to such other matters as may be appropriate in accordance with such Rule,
remove from the stock certificate representing such Registrable Securities that
portion of any restrictive legend which relates to the registration provisions
of the Securities Act, provided, however, that, at the Company's cost and
expense, counsel to Subscriber may provide such instructions and opinion to the
transfer agent regarding the removal of the restrictive legend upon the sale of
Registrable Securities by the Subscriber under Rule 144.
9 Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Subscriber. Any amendment or waiver
effected in accordance with this Section 9 shall be binding upon each Subscriber
and the Company.
10. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be given in
the manner and to the addresses contemplated by the Exchange Agreement.
(c) The rights of each of the parties under this Agreement are cumulative.
The rights of each of the parties hereunder shall not be capable of being waived
or varied other than by an express waiver or variation in writing. Any failure
to exercise or any delay in exercising any of such rights shall not operate as a
waiver or variation of that or any other such right. Any defective or partial
exercise of any of such rights shall not preclude any other or further exercise
of that or any other such right. No act or course of conduct or negotiation on
the part of any party shall in any way preclude such party from exercising any
such right or constitute a suspension or any variation of any such right.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Subscriber for
any reasonable legal fees and disbursements incurred by the Subscriber in
enforcement of or protection of any of its rights under this Agreement.
(e) The Company and the Subscriber 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
this Agreement or any of the other Transaction Agreements.
(f) Each part of this Agreement is intended to be severable. In the event
that any provision of this Agreement is found by any court or other authority of
competent jurisdiction to be illegal or unenforceable, such provision shall be
severed or modified to the extent necessary to render it enforceable and as so
severed or modified, this Agreement shall continue in full force and effect. 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.
(g) This Agreement and the terms, covenants, conditions, provisions,
obligations, undertakings, rights, and benefits hereof, shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors and assigns.
(h) Unless the context otherwise requires, when used herein, the singular
shall be deemed to include the plural, the plural shall be deemed to include
each of the singular, and pronouns of one or no gender shall be deemed to
include the equivalent pronoun of the other or no gender.
(i) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
A facsimile transmission of the signed Agreement shall be legal and binding on
all parties hereto.
(k) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Subscriber, and the Company agrees that, in addition to
any other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(l) The person signing this Agreement on behalf of each party hereby
represents and warrants that he has the necessary power, consent and authority
to execute and deliver this Agreement on behalf of that party.
(m) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no promises,
agreements, conditions, undertakings, understandings, warranties, covenants or
representations, oral or written, express or implied, between them with respect
to this Agreement or the matters described in this Agreement, except as set
forth in this Agreement and in the other documentation relating to the
transactions contemplated by this Agreement solely as same are referred to
herein. Any such negotiations, promises, or understandings shall not be used to
interpret or constitute this Agreement. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written. COMPANY: NCT GROUP, INC.
By:
Name:
Title:
SUBSCRIBER:
XXXXXXX ROAD LLC
By:
Name:
Title:
SCHEDULE 1
SCHEDULE OF CONVERTIBLE NOTES
[Schedule to identify Note[s] having aggregate original principal $1,500,000]
