Exhibit 10(a)
SUBSCRIPTION AGREEMENT
Dated as of January 10, 2002
Dear Subscriber:
The subscriber identified on the signature page hereto ("Subscriber")
hereby agrees to purchase, and Artera Group, Inc., a Delaware corporation (the
"Company") hereby agrees to issue and to sell to the Subscriber, 8% Secured
Convertible Notes ("Note") convertible in accordance with the terms thereof into
shares of $.01 par value common stock of NCT Group, Inc., a Delaware corporation
("NCT") (the "Common Stock") for the consideration as set forth on the signature
page hereof ("Purchase Price"). The form of Secured Note is annexed hereto as
Exhibit A. (The Common Stock included in the Securities (as hereinafter defined)
is sometimes referred to herein as the "Shares", "NCT Shares", "Common Shares"
or "Common Stock".) (The Notes and the NCT Shares are collectively referred to
herein as, the "Securities".) Upon acceptance of this Agreement by the
Subscriber, the Company shall issue and deliver the Note against payment, by
federal funds wire transfer of the Purchase Price.
Now, therefore, for good and valuable consideration, receipt of which is
acknowledged, and the mutual promises herein described, it is agreed:
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company and NCT that:
(a) Investment Purpose. The Subscriber is acquiring the Notes, and
upon conversion of the Notes, will acquire the NCT Shares then issuable,
for its own account for investment purposes only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the
Securities Act of 1933, as amended (the "1933 Act"); provided, however,
that by making the representations herein, the Subscriber does not agree to
hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or
pursuant to an effective registration statement under the 1933 Act and in
compliance with applicable state securities laws or an exemption from such
registration.
(b) Information on Company. The Subscriber, and its advisors, if any,
have been furnished with written information relating to the business of
the Company and NCT and such other information concerning their operations,
financial condition and other matters as the Subscriber has requested. The
Subscriber and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and NCT. Neither such inquiries nor any other
due diligence investigations conducted by the Subscriber or its advisors,
if any, or their representatives shall modify, amend or affect the
Subscriber's right to rely on the Company's or NCT's representations and
warranties contained in Section 2 below. The Subscriber understands that
its investment in the Notes and the NCT Shares involves a high degree of
risk. The Subscriber has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with
respect to its acquisition of the Notes and the NCT Shares. The Subscriber
has considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(c) Information on Subscriber; Accredited Investor Status. The
Subscriber is an "accredited investor", as such term is defined in
Regulation D promulgated by the Securities and Exchange Commission (the
"Commission") under the 1933 Act, is experienced in investments and
business matters, has made investments of a speculative nature and has
purchased securities of United States publicly-owned companies in private
placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable
the Subscriber to utilize the information made available by the Company and
NCT to evaluate the merits and risks of and to make an informed investment
decision with respect to the proposed purchase, which represents a
speculative investment. The Subscriber has the authority and is duly and
legally qualified to purchase and own the Securities. The Subscriber is
able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof.
(d) Compliance with 1933 Act. The Subscriber understands and agrees
that the Securities are being offered and sold to it in a private placement
in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company and
NCT are relying in part upon the truth and accuracy of, and the
Subscriber's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth herein in
order to determine the availability of such exemptions and the eligibility
of such Subscriber to acquire such securities.
(e) No Governmental Review. The Subscriber understands that no United
States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities, or the fairness or suitability of the investment in the
Securities, nor have such authorities passed upon or endorsed the merits of
the offering of the Securities.
(f) No Broker Commissions or Finder Fees. To the best of its
knowledge, the Subscriber has taken no action which would give rise to any
claim by any person for brokerage commissions, finders' fees or the like
relating to this Agreement or the transactions contemplated hereby except
as described in Section 6 hereof.
(g) Buyer Liquidity. The Subscriber has adequate means of providing
for its current needs and foreseeable financial contingencies.
(h) Transfer or Resale of Securities. The Subscriber understands that
except as provided herein (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned, transferred or otherwise disposed
of by the Subscriber unless (a) subsequently registered under the 1933 Act
and state securities laws, if applicable, (b) the Subscriber shall have
delivered to the Company and NCT an opinion of counsel, in form and
substance reasonably satisfactory to the Company and NCT in connection with
the Notes, to the effect that such Securities to be sold, assigned,
transferred or otherwise disposed of may be sold, assigned, transferred or
otherwise disposed of pursuant to an exemption from such registration, or
(c) the Subscriber provides the Company and to NCT in connection with the
NCT Shares with written customary assurance that such Securities can be
sold, assigned, transferred or otherwise disposed of pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144");
and (ii) any sale of such securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144
is not applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may
require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder.
(i) NCT Shares Legend. The NCT Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO NCT GROUP, INC., THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. "
(j) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO ARTERA GROUP, INC. AND NCT
GROUP, INC., THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT."
(k) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article,
radio or television advertisement, or any other form of general advertising
or solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(l) Powers; Authorization; Enforceability. The Subscriber has all
corporate or company power and authority to enter into and perform this
Agreement. This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Subscriber and is a valid and binding
agreement of the Subscriber enforceable in accordance with its terms,
except as such enforceability may be limited by general principles of
equity and bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally the enforcement
of, applicable creditors' rights and remedies.
(m) Conflicts. To the best knowledge of Subscriber, the execution,
delivery and performance of this Agreement by the Subscriber and the
consummation by the Subscriber of the transactions contemplated hereby will
not (i) conflict with or violate its organizational charters or by-laws, or
(ii) conflict with or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Subscriber is a party.
(n) Correctness of Representations. The Subscriber represents that the
foregoing representations and warranties are true and correct as of the
date hereof and, unless the Subscriber otherwise notifies the Company and
NCT prior to the Closing Date (as hereinafter defined), shall be true and
correct as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
2. NCT Representations and Warranties. NCT represents and warrants to and
agrees with the Subscriber that:
(a) Due Incorporation. NCT is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power to own its properties
and to carry on its business as now being conducted. NCT is duly qualified
as a foreign corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
the business, operations or financial condition of NCT.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of NCT has been duly authorized and validly issued and are fully paid
and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by NCT and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and NCT has full corporate
power and authority necessary to enter into this Agreement and to perform
its obligations hereunder and all other agreements entered into by NCT
relating hereto. To the best knowledge of the officers and directors of
NCT, there are no circumstances known to them that would impair NCT's
ability to perform its obligations described in this Agreement or in the
other agreements delivered in connection with this Agreement, including but
not limited to NCT's compliance with the registration requirements set
forth in Section 10 of this Agreement.
(d) Additional Issuances. Except as described in the Reports (as
defined in Paragraph 2(i) hereof), in other publicly available filings made
by NCT with the Commission (including but not limited to filings made
between the date of this Agreement and January 31, 2002) (the "Other
Filings"), in Other Written Information or as set forth on Schedule 2(d),
there are no outstanding agreements or preemptive or similar rights
affecting NCT's common stock or equity and no outstanding rights, warrants
or options to acquire, or instruments convertible into or exchangeable for,
or agreements or understandings with respect to the sale or issuance of any
shares of common stock or equity of NCT.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over
NCT, or any of its affiliates, the NASD, NASDAQ or NCT's shareholders is
required for execution of this Agreement, and all other agreements entered
into by NCT relating thereto, including, without limitation issuance and
sale of the Securities, and the performance of NCT's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, the
performance by NCT of its obligations under this Agreement and all other
agreements entered into by NCT relating hereto will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default) under
(A) the certificate of incorporation, charter or bylaws of NCT, (B) to
NCT's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to NCT of any court,
governmental agency or body, or arbitrator having jurisdiction over
NCT or any of its affiliates or over the properties or assets of NCT
or any of its affiliates, (C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or any agreement, stock option
or other similar plan, indenture, lease, mortgage, deed of trust or
other instrument to which NCT or any of its affiliates is a party, by
which NCT or any of its affiliates is bound, or to which any of the
properties of NCT or any of its affiliates is subject, or (D) the
terms of any "lock-up" or similar provision of any underwriting or
similar agreement to which NCT, or any of its affiliates is a party
except the violation, conflict, breach, or default of which would not
have a material adverse effect on NCT; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of NCT, or any of
its affiliates.
(g) The NCT Shares. The NCT Shares upon issuance:
(i) are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on the
date of issuance and on the Closing Date, as hereinafter defined, and the
date the Note is converted, the NCT Shares will be duly and validly issued,
fully paid and nonassessable (and if registered pursuant to the 1933 Act,
and resold pursuant to an effective registration statement will be free
trading and unrestricted, provided that the Subscriber complies with the
Prospectus delivery requirements);
(iii) will not have been issued or sold in violation of any preemptive
or other similar rights of the holders of any securities of NCT; and
(iv) will not subject the holders thereof to personal liability by
reason of being such holders.
(h) Litigation. There is no pending or, to the best knowledge of NCT,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over NCT, or
any of its affiliates or subsidiaries that would affect the execution by
NCT or the performance by NCT of its obligations under this Agreement, and
all other agreements entered into by NCT relating hereto. Except as
disclosed in the Reports or other publicly available filings made with the
Commission or Other Written Information, there is no pending or, to the
best knowledge of NCT, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over NCT, or any of its affiliates or subsidiaries, which
litigation, if adversely determined could have a material adverse effect on
NCT.
(i) Reporting Company. NCT is a publicly-held company subject to
reporting obligations pursuant to Sections 15(d) and 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. NCT's common
stock is trading on the NASD OTC Bulletin Board ("Bulletin Board").
Pursuant to the provisions of the 1934 Act, NCT has filed all reports and
other materials required to be filed thereunder with the Commission during
the twelve months preceding the date of this Agreement ("Reports").
(j) No Market Manipulation. NCT has not taken, and will not take,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of the common stock of NCT to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued.
(k) Information Concerning NCT. The Reports contain all material
information relating to NCT and its operations and financial condition as
of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the
Reports, and except as modified in the Other Written Information, in the
Other Filings or in a Schedule hereto, there has been no material adverse
change in NCT's business, financial condition or affairs not disclosed in
the Reports. The Reports do not contain any untrue statement of a material
fact or omit to state a material fact in light of the circumstances when
made required to be stated therein or necessary to make the statements
therein not misleading.
(l) Dilution. The number of Shares issuable upon conversion of the
Notes may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to conversion of the Note. NCT's executive
officers and directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have a potential
dilutive effect. The board of directors of NCT has concluded, in its good
faith business judgment, that such issuance is in the best interests of
NCT. NCT specifically acknowledges that its obligation to issue NCT Shares
upon conversion of the Note is binding upon NCT and enforceable, except as
otherwise described in this Subscription Agreement or the Note, regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of NCT.
(m)Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. NCT will not issue any stop transfer order or other
order impeding the sale and delivery of the Securities, except as may be
required by federal securities laws.
(n) Defaults. Neither NCT nor any of its subsidiaries is in violation
of its Certificate of Incorporation or ByLaws. Neither NCT nor any of its
subsidiaries is (i) in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
material adverse effect on NCT, (ii) in default with respect to any order
of any court, arbitrator or governmental body or subject to or party to any
order of any court or governmental authority arising out of any action,
suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or
(iii) to its knowledge in violation of any statute, rule or regulation of
any governmental authority which violation would have a material adverse
effect on NCT.
(o) No Integrated Offering. Neither NCT, 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 under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings
by NCT for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations
of Bulletin Board nor will NCT or any of its affiliates or subsidiaries
take any action or steps that would cause the offering of the Securities to
be integrated with other offerings. NCT has not conducted and will not
conduct any offering other than the transactions contemplated hereby that
will be integrated with the offer and issuance of the Securities.
(p) No General Solicitation. Neither NCT, nor any of its affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or
sale of the Securities.
(q) Listing. NCT's common stock is quoted on, and listed for trading
on the Bulletin Board. As of the date of this Agreement and the Closing
Date, the Bulletin Board is the Principal Market as defined in Section
7.1(b) of this Agreement. Except as disclosed in the Other Written
Information, NCT has not received any oral or written notice that its
Common Stock will be delisted from the Bulletin Board or that the Common
Stock does not meet all requirements for the continuation of such listing.
(r) No Undisclosed Liabilities. NCT has no liabilities or obligations
which are material, individually or in the aggregate, which are not
disclosed in the Reports, Other Filings and Other Written Information,
other than those incurred in the ordinary course of NCT's businesses since
September 30, 2001 and which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on NCT's financial
condition.
(s) No Undisclosed Events or Circumstances. Since September 30, 2001,
no event or circumstance has occurred or exists with respect to NCT or its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by NCT but which has not been so
publicly announced or disclosed in the Reports or the Other Filings.
(t) Capitalization. The authorized and outstanding capital stock of
NCT as of the date of this Agreement and the Closing Date are set forth on
Schedule 2(t) hereto. Except as set forth in the Reports, Other Filings,
Other Written Information and Schedule 2(t), there are no options,
warrants, or rights to subscribe to, securities, rights or obligations
convertible into or exchangeable for or giving any right to subscribe for
any shares of capital stock of NCT. All of the outstanding shares of
capital stock of NCT have been duly and validly authorized and issued and
are fully paid and nonassessable.
(u) Correctness of Representations. NCT represents that the foregoing
representations and warranties are true and correct as of the date hereof
in all material respects and shall be true and correct in all material
respects as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
3. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power to own 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 each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity; and the Company has
full corporate power and authority necessary to enter into this Agreement
and to perform its obligations hereunder and all other agreements entered
into by the Company relating hereto. To the best knowledge of the officers
and directors of the Company, there are no circumstances known to them that
would impair the Company's ability to perform its obligations described in
this Agreement or in the other agreements delivered in connection with this
Agreement.
(d) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the NASD, NASDAQ or the Company's
shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(e) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance by the Company of
its obligations under this Agreement and all other agreements entered into
by the Company relating hereto will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of
time or both would be reasonably likely to constitute a default) under
(A) the certificate of incorporation, charter or bylaws of the
Company, (B) to the Company's knowledge, any decree, judgment, order,
law, treaty, rule, regulation or determination applicable to the
Company of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of its affiliates or over
the properties or assets of the Company or any of its affiliates, (C)
the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which
the Company or any of its affiliates is a party, by which the Company
or any of its affiliates is bound, or to which any of the properties
of the Company or any of its affiliates is subject, or (D) the terms
of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates is a party
except the violation, conflict, breach, or default of which would not
have a material adverse effect on the Company; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company,
or any of its affiliates.
(f) The Note. The Note, upon issuance:
(i) is, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon
transfer under the 1933 Act and State laws;
(ii) has been, or will be, duly and validly authorized and
issued;
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of
the Company; and
(iv) will not subject the holders thereof to personal liability
by reason of being such holders.
(g) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over
the Company, or any of its affiliates or subsidiaries that would affect the
execution by the Company or the performance by the Company of its
obligations under this Agreement, and all other agreements entered into by
the Company relating hereto. Except as disclosed in the Reports, Other
Filings or Other Written Information, there is no pending or, to the best
knowledge of the Company, threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates or
subsidiaries, which litigation, if adversely determined could have a
material adverse effect on the Company.
(h) Information Concerning Company. The Reports contain all material
information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein. Since the date of the financial statements included in
the Reports, and except as modified in the Other Written Information, in
the Other Filings or in a Schedule hereto, there has been no material
adverse change in the Company's business, financial condition or affairs
not disclosed in the Reports. The Reports do not contain any untrue
statement of a material fact or omit to state a material fact in light of
the circumstances when made required to be stated therein or necessary to
make the statements therein not misleading.
(i) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or ByLaws. Neither the
Company nor any of its subsidiaries is (i) in default under or in violation
of any other material agreement or instrument to which it is a party or by
which it or any of its properties are bound or affected, which default or
violation would have a material adverse effect on the Company, (ii) in
default with respect to any order of any court, arbitrator or governmental
body or subject to or party to any order of any court or governmental
authority arising out of any action, suit or proceeding under any statute
or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority which
violation would have a material adverse effect on the Company.
(j) 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 under circumstances that would cause the offering of
the Securities pursuant to this Agreement to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions, including, without limitation, under the
rules and regulations of Bulletin Board nor will the Company or any of its
affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings. The
Company has not conducted and will not conduct any offering other than the
transactions contemplated hereby that will be integrated with the offer and
issuance of the Securities.
(k) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in connection with
the offer or sale of the Securities.
(l) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, which are
not disclosed in the Reports, the Other Filings and Other Written
Information, other than those incurred in the ordinary course of the
Company's businesses since September 30, 2001 and which, individually or in
the aggregate, would not reasonably be expected to have a material adverse
effect on the Company's financial condition.
(m)No Undisclosed Events or Circumstances. Since September 30, 2001,
no event or circumstance has occurred or exists with respect to the Company
or its businesses, properties, 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 Reports or the Other Filings.
(n) Capitalization. All of the outstanding shares of capital stock of
the Company have been duly and validly authorized and issued and are fully
paid and nonassessable.
(o) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the
date hereof in all material respects and shall be true and correct in all
material respects as of the Closing Date. The foregoing representations and
warranties shall survive the Closing Date.
4. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the 1933 Act afforded by Rule 506
of Regulation D promulgated thereunder. On the Closing Date, the Company will
provide an opinion reasonably acceptable to Subscriber from the Company's legal
counsel opining on the availability of the Regulation D exemption as it relates
to the offer and issuance of the Securities. A form of the legal opinion is
annexed hereto as Exhibit B. NCT will provide, at NCT's and/or the Company's
expense, such other legal opinions in the future as are reasonably necessary for
the conversion of the Note.
5. Reissuance of Securities. NCT agrees to reissue certificates
representing the NCT Shares without the legend set forth in Section 1(i) above
at such time as (a) the holder thereof is permitted to and disposes of the NCT
Shares pursuant to Rule 144(d) and/or Rule 144(k) under the 1933 Act in the
opinion of counsel reasonably satisfactory to NCT, or (b) upon resale subject to
an effective registration statement after the NCT Shares are registered under
the 1933 Act. NCT agrees to cooperate with the Subscriber in connection with all
resales of NCT Shares pursuant to Rule 144(d) and Rule 144(k) and provide legal
opinions necessary to allow such resales provided NCT and its counsel receive
all reasonably requested written representations from the Subscriber and selling
broker, if any. Provided the Subscriber provides required certifications and
representation letters, if any, if NCT fails to remove any legend as required by
this Section 4 (a "Legend Removal Failure"), then beginning on the tenth (10th)
day following the date that the Subscriber has lawfully requested the removal of
the legend and delivered all items reasonably required by NCT to be delivered by
the Subscriber, the Company continues to fail to remove such legend, the Company
shall pay to Subscriber or assignee holding shares subject to a Legend Removal
Failure an amount equal to one percent (1%) of the Purchase Price of the shares
subject to a Legend Removal Failure per day that such failure continues. If
during any twelve (12) month period, the Company fails to remove any legend as
required by this Section 4 for an aggregate of thirty (30) days, each Subscriber
or assignee holding NCT Shares subject to a Legend Removal Failure may, at its
option, require NCT and/or the Company to purchase all or any portion of the NCT
Shares subject to a Legend Removal Failure held by such Subscriber or assignee
at a price per share equal to 130% of the applicable Purchase Price.
6. Security Interest. The Subscribers will be granted a security interest
in certain assets of the Company to be memorialized in a Security Agreement. The
Company will execute a Security Agreement and Forms UCC-1 to be filed at the
Company's expense with such states and counties reasonably designated by the
Subscriber. The Company will also execute all such documents reasonably
necessary in the opinion of Subscriber to memorialize and further protect the
security interest described herein. A form of Security Agreement is annexed
hereto as Exhibit C.
7. Fees.
(a) The Company shall pay to counsel to the Subscriber its fees of
$10,000 for services rendered to Subscribers in connection with this
Agreement for aggregate subscription amounts of up to $550,000 of principal
amount of Notes (the "Initial Offering") and acting as escrow agent for the
Initial Offering. The Company will pay to Libra Finance, S.A. ("Finder") a
cash fee equal to $50,000 ("Finder's Fee"). The Finder's Fee in connection
with the Initial Offering must be paid on the Closing Date. The legal fees
will be payable out of funds held pursuant to a Funds Escrow Agreement to
be entered into by the Company, Subscriber and Escrow Agent. The Company
agrees to reimburse Subscriber and/or its attorney within ten days of
demand for all filings fees in connection with the security interest
described in Section 5 above.
(b) The Company on the one hand, and the Subscriber 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 other than Libra Finance, S.A. 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 and
arising out of such party's actions. The Company and Subscribers represent
that there are no other parties entitled to receive fees, commissions, or
similar payments in connection with the offering described in this
Subscription Agreement.
7.1 Covenants of NCT. NCT covenants and agrees with the Subscriber as
follows:
(a) Stop Orders. NCT will advise the Subscriber, promptly after it
receives notice of issuance by the Commission, any state securities
commission or any other regulatory authority of any stop order or of any
order preventing or suspending any offering of any securities of NCT, or of
the suspension of the qualification of the Common Stock of NCT for offering
or sale in any jurisdiction, or the initiation of any proceeding for any
such purpose.
(b) Listing. NCT shall promptly secure the listing of the NCT Shares
upon each national securities exchange, or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain such listing so long as any Notes
are outstanding. NCT will maintain the listing of its Common Stock on the
NASDAQ SmallCap Market, NASDAQ National Market System, New York Exchange,
OTC Bulletin Board or American Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the Common
Stock, the "Principal Market"), and will comply in all respects with NCT's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such other
exchanges or markets, as applicable. NCT will provide the Subscriber copies
of all notices it receives notifying NCT of the threatened or actual
delisting of the Common Stock from any Principal Market provided the
provisions of such information to the Subscriber would not violate the
provisions of Regulation FD under the 1933 Act.
(c) Market Regulations. NCT shall notify the SEC, NASD, the Principal
Market and applicable state authorities, in accordance with their
requirements, if any, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Subscriber and promptly
provide copies thereof to Subscriber.
(d) Reporting Requirements. From the Closing Date and until at least
two (2) years after the effectiveness of the registration statement on Form
S-1 or such other registration statement described in Section 10.1(iv)
hereof, NCT will (i) cause its Common Stock to continue to be registered
under Sections 12(b) or 12(g) of the 1934 Act, (ii) comply in all respects
with its reporting and filing obligations under the 1934 Act, (iii) comply
with all reporting requirements that is applicable to an issuer with a
class of Shares registered pursuant to Section 12(g) of the 1934 Act, and
(iv) comply with all requirements related to any registration statement
filed pursuant to this Agreement. NCT will use its best efforts not to take
any action or file any document (whether or not permitted by the 1933 Act
or the 1934 Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said Acts until the later of two (2) years after the
actual effective date of the registration statement on Form S-1 or such
other registration statement described in Section 10.1(iv) hereof.
(e) Reservation of Common Stock. NCT undertakes to reserve, pro rata
on behalf of each holder of a Note, from its authorized but unissued Common
Stock, at all times that Notes remain outstanding, a number of Common
Shares equal to not less than 130% of the amount of Common Shares necessary
to allow each such holder to be able to convert all such outstanding Notes,
at the then applicable Conversion Price.
(f) Taxes. NCT will promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property
or business of NCT; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if NCT shall have
set aside on its books adequate reserves with respect thereto, and
provided, further, that NCT will pay all such taxes, assessments, charges
or levies forthwith upon the commencement of proceedings to foreclose any
lien which may have attached as security therefore.
(g) Insurance. NCT will keep its assets which are of an insurable
character insured by financially sound and reputable insurers against loss
or damage by fire, explosion and other risks customarily insured against by
companies in NCT's line of business, in amounts sufficient to prevent NCT
from becoming a co-insurer and not in any event less than 100% of the
insurable value of the property insured; and NCT will maintain, with
financially sound and reputable insurers, insurance against other hazards
and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated and
to the extent available on commercially reasonable terms.
(h) Books and Records. NCT will keep true records and books of account
in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
(i) Governmental Authorities. NCT shall duly observe and conform in
all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.
(j) Intellectual Property. NCT shall maintain in full force and effect
its corporate existence, rights and franchises and all licenses and other
rights to use intellectual property owned or possessed by it and reasonably
deemed to be necessary to the conduct of its business.
(k) Properties. NCT will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions
and improvements thereto; and NCT will at all times comply with each
provision of all leases to which it is a party and under which it occupies
property if the breach of such provision could reasonably be expected to
have a material adverse effect.
(l) Confidentiality. NCT agrees that it will not disclose, and will
not include in any public announcement, the name of any Subscriber, unless
expressly agreed to by such Subscriber or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of
such requirement.
7.2 Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) Use of Proceeds. The Company undertakes to use the proceeds of the
Subscriber's funds for working capital. The Purchase Price may not and will
not be used on behalf of the Company or NCT for accrued officer and
director salaries, payment of financing related debt (except for funds
advanced by Subscriber to NCT during November and December, 2001),
redemption of outstanding redeemable notes or equity instruments of the
Company nor non-trade obligations outstanding on the Closing Date.
(b) Taxes. The Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits,
property or business of the Company; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
(c) Insurance. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily
insured against by companies in the Company's line of business, in amounts
sufficient to prevent the Company from becoming a co-insurer and not in any
event less than 100% of the insurable value of the property insured; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and
property to the extent and in the manner customary for companies in similar
businesses similarly situated and to the extent available on commercially
reasonable terms.
(d) Books and Records. The Company will keep true records and books of
account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a
consistent basis.
(e) Governmental Authorities. The Company shall duly observe and
conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.
(f) Intellectual Property. The Company shall maintain in full force
and effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.
(g) Properties. The Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from
time to time make all needful and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times
comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably
be expected to have a material adverse effect.
(h) Confidentiality. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Subscriber,
unless expressly agreed to by such Subscriber or unless and until such
disclosure is required by law or applicable regulation, and then only to
the extent of such requirement.
8. Covenants of the Company, NCT and Subscriber Regarding Indemnification.
8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend Subscriber, Subscriber's officers, directors,
agents, affiliates, control persons, and principal shareholders, against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon Subscriber or
any such person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered by the Company pursuant hereto; or (ii) after any applicable notice
and/or cure periods, any breach or default in performance by the Company of any
covenant or undertaking to be performed by the Company hereunder, or any other
agreement entered into by the Company and Subscriber relating hereto.
8.2 NCT Indemnification. NCT agrees to indemnify, hold harmless, reimburse
and defend Subscriber, Subscriber's officers, directors, agents, affiliates,
control persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon Subscriber or any such person which results,
arises out of or is based upon (i) any material misrepresentation by Company or
breach of any warranty by Company in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered by NCT pursuant hereto;
or (ii) after any applicable notice and/or cure periods, any breach or default
in performance by NCT of any covenant or undertaking to be performed by NCT
hereunder, or any other agreement entered into by NCT and Subscriber relating
hereto.
8.3 Subscriber Indemnification. Subscriber agrees to indemnify, hold
harmless, reimburse and defend the Company and NCT and each of the Company's and
NCT's officers, directors, agents, affiliates, control persons against any
claim, cost, expense, liability, obligation, loss or damage (including
reasonable legal fees) of any nature, incurred by or imposed upon the Company or
NCT or any such person which results, arises out of or is based upon (i) any
material misrepresentation by Subscriber in this Agreement or in any Exhibits or
Schedules attached hereto, or other agreement delivered by Subscriber pursuant
hereto; or (ii) after any applicable notice and/or cure periods, any breach or
default in performance by Subscriber of any covenant or undertaking to be
performed by Subscriber hereunder, or any other agreement entered into by the
Company, NCT (or either thereof) and Subscriber relating hereto.
8.4 Procedures. The procedures and limitations set forth in Section 10.6
shall apply to the indemnifications set forth in Sections 8.1, 8.2 and 8.3
above.
9. Conversion of Note.
9.1 Mechanics of Conversion.
(a) The Subscriber shall have the right from and after the issuance of
the Note and then at any time until the Note is fully paid, to convert any
outstanding and unpaid principal portion of the Note, and accrued interest
("Conversion"), at the election of the Subscriber (the date of giving of
such notice of conversion being a "Conversion Date") into fully paid and
nonassessable NCT Shares as such stock exists on the date of issuance of
the Note, or any shares of capital stock of NCT into which such stock shall
hereafter be changed or reclassified at the conversion price as defined in
Section 9.1(b) (the "Conversion Price"), determined as provided herein. The
number of shares of Common Stock to be issued upon each conversion of the
Note shall be determined by dividing that portion of the principal of the
Note and interest to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 9.1(c), the
Conversion Price per share shall be the lower of (i) seven cents ($.07)
("Maximum Base Price") or (ii) eighty percent (80%) of the average of the
closing bid prices for the Common Stock on the Principal Market for the
five (5) trading days prior to but not including the Conversion Date. For
purposes of the NASD OTC Bulletin Board, closing bid price shall mean the
last closing bid price as reported by Bloomberg Financial.
(c) The Maximum Base Price described in Section 9.1(b)(i) above and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 9.1(a) and 9.1(b), shall be subject to
adjustment from time to time upon the happening of certain events while the
conversion right remains outstanding, as follows:
(A) Merger, Sale of Assets, etc. If NCT at any time shall
consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, the Note, as to the unpaid
principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such number and
kind of shares or other securities and property as would have been
issuable or distributable on account of such consolidation, merger,
sale or conveyance, upon or with respect to the securities subject to
the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision
shall similarly apply to successive transactions of a similar nature
by any such successor or purchaser. Without limiting the generality of
the foregoing, the anti-dilution provisions of this section shall
apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.
(B) Reclassification, etc. If NCT at any time shall, by
reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, the Note,
as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other
change.
(C) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the
Common Stock in shares of Common Stock, the Conversion Price shall be
proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of
shares, in each such case by the ratio which the total number of
shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately
prior to such event.
(d) Upon the conversion of the Note or part thereof ("Conversion"),
NCT shall, at its own cost and expense, take all necessary action
(including the issuance of an opinion of counsel) to assure that NCT's
transfer agent shall issue stock certificates in the name of Subscriber (or
its nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at Conversion representing the number of
shares of common stock issuable upon such Conversion. NCT warrants that no
instructions other than these instructions have been or will be given to
the transfer agent of NCT's Common Stock and that the NCT Shares will be
unlegended, free-trading, and freely transferable, and will not contain a
legend restricting the resale or transferability of the NCT Shares provided
the NCT Shares are being sold pursuant to an effective registration
statement covering the Shares to be sold or are otherwise exempt from
registration when sold and, if applicable, Subscriber complies with
prospectus delivery requirements.
(e) Subscriber will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying an executed and
completed Notice of Conversion (a form of which is annexed hereto as
Exhibit D) to NCT via confirmed telecopier transmission. The Subscriber
will not be required to surrender the Note until the Note has been fully
converted or satisfied. Each date on which a Notice of Conversion is
telecopied to NCT in accordance with the provisions hereof shall be deemed
a Conversion Date. NCT will itself or cause its transfer agent to transmit
NCT's Common Stock certificates representing the NCT Shares issuable upon
conversion of the Note to the Subscriber via express courier for receipt by
such Subscriber within five (5) business days after receipt by NCT of the
Notice of Conversion (the "Delivery Date"). In the event the NCT Shares are
electronically transferable, then delivery of the NCT Shares must be made
by electronic transfer provided request for such electronic transfer has
been made by the Subscriber. A Note representing the balance of the Note
not so converted will be provided to the Subscriber, if requested by
Subscriber provided an original Note is delivered to NCT. To the extent
that a Subscriber elects not to surrender a Note for reissuance upon
partial payment or Conversion, the Subscriber hereby indemnifies NCT
against any and all loss or damage attributable to such non-surrender
arising from a third-party claim in an amount in excess of the actual
amount then due under the Note.
(f) NCT understands that a delay in the delivery of the NCT Shares in
the form required pursuant to Section 9 hereof, or the Mandatory Redemption
Amount described in Section 9.2 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as hereinafter defined) will result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, NCT and the Company agree to pay late payments to the Subscriber for
late issuance of NCT Shares in the form required pursuant to Section 9
hereof upon Conversion or late payment of the Mandatory Redemption Amount,
in the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note
principal amount being converted or redeemed. NCT and the Company shall pay
any payments incurred under this Section 9 in immediately available funds
upon demand. Furthermore, in addition to any other remedies which may be
available to the Subscriber, in the event that NCT fails for any reason to
effect delivery of the NCT Shares by the Delivery Date or make payment by
the Mandatory Redemption Payment Date, the Subscriber will be entitled to
revoke all or part of the relevant Notice of Conversion or rescind all or
part of the notice of Mandatory Redemption by delivery of a notice to such
effect to NCT whereupon NCT and the Subscriber shall each be restored to
their respective positions immediately prior to the delivery of such
notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to NCT.
(g) Nothing contained herein or in any document referred to herein or
delivered in connection herewith shall be deemed to establish or require
the payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Company or NCT to the Subscriber and
thus refunded to the Company or NCT, as the case may be.
(h) NCT shall not be required, in connection with any Conversion to
issue a fraction of a share of Common Stock and shall instead deliver a
stock certificate representing the next whole number.
(i) In the event the NCT Shares issuable upon Conversion of a Note or
part thereof are not included for resale in an effective registration
statement at any time when such NCT Shares are required to be so included
pursuant to the terms of this Agreement, then the Subscriber may elect, at
the Subscriber's sole discretion, to receive an amount of restricted NCT
Shares equal to the amount of NCT Shares otherwise receivable upon
Conversion in lieu of the NCT Shares otherwise receivable pursuant to the
relevant Notice of Conversion.
9.2. Mandatory Redemption at Subscriber's Election. In the event NCT is
prohibited from issuing NCT Shares, or fails to timely deliver NCT Shares on a
Delivery Date, or upon the occurrence of any other Event of Default (as defined
in the Note and Section 9.8 of this Subscription Agreement) or for any reason
other than pursuant to the limitations set forth in Section 9.3 hereof, then at
the Subscriber's election, NCT and the Company must pay to the Subscriber ten
(10) business days after request by the Subscriber or on the Delivery Date (if
requested by the Subscriber) a sum of money determined by (i) multiplying up to
the outstanding principal amount of the Note designated by the Subscriber by
120%, or (ii) multiplying the number of Shares otherwise deliverable upon
conversion of an amount of Note principal designated by the Subscriber (with the
date of giving of such designation being a Deemed Conversion Date) at the then
Conversion Price that would be in effect on the Deemed Conversion Date by the
highest closing price of the Common Stock on the principal market from the
Deemed Conversion Date until the day prior to the receipt by the Subscriber of
the Mandatory Redemption Payment, whichever is greater, together with accrued
but unpaid interest thereon ("Mandatory Redemption Payment"). The Mandatory
Redemption Payment must be received by the Subscriber on the same date as the
NCT Shares otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of the
Mandatory Redemption Payment, the corresponding Note principal and interest will
be deemed paid and no longer outstanding.
9.3. Maximum Conversion. The Subscriber shall not be entitled to convert on
a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Subscriber and its affiliates
on a Conversion Date, and (ii) the number of shares of Common Stock issuable
upon the conversion of the Note with respect to which the determination of this
provision is being made on a Conversion Date, which would result in beneficial
ownership by the Subscriber and its affiliates of more than 9.99% of the
outstanding shares of Common Stock of NCT on such Conversion Date. For the
purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the 1934 Act
and Regulation 13d-3 thereunder. Subject to the foregoing, the Subscriber shall
not be limited to aggregate conversions of only 9.99% and aggregate conversion
by the Subscriber may exceed 9.99%. The Subscriber shall have the authority and
obligation to determine whether the restriction contained in this Section 9.3
will limit any conversion hereunder and to the extent that the Subscriber
determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Subscriber. The Subscriber may void the
conversion limitation described in this Section 9.3 upon 75 days prior written
notice to NCT. The Subscriber may allocate which of the equity of NCT deemed
beneficially owned by the Subscriber shall be included in the 9.99% amount
described above and which shall be allocated to the excess above 9.99%.
9.4. Injunction - Posting of Bond. In the event a Subscriber shall elect to
convert a Note or part thereof, NCT may not refuse conversion based on any claim
that such Subscriber or any one associated or affiliated with such Subscriber
has been engaged in any violation of law, or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of said Note shall have been sought and obtained and NCT posts a
surety bond for the benefit of such Subscriber in the amount of 130% of the
amount of the Note, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Subscriber to the extent Subscriber
obtains judgment.
9.5. Buy-In. In addition to any other rights available to the Subscriber,
if NCT fails to deliver the NCT Shares to the Subscriber by the Delivery Date
and if ten (10) days after the Delivery Date the Subscriber or a broker on
behalf of the Subscriber, purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Subscriber
of the NCT Shares which the Subscriber anticipated receiving upon such
conversion (a "Buy-In"), then NCT and the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company and NCT shall be required to pay the Subscriber $1,000, plus interest.
The Subscriber shall provide NCT written notice indicating the amounts payable
to the Subscriber in respect of the Buy-In.
9.6 Adjustments. The Conversion Price and amount of NCT Shares issuable
upon Conversion of the Notes shall be adjusted to offset the effect of stock
splits, stock dividends and pro rata distributions of property or equity
interests to NCT's shareholders.
9.7 Redemption. Neither the Company nor NCT may redeem or call the Note
without the consent of the holder of the Note.
9.8 Additional Events of Default. Each of the following events shall be an
Event of Default (as employed in the Note) in addition to the other Events of
Default described in the Note and in this Subscription Agreement.
(a) Breach of Covenant. NCT breaches any material covenant or other
term or condition of this Agreement in any material respect and such
breach, if subject to cure, continues for a period of seven (7) days after
written notice to NCT from the Subscriber.
(b) Breach of Representations and Warranties. Any material
representation or warranty of NCT made herein, or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
therewith shall be false or misleading in any material respect as of the
date made and the Closing Date.
(c) Receiver or Trustee. NCT shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for a substantial part of its property or business; or
such a receiver or trustee shall otherwise be appointed.
(d) Judgments. Any money judgment, writ or similar final process shall
be entered or filed against NCT or any of its property or other assets
after the Closing Date for more than $50,000, and shall remain unvacated,
unbonded or unstayed for a period of sixty (60) days.
(e) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against NCT and if
instituted against NCT are not dismissed within 75 days of initiation.
(f) Delisting. Delisting of the Common Stock from the OTC Bulletin
Board or such other principal exchange on which the Common Stock is listed
for trading; failure to comply with the requirements for continued listing
on the OTC Bulletin Board for a period of three consecutive trading days;
or notification from the OTC Bulletin Board or any Principal Market that
NCT is not in compliance with the conditions for such continued listing on
the OTC Bulletin Board or other Principal Market and the Common Stock does
not at the time of such notification comply with the initial listing
requirements of the OTC Bulletin Board.
(g) Stop Trade. An SEC stop trade order or Principal Market trading
suspension that lasts for five or more consecutive trading days.
(h) Failure to Deliver Common Stock or Replacement Note. NCT's failure
to timely deliver Common Stock to the Subscriber pursuant to and in the
form required by this Agreement, or if required a replacement Note.
(i) Non-Registration Event. The occurrence of a Non-Registration Event
as described in Section 10.4 of the Subscription Agreement.
(j) Cross Default. A default by NCT of a material term, covenant,
warranty or undertaking of any other agreement to which the NCT and
Subscriber are parties, or the occurrence of a material event of default
under any such other agreement.
10. Registration Rights.
10.1. Registration Rights Granted. NCT hereby grants the following
registration rights to holders of the Securities.
(a) On one occasion, for a period commencing 121 days after the
Closing Date, but not later than three years after the Closing Date
("Request Date"), NCT, upon a written request therefor from any record
holder or holders of more than 50% of the aggregate of NCT's Shares
actually issued and issuable upon Conversion of the Notes issued in the
Initial Offering (the Common Stock issued or issuable upon conversion of
the Notes or issuable by virtue of ownership of the Notes, being the
"Registrable Securities"), shall prepare and file with the SEC a
registration statement under the 1933 Act covering the Registrable
Securities which are the subject of such request, unless such Registrable
Securities are the subject of an effective registration statement or
included for registration in a pending registration statement. In addition,
upon the receipt of such request, NCT shall promptly give written notice to
all other record holders of the Registrable Securities that such
registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received
written requests within 10 days after NCT gives such written notice. Such
other requesting record holders shall be deemed to have exercised their
demand registration right under this Section 10.1(a). As a condition
precedent to the inclusion of Registrable Securities, the holder thereof
shall provide NCT with such information as NCT reasonably requests. The
obligation of NCT under this Section 10.1(a) shall be limited to one
registration statement.
(b) If NCT at any time proposes to register any of its securities
under the 1933 Act for sale to the public, whether for its own account or
for the account of other security holders or both, except with respect to
registration statements on Forms ▇-▇, ▇-▇ or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the
Subscriber or holder pursuant to an effective registration statement, each
such time it will give at least 25 days' prior written notice to the record
holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by NCT within 15 days after the
giving of any such notice by NCT, to register any of the Registrable
Securities, NCT will cause such Registrable Securities as to which
registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed
by NCT, all to the extent required to permit the sale or other disposition
of the Registrable Securities so registered by the holder of such
Registrable Securities (the "Seller"). In the event that any registration
pursuant to this Section 10.1(b) shall be, in whole or in part, an
underwritten public offering of common stock of NCT, the number of shares
of Registrable Securities to be included in such an underwriting may be
reduced by the managing underwriter if and to the extent that NCT and the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by NCT therein;
provided, however, that NCT shall notify the Seller in writing of any such
reduction. Notwithstanding the foregoing provisions, or Section 10.4
hereof, NCT may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 10.1(b) without thereby incurring any
liability to the Seller.
(c) NCT shall file with the Commission not later than April 15, 2002
(the "Filing Date"), and use its reasonable commercial efforts to cause to
be declared effective a Form S-1 registration statement (or such other form
that it is eligible to use) in order to register the Registrable Securities
for resale and distribution under the 1933 Act. The registration statement
described in this paragraph must be declared effective by the Commission
one hundred and twenty days (120) of the Filing Date ("Effective Date").
NCT will register not less than a number of shares of Common Stock in the
aforedescribed registration statement that is equal to 140% of the NCT
Shares issuable at the Conversion Price that would be in effect on the
Closing Date or the date of filing of such registration statement
(employing the Conversion Price which would result in the greater number of
Shares), assuming the conversion of 100% of the Notes. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of
the Subscriber, and not issued, employed or reserved for anyone other than
the Subscriber. Such registration statement will immediately be amended or
additional registration statements will be immediately filed by NCT as
necessary to register additional NCT Shares to allow the public resale of
all Common Stock included in and issuable by virtue of the Registrable
Securities.
10.2. Registration Procedures. If and whenever NCT is required by the
provisions hereof to effect the registration of any shares of Registrable
Securities under the 1933 Act, NCT will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and
promptly provide to the Sellers copies of all filings and Commission
letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the latest of: (i) twenty-four months after the
latest Maturity Date of a Note; (ii) until twelve months after all the NCT
Shares are eligible for resale pursuant to Rule 144(k) of the 1933 Act; or
(iii) until such registration statement has been effective for a period of
not less than 365 days, and comply with the provisions of the 1933 Act with
respect to the disposition of all of the Registrable Securities covered by
such registration statement in accordance with the Seller's intended method
of disposition set forth in such registration statement for such period;
(c) furnish to the Seller, such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as such persons reasonably may request in order to facilitate
the public sale or their disposition of the securities covered by such
registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller,
provided, however, that NCT shall not for any such purpose be required to
qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of NCT is
then listed;
(f) immediately notify the Seller when a prospectus relating thereto
is required to be delivered under the 1933 Act, of the happening of any
event of which NCT has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) make available for inspection by the Seller, and any attorney,
accountant or other agent retained by the Seller or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of NCT, and cause NCT's officers,
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the seller, attorney, accountant or
agent in connection with such registration statement.
10.3. Provision of Documents. At the request of the Seller, provided a
demand for registration has been made pursuant to Section 10.1(a) or a request
for registration has been made pursuant to Section 10.1(b), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10. In connection with each registration hereunder, the Seller will
furnish to NCT in writing such information and representation letters with
respect to itself and the proposed distribution by it as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws. In connection with each registration pursuant to Section
10.1(a) or 10.1(b) covering an underwritten public offering, NCT and the Seller
agree to enter into a written agreement with the managing underwriter in such
form and containing such provisions as are customary in the securities business
for such an arrangement between such underwriter and companies of NCT's size and
investment stature.
10.4. Non-Registration Events. NCT and the Subscriber agree that the Seller
will suffer damages if any registration statement required under Section 10.1(a)
or 10.1(b) above is not filed within 30 days after written request by the Seller
and not declared effective by the Commission within 90 days after such request
[or the Filing Date and Effective Date, respectively, in reference to the
Registration Statement on Form S-1 or such other form described in Section
10.1(c)], and maintained in the manner and within the time periods contemplated
by Section 10 hereof, and it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if (i) the Registration Statement
described in Sections 10.1(a) or 10.1(b) is not filed within 30 days of such
written request, or is not declared effective by the Commission on or prior to
the date that is 90 days after such request, or (ii) the registration statement
on Form S-1 or such other form described in Section 10.1(c) is not filed on or
before the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within ten business days of receipt by NCT of a written or
oral communication from the Commission that the registration statement described
in Section 10.1(c) will not be reviewed, or (iii) any registration statement
described in Sections 10.1(a), 10.1(b) or 10.1(c) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate per
year but not more than 20 consecutive calendar days ("year" being defined as a
period of 365 days commencing on the date the Registration Statement is declared
effective) (each such event referred to in clauses (i), (ii) and (iii) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then, for so
long as such Non-Registration Event shall continue, NCT and the Company shall
pay, at the Subscriber's option, in cash or stock at the applicable Conversion
Price, as Liquidated Damages to each holder of any Registrable Securities an
amount equal to two (2%) percent per month or pro rata part thereof for each
month or part thereof thereafter during the pendency of such Non-Registration
Event, of the principal of the Notes issued in the Initial Offering and
principal and interest of the Notes converted into NCT Shares, then owned of
record by such holder or issuable as of or subsequent to the occurrence of such
Non-Registration Event. Payments to be made pursuant to this Section 10.4 shall
be due and payable within ten (10) business days after demand in immediately
available funds. In the event a Mandatory Redemption Payment is demanded by the
Subscriber pursuant to Section 9.2 of this Subscription Agreement, then the
Liquidated Damages described in this Section 10.4 shall no longer accrue on the
portion of the Purchase Price underlying the Mandatory Redemption Payment, from
and after the date the Subscriber receives the Mandatory Redemption Payment. It
shall also be deemed a Non-Registration Event if at any time a Note is
outstanding, there is less than 120% of the amount of Common Shares necessary to
allow full conversion of such Note at the then applicable Conversion Price
registered for unrestricted resale in an effective registration statement.
10.5. Expenses. All expenses incurred by NCT in complying with Section 10,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants
for NCT, fees and expenses (including reasonable counsel fees) incurred in
connection with complying with state securities or "blue sky" laws, fees of the
National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, and costs of insurance are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller, are called "Selling Expenses". The Seller shall
pay the fees of its own additional counsel, if any. NCT will pay all
Registration Expenses in connection with the registration statement under
Section 10. All Selling Expenses in connection with each registration statement
under Section 10 shall be borne by the Seller and may be apportioned among the
Sellers in proportion to the number of shares sold by the Seller relative to the
number of shares sold under such registration statement or as all Sellers
thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities under
the 1933 Act pursuant to Section 10, NCT will indemnify and hold harmless
the Seller, each officer of the Seller, each director of the Seller, each
underwriter of such Registrable Securities thereunder and each other
person, if any, who controls such Seller or underwriter within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities, joint
or several, to which the Seller, or such underwriter or controlling person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities was registered under the 1933 Act pursuant to
Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are
based upon 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 in light of the circumstances when made, and will
subject to the provisions of Section 10.6(c) reimburse the Seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that NCT shall not be liable to the Seller to the extent that any
such damages arise out of or are based upon an untrue statement or omission
made in any preliminary prospectus if (i) the Seller failed to send or
deliver a copy of the final prospectus delivered by NCT to the Seller with
or prior to the delivery of written confirmation of the sale by the Seller
to the person asserting the claim from which such damages arise, (ii) the
final prospectus would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any
such Seller, or any such controlling person in writing specifically for use
in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 10, the Seller will
indemnify and hold harmless NCT, and each person, if any, who controls NCT
within the meaning of the 1933 Act, each officer of NCT who signs the
registration statement, each director of NCT, each underwriter and each
person who controls any underwriter within the meaning of the 1933 Act,
against all losses, claims, damages or liabilities, joint or several, to
which NCT or such officer, director, underwriter or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the 1933 Act pursuant to
Section 10, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are
based upon 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, and will reimburse NCT and each such officer,
director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided,
however, that the Seller will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
information pertaining to such Seller, as such, furnished in writing to NCT
by such Seller specifically for use in such registration statement or
prospectus, and provided, further, however, that the liability of the
Seller hereunder shall be limited to the gross proceeds received by the
Seller from the sale of Registrable Securities covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to
notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section 10.6(c)
and shall only relieve it from any liability which it may have to such
indemnified party under this Section 10.6(c), except and only if and to the
extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish,
to assume and undertake the defense thereof with counsel satisfactory to
such indemnified party, and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under this Section 10.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison
with counsel so selected, provided, however, that, if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional
to those available to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified parties shall have the right to
select one separate counsel and to assume such legal defenses and otherwise
to participate in the defense of such action, with the reasonable expenses
and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the 1933 Act in any case in which either (i)
the Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be enforced
in such case notwithstanding the fact that this Section 10.6 provides for
indemnification in such case, or (ii) contribution under the 1933 Act may
be required on the part of the Seller or controlling person of the Seller
in circumstances for which indemnification is provided under this Section
10.6; then, and in each such case, NCT and the Seller will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
Seller is responsible only for the portion represented by the percentage
that the public offering price of its securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, provided, however, that, in any
such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty
of fraudulent misrepresentation will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
11. Offering Restrictions. Except (i) as disclosed in the Reports or Other
Written Information prior to the date of this Subscription Agreement, (ii) stock
or stock options granted to employees or directors of the Company pursuant to a
plan which has been approved by the shareholders of the Company, (iii)
non-financing equity or debt issued in connection with an acquisition of a
business or assets by NCT, (iv) the issuance by the Company of stock in
connection with the establishment of a joint venture, partnership or licensing
arrangement relating to its business, and (v) Common Stock issued in a public
offering (these exceptions hereinafter referred to as the "Excepted Issuances"),
without the prior written consent of the holders of a majority of the principal
amount of the Notes issued in the Offering, the Company will not issue any
equity, convertible debt or other securities, prior to the expiration of the
later of a period equal to 270 days during which the registration statement
described in Section 10.1(c) above has been effective or two years from the
Closing Date.
12. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a
copy is delivered by first class mail) to the party to receive the same at
its address set forth below or to such other address as either party shall
hereafter give to the other by notice duly made under this Section: (i) if
to the Company or NCT, to each of them at: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, attn: Chief Financial Officer, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇,
with a copy by telecopier only to: General Counsel, and (ii) if to the
Subscriber, to the name, address and telecopy number set forth on the
signature page hereto, with a copy by telecopier only to Grushko & ▇▇▇▇▇▇▇,
P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier
number: (▇▇▇) ▇▇▇-▇▇▇▇. Any notice that may be given pursuant to this
Agreement, or any document delivered in connection with the foregoing may
be given by the Subscriber on the first business day after the observance
dates in the United States of America by Orthodox Jewry of Rosh Hashanah,
Yom Kippur, the first two days of the Feast of Tabernacles, Shemini
Atzeret, Simchat Torah, the first two and final two days of Passover and
Pentecost, with such notice to be deemed given and effective, at the
election of the Subscriber on a holiday date that precedes such notice,
however the Company's and NCT's time to respond to such notice shall
commence from the actual date such notice is given. Any notice received by
the Subscriber on any of the aforedescribed holidays may be deemed by the
Subscriber to be received and effective as if such notice had been received
on the first business day after the holiday.
(b) Closing. The consummation of the transactions contemplated herein
shall take place at the offices of Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, upon the satisfaction of all
conditions to Closing set forth in this Agreement. The closing date shall
respectively be the dates that subscriber funds representing the net amount
due the Company from the Purchase Price of the Initial Offering are
transmitted by wire transfer to the Company or credited to the Company (the
"Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the entire
agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No
right or obligation of either party shall be assigned by that party without
prior notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed and delivered by
facsimile transmission, and in counterparts, each of which will be deemed
an original.
(e) Law Governing this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by any party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. The parties and the
individuals executing this Agreement and other agreements on behalf of such
parties agree to submit to the jurisdiction of such courts and waive trial
by jury. The prevailing party shall be entitled to recover from the other
party or parties to the applicable dispute such party's reasonable
attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company, NCT
and Subscriber acknowledge and agree that irreparable damage would occur 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 parties 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. Subject to Section 13(e) hereof, each of the
Company, NCT and Subscriber hereby waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the
suit, action or proceeding is improper. Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by
law.
(g) Joint and Several Liability. The Company and NCT acknowledge that
their liability for payments and expenses described in Sections 3, 4,
9.1(e), 9.2, 9.5 and 10.4 of this Agreement is joint and several.
(h) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing
shall not have occurred by the tenth (10th) business day following the date
this Agreement is accepted by the Subscriber.
This Agreement is made by and among the Company, NCT and Subscriber as of
the date first written above.
ARTERA GROUP, INC.
A Delaware Corporation
By:_________________________________
Name:
Title:
Date signed:
NCT GROUP, INC.
A Delaware Corporation
By:_________________________________
Name:
Title:
Date signed:
Purchase Price and Note Principal: $550,000.00
ALPHA CAPITAL AKTIENGESELLSCHAFT - Subscriber
A Lichtenstein corporation
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Lichtenstein
Fax: ▇▇▇-▇▇▇-▇▇▇-▇▇▇▇
By:______________________________________
Date signed:
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Legal Opinion
Exhibit C Form of Security Agreement
Exhibit D Form of Conversion Notice
Schedule 2(d) Additional Issuances
Schedule 2(t) Capitalization
EXHIBIT D
NOTICE OF CONVERSION
(To be executed by the registered holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ARTERA GROUP, INC. on
January 10, 2002 into shares of common stock of NCT GROUP, INC. according to the
conditions set forth in such Note, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________