Exhibit 10(bq)(1)
REGISTRATION RIGHTS AGREEMENT
RELATING TO THE
PRIVATE EQUITY CREDIT AGREEMENT
This Registration Rights Agreement ("Agreement"), dated as of July 25,
2002, is made by and between NCT GROUP, INC., a corporation organized and
existing under the laws of the state of Delaware (the "Company"), and ▇▇▇▇▇▇▇
ROAD LLC, an entity organized and existing under the laws of the Cayman Islands
(the "Investor").
Recitals
WHEREAS, upon the terms and subject to the conditions of the Private Equity
Credit Agreement of even date (the "Equity Credit Agreement"), between the
Investor and the Company, the Company has agreed to issue and sell to the
Investor up to Fifty Million Dollars ($50,000,000) of shares ("Subscribed
Shares") of the common stock of the Company, par value $.01 per share (the
"Common Stock"), and
WHEREAS, to induce the Investor to execute and deliver the Equity Credit
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, "Securities Act"),
and applicable state securities laws with respect to the Subscribed Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Potential Material Event" means any of the following: (a) the
possession by the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the Registration Statement would be detrimental to the business and affairs of
the Company, or (b) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a Registration Statement at such time,
which determination is accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.
(ii) "Register", "registered" and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a delayed or
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "NASD" means the National Association of Securities Dealers, Inc.
(iv) "Prospectus" or "prospectus" means the prospectus included in the
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
(b) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Equity Credit Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare and file with the
SEC, no later than thirty (30) business days after the effectiveness of the
registration statement for the Exchange Agreement dated as of June 21, 2002,
between the Company and Investor ("Filing Date"), a Registration Statement
registering for distribution by the Investor pursuant to Rule 457(o) of the
Securities Act, no less than (a) 112% of the Maximum Commitment Amount under the
Equity Credit Agreement (the "Registrable Securities"). The Registration
Statement (W) shall include the Registrable Securities, and with the prior
written consent of the Investor, which shall not be unreasonably withheld, upt
to 10,000,000 adsitional shares of Common Stock and (X) shall state that, in
accordance with Rules 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
to prevent dilution resulting from stock splits, or stock dividends. If at any
time the number of Registrable Securities exceeds the aggregate number of shares
of Common Stock then registered, the Company shall file with the SEC an
additional Registration Statement to register the Subscribed Shares that exceed
the aggregate number of shares of Common Stock already registered.
(b) Termination. If the Registration Statement covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective within one hundred twenty (120) days from the Filing
Date, or any Blackout Period exceeds thirty (30) days, then the Investor may, at
the Investor's option, by twenty (20) days prior written notice (with
opportunity to cure), terminate its Investment Obligation under the Equity
Credit Agreement (the "Commitment"), and the Investor shall be entitled to the
sums, if any, set forth in Section 2.7 of the Equity Credit Agreement.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) The Company shall prepare and file with the SEC by the Filing Date, a
Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and, thereafter, use all diligent
efforts to cause the Registration Statement relating to the Registrable
Securities to become effective the earlier of (a) five (5) business days after
notice from the SEC that the Registration Statement may be declared effective,
or (b) the Effective Date, and keep the Registration Statement effective at all
times until the earliest of (i) the date that is eighteen (18) months after the
last Closing Date under the Equity Credit Agreement, (ii) the date when the
Investor may sell all Registrable Securities under Rule 144(k) without volume
limitations, or (iii) the date the Investor no longer owns any of the
Registrable Securities (collectively, the "Registration Period"). The
Registration Statement (including any amendments or supplements, thereto and
Prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the Prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during the Registration Period, it shall
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until the expiration of the Registration Period.
(c) The Company shall permit a single firm of counsel designated by the
Investor to review the Registration Statement and all amendments and supplements
thereto a reasonable period of time (but not less than three (3) business days)
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects; it being understood that such review and
objections shall relate exclusively to matters in the Registration Statement or
omitted therefrom affecting any or all of the Equity Credit Agreement, Investor
and the Registrable Securities or compliance with the terms of this Agreement or
the other Transaction Documents.
(d) The Company shall notify Investor and Investor's legal counsel
identified to the Company (which, until further notice, shall be deemed to be
▇▇▇▇▇▇▇ & Prager, LLP, ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.; "Investor's Counsel") (and,
in the case of (i)(A) below, not less than five (5) business days prior to such
filing) and (if requested by any such person) confirm such notice in writing no
later than one (1) business day following the day (i): (A) when a prospectus or
any prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) whenever the SEC notifies the Company
whether there will be a "review" of such Registration Statement; and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the SEC or any other Federal
or state governmental authority for amendments or supplements to the
Registration Statement or the Prospectus or for additional information; (iii) of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
knowledge of the Company makes any statement made in the Registration Statement
or the Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires any
revisions to the Registration Statement, the Prospectus or other documents so
that, in the case of the Registration Statement or the Prospectus, as the case
may be, it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(e) The Company shall furnish to Investor and Investor's Counsel, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary Prospectus and the Prospectus, each amendment or supplement
thereto, all correspondence to, with, or from the SEC, and (ii) such number of
copies of a Prospectus, including a preliminary Prospectus, and all amendments
and supplements thereto and such other documents, as the Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by the Investor.
(f) The Company shall use all diligent efforts to (i) register and/or
qualify the Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as the Investor may
reasonably request and in which significant volumes of shares of Common Stock
are traded, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualification in effect at all
times during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions: provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (A) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(f), (B) subject itself to general taxation in any such
jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause more than nominal expense
or burden to the Company or (E) make any change in its charter or by-laws or any
then existing contracts.
(g) The Company shall, as promptly as practicable after becoming aware of
such event, notify the Investor of the happening of any event of which the
Company has knowledge, as a result of which the Prospectus included in the
Registration Statement, as then in effect, includes any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading ("Registration Default"), and use its
best efforts to promptly prepare a supplement or amendment to the Registration
Statement or other appropriate filing with the SEC to correct such untrue
statement or omission, and any other necessary steps to cure the Registration
Default, and deliver a number of copies of such supplement or amendment to the
Investor as the Investor may reasonably request.
(h) The Company shall, as promptly as practicable after becoming aware of
such event, notify the Investor (or, in the event of an underwritten offering,
the managing underwriters) of the issuance by the SEC of any notice of
effectiveness or any stop order or other suspension of the effectiveness of the
Registration Statement.
(i) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies Investor in writing of the existence of a Potential Material Event
("Blackout Notice"), Investor shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until Investor receives written notice (the "Blackout
End Notice") from the Company that such Potential Material Event either has been
disclosed to the public or no longer constitutes a Potential Material Event (the
period from the Investor's receipt of the Blackout Notice until the Blackout End
Notice, "Blackout Period"); provided, however, that the Company may not so
suspend or delay the right of the Investor to sell the Registrable Securities
other than during a Permitted Suspension Period. The term "Permitted Suspension
Period" means up to two Blackout Periods during any consecutive 12-month period,
each of which Blackout Period shall not either (i) be for more than five (5)
days or (ii) begin less than ten (10) Trading Days after the last day of the
preceding suspension (whether or not such last day was during or after a
Permitted Suspension Period); and provided further that the Company shall, if
lawful to do so, provide the Investor with at least two (2) business days'
notice of the existence (but not the substance) of a Potential Material Event.
(j) The Company shall use its commercially reasonable efforts, if eligible,
either to (i) cause all the Registrable Securities covered by the Registration
Statement to be listed on a national securities exchange and on each additional
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation of all the Registrable Securities covered by the
Registration Statement as a National Association of Securities Dealers Automated
Quotations System ("Nasdaq") "Small Capitalization" within the meaning of Rule
11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the quotation of the Registrable Securities on the Nasdaq
Small Cap Market; or if, despite the Company's commercially reasonable efforts
to satisfy the preceding clause (i) or (ii), the Company is unsuccessful in
doing so, to secure NASD authorization and quotation for such Registrable
Securities on the over-the-counter bulletin board and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the NASD as such with respect to such Registrable Securities.
(k) The Company shall provide a transfer agent for the Registrable
Securities not later than the Effective Date.
(l) The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates for
the Registrable Securities to be in such denominations or amounts as the case
may be, as the Investor may reasonably request and registration in such names as
the Investor may reasonably request; and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investor) an appropriate instruction and opinion
of such counsel, if so required by the Company's transfer agent.
(m) The Company shall comply with all applicable rules and regulations of
the Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the Effective Date,
which statement shall cover said 12-month period, or any shorter period as is
consistent with the requirements of Rule 158.
(n) The Company shall take all other reasonable actions necessary to
expedite and facilitate distribution to the Investor of the Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Investor. In connection with the registration of the
Registrable Securities, the Investor shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the Registration pursuant to this Agreement with respect to the
Registrable Securities of the Investor that the Investor shall timely furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of the Registrable Securities held
by it, as shall be reasonably required to effect the Registration of such
Registrable Securities and shall timely execute such documents in connection
with such Registration as the Company may reasonably request. If the
Registration Statement refers to the Investor by name or otherwise as the holder
of any securities of the Company, then such Investor shall have the right to
require (i) the inclusion therein of language, in form and substance reasonably
satisfactory to the Investor, to the effect that the ownership by the Investor
of such securities is not to be construed as a recommendation by the Investor of
the investment quality of the Company's securities covered thereby and that such
ownership does not imply that the Investor will assist in meeting any future
financial requirements of the Company, or (ii) if such reference to the Investor
by name or otherwise is not required by the Securities Act or any similar
Federal statute then in force, the deletion of the reference to the Investor in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
(b) The Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder.
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(g) or 3(h),
above (except for an SEC notice of effectiveness), such Investor will
immediately, if required, discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(g) or 3(h).
5. Expenses of Registration. (a) All reasonable expenses (other than
underwriting discounts and commissions to the Investor) incurred in connection
with Registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all Registration, listing, and qualifications fees, printers
and accounting fees, the fees and disbursements of counsel for the Company and a
fee for a single counsel for Investor of $4,500 for the initial Registration
Statement and $2,000 for each Additional Registration Statement covering the
Registrable Securities shall be borne by the Company.
(b) Except as otherwise provided for in Schedule 5(b) attached hereto, the
Company nor any of its subsidiaries has, as of June 30, 2002, and the Company
shall not on or after such date , have entered or enter into any agreement with
respect to its securities that is inconsistent with the rights granted to
Investor in this Agreement or otherwise conflicts with the provisions hereof.
Except as otherwise provided for in Schedule 5(b), the Company has not, on or
prior to June 30, 2002, entered into any agreement granting any registration
rights with respect to any of its securities to any person. Except as otherwise
provided for in this Section 5, and without limiting the generality of the
foregoing, without the written consent of Investor, the Company shall not, after
June 30, 2002, have granted or grant to any person any new right to request the
Company to Register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of Investor set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement and the other Transaction
Documents.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an _Indemnified Party_), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
Prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the final Prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to clause (b) of this Section 6, the Company shall reimburse the Investor,
promptly as such expenses are incurred and are due and payable, for any legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not (I) apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Indemnified Party
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
Prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the Prospectus made available by
the Company; (III) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or (IV) apply to the extent that such
Claims are caused by, result from or arise out of any breach of this Agreement
by the Investor or any intentionally wrongful or grossly negligent conduct by
the Investor. Each Investor will indemnify the Company and its officers,
directors and agents (each, an _Indemnified Party_) against any Claims arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, or arising out of or based upon a failure of the
Investor to deliver or cause to be delivered the Prospectus made available by
the Company, subject to such limitations and conditions as are applicable to the
indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Party and shall survive the offering and transfer of
the Registrable Securities by the Investor pursuant to Section 9(f).
(b) Promptly after receipt by an Indemnified Party under this Section 6 of
notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Party. In case any such action is
brought against any Indemnified Party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, assume the defense thereof, subject to the provisions
herein stated and after notice from the indemnifying party to such Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will not be liable to such Indemnified Party under this Section 6 for any legal
or other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and reasonable out-of-pocket expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Party under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; and (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation.
8. Reports under Exchange Act. With a view to making available to the
Investor the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act;
(c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company
solely if unavailable by ▇▇▇▇▇, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration; and
(d) at the request of any Investor, give its Transfer Agent instructions
(supported by an opinion of Company counsel, if required or requested by the
Transfer Agent) to the effect that, upon the Transfer Agent's receipt from such
Investor of:
(i) a certificate (a "Rule 144 Certificate") certifying (A) that such
Investor has held the shares of Registrable Securities which the Investor
proposes to sell (the "Securities Being Sold") for a period of not less
than (1) year and (B) as to such other matters as may be appropriate in
accordance with Rule 144 under the Securities Act, and
(ii) an opinion of Investor's counsel, acceptable to the Company, that
based on the Rule 144 Certificate, the Securities Being Sold may be sold
pursuant to the provisions of Rule 144, even in the absence of an effective
Registration Statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the
Investor, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Investor). If the Transfer Agent requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.
9. Miscellaneous.
(a) Registered Owners. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities, who shall provide a bond or other form of satisfactory
protection to the Company so as to cover contingent liability against any other
claimants.
(b) Rights Cumulative; Waivers. The rights of each of the parties under
this Agreement are cumulative. The rights of each of the parties hereunder shall
not be capable of being waived or varied other than by an express waiver or
variation in writing. Any failure to exercise or any delay in exercising any of
such rights shall not operate as a waiver or variation of that or any other such
right. Any defective or partial exercise of any of such rights shall not
preclude any other or further exercise of that or any other such right. No act
or course of conduct or negotiation on the part of any party shall in any way
preclude such party from exercising any such right or constitute a suspension or
any variation of any such right.
(c) Liability. The Company acknowledges that any failure by the Company to
perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.
(d) Benefit; Successors Bound. This Agreement and the terms, covenants,
conditions, provisions, obligations, undertakings, rights, and benefits hereof,
shall be binding upon, and shall inure to the benefit of, the undersigned
parties and their heirs, executors, administrators, representatives, successors,
and permitted assigns.
(e) Entire Agreement. This Agreement contains the entire agreement between
the parties with respect to the subject matter hereof. There are no promises,
agreements, conditions, undertakings, understandings, warranties, covenants or
representations, oral or written, express or implied, between them with respect
to this Agreement or the matters described in this Agreement, except as set
forth in this Agreement and in the other documentation relating to the
transactions contemplated by this Agreement solely as the same are referred to
herein. Any such promises, agreements, condition, undertakings, understandings,
warranties, covenants or representations, shall not be used to interpret or
constitute this Agreement.
(f) Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement may be assigned by the Investors to any
transferee, only if: (a) the assignment requires that the Transferee be bound by
all of the provisions contained in this Agreement, and Investor and the
transferee or assignee (the "Transferee") enter into a written agreement, which
shall be enforceable by the Company against the Transferee and by the Transferee
against the Company, to assign such rights; and (b) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws. In the event of any delay in filing or effectiveness of
the Registration Statement as a result of such assignment, the Company shall not
be liable for any damages arising from such delay.
(g) Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Investor. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon the Company and any subsequent Transferees.
(h) Severability. Each part of this Agreement is intended to be severable.
In the event that any provision of this Agreement is found by any court or other
authority of competent jurisdiction to be illegal or unenforceable, such
provision shall be severed or modified to the extent necessary to render it
enforceable and as so severed or modified, this Agreement shall continue in full
force and effect.
(i) Notices. Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be given as provided in the Equity Credit
Agreement.
(j) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass 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 and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.
(k) 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.
(l) Consents. The person signing this Agreement on behalf of each party
hereby represents and warrants that he has the necessary power, consent and
authority to execute and deliver this Agreement on behalf of that party.
(m) Further Assurances. In addition to the instruments and documents to be
made, executed and delivered pursuant to this Agreement, the parties hereto
agree to make, execute and deliver or cause to be made, executed and delivered,
to the requesting party such other instruments and to take such other actions as
the requesting party may reasonably require to carry out the terms of this
Agreement and the transactions contemplated hereby.
(n) Section Headings. The Section headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(o) Construction. Unless the context otherwise requires, when used herein,
the singular shall be deemed to include the plural, the plural shall be deemed
to include each of the singular, and pronouns of one or no gender shall be
deemed to include the equivalent pronoun of the other or no gender.
(p) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
NCT GROUP, INC.
By: /s/ ▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Title: Senior Vice President & CFO
----------------------------
▇▇▇▇▇▇▇ ROAD LLC
By: /s/▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: Navigator Management Ltd.
----------------------------
Title: Director
----------------------------
SCHEDULE 5(b)
NCT Group, Inc.
Common Stock Registration Obligations
As of June 30, 2002
No. Shares
----------
Issued and Outstanding Shares 4,991,041
Secured Convertible Notes (▇▇▇▇▇▇▇) 112,261,346
▇▇▇▇▇▇▇ Interest 4,747,211
▇▇▇▇▇▇▇ Default Penalty 14,150,867
▇▇▇▇▇▇▇ Warrants 25,554,310
Other Warrants 59,200,141
Options 48,880,923
Theatre Radio Network 7,207,785
Midcore Look Back Shares 14,655,337
8% Convertible Note 3/14/01 346,123
Interest thereon 46,125
8% Convertible Notes 4/12/01 173,062
Interest thereon 20,587
NCT Group Promissory Note 3/11/02 8,038,647
Interest thereon 195,570
NCT Preferred Stock Series H 455,696,203
Preferred stock accretion 41,012,658
Pro Tech Preferred Stock Series A 909,810
Pro Tech Preferred accretion 63,712
Pro Tech Preferred Stock Series B 9,493,671
Pro Tech Preferred accretion 348,535
Artera Group Promissory Notes 1/9/01 33,364,557
Interest thereon 4,831,919
Artera Group Promissory Notes 4/4/01 15,506,329
Interest thereon 1,595,665
Artera Group Promissory Notes 5/25/01 1,439,873
Interest thereon 98,937
Artera Group Promissory Notes 6/29/01 20,569,620
Interest thereon 1,227,415
Artera Group Series A Preferred Stock 70,364,557
Artera Group Preferred accretion 3,763,058
Artera Group Promissory Note 1/10/02 11,313,291
Interest thereon 424,016
-------------
Total 972,492,902
=============
Notes:
------
- Excludes registration obligations under the Private Equity Credit Agreement
to which this Registration Rights Agreement relates.
- Excludes shares covered on the NCT Group, Inc. registration statement
currently pending before the Securities and Exchange Commission
(Registration No. 333-60574).
- Excludes registration obligations under the April 12, 2001 Private Equity
Credit Agreement between NCT Group, Inc. and ▇▇▇▇▇▇▇ Road LLC.
- Calculated based upon Friday, June 28, 2002 closing bid price of $0.079 in
accordance with respective agreements (where applicable).