Exhibit 10(b)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 27, 1999, among NCT Group, Inc., a Delaware corporation (the
"Company"), Nesher Inc. ("Nesher"), Austost Anstalt ▇▇▇▇▇▇ ("Austost"), Balmore
Funds S.A. ("Balmore") and Libra Finance S.A. (the "Placement Agent"). Nesher,
Austost and Balmore are collectively referred to herein as the "Purchasers."
WHEREAS, this Agreement is being entered into pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the "Purchase
Agreement") by and between the Company and the Purchasers.
The parties hereto hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Additional Registration Statements" shall have the meaning set
forth in Section 2 hereof.
"Additional Shares" shall have the meaning assigned to it in the
Purchase Agreement.
"Advice" shall have meaning set forth in Section 3(l) hereof.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Board" shall have meaning set forth in Section 3(m) hereof.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning assigned to it in Section
1.3(i) of the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Effectiveness Date" means with respect to the Registration
Statement the 90th day following the Closing Date.
"Effectiveness Period" means, (i) with respect to any Registration
Statement, the period ending on the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold or (y) the date
on which the Registrable Securities may be sold without any restriction pursuant
to Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Company's transfer agent to such effect, and
(ii) with respect to any Additional Registration Statement, the period ending on
the earlier of (x) the date when all Additional Shares covered by such
Additional Registration Statement have been sold or (y) the date on which the
Additional Shares may be sold without any restriction pursuant to Rule 144 as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect.
"Event" shall have the meaning set forth in Section 7(c) hereof.
"Event Date" shall have the meaning set forth in Section 7(c)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 20th Business Day following the Closing
Date.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities or Additional Shares.
"Indemnified Party" shall have the meaning set forth in Section 5(c)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section
5(c) hereof.
"Losses" shall have the meaning set forth in Section 5(a) hereof.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Placement Agent Shares" means shares of Common Stock issued to the
Placement Agent pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities and Additional Shares, if any, covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.
"Purchaser Shares" means shares of Common Stock purchased by the
Purchasers, severally and not jointly, pursuant to the Purchase Agreement on the
Closing Date.
"Registrable Securities" means (i) the Purchaser Shares and (ii)
the Placement Agent Shares.
"Registration Statement" means the Shelf Registration Statement and
any Additional Registration Statements, including (in each case) the related
Prospectus, amendments and supplements to any registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in any such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" shall have the meaning set forth in
Section 2 hereof.
"Special Counsel" means any special counsel to the Holders, for
which the Holders will be reimbursed by the Company pursuant to, and subject to
the limitations of, Section 4 hereof.
2. Shelf Registration Statement; Additional Registration Statements.
On or prior to the Filing Date the Company shall prepare and file
with the Commission a "shelf" registration statement (the "Shelf Registration
Statement") covering all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Shelf Registration Statement shall be
on Form S-1. If the Company shall have been required to issue Additional Shares
pursuant to Section 3.11 of the Purchase Agreement and the Shelf Registration
Statement shall not yet have been declared effective, the Company shall file a
pre-effective amendment to the Shelf Registation Statement to include such
Additional Shares. The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Shelf Registration Statement continuously
effective under the Securities Act for the applicable Effectiveness Period. If
one or more additional registration statements (the "Additional Registration
Statements") are required to be filed because the Company shall have been
required to issue Additional Shares pursuant to Section 3.11 of the Purchase
Agreement, the Company shall have twenty (20) Business Days to file such
Additional Registration Statement or Additional Registration Statements, and the
Company shall use its best efforts to cause such Additional Registration
Statement or Additional Registration Statements to be declared effective by the
Commission as soon as possible, but in no event later than 90 days after filing,
and to keep such Additional Registration Statements continuously effective under
the Securities Act for the applicable Effectiveness Period.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to any Registration Statement as may be
necessary to keep such Registration Statement continuously effective as to the
applicable Registrable Securities and Additional Shares, if any, for the
applicable Effectiveness Period and prepare and file with the Commission such
Registration Statements in order to register for resale under the Securities Act
all of the Additional Shares that may be issued; (ii) cause any Prospectus
related to such Registration Statement to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed
pursuant to Rule 424 (or any similar provisions then in force) promulgated under
the Securities Act; (iii) respond as promptly as possible to any comments
received from the Commission with respect to any Registration Statement or any
amendment thereto; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities and Additional Shares, if any, covered by any
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the related
Registration Statement as so amended or in such Prospectus as so supplemented.
(b) Notify the Holders of Registrable Securities and Additional
Shares, if any, to be sold and any Special Counsel as promptly as possible (i)
of the issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable Securities
and Additional Shares, if any, or the initiation of any Proceedings for that
purpose; (ii) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities or Additional Shares, if any, for sale in any
jurisdiction; and (iii) of the occurrence of any event that makes any statement
made in a Registration Statement or a Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of such Registration Statement or such
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, (i) any order suspending the effectiveness of any
Registration Statement or (ii) any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities and Additional Shares,
if any, for sale in any jurisdiction, at the earliest practicable moment.
(d) If requested by the Holders of a majority in interest of the
Registrable Securities and the Additional Shares, if any, taken together, (i)
promptly incorporate in a Prospectus supplement or post-effective amendment to a
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment.
(e) Furnish to each Holder and any Special Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to the extent
requested by such Person, and all exhibits to the extent requested by such
Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(f) Promptly deliver to each Holder and any Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
and Additional Shares, if any, covered by such Prospectus and any amendment or
supplement thereto.
(g) Prior to any public offering of Registrable Securities and
Additional Shares, if any, use its best efforts to register or qualify or
cooperate with the selling Holders and any Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities and Additional Shares, if any, for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any Holder requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
applicable Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities and Additional Shares, if any, covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(h) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities and Additional
Shares, if any, to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities and Additional Shares, if any, to be in such
denominations and registered in such names as any Holder may request at least
three (3) Business Days after any sale of Registrable Securities and Additional
Shares, if any.
(i) Upon the occurrence of any event contemplated by Section
3(b)(iii), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to a Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither such Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(j) Use its best efforts to cause all Registrable Securities and
Additional Shares, if any, relating to a Registration Statement to be quoted on
the OTC Bulletin Board and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which similar securities
issued by the Company are then listed as and when required pursuant to the
Purchase Agreement.
(k) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Shelf Registration Statement, which
statements shall conform to the requirements of Rule 158.
(l) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities and Additional Shares, if any, as is required by law to
be disclosed in a Registration Statement, and the Company may exclude from such
registration the Registrable Securities and Additional Shares, if any, of any
such Holder who unreasonably fails to furnish such information within seven (7)
Business Days after receiving such request.
If a Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to such Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities or Additional Shares, if any, under a Registration
Statement until it has obtained copies of the related Prospectus as then amended
or supplemented as contemplated in Section 3(f) and (ii) it and its officers,
directors or Affiliates, if any, will comply with the prospectus delivery
requirements of the Securities Act as applicable to them in connection with
sales of Registrable Securities or Additional Shares, if any, pursuant to such
Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities and Additional Shares, if any, that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(b)(i), 3(b)(ii) or 3(b)(iii), such Holder will forthwith discontinue
disposition of such Registrable Securities and Additional Shares, if any, under
the Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(i), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
(m) If (i) there is material non-public information regarding the
Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 20
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(m) for more than 45 days in the aggregate during
any 12 month period; provided, however, that no such postponement or suspension
shall be permitted for consecutive 20 day periods, arising out of the same set
of facts, circumstances or transactions.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company (provided that
the aggregate amount of fees and disbursements of a Special Counsel payable by
the Company hereunder shall be limited to a maximum amount of $10,000) whether
or not the Registration Statement is filed or becomes effective and whether or
not any Registrable Securities or Additional Shares, if any, are sold pursuant
to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the OTC Bulletin Board and each securities
exchange or market, if any, on which Registrable Securities and Additional
Shares, if any, are required hereunder to be quoted or listed, (B) with respect
to filings required to be made with the National Association of Securities
Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and Additional Shares, if any, and
determination of the eligibility of the Registrable Securities and Additional
Shares, if any, for investment under the laws of such jurisdictions as the
Holders of a majority of Registrable Securities and Additional Shares, if any,
taken together may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities and
Additional Shares, if any, and of printing prospectuses (which may be
camera-ready copies of such prospectuses)), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company and
one Special Counsel for the Holders, in the case of such Special Counsel, to a
maximum amount of $10,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities and Additional Shares, if any, on any securities exchange as required
hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities or Additional Shares, if any, as principal
as a result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, or arising out of or relating to any violation by the
Company or its agents of the Securities Act or any rule or regulation
promulgated under the Securities Act applicable to the Company or its agents and
relating to action or inaction required of the Company in connection with a
registration of Registrable Securities or Additional Shares, if any, pursuant to
this Agreement, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use therein or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities or Additional Shares,
if any, and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto. The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, such Prospectus, or any
form of Prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of Prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and Additional Shares, if any, and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party because of a failure or refusal
of a governmental authority to enforce such indemnification in accordance with
its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144.
As long as any Holder owns Registrable Securities or Additional
Shares, if any, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true
and complete copies of all such filings or notify the Holders that such filings
are publicly available. As long as any Holder owns Registrable Securities or
Additional Shares, if any, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Registrable Securities or Additional
Shares, if any, without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act.
7. Miscellaneous.
(a) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof entered into any agreement currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(q) to the Purchase Agreement, neither the Company nor any of its
subsidiaries has previously entered into any agreement currently in effect
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities and Additional Shares, if any, taken together, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict with the provisions of this Agreement.
(b) Piggy-Back Registrations. If at any time when there is not an
effective Registration Statement covering all the Registrable Securities or, if
required to be issued, the Additional Shares, the Company shall determine to
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, the Company shall send to each Holder of
Registrable Securities or, if issued, Additional Shares, written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such Holder shall so request in writing, (which request shall specify the
Registrable Securities or, if issued, Additional Shares intended to be disposed
of by the Holders), the Company will cause the registration under the Securities
Act of all Registrable Securities or, if issued, Additional Shares which the
Company has been so requested to register by the Holder, to the extent requisite
to permit the disposition of the Registrable Securities or, if issued,
Additional Shares so to be registered, provided that if at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities or, if issued, Additional Shares in
connection with such registration (but not from its obligation to pay expenses
in accordance with Section 4 hereof), and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities or, if issued, Additional Shares being registered pursuant to this
Section 7(b) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities or, if issued, Additional Shares such Holder
requests to be registered; provided, however, that the Company shall not be
required to register any Registrable Securities or, if issued, Additional Shares
pursuant to this Section 7(b) that are eligible for sale pursuant to Rule 144(k)
of the Securities Act. In the case of an underwritten public offering, if the
managing underwriter(s) or underwriter(s) should reasonably object to the
inclusion of the Registrable Securities or, if issued, Additional Shares in such
registration statement, then if the Company after consultation with the managing
underwriter should reasonably determine that the inclusion of such Registrable
Securities or, if issued, Additional Shares, would materially adversely affect
the offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or
none of the Registrable Securities or, if issued, Additional Shares of the
Holders, then (x) the number of Registrable Securities or, if issued, Additional
Shares of the Holders included in such registration statement shall be reduced
pro-rata among such Holders (based upon the number of Registrable Securities
and, if issued, Additional Shares requested to be included in the registration),
if the Company after consultation with the underwriter(s) recommends the
inclusion of fewer Registrable Securities and, if issued, Additional Shares, or
(y) none of the Registrable Securities and, if issued, Additional Shares of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities and, if issued, Additional Shares; provided, however,
that if Common Stock is being offered for the account of other persons or
entities as well as the Company, such reduction shall not represent a greater
fraction of the number of Registrable Securities and, if issued, Additional
Shares intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(c) Failure to File Registration Statement and Other Events. The
Company and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the times set forth in
Section 2 and maintained in the manner contemplated herein during the applicable
Effectiveness Period or if certain other events occur. The Company and the
Holders further agree that it would not be feasible to ascertain the extent of
such damages with precision. Accordingly, if (A) the Shelf Registration
Statement is not filed on or prior to the Filing Date or is not declared
effective by the Commission on or prior to the time periods set forth in Section
2 (or in the event an Additional Registration Statement, filed because the
Company shall have been required to issue Additional Shares pursuant to Section
3.11 of the Purchase Agreement, is not filed and declared effective with the
time periods set forth in Section 2), or (B) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the Securities Act within five (5) Business Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not subject
to further review, or (C) the Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective as to all
Registrable Securities and Additional Shares, if any, at any time prior to the
expiration of the applicable Effectiveness Period, without being succeeded
immediately by a subsequent Registration Statement filed with and declared
effective by the Commission, or (D) trading in the Common Stock shall be
suspended or if the Common Stock is delisted from the OTC Bulletin Board or the
market or exchange on which the Common Stock is then quoted or listed for any
reason for more than three (3) Business Days in the aggregate, (E) the Company
breaches in a material respect any covenant or other material term or condition
to this Agreement, the Purchase Agreement (other than a representation or
warranty contained therein) or any other agreement, document, certificate or
other instrument delivered in connection with the transactions contemplated
hereby and thereby, and such breach continues for a period of thirty (30) days
after written notice thereof to the Company, or (F) the Company has breached
Section 3(m) (any such failure or breach being referred to as an "Event," and
for purposes of clauses (A) and (F) the date on which such Event occurs, or for
purposes of clause (B) the date on which such five day period is exceeded, or
for purposes of clause (C) after more than fifteen (15) Business Days, or for
purposes of clause (D) the date on which such three Business Day period is
exceeded, or for clause (E) the date on which such thirty day period is
exceeded, being referred to as "Event Date"), the Company shall pay in cash as
liquidated damages to each Holder an amount equal to 1.5% per calendar month or
portion thereof of the market value of the outstanding Registrable Securities
and Additional Shares, if any, held by such Holder that have not been sold from
the Event Date until the applicable Event is cured. Payments to be made pursuant
to this Section 7(c) shall be due and payable immediately upon demand in
immediately available funds.
(d) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities and Additional Shares, if any, in accordance with the
terms of this Agreement, shall be automatically assignable by each Holder to any
Affiliate of such Holder or any other Holder or Affiliate of any other Holder of
all or a portion of the Registrable Securities or Additional Shares, if any, if:
(i) the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders' successors and assigns.
(e) Trading of Common Stock. The Company will take all action
within its power to continue the trading of its Common Stock on the OTC Bulletin
Board (or the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market or The Nasdaq Small-Cap Market) and will comply in all respects
with the Company's reporting, filing and other obligations under the by-laws or
rules of the NASD and the OTC Bulletin Board (or the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market or The Nasdaq Small-Cap
Market).
(f) Shares Held by the Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities and Additional Shares, if any, taken together is required hereunder,
Registrable Securities and Additional Shares, if any, held by the Company or its
Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities and Additional Shares, if any) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(g) Fees and Expenses. The Company shall pay the reasonable legal
fees and expenses of Stroock & Stroock & ▇▇▇▇▇ LLP, counsel for the Purchasers,
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement and the Purchase Agreement to a maximum amount of $17,000. The
Company shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by it incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of its securities pursuant to this Agreement.
(h) Entire Agreement; Amendments. This Agreement and the Purchase
Agreement, together with the exhibits and schedules hereto and thereto, contain
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters.
(i) Notices. Any and all notices other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to each party at its address set forth under its name on Schedule
5.3 to the Purchase Agreement or to such other address or addresses or facsimile
number or numbers as any such party may most recently have designated in writing
to the other parties hereto by such notice.
(j) Amendments; Waivers. No provision of this Agreement may be
amended except in a written instrument signed by each of the parties hereto and
no provision of this Agreement may be waived except in a written instrument
signed by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof or thereof, nor
shall any delay or omission of any party to exercise any right hereunder or
thereunder in any manner impair the exercise of any such right accruing to it
thereafter.
(k) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement, as the case may be, and shall not be deemed
to limit or affect any of the provisions hereof.
(l) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(m) No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
(n) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(o) Survival. The agreements, covenants and provisions contained in
this Agreement shall survive until the second anniversary of the Closing Date
and the representations and warranties contained herein shall survive until the
first anniversary of the Closing Date.
(p) Execution. This Agreement may be executed in two or more
counterparts. All of the signature pages of this Agreement when taken together
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that all parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
(q) Publicity. The parties hereto shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and none of the parties shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which case the disclosing party shall provide
the other parties with prior notice of such public statement. The Company shall
not publicly or otherwise disclose the name of any Holder without its prior
written consent unless otherwise required by law, in which case the Company
shall inform such Holder of such disclosure in writing prior to making such
disclosure.
(r) Consent to Jurisdiction; Attorneys' Fees.
(i) The Company (including, but not limited to, its
Affiliates, subsidiaries, officers, directors and controlling persons) hereby
(A) irrevocably submits to the exclusive jurisdiction of any New York State
court or Federal court sitting in the Borough of Manhattan, The City of New York
in any action related to, connected with or arising out of, in whole or in part,
this Agreement (B) agrees that all claims in such action shall be decided in
such courts, (C) waives, to the fullest extent it may effectively do so, the
defense of inconvenient forum, and (D) consents to the service of process by
certified mail, return receipt requested. Nothing herein shall affect the right
of either party to serve legal process in any manner permitted by law or affects
its right to bring any action in any other court.
(ii) In connection with any dispute between the Company and a
Holder, related to, connected with or arising out of, in whole or in part, this
Agreement, the prevailing party shall be awarded all reasonable attorney's fees
and expenses incurred by it. In that connection fees and expenses actually paid
by a party in connection with the litigation of any dispute shall be deemed
presumably reasonable.
(iii) In the event that any Holder, becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
Person, including shareholders of the Company, in connection with or as a result
of any matter referred to in this Agreement, the Company will reimburse such
Holder for its legal fees and expenses and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, as those
fees and expenses are incurred; provided, however, that if at the conclusion of
such action, proceeding or investigation it shall be finally judicially
determined by a court of competent jurisdiction that indemnity for such fees and
expenses is contrary to law, or that such Holder is not the prevailing party,
then in that event, such party and/or any other Person having received such
advances of fees and expenses shall reimburse the Company in full for the sums
advanced.
(iv) The provisions of this Section 7(r) shall survive any
termination or completion of this Agreement.
(s) Waiver of Jury Trial.
(i) The parties hereto each waive their respective rights to a
trial by jury of any claim or cause of action based upon or arising out of or
related to this Agreement, or the transactions contemplated by this Agreement,
in any action, proceeding or other litigation of any type brought by any of the
parties against any other party, whether with respect to contract claims, tort
claims, or otherwise. The parties hereto each agree that any such claim or cause
of action shall be tried by a court trial without a jury. Without limiting the
foregoing, the parties further agree that their respective right to a trial by
jury is waived by operation of this Section 7(s) as to any action, counterclaim
or other proceeding which seeks, in whole or in part, to challenge the validity
or enforceability of this Agreement or any provision hereof. The waiver shall
apply to any subsequent amendments, renewals, supplements or modifications to
this Agreement.
(ii) The provisions of this Section 7(s) shall survive any
termination or completion of this Agreement.
(t) Severability. If any term, provision, covenant or restriction
of this Agreement is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(u) Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Holders
will be entitled to specific performance of the obligations of the Company under
this Agreement and injunctive relief. Each of the parties hereto (severally and
not jointly) agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation or injunctive relief the defense that a
remedy at law would be adequate.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
NCT GROUP, INC.
By: /s/ ▇▇ ▇. ▇▇▇▇▇▇▇
-----------------
Name: ▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President,
Chief Financial Officer
NESHER INC.
By: /s/ ▇▇▇▇▇ GRIN
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Name: ▇▇▇▇▇ Grin
Title: Investment Manager
AUSTOST ANSTALT ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Representative
BALMORE FUNDS S.A.
By: /s/ FRANCOIS MORAX
------------------
Name: Francois Morax
Title: Director
LIBRA FINANCE S.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director