Exhibit 10(fn)
AMENDED AND RESTATED PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
NCT GROUP, INC.
AND
XXXXXXX ROAD LLC
Dated as of
September 30, 2004
THIS AMENDED AND RESTATED PRIVATE EQUITY CREDIT AGREEMENT is entered into
as of the 30th day of September 2004 (this "AGREEMENT"), by and between XXXXXXX
ROAD LLC, a limited liability company 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 hereto are parties to a Private Equity Credit
Agreement dated as of July 25, 2002, and now wish to amend and restate such
Private Equity Credit Agreement in its entirety by entering into this Agreement;
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); 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, as amended, and the
rules and regulations promulgated thereunder (the "SECURITIES ACT"), Regulation
D promulgated under the Securities Act ("REGULATION D"), 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):
"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 PERIOD" shall have the meaning specified in the Registration
Rights Agreement.
"BLACKOUT SHARES" shall have the meaning specified in Section 2.6.
"BUY-IN" shall have the meaning specified in Section 8.3.
"BUY-IN ADJUSTMMENT AMOUNT" shall have the meaning specified in Section
8.3.
"BY-LAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section 4.8.
1
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and sale of shares
of Common Stock pursuant to Section 2.3.
"CLOSING DATE" shall mean, with respect to a Closing, the eleventh (11th)
Trading 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 Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the Effective Date,
and ending on the earlier 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 thirty six (36) months from the date
of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, $.01 par value 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 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 mean each of (a) the date of delivery
of the relevant Put Notice and (b) the applicable Closing Date for such Put
Notice.
"CONTROL PERSON" shall mean each director, executive officer, promoter, and
such other Persons as may be deemed in control of the Company pursuant to
Section 15 of the Securities Act or Section 20 of the Exchange Act.
"COVERING SHARES" shall have the meaning specified in Section 8.3.
"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.
"DISCOUNT" shall mean nine (9%) percent.
"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.
2
"ESCROW AGREEMENT" shall mean the Joint Escrow Instructions in the form
annexed hereto as Exhibit F.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
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).
"HOLDER" shall have the meaning specified in Section 8.3.
"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.
"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 Day 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 either of (a) this Agreement or (b) the Registration
Rights Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean Fifty Million Dollars ($50,000,000).
"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the lesser of (a)
Two Million Dollars ($2,000,000), or (b) the greater of (i) One Hundred Fifty
(150%) percent of the Weighted Average Volume for the fifteen (15) Trading Days
immediately preceding each Put Date or (ii) One Hundred Fifty Thousand Dollars
($150,000).
"MINIMUM COMMITMENT AMOUNT" shall mean Five Million Dollars ($5,000,000).
"MINIMUM PUT AMOUNT" shall mean, with respect to any Put, Twenty-Five
Thousand Dollars ($25,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
3
"NEW BID PRICE" shall have the meaning specified in Section 2.6.
"NEW COMMON STOCK" shall have the meaning specified in Section 6.14(a).
"OLD BID PRICE" shall have the meaning specified in Section 2.6.
"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 which is at the time
the principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean, with respect to a Put, the Market Price less
the product of the Discount and the Market Price.
"PUT" shall mean each occasion that the Company elects to exercise its
right to tender a Put Notice requiring Investor to purchase shares of Common
Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean 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 Investor setting forth the Investment Amount with respect
to which the Company is requiring Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
"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
for the Company, such Registrable Securities may be sold without registration
under the Securities Act or 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
4
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.
"REGULATION D" shall have the meaning specified in the recitals of this
Agreement.
"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 filed by the Company pursuant to the Securities Act or 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).
"SOLD SHARES" shall have the meaning specified in Section 8.3.
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed
and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
"TRADING CUSHION" shall mean a minimum of two (2) Trading Days between a
Closing Date and the next Put Date.
"TRADING DAY" shall mean any day during which the Principal Market shall be
open for business.
"TRANSACTION DOCUMENTS" means this Amended and Restated Private Equity
Credit Agreement, the Registration Rights Agreement, Closing Certificate, and
the Transfer Agent instructions described in Section 8.1.
"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).
5
"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 any preferred stock of the Company;
(c) issues any 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 options or
other rights shall be less than the Bid Price in effect immediately prior
to such issuance (other than such shares issued pursuant to and in
accordance with the terms of a stock option plan in effect prior to March
1, 2002);
(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) issues 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 shares 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, 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 tenth (10th) Trading Day
thereafter (and, in such event, the Put Date for the most recently issued Put
Notice shall be automatically revised to be the date of the occurrence of such
Valuation Event for all purposes of this Agreement).
"WEIGHTED AVERAGE VOLUME" shall mean the average of the Weighted Volumes
for the relevant Trading Days.
"WEIGHTED VOLUME" shall mean the product of (a) the Bid Price times (b) the
volume on the
6
Principal Market.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any Put Date
the Company may exercise 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 Purchase
Price with respect to such Put Date.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time during the Commitment Period, the Company may
deliver a Put Notice to Investor, subject to the conditions set forth in Section
7.2; provided, however, the Investment Amount for each Put as designated by the
Company in the applicable Put Notice shall be neither less than the Minimum Put
Amount 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.
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, 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 the Investment Amount specified in the Put Notice 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 holder'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 [INTENTIONALLY OMITTED]
Section 2.5 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor pursuant to this Agreement to purchase shares of Common Stock shall, at
Investor's option, terminate permanently (including with respect to a Closing
Date that has not yet occurred) in the event that (a) there shall
7
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, or made public 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 [INTENTIONALLY OMITTED]
Section 2.8 LIQUIDATED DAMAGES. Each of the Company and Investor
acknowledges and agrees that 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 acknowledges 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 Section 2.6 bears a reasonable proportion and are
not plainly or grossly disproportionate to the probable loss likely to be
incurred by Investor 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, Investor 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 the Common Stock. Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
8
Section 3.3 AUTHORITY. 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;
(a) 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
(b) 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,
Articles of Association, Certificate of Incorporation 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 has 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 as it
relates in any manner to this Agreement.
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.
9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as disclosed
in the SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, 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 consists of 645,000,000 shares of Common
Stock, of which, as of June 30, 2004, 641,970,392 shares were issued and
outstanding, and 10,000,000 shares of preferred stock, par value $.10 per share,
of which, as of June 30, 2004, 1,752 Series H shares were issued and
outstanding. Except for options to purchase 504,923,944 shares of Common Stock,
warrants to purchase 897,054,087 shares of Common Stock, and conversion rights
and exchange rights to purchase 2,624,773,281 shares of Common Stock and any
rights to purchase shares of Common Stock existing under the July 25, 2002
Private Equity Credit Agreement between the Company and the Investor, there
were, as of June 30, 2004, 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 nonassessable.
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 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). To the best of
Company's knowledge, 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
10
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. To the best of
Company's knowledge, 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 nonassessable. 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,
except as may be provided by applicable law.
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) has 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
11
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 Over The Counter
Bulletin Board); 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 June 30, 2004, 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 June 30,
2004 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since June 30, 2004,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents or otherwise.
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, nor any
12
Person representing the Company in connection with the transactions contemplated
by this Agreement, has 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 TRADING IN SECURITIES. The Company specifically acknowledges
that, except to the extent specifically provided herein or in any of the other
Transaction Documents (but limited in each instance to the extent so specified),
the Investor retains the right (but is not otherwise obligated) to buy, sell,
engage in hedging transactions or otherwise trade in the securities of the
Company, including, but not necessarily limited to, the Common Stock, at any
time before, contemporaneous with or after the execution of this Agreement or
from time to time and in any manner whatsoever permitted by applicable federal
and state securities laws.
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 have available
and the Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue the Put Shares for the Minimum
Commitment Amount and the Blackout Shares, if any; such amount of shares of
Common Stock shall be based upon the then applicable Market Price as if a Put
Date occurred twelve Trading Days before the last Trading Day of the most recent
fiscal quarter of the Company for the Put Shares and a good faith estimate by
the Company in consultation with Investor of the number of Blackout Shares, if
any, that will need to be issued. 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 by unissued and reserved shares to
deliver the requisite number of Blackout Shares, the Company
13
shall deliver to Investor such number of Blackout Shares that the Company has
authorized by unissued and unreserved. In either case, the Company shall, at its
expense, promptly seek and use its best efforts to obtain stockholder 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
had occurred within five days prior to the day of the proxy statement prepared
by the Company in connection with such authorization, less 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. 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 use its best efforts to
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 the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under the Exchange 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 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 or 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
14
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 Common 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 and the issuance of the Blackout Shares, if any, shall be made in
accordance with the provisions and requirements of Section 4(2) and/or
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 applicable law,
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, except that officers and/or directors of the Company shall have no
personal liability for the Company's obligations under this Section.
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
15
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. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Common Stock) for general
corporate purposes. 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 or obligation or advance by
the Company to any affiliate or Control Person.
Section 6.14 CERTAIN AGREEMENTS. (a)The Company covenants and agrees that
during the period from the date hereof through the end of the Commitment Period,
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 below
the Market Price on any date which is thirty (30) days prior or subsequent to
any Closing Date.
(b) The provisions of subparagraph 6.14(a) will not apply to (i) Common
Stock issued pursuant to an exemption from registration under the Securities
Act; (ii) an underwritten public offering of shares of Common Stock or preferred
stock; (iii) an offering of convertible preferred stock with a conversion price
at above the Market Price; or (iv) the issuance of securities (other than for
cash) in connection with an acquisition, merger, consolidation, sale of assets,
disposition or the exchange of the capital stock for assets, stock or other
joint venture interests.
(c) In the event the Company breaches the provisions of this Section 6.14,
the Discount shall be amended to be equal to (i) 110% of the Discount set forth
herein and (ii) the Investor may terminate its obligations under this Agreement.
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 REPRESENTATIONS 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 on Investor.
(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.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO
16
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 each 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
Registration Statement with respect to the resale of the Registrable Securities
by Investor.
(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 (i) the initial
Put Notice, an opinion of the Company's legal counsel in the form of Exhibit C
hereto, addressed to Investor.
17
(i) [INTENTIONALLY OMITTED]
(j) 9.9 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) WEIGHTED AVERAGE VOLUME. The Weighted Average Volume for the ten (10)
Trading Days immediately preceding the Put Notice shall have equaled or exceeded
$25,000 (as adjusted for stock splits, stock dividends, reverse stock splits,
and similar events).
(l) 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 (15) Trading Days following the Trading Day on which such Put
Notice is deemed delivered).
(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, if any, 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), or 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
18
information reasonably requested by Investor or any such representative, advisor
or Underwriter in connection with such Registration Statement (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 on
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
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
TRANSFER AGENT INSTRUCTIONS
Section 8.1 LEGENDS AND TRANSFER AGENT INSTRUCTIONS. Unless otherwise
provided below, each certificate representing Registrable Securities will bear
the following legend (the "Legend"):
"The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") or qualified under
applicable state securities laws. These securities may not be offered, sold,
pledged, hypothecated, transferred or otherwise disposed of except pursuant to
(i) an effective registration statement and qualification in effect with respect
thereto under the Securities Act and under applicable state securities law, (ii)
to the extent applicable, Rule 144 under the Securities Act, or (iii) an opinion
of counsel reasonable acceptable to the Company that such registration and
qualification is not
19
required under applicable federal and state securities laws."
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.
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. Other than as
specified in Section 8.1, no legend 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 Transfer Agent with respect
thereto other than as expressly set forth in this Article VIII.
Section 8.3 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 "HOLDER")
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 Holder (the "SOLD SHARES"), which delivery such Holder
anticipated to make using the Put Shares (a "BUY-IN"), then the Company shall
pay to such Holder, 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 Holder'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 Holder in immediately available funds immediately upon demand by
such Holder. By way of illustration and not in limitation of the foregoing, if
such Holder 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 Holder will be $1,000.
Section 8.4 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.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals,
and other
20
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, Xxxxxxxxxxx 00000
Telephone No.: (000) 000-0000 Ext. 3522
Telecopier No.: (000) 000-0000
Attn: Chief Financial Officer
with a copy (which shall not constitute notice) to:
NCT Group, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: (000) 000-0000 Ext. 3572
Telecopier No.: (000) 000-0000
Attn: General Counsel
if to Investor:
Xxxxxxx Road LLC
X/x Xxxxxxxxx Xxxxxxxxxx
X.X.X. 000
XXXX XXXX
XXXXXXX
XXXXXXX XXXXXX XXX.
Telephone No.: 0-000-000-0000
Telecopier No. 0-000-000-0000
with a copy to:
Xxxxxxx & Prager, LLP
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
21
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, 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 Control 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
the 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
officer's, director's, employee's, agent's or Control Person's 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
22
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 to 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 Third
Party Claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however, that if
the dispute is not resolved within thirty (30) days after the Claim Notice, the
Indemnifying Party shall be entitled 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,
23
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 if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled 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 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 exclusive jurisdiction of the federal courts whose districts encompass
any part of the County of New York or the state courts of the State of New York
sitting in the County of New York in connection with any dispute arising under
this Agreement or any of the other Transaction Documents and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
Section 10.2 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.
Section 10.3 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 10.4 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, (a) 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
24
acquired by Investor hereunder with respect to the Common Stock held by such
person, and (b) Investor's interest in this Agreement may be assigned at any
time, in whole but not in part, to any affiliate of Investor.
Section 10.5 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 10.6 TERMINATION. This Agreement shall terminate at the end of
Commitment Period or as otherwise provided herein (unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of Articles VI, VIII, IX and Sections 10.1, 10.2 and 10.3 shall survive the
termination of this Agreement.
Section 10.7 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 10.8 FEES AND EXPENSES. 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. 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 Put
Shares and Blackout Shares, if pursuant hereto.
Section 10.9 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 10.10 COUNTERPARTS - TERMINATION OF PRIOR AGREEMENTS. 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. The Private
Equity Credit Agreement between the parties dated July 25, 2002 is hereby
terminated and shall be of no further force or effect.
Section 10.11 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.
25
Section 10.12 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 10.13 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 10.14 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 trading price 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 10.17 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 party, 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 party 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
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: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
XXXXXXX ROAD LLC
By: /s/ Xxxxx Xxxx
-------------------------------------------
Name: Xxxxx Xxxx
Title: Director
Navigator Management Ltd.
27
EXHIBITS
--------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT C Opinion to Investor
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
EXHIBIT F Joint Escrow Instructions
28
