Exhibit 10(a)
SECURITIES PURCHASE AGREEMENT
Among
NCT GROUP, INC.,
NESHER, INC.,
AUSTOST ANSTALT ▇▇▇▇▇▇
and
BALMORE FUNDS S.A.
Dated as of December 27, 1999
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF SHARES OF COMMON STOCK..................5
1.1. Purchase and Sale............................................5
1.2 [Intentionally omitted.].....................................5
1.3 The Closing; Additional Shares; Purchase Price...............6
ARTICLE II. REPRESENTATIONS AND WARRANTIES...............................6
2.1 Representations, Warranties and Agreements of the Company....7
(a) Organization and Qualification; Subsidiaries.........7
(b) Authorization; Enforcement...........................7
(c) Capitalization; Rights to Acquire Capital Stock......8
(d) Issuance of Shares...................................9
(e) No Conflicts.........................................9
(f) Consents and Approvals..............................10
(g) Litigation; Proceedings.............................10
(h) No Default or Violation.............................10
(i) Schedules...........................................11
(j) Private Offering....................................11
(k) SEC Documents; Financial Statements;
No Adverse Change...................................11
(l) Investment Company..................................12
(m) Certain Fees........................................12
(n) Solicitation Materials..............................12
(o) Employment Matters..................................13
(p) Patents and Trademarks..............................13
(q) Registration Rights; Rights of Participation........13
(r) Title...............................................14
(s) Regulatory Permits..................................14
(t) Insurance...........................................14
(u) Taxes...............................................14
(v) No Integrated Offering..............................15
(w) Year 2000 Compliance................................15
(x) Full Disclosure.....................................15
2.2 Representations and Warranties of the Purchaser.............15
(a) Investment Intent...................................16
(b) Purchaser Status....................................16
(c) Ability of Purchaser to Bear Risk of Investment.....16
(d) Reliance............................................16
ARTICLE III. OTHER AGREEMENTS OF THE PARTIES.............................17
3.1 Transfer Restrictions.......................................17
3.2 Stop Transfer Orders; Suspension of Qualification...........18
3.3 Furnishing of Information...................................18
3.4 Blue Sky Laws...............................................18
3.5 Integration.................................................19
3.6 Certain Agreements..........................................19
3.7 Compliance with Law.........................................19
3.8 Notice of Breaches..........................................20
3.9 Use of Proceeds.............................................20
3.10 Indemnification.............................................20
3.11 Additional Shares...........................................22
3.12 Placement Agent Shares......................................25
ARTICLE IV. CONDITIONS..................................................26
4.1 Conditions Precedent to Sale of the Shares..................26
(a) Conditions Precedent to the Obligation of the
Company to Sell the Shares..........................26
(i) Accuracy of the Purchaser's Representations
and Warranties................................26
(ii) Performance by the Purchaser..................26
(iii) No Injunction.................................26
(b) Conditions Precedent to the Obligation of the
Purchaser to Purchase the Shares....................26
(i) Accuracy of the Company's Representations
and Warranties................................27
(ii) Performance by the Company....................27
(iii) No Injunction.................................27
(iv) Adverse Changes...............................27
(v) No Suspensions of Trading in Common Stock.....27
(vi) Legal Opinion.................................27
(vii) Required Approvals............................28
(viii)Delivery of Stock Certificates................28
(ix) Registration Rights Agreement.................28
ARTICLE V. MISCELLANEOUS................................................28
5.1. Fees and Expenses............................................28
5.2 Entire Agreement; Amendments.................................28
5.3 Notices......................................................28
5.4 Amendments; Waivers..........................................29
5.5 Headings.....................................................29
5.6 Successors and Assigns.......................................29
5.7 No Third Party Beneficiaries.................................29
5.8 GOVERNING LAW................................................30
5.9 Survival.....................................................30
5.10 Execution....................................................30
5.11 Publicity....................................................30
5.12 Consent to Jurisdiction; Attorneys' Fees.....................30
5.13 Waiver of Jury Trial.........................................31
5.14 Severability.................................................32
5.15 Remedies.....................................................32
Schedules and Exhibits
Schedule 1 - Purchasers
Schedule 2.1(c) - Capitalization; Rights to Acquire Capital Stock
Schedule 2.1(f) - Consents and Approvals
Schedule 2.1(q) - Registration Rights; Rights of Participation
Schedule 2.1(r) - Title
Schedule 2.1(w) - Year 2000 Compliance
Schedule 5.3 - Notices
Exhibit A - Registration Rights Agreement
Exhibit B - Legal Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
December 27, 1999, between NCT Group, Inc., a Delaware corporation (the
"Company"), Nesher, Inc. ("Nesher"), a corporation organized under the laws of
the Isle of Man, United Kingdom, Austost Anstalt ▇▇▇▇▇▇ ("Austost"), a
corporation organized under the laws of ▇▇▇▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ Funds S.A.
("Balmore"), a corporation organized under the laws of the British Virgin
Islands. Nesher, Austost and Balmore are each referred to herein as a
"Purchaser" and collectively referred to herein as the "Purchasers".
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to an offer and acceptance among the parties hereto based
on the Per Share Market Value of the Company's common stock, par value $.01 per
share (the "Common Stock"), on November 9, 1999, the Company desires to issue
and sell to the Purchasers, and the Purchasers desire to acquire from the
Company, shares of the Company's common stock, par value $.01 per share (the
"Common Stock"); and
WHEREAS, contemporaneously with the execution and delivery hereof, the
Company, the Purchasers and Libra Finance S.A. (the "Placement Agent") have
entered into that certain Registration Rights Agreement dated the date hereof in
substantially the form of Exhibit A annexed hereto (the "Registration Rights
Agreement;" the Registration Rights Agreement and this Agreement are
collectively referred to herein as the "Transaction Documents");
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES OF COMMON STOCK
1.1 Purchase and Sale Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchasers, and the Purchasers,
severally and not jointly, shall purchase from the Company, 3,846,153 shares
(the "Shares") of Common Stock at the Closing and, subject to the provisions of
Section 3.11 hereof, the Additional Shares, if any.
1.2 [Intentionally omitted.]
1.3 The Closing; Additional Shares; Purchase Price.
(i) The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Stroock & Stroock &
▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
immediately following the execution hereof or such later date or
different location as the parties shall agree in writing, but not
prior to the date that the conditions set forth in Section 4.1 have
been satisfied or waived by the appropriate party. The date of the
Closing is hereinafter referred to as the "Closing Date." At the
Closing, the Company shall sell and issue to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from the
Company, the Shares. In addition, if required by the provisions of
this Agreement, the Company shall sell and issue to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from
the Company, the Additional Shares in accordance with the provisions
of Section 3.11 hereof. The purchase price for the Shares and any
Additional Shares shall equal in the aggregate $500,000 (the
"Purchase Price"), which Purchase Price shall be paid by the
Purchasers at the Closing in accordance with Section 1.3(ii) below.
(ii) At the Closing (a) the Company shall deliver to each
Purchaser: (1) one or more certificates representing the Shares
purchased by such Purchaser as set forth next to such Purchaser's
name on Schedule 1 attached hereto, each registered in the name of
such Purchaser and (2) all other documents, instruments and writings
required to have been delivered at or prior to the Closing by the
Company pursuant to this Agreement and the Registration Rights
Agreement, and (b) each Purchaser shall deliver to the Company the
portion of the Purchase Price set forth next to its name on Schedule
1, in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such
purpose, and all documents, instruments and writings required to
have been delivered at or prior to the Closing by such Purchaser
pursuant to this Agreement and the Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. Unless
otherwise specified, the Company hereby makes the following representations and
warranties to the Purchasers as of the date hereof and as of the Closing Date if
the Closing does not occur on the date hereof:
(a) Organization and Qualification; Subsidiaries. The Company is a
corporation, duly organized, validly existing and in good standing under
the laws of the State of Delaware, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no material subsidiaries
other than as set forth in the Company's most recently filed Annual Report
on Form 10-K (collectively, the "Subsidiaries"). Each of the Subsidiaries
is a corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the full corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure
to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of the Transaction Documents, (y) have or
result in a material adverse effect on the results of operations, assets,
prospects (insofar as they may reasonably be foreseen) or financial
condition of the Company and the Subsidiaries, taken as a whole or (z)
adversely impair the Company's ability to perform fully on a timely basis
its obligations under any Transaction Document (any of (x), (y) or (z),
being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents, and otherwise to
carry out its obligations hereunder and thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company. Each of the
Transaction Documents has been duly executed by the Company and when
delivered in accordance with the terms hereof will constitute the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective certificate of
incorporation, bylaws or other organizational documents.
(c) Capitalization; Rights to Acquire Capital Stock. The authorized,
issued and outstanding capital stock of the Company is set forth in
Schedule 2.1(c). All issued and outstanding shares of capital stock of the
Company and each Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable. No shares of the capital stock of
the Company are entitled to preemptive or similar rights, nor is any
holder of the capital stock of the Company entitled to preemptive or
similar rights arising out of any agreement or understanding with the
Company by virtue of any of the Transaction Documents. Except as disclosed
in Schedule 2.1(c), there are no outstanding options, warrants, script
rights to subscribe to, calls, written commitments or, to the knowledge of
the Company, oral commitments relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, written arrangements or, to the
knowledge of the Company, oral arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except as set forth on Schedule 2.1(c), and, to the best
knowledge of the Company, no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or
has the right to acquire by agreement with or by obligation binding upon
the Company beneficial ownership of in excess of 5% of the Common Stock. A
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind. The Common Stock is
quoted for trading on the OTC Bulletin Board. The Company has received no
notice, either oral or written, with respect to the continued eligibility
of the Common Stock for such quotation, and the Company has maintained all
requirements for the continuation of such quotation.
(d) Issuance of Shares. The Shares are duly authorized, and when
issued and paid for in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable, free and clear of all liens,
encumbrances, security interests, charges and rights of first refusal of
any kind (collectively, "Liens"). The Shares, upon issuance, will not
subject the holders thereof to personal liability by reason of being such
holders.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of
its or any Subsidiary's certificate of incorporation, bylaws or other
organizational documents (each as amended through the date hereof) or (ii)
subject to obtaining the consents referred to in Section 2.1(f), 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 (evidencing a Company debt or otherwise) to which
the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to
which the Company or any Subsidiary is subject (including Federal and
state securities laws and regulations), or by which any property or assets
of the Company or any Subsidiary is bound or affected, or (iv) result in
the creation or imposition of a Lien upon any of the Shares or any of the
property or assets of the Company or any Subsidiary, or any of its
"Affiliates" (as such term is defined under Rule 405 promulgated under the
Securities Act), except in the case of each of clauses (ii) and (iii),
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have or result in a Material Adverse Effect. The businesses of
the Company and the Subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any governmental authority except for
any such violation as would not, individually or in the aggregate, have or
result in a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents other than (i) the approval of the Company's Board
of Directors, (ii) the filings with the Securities and Exchange Commission
(the "Commission") contemplated by and in the time periods set forth in
the Registration Rights Agreement, and (iii) any filings, notices or
registrations under applicable federal and state securities laws (together
with the consents, waivers, authorizations, orders, notices and filings
referred to in Schedule 2.1(f), the "Required Approvals").
(g) Litigation; Proceedings. Except as disclosed in the Company's
registration statement on Form S-1 (Registration No. 333-87757) originally
filed with the Commission on September 24, 1999, as amended by
Pre-effective Amendment No. 1 filed with the Commission on October 28,
1999, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of the Subsidiaries or any of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Shares or (ii) would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound which would reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body applicable to it, or (iii) is in violation of any
statute, rule or regulation of any governmental authority to which it is
subject, which violation would reasonably be expected to, individually or
in the aggregate, have a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or on
behalf of the Company do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein not misleading.
(j) Private Offering. The Company and all Persons acting on its
behalf have not made, and will not make, offers or sales of the Common
Stock, and any securities that might be integrated with offers and sales
of the Common Stock, except to "accredited investors" (as defined in
Regulation D ("Regulation D") under the Securities Act of 1933, as amended
(the "Securities Act")) without any general solicitation or advertising
and otherwise in compliance with the conditions of Regulation D. The offer
and sale by the Company to the Purchasers of the Shares is exempt from the
registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the three years preceding the date hereof (the foregoing materials being
collectively referred to herein as the "SEC Documents") on a timely basis
or has received a valid extension of such time of filing and has filed any
such SEC Documents prior to the expiration of any such extension. As of
their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading. All
material agreements to which the Company or any Subsidiary is a party or
to which the property or assets of the Company or any Subsidiary are
subject have been filed as exhibits to the SEC Documents as required;
neither the Company nor any of the Subsidiaries is in breach of any
agreement where such breach would reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect. The consolidated
financial statements of the Company and the Subsidiaries included in the
SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material
respects the consolidated financial position of the Company and the
Subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments. Since the date
of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q for the period ended September 30, 1999, there has
been no event, occurrence or development that has had, or would reasonably
be expected to have, a Material Adverse Effect which has not been
specifically disclosed to the Purchasers by the Company. The Company last
filed audited financial statements with the Commission on May 3, 1999, and
has not received any comments from the Commission in respect thereof.
(l) Investment Company. The Company is not, and is not controlled by
or under common control with an affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(m) Certain Fees. Except for a certain commission payable to the
Placement Agent in connection with the transactions contemplated by this
Agreement, no fees or commissions will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank with respect
to the transactions contemplated by this Agreement. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in
this Section 2.1(m) that may be due in connection with the transactions
contemplated by the Transaction Documents. The Company shall indemnify and
hold harmless each of the Purchasers, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against
all claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees arising from the action or inaction of the Company.
(n) Solicitation Materials. The Company has not distributed any
offering materials in connection with the offering and sale of the Shares
which are the subject of this Agreement. The Company confirms that it has
not provided the Purchasers or their agents or counsel with any
information that constitutes or might constitute material non-public
information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
(o) Employment Matters. Each of the Company and each Subsidiary is
in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither the
Company nor any Subsidiary has incurred and expects to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which
the Company or any Subsidiary would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(p) Patents and Trademarks. The Company and each Subsidiary has, or
has rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights
(collectively, the "Intellectual Property Rights") which are necessary for
use in connection with its business, as currently conducted and as
described in the SEC Documents, and which the failure to so have would
have a Material Adverse Effect.
(q) Registration Rights; Rights of Participation. (A) Except as
disclosed in Schedule 2.1(q), the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been
satisfied and (B) no Person, including, but not limited to, current or
former stockholders of the Company, underwriters, brokers or agents, has
any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by this
Agreement or the Registration Rights Agreement.
(r) Title. Except as disclosed in Schedule 2.1(r), the Company and
the Subsidiaries have good and marketable title to, or the right to use,
all personal property owned or leased by them which is material to the
businesses of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Neither the
Company nor any of its Subsidiaries owns any real property. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries.
(s) Regulatory Permits. The Company and the Subsidiaries possess all
franchises, certificates, licenses, authorizations and permits or similar
authority issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the SEC Documents except where the failure to possess such permits
would not, individually or in the aggregate, have a Material Adverse
Effect ("Material Permits"), and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) Insurance. The Company and each Subsidiary maintains property
and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate, consistent with
industry standards. Neither the Company nor any Subsidiary has received
notice from, and has any knowledge of any threat by, any insurer (that has
issued any insurance policy to the Company or any Subsidiary) that such
insurer intends to deny coverage under or cancel, discontinue or not renew
any insurance policy presently in force.
(u) Taxes. All applicable tax returns required to be filed by the
Company and each of the Subsidiaries have been filed, or if not yet filed
have been granted extensions of the filing dates which extensions have not
expired, and all taxes, assessments, fees and other governmental charges
upon the Company, the Subsidiaries, or upon any of their respective
properties, income or franchises, shown in such returns and on assessments
received by the Company or the Subsidiaries to be due and payable have
been paid, or adequate reserves therefor have been set up if any of such
taxes are being contested in good faith; or if any of such tax returns
have not been filed or if any such taxes have not been paid or so reserved
for, the failure to so file or to pay would not in the aggregate or
individually have a Material Adverse Effect.
(v) 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 in any security or solicited any
offers to buy any securities under circumstances that would require
registration of any such securities under the Securities Act or cause the
offering of the Shares pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions.
(w) Year 2000 Compliance. The Company has initiated a review and
assessment of all areas within its and each Subsidiary's business and
operations that could be adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by the Company or any
of the Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999). Based on the foregoing, except as set forth on
Schedule 2.1(w), the Company believes that the computer applications that
are currently material to its or any Subsidiary's business and operations
are reasonably expected to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000, except to the
extent that a failure to do so would not reasonably be expected to have a
Material Adverse Effect.
(x) Full Disclosure. The representations and warranties of the
Company set forth in each of the Transaction Documents do not contain any
untrue statement of a material fact or omit any material fact necessary to
make the statements contained herein, in the light of the circumstances
under which they were made, not misleading.
2.2 Representations and Warranties of the Purchaser. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Investment Intent. Such Purchaser is acquiring the Shares for
its own account for investment purposes only and not with a view to or for
distributing or reselling the Shares or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to
the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of the Shares
pursuant to an effective registration statement under the Securities Act
and in compliance with applicable state securities laws or under an
exemption from such registration.
(b) Purchaser Status. At the time such Purchaser was offered the
Shares, and at the Closing Date, (i) it was and will be, an "accredited
investor" (as defined in Regulation D), or (ii) such Purchaser either
alone or together with its representatives, had and will have such
knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the prospective
investment in the Shares, and had and will have so evaluated the merits
and risks of such investment. Such Purchaser has the authority and is duly
and legally qualified to purchase and own the Shares.
(c) Ability of Purchaser to Bear Risk of Investment. Such Purchaser
is able to bear the economic risk of an investment in the Shares and, at
the present time, is able to afford a complete loss of such investment.
(d) Reliance. Such Purchaser understands and acknowledges that (i)
the Shares are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption, depends in part on, and the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) If any Purchaser should decide to dispose of any Shares held by
it, each Purchaser understands and agrees that it may dispose of the
Shares only pursuant to an effective registration statement under the
Securities Act and the applicable state blue-sky laws, to the Company or
pursuant to an available exemption from the registration requirements of
the Securities Act and the applicable state blue-sky laws. In connection
with any transfer of any of the Shares other than pursuant to an effective
registration statement or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel,
the form and substance of which opinion shall be reasonably satisfactory
to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act and
the applicable state blue-sky laws. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register (i) any transfer of
Shares by one Purchaser to another Purchaser, and agrees that no
documentation other than the executed transfer documents shall be required
for any such transfer, and (ii) any transfer by any Purchaser to an
Affiliate of such Purchaser or to an Affiliate of another Purchaser, or
any transfer among such Affiliates, provided that transferee certifies in
writing to the Company that it is an "accredited investor" (as defined in
Regulation D). Any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights under this Agreement
and the Registration Rights Agreement of the Purchaser from which it
received the transferred shares.
(b) Each Purchaser agrees to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
3.2 Stop Transfer Orders; Suspension of Qualification. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions of transfer set forth in Section
3.1. The Company will advise the Purchasers, 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
the use of any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.
3.3 Furnishing of Information. As long as a Purchaser owns Shares, 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 such Purchaser with true and complete copies of all
such filings. As long as a Purchaser owns Shares, 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 such Purchaser 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 of Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Shares under the securities or Blue Sky laws of
such jurisdictions as the Purchasers may request and shall continue such
qualification at all times through the third anniversary of the Closing Date
unless an exemption from registration applies.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares in a manner that would require the registration under the
Securities Act of the sale of any or all of such securities to any Purchaser.
3.6 Certain Agreements. As long as any Purchaser owns Shares, the Company
shall not and shall cause the Subsidiaries not to, without the consent of the
holders of all of the Shares then outstanding, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of any Purchaser; (ii) declare, authorize, set aside or pay any dividend
or other distribution with respect to the Common Stock except as would not
adversely affect the rights of any Purchaser hereunder; (iii) repay, repurchase
or offer to repay, repurchase or otherwise acquire shares of its Common Stock in
any manner; (iv) issue any series of preferred stock or other securities with
rights senior (in respect of liquidations, dividends, preferences and similar
rights) to those of the Shares; or (v) enter into any agreement with respect to
any of the foregoing.
3.7 Compliance with Law.
(a) The Company shall take all steps necessary to cause the Shares
to be approved for quotation on the OTC Bulletin Board, and the Company
shall maintain the quotation of its Common Stock on such market, as long
as the rules governing such quotation on the OTC Bulletin Board do not
change.
(b) Until at least two (2) years after the date on which the last
Registration Statement filed pursuant to the Registration Rights Agreement
is declared effective, (i) the Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations
under such Exchange Act, will comply with all requirements related to any
registration statement filed pursuant to this Agreement or the
Registration Rights Agreement and will not take any action or file any
document (whether or not permitted by the Securities Act or the Exchange
Act or the rules and regulations thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under the Securities Act and Exchange Act, except as permitted
herein and (ii) 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
bylaws 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).
3.8 Notice of Breaches.
(a) Each of the Company and the Purchasers shall give prompt written
notice to the other of any breach of any representation, warranty or other
agreement contained in this Agreement or the Registration Rights
Agreement, as well as any events or occurrences arising after the date
hereof and prior to the Closing Date, which would reasonably be likely to
cause any representation or warranty or other agreement of such party, as
the case may be, contained herein to be incorrect or breached as of the
Closing Date. However, no disclosure by any party pursuant to this Section
3.8 shall be deemed to cure any breach of any representation, warranty or
other agreement contained herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.8(a), the Company
shall promptly notify the Purchasers of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that
the consummation of the transactions contemplated by the Transaction
Documents violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly
furnish by facsimile to the Purchaser a copy of any written statement in
support of or relating to such claim or notice.
3.9 Use of Proceeds. The Company shall use the proceeds from the sale of
the Shares for general corporate purposes; provided, however, none of such
proceeds shall be used to satisfy any portion of any obligation or liability
relating to indebtedness for borrowed money owed by the Company to any
shareholder, officer or director of the Company.
3.10 Indemnification. The Company also will indemnify and hold the
Purchasers harmless against any and all losses, claims, damages or liabilities
to any such Person (including, without limitation, in connection with any
action, proceeding or investigation brought by or against any such Person,
including by stockholders of the Company) in connection with or as a result of
any matter referred to in the Transaction Documents, including, without
limitation, for any misrepresentation by the Company, for breaches of
representations and warranties contained in any of the Transaction Documents,
and for any breach, non-compliance or nonfulfillment by the Company of any
covenant, agreement or undertaking to be complied with or performed by it
contained in or pursuant to the Transaction Documents, except to the extent that
it is finally judicially determined that such losses, claims, damages or
liabilities resulted solely from the gross negligence or bad faith of the
Purchasers. If for any reason the foregoing indemnification is unavailable to
the Purchasers or is insufficient to hold each Purchaser harmless, then the
Company shall contribute to the amount paid or payable by each Purchaser as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Company and its
shareholders on the one hand and such Purchaser on the other hand in the matters
contemplated by the Transaction Documents as well as the relative fault of the
Company and each Purchaser with respect to such loss, claim, damage or liability
and any other relevant equitable considerations. The reimbursement, indemnity
and contribution obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliate of the Purchasers and the
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers, any such Affiliate and any such
Person. The Company also agrees that neither the Purchasers nor any of such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of any matter referred
to in the Transaction Documents except to the extent that it is finally
judicially determined that any losses, claims, damages, liabilities or expenses
incurred by the Company result solely from the gross negligence or bad faith of,
or knowing breach of this Agreement by, the Purchasers. Promptly after receipt
by the Purchasers or any Affiliate, partners, directors, agents, employees or
controlling persons, as the case may be, of notice of any claim or other
commencement of any action in respect of which indemnity may be sought, such
party will notify the Company in writing of the receipt or commencement thereof
and the Company shall have the right to assume the defense of such claim or
action (including the employment of counsel reasonably satisfactory to the
indemnified parties and the payment of fees and expenses of such counsel). The
indemnified party shall cooperate with the Company and the Company's counsel in
the defense of such claim or action. The Purchasers understand that the Company
shall not in connection with any one such claim or action or separate but
substantially similar related claims or actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for all
of the indemnified parties unless the defense of one indemnified party is unique
or separate from that of another indemnified party or one or more legal defenses
are available to an indemnified party but not to other indemnified parties
subject to the same claim or action. In the event the Company does not promptly
assume the defense of a claim or action, the indemnified parties shall have the
right to employ counsel reasonably satisfactory to the Company, at the Company's
expense, to defend such claim or action. The indemnified party shall not admit
any liability with respect to the claim or action or settle, compromise, pay or
discharge the same without the prior written consent of the Company so long as
the Company is reasonably contesting or defending the same in good faith. The
Company shall not compromise, settle or discharge any claim or action without
the Purchasers' consent, as applicable, which consent will not be unreasonably
withheld, unless there is no finding or admission of any violation of any law
against the indemnified party and the sole relief is monetary damages paid in
full by the Company. The provisions of this Section 3.10 shall survive any
termination or completion of the Transaction Documents.
3.11 Additional Shares.
(a) With respect to a Purchaser, if on the 180th day following
the Closing Date (the period ending on such date, the "First Look-Back
Period") (i) such Purchaser continues to own Shares and (ii) such
Shares have an aggregate value (based on Per Share Market Value, as
defined below) that, when added to the aggregate value of any Shares
transferred (other than by sale) by such Purchaser (based upon Per
Share Market Value on the date(s) of such transfer(s)) and the amounts
realized (the "First Realized Amount") by such Purchaser in connection
with any sale or sales of the Shares during the First Look-Back Period
(without giving effect to any commission to any broker or other person
or any legal fees and disbursements or other costs or expenses paid or
payable by such Purchaser in connection with such sale or sales),
would be less than 120% of the portion of the Purchase Price paid by
such Purchaser on the Closing Date, the Company shall issue to such
Purchaser at such Purchaser's request on the first day after the First
Look-Back Period (or such later date as soon thereafter as is mutually
acceptable to the parties), a number of additional shares of Common
Stock (the "First Additional Shares") having an aggregate value (based
upon Per Share Market Value on such date) that, when added to the sum
of such First Realized Amount and the aggregate value (based upon Per
Share Market Value) of the Shares held by such Purchaser on the last
day of the First Look-Back Period and the aggregate value of any
shares transferred (other than by sale) by such Purchaser (based upon
Per Share Market Value on the date(s) of such transfer(s)), would
equal at least 120% of the portion of the Purchase Price paid by such
Purchaser on the Closing Date. With respect to a Purchaser, if on the
270th day following the Closing Date (the period ending on such date,
the "Second Look-Back Period") (x) such Purchaser continues to own
Shares or any First Additional Shares and (y) such Shares and First
Additional Shares have an aggregate value (based on Per Share Market
Value) that, when added to the aggregate value of any Shares or any
First Additional Shares transferred (other than by sale) by such
Purchaser (based upon Per Share Market Value on the date(s) of such
transfer(s)) and the amounts realized (the "Second Realized Amount")
by such Purchaser in connection with any sale or sales of the Shares
and First Additional Shares, as applicable, during the Second
Look-Back Period (without giving effect to any commission to any
broker or other person or any legal fees and disbursements or other
costs or expenses paid or payable by such Purchaser in connection with
such sale or sales), would be less than 120% of the portion of the
Purchase Price paid by such Purchaser on the Closing Date, the Company
shall issue to such Purchaser at its request on the first day after
the Second Look-Back Period (or such later date as soon thereafter as
is mutually acceptable to the parties), a number of additional shares
of Common Stock (the "Second Additional Shares", and together with the
First Additional Shares collectively, the "Additional Shares") having
an aggregate value (based upon Per Share Market Value on such date)
that, when added to the sum of the Second Realized Amount and the
aggregate value (based upon Per Share Market Value) of the Shares and
First Additional Shares held by such Purchaser on the last day of the
Second Look-Back Period and the aggregate value of any shares
transferred (other than by sale) by such Purchaser (based upon Per
Share Market Value on the date(s) of such transfer(s)), would equal at
least 120% of the portion of the Purchase Price paid by such Purchaser
on the Closing Date. Notwithstanding the foregoing, however, with
respect to any period of 20 consecutive Trading Days after the Closing
Date (each such period a "Test Period"), if (A) the average daily
trading volume of the Company's Common Stock during such Test Period
is equal to or greater than 400,000 shares and (B) with respect to any
Purchaser, on each Trading Day of such Test Period, the sum of the
aggregate value of all Shares and Additional Shares, if any, that are
subject to an effective registration statement during each day of such
Test Period and held by such Purchaser (based on Per Share Market
Value) and the amounts realized by such Purchaser in connection with
any sale or sales of Shares and Additional Shares (without giving
effect to any commission to any broker or other person or any legal
fees and disbursements or other costs or expenses paid or payable by
such Purchaser in connection with such sale or sales) and the
aggregate value of any Shares and Additional Shares, if any,
transferred (other than by sale) by such Purchaser (based upon Per
Share Market Value on the date(s) of such transfer(s)) would equal at
least 125% of the Purchase Price, then notwithstanding any other
provision of this Agreement the Company shall be under no obligation
to issue any Additional Shares to such Purchaser at any time
thereafter. Upon the issuance of First Additional Shares, if any, and
again upon the issuance of Second Additional Shares, if any, to any
Purchaser, the Company shall cause to be delivered to such Purchaser
an opinion of counsel stating that the relevant Additional Shares
being issued by the Company are duly authorized, validly issued, fully
paid and nonassessable.
(b) For purposes of this Agreement, "Per Share Market Value" shall
mean on any particular date (i) the closing bid price per share of the
Common Stock on such date on The Nasdaq Small Cap Market, the Nasdaq
National Market or other registered national stock exchange on which the
Common Stock is then listed or if there is no such price on such date,
then the closing bid price on such exchange or quotation system on the
date nearest preceding such date, or (ii) if the Common Stock is not
listed then on The Nasdaq Small Cap Market, the Nasdaq National Market or
any registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by NASDAQ or
the National Quotation Bureau Incorporated or a similar organization or
agency succeeding to its functions of reporting prices) at the close of
business on such date, or (iii) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the average
of the "Pink Sheet" quotes for the relevant period, as determined in good
faith by the holder, or (iv) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by a
nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may
be the firm that regularly examines the financial statements of the
Company) that is regularly engaged in the business of appraising the
capital stock or assets of corporations or other entities as going
concerns, and which is not affiliated with either the Company or the
Purchasers (an "Independent Appraiser") selected in good faith by the
holders of a majority in interest of the shares of Common Stock; provided,
however, that the Company, after receipt of the determination by such
Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal
to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during such period. The determination
of fair market value by an Independent Appraiser shall be based upon the
fair market value of the Company determined on a going concern basis as
between a willing buyer and a willing seller and taking into account all
relevant factors determinative of value, and shall be final and binding on
all parties. In determining the fair market value of any shares of Common
Stock, no consideration shall be given to any restrictions on transfer of
the Common Stock imposed by agreement or by federal or state securities
laws, or to the existence or absence of, or any limitations on, voting
rights.
(c) For purposes of this Agreement, "Trading Day" shall mean (i) a
day on which the Common Stock is traded on The Nasdaq Small Cap Market,
the Nasdaq National Market or other registered national stock exchange on
which the Common Stock has been listed, or (ii) if the Common Stock is not
listed on The Nasdaq Small Cap Market, the Nasdaq National Market or any
registered national stock exchange, a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin
Board.
(d) In addition, the Company shall use its best efforts to register
such Additional Shares under the same terms and conditions as the Shares
are being registered. Upon each issuance of Additional Shares, (i) the
Company shall deliver to the Purchasers an officer's certificate
certifying that the representations and warranties of the Company set
forth herein were true and correct in all material respects as of the date
when made and as of the date of the issuance of the Additional Shares
(except as may be disclosed in a schedule to such certificate that is
subject to review by the Purchasers), as though made on and as of such
date and with representations and warranties with respect to the Shares
being made as to the Additional Shares and (ii) this Agreement shall be
deemed amended such that the covenants and agreements of the Company
herein with respect to the Shares shall apply equally to the Additional
Shares. If, on the 180th day following the Closing Date, the Company is
required under the terms hereof to issue any Additional Shares and an
insufficient number of shares of the Company's Common Stock are authorized
for such issuance, then the Company shall promptly seek a vote of its
shareholders, which vote shall take place no later than the 240th day
following the Closing Date (or, if such day is not a Business Day, as such
term is defined in the Registration Rights Agreement, then on the next
succeeding day that is a Business Day), in order to obtain such approvals
and authorizations from its shareholders as are required under Delaware
law and the Company's organizational documents to allow the Company to
issue such Additional Shares (and any Second Additional Shares as the
Company in its sole discretion may anticipate will be required) to the
Purchasers.
3.12 Placement Agent Shares. At the Closing, as payment for services
rendered by the Placement Agent, in its capacity as placement agent in
connection with the issuance and sale of Common Stock to Nesher, the Company
shall issue to the Placement Agent 288,461 shares of Common Stock (the
"Placement Agent Shares"). The Company shall use its best efforts to register
the Placement Agent Shares under the same terms and conditions as the Shares are
being registered. Upon the issuance of Placement Agent Shares, (i) the Company
shall be deemed to have made for the benefit of the Placement Agent the
representations and warranties of the Company set forth herein, as if such
representations and warranties had been made for the benefit of the Placement
Agent with respect to the Placement Agent Shares and (ii) this Agreement shall
be deemed amended such that the covenants and agreements of the Company herein
with respect to the Shares shall apply equally to the Placement Agent Shares.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to Sale of the Shares.
(a) Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation of the Company to sell the Shares hereunder is
subject to the satisfaction or waiver by the Company, at or before the
Closing, of each of the following conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser
shall be true and correct in all material respects as of the date
when made and as of the Closing Date, as though made on and as of
such date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by such Purchaser at or
prior to the Closing; and
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation
of any of the transactions contemplated by the Transaction
Documents.
(b) Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares. The obligation of each Purchaser hereunder to acquire
and pay for the Shares is subject to the satisfaction or waiver by such
Purchaser, at or before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in the
Transaction Documents shall be true and correct in all material
respects as of the date when made and as of the Closing Date as
though made on and as of such date;
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied with in all material respects all
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation
of any of the transactions contemplated by this Agreement or the
Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the financial
statements included in the Company's Quarterly Report on Form 10-Q
last filed prior to the date of this Agreement, no event which had a
Material Adverse Effect and no material adverse change in the
financial condition of the Company shall have occurred;
(v) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or
on the OTC Bulletin Board, which suspension remains in effect;
(vi) Legal Opinion. The Company shall have delivered to the
Purchasers the opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, outside counsel to
the Company, in substantially the forms annexed hereto as Exhibit B;
(vii) Required Approvals. All Required Approvals shall
have been obtained;
(viii) Delivery of Stock Certificates. The Company shall have
arranged for the delivery to each Purchaser or such Purchaser's
designee of the stock certificate(s) representing the Shares,
registered in the name of such Purchaser, each in form satisfactory
to such Purchaser; and
(ix) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement.
ARTICLE V
MISCELLANEOUS
5.1 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 the
Transaction Documents 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 the Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of its securities pursuant to the Transaction Documents.
5.2 Entire Agreement; Amendments. The Transaction Documents, 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.
5.3 Notices. Any and all notices or 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 attached hereto 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.
5.4 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.
5.5 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.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and permitted assigns.
The Company may not assign this Agreement, or any rights or obligations
hereunder without the prior written consent of the Purchasers. Each Purchaser
may assign this Agreement, or any rights or obligations hereunder (i) to its
Affiliates or to another Purchaser without the prior written consent of the
Company and (ii) to any other Person with the prior written consent of the
Company, such consent not to be unreasonably withheld. This provision shall not
limit the Purchaser's right to transfer securities or transfer or assign rights
under any Registration Rights Agreement to which it is a party.
5.7 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.
5.8 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.
5.9 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.
5.10 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.
5.11 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 no party hereto 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 such 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 of the
Purchasers without such Purchaser's prior written consent unless otherwise
required by law, in which case the Company shall inform such Purchaser of such
disclosure in writing prior to making such disclosure.
5.12 Consent to Jurisdiction; Attorneys' Fees.
(a) The Company (including, but not limited to, its Affiliates,
subsidiaries, officers, directors and controlling persons) hereby (i)
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, the Transaction Documents, (ii) agrees that all claims
in such action shall be decided in such court, (iii) waives, to the
fullest extent it may effectively do so, the defense of inconvenient forum
and (iv) consents to the service of process by certified mail, return
receipt requested. Nothing herein shall affect the right of any party to
serve legal process in any manner permitted by law or affect its right to
bring any action in any other court.
(b) In connection with any dispute between the Company and any
Purchaser related to, connected with or arising out of, in whole or in
part, the Transaction Documents, the prevailing party shall be awarded all
reasonable attorneys' 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.
(c) In the event that any Purchaser 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 the Transaction Documents, the Company
will reimburse such Purchaser 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 Purchaser 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.
(d) The provisions of this Section 5.12 shall survive any
termination or completion of the Transaction Documents.
5.13 Waiver of Jury Trial.
(a) 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 the Transaction Documents, or the transactions contemplated by
the Transaction Documents, in any action, proceeding or other litigation
of any type brought by either of the parties against the other, 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 5.13 as to any action, counterclaim or other
proceeding which seeks, in whole or in part, to challenge the validity or
enforceability of any of the Transaction Documents or any provision hereof
or thereof. The waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to any of the Transaction Documents.
(b) The provisions of this Section 5.13 shall survive any
termination or completion of the Transaction Documents.
5.14 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 remain 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.
5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents 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 Securities
Purchase 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
----------------
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
EXHIBIT A
Registration Rights Agreement
See Exhibit 10(b) in this Item 7.