Exhibit 10(bx)
SETTLEMENT AGREEMENT AND RELEASE
THIS AGREEMENT is dated as of October 30, 2002 and is made by and between
XXXXXXX ROAD LLC ("Xxxxxxx Road") and NCT GROUP, INC. ("NCT").
BACKGROUND
WHEREAS, NCT and Xxxxxxx Road entered into a Private Equity Credit
Agreement dated as of September 27, 2000 (the "2000 Agreement"), under which
Xxxxxxx Road acquired $500,000 of common stock, par value $.01 per share, of NCT
("Common Stock"); and
WHEREAS, NCT and Xxxxxxx Road entered into a Private Equity Credit
Agreement dated as of April 12, 2001 (the "Equity Credit Agreement"), which
Xxxxxxx Road asserts obligated NCT to put a minimum of $17,000,000 (the "Minimum
Commitment Amount") of Common Stock to Xxxxxxx Road by means of monthly put
notices; and
WHEREAS, simultaneously with the execution of the Equity Credit Agreement,
Xxxxxxx Road and NCT entered into a Registration Rights Agreement (the "Equity
Registration Rights Agreement"), also dated as of April 12, 2001, which Xxxxxxx
Road asserts required NCT to file a registration statement with the Securities
and Exchange Commission ("SEC") (the "Equity Credit Registration Statement") and
to cause such Equity Credit Registration Statement to become effective on or
before September 15, 2001; and
WHEREAS, after execution of the Equity Credit Agreement, NCT did not
deliver any put notices to Xxxxxxx Road and did not put to Xxxxxxx Road
$17,000,000 of its Common Stock; and
WHEREAS, NCT did not, in connection with the Equity Registration Rights
Agreement, cause the Equity Credit Registration Statement to be filed or to
become effective by September 15, 2001; and
WHEREAS, pursuant to the terms of an Exchange Agreement dated as of April
12, 2001 (the "Exchange Agreement"), NCT agreed to acquire from Xxxxxxx Road
2,000 shares of common stock, without par value ("DMC NY Common Stock"), of DMC
New York, Inc. ("DMC NY") having an aggregate value of $2,000,000 in exchange
for 13,333,333 shares of Common Stock; and
WHEREAS, simultaneously with the execution of the Exchange Agreement, NCT
and Xxxxxxx Road entered into a Registration Rights Agreement, dated as of April
12, 2001 (the "Exchange Registration Rights Agreement"), which required NCT to
file a registration statement with the SEC (the "Exchange Registration
Statement"); and
WHEREAS, Xxxxxxx Road asserts that, under the Exchange Agreement, NCT was
obligated to issue to Xxxxxxx Road up to 3,333,334 additional shares of Common
Stock if the closing bid price of the Common Stock was less than $0.15 per share
for the five business days prior to the day before NCT requested acceleration of
the effectiveness of the Exchange Registration Statement (the "Reset Shares");
and
WHEREAS, pursuant to the terms of the Exchange Agreement, Xxxxxxx Road also
received two convertible notes: (i) NCT issued to Xxxxxxx Road its $1,000,000
convertible note (the "Convertible Note") due December 31, 2001 in exchange for
1,000 shares of DMC NY Common Stock, and (ii) NCT's subsidiary, NCT Video
Displays, Inc. ("NCT Video"), entered into a subscription agreement with Xxxxxxx
Road under which NCT Video issued its $500,000 convertible note due December 31,
2001 (the "$500,000 Note") to Xxxxxxx Road in exchange for a $500,000 loan; and
WHEREAS, after entering into the Exchange Agreement, NCT did not pay the
principal or interest described in the Convertible Note and did not issue the
Reset Shares; and
WHEREAS, NCT did not cause the Exchange Registration Statement registering
the shares of Common Stock associated with the Exchange Agreement, the
Convertible Note, the $500,000 Note or the 2000 Agreement to be filed or to
become effective by July 26, 2001; and
WHEREAS, on April 12, 2001, NCT entered into a related agreement with
Xxxxxxx Road (the "Additional Agreement") under which NCT agreed to purchase
1,000 shares of DMC NY Common Stock from Xxxxxxx Road for $1,000,000 in cash if
certain milestones relating to registration, via the Exchange Registration
Statement, of the NCT Common Stock described in the Exchange Registration Rights
Agreement were not met; and
WHEREAS, NCT made a cash payment of $100,000 under the Additional Agreement
but did not pay the remaining $900,000 described therein;
WHEREAS, on or about September 9, 0000, Xxxxxxx Xxxx filed an action
against NCT entitled Xxxxxxx Road LLC vs. NCT Group, Inc., Civil Action No.
302CV1590 (the "Action"), United States District Court, District of Connecticut
(the "Court"), whereby Xxxxxxx Road asserted claims against NCT under the Equity
Credit Agreement, Equity Registration Rights Agreement, Exchange Agreement,
Exchange Registration Rights Agreement and Additional Agreement (collectively,
the "2001 Agreements"); and
WHEREAS, Xxxxxxx Road and NCT desire to resolve, settle and compromise,
among other things, the claims that Xxxxxxx Road has asserted against NCT, which
arise out of or relate to (a) the Equity Credit Registration Statement, (b) the
Exchange Registration Statement, (c) the delivery of put notices and puts of
Common Stock described above, (d) the issuance of the Reset Shares, (e) the
payments under the Convertible Note and (f) the payment of $900,000 under the
Additional Agreement (items (a) - (f) hereinafter referred to collectively as
the "Claims").
With this background incorporated herein, the parties hereby agree to the
following settlement:
TERMS OF SETTLEMENT
1. SETTLEMENT SHARES. Following entry of an order by the Court in
accordance with Paragraph 2 herein and the delivery by Xxxxxxx Road to NCT of
the Stipulation of Dismissal (as defined below), NCT shall issue and deliver to
Xxxxxxx Road shares of Common Stock (the "Settlement Shares") as follows:
(a) Forty million (40,000,000) shares of Common Stock shall be issued and
delivered by NCT to Xxxxxxx Road within ten days after the entry of an
Order by the Court in accordance with Paragraph 2 herein and the delivery
by Xxxxxxx Road to NCT of the Stipulation of Dismissal; and
(b) Twenty-eight million (28,000,000) shares of Common Stock (the "Additional
Settlement Shares") shall be issued and delivered by NCT to Xxxxxxx Xxxx 00
days after delivery of a written demand by Xxxxxxx Road to NCT for the
Additional Settlement Shares (which written demand may be made only if, by
then, the Order and Stipulation of Dismissal described above have been
entered and delivered, respectively).
Notwithstanding anything to the contrary contained herein, it is the intention
of the parties that the Additional Settlement Shares, together with all other
shares of Common Stock then owned by Xxxxxxx Road, whether of record or
beneficially, should not result in Xxxxxxx Road owning more than 9.9% of all
such Common Stock as would be outstanding on the date of the notice demanding
the Additional Settlement Shares.
2. FAIRNESS HEARING. Upon the execution hereof, Xxxxxxx Road and NCT agree,
pursuant to 15 U.S.C.ss.77(a)(10), to immediately submit the terms and
conditions of this Agreement to the Court for a hearing on the fairness of such
terms and conditions, and the issuance exempt from registration of the
Settlement Shares. This Agreement shall become binding upon the parties only
upon entry of an order by the Court substantially in the form annexed hereto as
Exhibit A (the "Order").
3. NECESSARY ACTION. At all times after the execution of this Agreement and
entry of the Order by the Court, each party hereto agrees to take or cause to be
taken all such necessary action including, without limitation, the execution and
delivery of such further instruments and documents, as may be reasonably
requested by any party for such purposes or otherwise necessary to complete or
perfect the transactions contemplated hereby.
4. RELEASES. Upon receipt of all of the Settlement Shares for and in
consideration of the terms and conditions of this Agreement, and except for the
obligations and representations arising or made hereunder or a breach hereof,
the parties hereby release, acquit and forever discharge the other and each,
every and all of their current and past officers, directors, shareholders,
affiliated corporations, subsidiaries, agents, employees, representatives,
attorneys, predecessors, successors and assigns (the "Released Parties"), of and
from any and all claims, damages, causes of action, suits and costs, of whatever
nature, character or description, whether known or unknown, anticipated or
unanticipated, which the parties may now have or may hereafter have or claim to
have against each other with respect to (a) the Claims, (b) registration
obligations under the 2000 Agreement (to the extent, if any, that a release
therefrom has not already been given) and (c) the 2001 Agreements. Nothing
contained herein shall be deemed to negate or affect Xxxxxxx Road's right and
title to any securities heretofore issued to it by NCT or any subsidiary of NCT.
5. CONTINUING JURISDICTION. Simultaneously with the execution of this
Agreement, the attorneys representing the parties hereto will execute a
stipulation of dismissal substantially in the form annexed hereto as Exhibit B
(the "Stipulation of Dismissal"). In order to enable the Court to grant specific
enforcement or other equitable relief in connection with this Agreement, (a) the
parties consent to the jurisdiction of the Court for purposes of enforcing this
Agreement and (b) each party to this Agreement expressly waives any contention
that there is an adequate remedy at law or any like doctrine that might
otherwise preclude injunctive relief to enforce this Agreement.
6. CONDITIONS PRECEDENT. If NCT shall default in delivering the Settlement
Shares to Xxxxxxx Road as required by Paragraphs 1 and 2 herein, or if the Order
shall not have been entered by the Court on or prior to December 31, 2002, then
this Agreement shall be null and void, unless extended by written agreement of
the parties. Both parties agree to use their best efforts to cooperate with the
Court to cause the Order to be timely entered and agree that delays caused due
to Court calendars shall not constitute a valid reason to void this Agreement.
7. INFORMATION. NCT and Xxxxxxx Road each represent that prior to the
execution of this Agreement, they have fully informed themselves of its terms,
contents, conditions and effects, and that no promise or representation of any
kind has been made to them except as expressly stated in this Agreement.
8. OWNERSHIP AND AUTHORITY. NCT and Xxxxxxx Road represent and warrant that
they have not sold, assigned, transferred, conveyed or otherwise disposed of any
or all of any claim, demand, right or cause of action, relating to any matter
which covered by this Agreement, that each is the sole owner of such claim,
demand, right or cause of action, and each has the power and authority and has
been duly authorized to enter into and perform this Agreement and that this
Agreement is the binding obligation of each, enforceable in accordance with its
terms.
9. NO ADMISSION. This Agreement is contractual and it has been entered into
in order to compromise disputed claims and to avoid the uncertainty and expense
of the litigation. This Agreement and each of its provisions in any orders of
the Court relating to it shall not be offered or received in evidence in any
action, proceeding or otherwise used as an admission or concession as to the
merits of the Action or the liability of any nature on the part of any of the
parties hereto except to enforce its terms.
10. BINDING NATURE. This Agreement shall be binding on all parties
executing this Agreement and their respective successors, assigns and heirs.
11. AUTHORITY TO BIND. Each party to this Agreement represents and warrants
that the execution, delivery and performance of this Agreement and the
consummation of the transactions provided in this Agreement have been duly
authorized by all necessary action of the respective entity and that the person
executing this Agreement on its behalf has the full capacity to bind that
entity. Each party further represents and warrants that is has been represented
by independent counsel of its choice in connection with the negotiation and
execution of this Agreement and that counsel has reviewed this Agreement.
12. SIGNATURES. This Agreement may be signed in counterparts and the
Agreement, together with its counterpart signature pages, shall be deemed valid
and binding on each party when duly executed by all parties.
13. CHOICE OF LAW, ETC. Notwithstanding the place where this Agreement may
be executed by either of the parties, or any other factor, all terms and
provisions hereof shall be governed by and construed in accordance with the laws
of the State of Connecticut, applicable to agreements made and to be fully
performed in that State and without regard to the principles of conflicts of
laws thereof. Any action brought to enforce, or otherwise arising out of this
Agreement shall be brought only in the Federal Court sitting in the State of
Connecticut.
14. INCONSISTENCY. In the event of any inconsistency between the terms of
this Agreement and any other document executed in connection herewith, the terms
of this Agreement shall control to the extent necessary to resolve such
inconsistency.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first indicated above.
XXXXXXX ROAD LLC
By: /s/ NAVIGATOR MANAGEMENT LTD.
-----------------------------
Its DIRECTOR
-------------------------------
NCT GROUP, INC.
By: XX X. XXXXXXX
-------------------------------
Its SENIOR VP & CFO
-------------------------------
EXHIBIT A
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
-----------------------------------------------------------
CIVIL ACTION NO:
XXXXXXX ROAD LLC,
302-CV-1590 (RNC)
Plaintiff,
- against -
____________, 2002
NCT GROUP, INC.,
Defendant.
-----------------------------------------------------------
ORDER GRANTING APPROVAL OF SETTLEMENT AGREEMENT
This matter having come on for a hearing on the ____ day of ____________,
2002, to approve the Settlement Agreement and Release entered into as of
______________, 2002 (the "Settlement Agreement") between Plaintiff Xxxxxxx Road
LLC ("Xxxxxxx Road") and Defendant NCT Group, Inc. ("NCT" and, collectively with
Xxxxxxx Road, the "Parties"), and the Court having held a hearing as to the
fairness of the terms and conditions of the Settlement Agreement and being
otherwise fully advised in the premises, the Court hereby finds as follows:
1. The Court has been advised that the Parties intend that the sale of the
Settlement Shares (as defined by the Settlement Agreement and, hereinafter, the
"Settlement Shares") to and the resale of the Settlement Shares by Xxxxxxx Road
in the United States, assuming satisfaction of all other applicable securities
laws and regulations, will be exempt from registration under the Securities Act
of 1933 (the "Securities Act") in reliance upon Section 3(a)(10) of the
Securities Act based upon this Court's finding herein that the terms and
conditions of the issuance of the Settlement Shares by NCT to Xxxxxxx Road are
fair to Xxxxxxx Road;
2. The hearing having been scheduled upon the consent of Xxxxxxx Road and
NCT, Xxxxxxx Road has had adequate notice of the hearing and Xxxxxxx Road is the
only party to whom Settlement Shares will be issued pursuant to the Settlement
Agreement;
3. The terms and conditions of the issuance of the Settlement Shares in
exchange for the release of certain claims as set forth in the Settlement
Agreement are fair to Xxxxxxx Road, the only party to whom the Settlement Shares
will be issued;
4. The fairness hearing was open to Xxxxxxx Road. Xxxxxxx Road was
represented by counsel at the hearing who acknowledged that adequate notice of
the hearing was given and consented to the entry of this order.
It is therefore ORDERED AND ADJUDGED that the Settlement Agreement is
hereby approved as fair to the party to whom the Settlement Shares will be
issued, within the meaning of Section 3(a)(10) of the Securities Act and that
the sale of the Settlement Shares to, and the resale of the Settlement Shares in
the United States by, Xxxxxxx Road, assuming satisfaction of all other
applicable securities laws and regulations, will be exempt from registration
under the Securities Act.
SO ORDERED, this ____ day
of _________________, 2002.
_____________________________
The Honorable _______________
EXHIBIT B
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
-----------------------------------------------------------
CIVIL ACTION NO:
XXXXXXX ROAD LLC,
302-CV-1590 (RNC)
Plaintiff,
- against -
____________, 2002
NCT GROUP, INC.,
Defendant.
-----------------------------------------------------------
STIPULATION OF DISMISSAL
IT IS HEREBY STIPULATED AND AGREED, by and between the undersigned, the
attorneys of record for all the parties to the above-entitled action, pursuant
to the Federal Rules of Civil Procedure, that whereas no party hereto is an
infant or incompetent person for whom a committee has been appointed or
conservatee and no person not a party has an interest in the subject matter of
the action, the above-entitled action be, and the same hereby is, discontinued
with prejudice, each party to bear its own costs.
This Stipulation may be filed without further notice with the Clerk of the
Court.
Dated: _____________, 2002
XXXXXX & XXXXX, LLP ______________________
By:_________________________________________ By:_________________________
Xxxx X. XxXxxxxx _____________________
X.X. Xxx 0000 _____________________
Xxxxxxxxx, XX 00000 _____________________
(000) 000-0000
Attorneys for Plaintiff Attorneys for Defendant
SO ORDERED:
___________________________
The Honorable _____________
