Exhibit 10(ak)
SECURITIES PURCHASE AND SUPPLEMENTAL
EXCHANGE RIGHTS AGREEMENT
SECURITIES PURCHASE AND SUPPLEMENTAL EXCHANGE RIGHTS AGREEMENT (the
"Agreement"), dated as of August 10, 2000 by and among XxxxxxxXxxxxxx.xxx Inc.,
a Delaware corporation, with principal executive offices at 00 Xxxxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000 ("ConnectClearly"), NCT Group, Inc., a Delaware
corporation, with principal executive offices at 00 Xxxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000 ("NCT"), and the investors listed on Schedule 1 attached
hereto (individually, a "Buyer" and collectively, the "Buyers").
WITNESSETH:
WHEREAS, ConnectClearly is authorized to issue shares of common stock
having a par value of $0.01 per share (the "ConnectClearly Common Stock").
WHEREAS, ConnectClearly, NCT and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
pursuant to Section 4(2) and/or Regulation D ("Regulation D") as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Buyers desire to purchase from ConnectClearly, and
ConnectClearly desires to issue and sell to the Buyers, upon the terms and
conditions stated in this Agreement, an aggregate amount of 2,000 shares of
ConnectClearly Common Stock in the respective amounts set forth opposite each
Buyer's name on Schedule 1 (the "Shares");
WHEREAS, NCT is granting the Buyers supplemental exchange rights whereby
the Buyers may, in accordance with and subject to the terms of this Agreement,
exchange Shares for shares of NCT's common stock, $0.01 par value per share (the
"NCT Common Stock") (as exchanged, the "Exchange Shares"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, NCT, ConnectClearly and the Buyers are executing and delivering a
Registration Rights Agreement substantially in the form attached hereto as
"Exhibit A" (the "Registration Rights Agreement") pursuant to which NCT and
ConnectClearly have agreed to provide certain registration rights.
NOW THEREFORE, in consideration of the premises hereof and the mutual
covenants, representations and warranties contained herein, ConnectClearly, NCT
and each Buyer (severally and not jointly) hereby agree as follows:
1. PURCHASE AND SALE OF CONNECTCLEARLY
COMMON STOCK.
a. Purchase of ConnectClearly Common Stock. Subject to the
satisfaction (or waiver) of the conditions precedent to Closing (as
defined below) as set forth in Sections 8 and 9 below, on the Closing
Dates (as defined below), ConnectClearly shall issue and sell to the
Buyers, and the Buyers, severally and not jointly, shall purchase from
ConnectClearly, an aggregate of 2,000 Shares, each share having a
stated value of $1,000 (the "Stated Value"), in consideration for an
aggregate purchase price of $2,000,000 (the "Purchase Price") in the
respective amounts set forth opposite each Buyer's name on Schedule 1.
b. The Closings.
(i) The Initial Closing.
(A) The closing of the purchase and sale of the Initial
Shares (as defined below) (the "Initial Closing") shall take
place at the offices of Stroock & Stroock & Xxxxx LLP, 000
Xxxxxx Xxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, 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
Sections 8 and 9 have been satisfied or waived by the
appropriate party. The date of the Initial Closing is
hereinafter referred to as the "Initial Closing Date." At
the Initial Closing, ConnectClearly shall sell and issue to
the Buyers, and the Buyers shall, severally and not jointly,
purchase from ConnectClearly, 1,000 Shares (the "Initial
Shares") for an aggregate purchase price of $1,000,000 (the
"Initial Purchase Price").
(B) At the Initial Closing (a) ConnectClearly shall deliver
to each Buyer (1) stock certificates representing the
Initial Shares purchased by such Buyer as set forth next to
such Buyer's name on Schedule 1 attached hereto, each duly
executed on behalf of ConnectClearly and registered in the
name of such Buyer or its designee (the "Initial
ConnectClearly Common Stock Certificates"), (2) the Warrants
(the "Initial Warrants") purchased by such Buyer as set
forth next to such Buyer's name on Schedule 1 attached
hereto, registered in the name of such Buyer, (3) and all
other documents, instruments and writings required to have
been delivered at or prior to the Initial Closing by
ConnectClearly pursuant to this Agreement and the
Registration Rights Agreement, and (b) each Buyer shall
deliver to ConnectClearly the portion of the Initial
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
ConnectClearly for such purpose on or prior to the Initial
Closing Date, and all documents, instruments and writings
required to have been delivered at or prior to the Initial
Closing by such Buyer pursuant to this Agreement and the
Registration Rights Agreement.
(ii) Second Closing.
(A) Subject to the terms and conditions set forth in
Sections 8 and 9 and elsewhere in this Agreement, on August
__, 2001, or upon another date which the parties hereto may
otherwise mutually agree (the "Second Closing Date"), the
Buyers shall purchase, severally and not jointly, an
additional 1,000 Shares (the "Second Tranche Shares") for an
aggregate purchase price of $1,000,000 (the "Second Tranche
Purchase Price"). At the Second Closing, each Buyer shall be
obligated (subject to the terms and conditions herein) to
purchase the number of Second Tranche Shares next to such
Buyer's name on Schedule 1 attached hereto. The closing of
the purchase and sale of the Second Tranche Shares (the
"Second Closing") shall take place on the Second Closing
Date and in the same manner as the Initial Closing;
provided, however, that in no case shall the Second Closing
take place unless and until the conditions listed in Section
8 and 9 have been satisfied or waived by the appropriate
party. "Closing Date", as used herein, shall mean the
Initial Closing Date or the Second Closing Date, or both, as
applicable.
(B) At the Second Closing (a) ConnectClearly shall deliver
to each Buyer (1) stock certificates representing the Second
Tranche Shares purchased by such Buyer as set forth next to
such Buyer's name on Schedule 1 attached hereto, each duly
executed on behalf of ConnectClearly and registered in the
name of such Buyer or its designee ("Second ConnectClearly
Common Stock Certificates") (2) the Warrants (the "Second
Tranche Warrants"; and together with the Initial Warrants,
the "Warrants") purchased by such Buyer as set forth next to
such Buyer's name on Schedule 1 attached hereto, registered
in the name of such Buyer and (3) and all other documents,
instruments and writings required to have been delivered at
or prior to the Second Closing by ConnectClearly pursuant to
this Agreement and the Registration Rights Agreement, and
(b) each Buyer shall deliver to ConnectClearly the portion
of the Second Tranche Purchase Price set forth next to its
name on Schedule 1 attached hereto, in United States dollars
in immediately available funds by wire transfer to an
account designated in writing by ConnectClearly for such
purpose on or prior to the Second Closing Date.
2. BUYER'S SUPPLEMENTAL RIGHTS TO EXCHANGE CONNECTCLEARLY COMMON STOCK FOR
NCT COMMON STOCK
Each Buyer of Shares shall be entitled, at its sole election, to exchange
Shares for shares of NCT Common Stock on the following terms and conditions:
a. Exchange Rights. At any time, and from time to time, on or after
the 180th day following the applicable Issuance Date (as defined
below), a Buyer (or its successors and permitted assigns) of Shares
shall have the right, but not the obligation, to exchange any number
of Shares for fully paid and nonassessable shares of NCT Common Stock
at the Exchange Rate (as defined below).
b. Exchange Rate. The number of shares of NCT Common Stock issuable
upon exchange of each Share pursuant to this Section 2 shall be
determined according to the following formula (the "Exchange Rate"):
_____Stated Value_______ = Number of Shares of
Exchange Price NCT Common Stock
For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Exchange Price" means (i) the amount obtained by multiplying
0.8 by the average of the Closing Bid Prices (as defined below)
for NCT Common Stock for the five (5) consecutive trading days
immediately preceding the Exchange Date (as defined below) or
(ii) in the event of any adjustment thereof pursuant to Section
2A, such adjusted amount;
(ii) "Closing Bid Price" means, (a) for any security as of any
date, the last closing bid price on the OTC Bulletin Board (the
"OTCB") as reported by Bloomberg Financial Markets ("Bloomberg"),
or, if the OTCB is not the principal trading market for such
security, the last closing bid price of such security on the
principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the pink sheets or
bulletin board for such security as reported by Bloomberg, or, if
no closing bid price is reported for such security by Bloomberg,
the last closing trade price of such security as reported by
Bloomberg. If the Closing Bid Price for NCT Common Stock cannot
be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such
date shall be the fair market value as reasonably determined in
good faith by the Board of Directors of NCT (the price determined
pursuant to this Section 2(ii)(a) is referred to as the "Actual
Closing Bid Price"), or
b) if the "Actual Closing Bid Price" for NCT Common Stock at the time
of the determination thereof pursuant to Section 2(ii)(a) above shall
be less than $0.20 (the "Floor Price"), then NCT may elect to deem the
Closing Bid Price to be equal to the Floor Price for the purposes of
the Exchange Rate calculation in Section 2(b); provided, however, that
NCT may make such election only if it pays, in cash, to an exchanging
Buyer an amount equal to the Actual Closing Bid Price multiplied by
the number of additional Exchange Shares such Buyer would have
received had the Actual Closing Bid Price (rather than the Floor
Price) been used to calculate the number of Exchange Shares to which
such Buyer was entitled.
(iii) "Issuance Date" means, with respect to the Initial Shares,
the Initial Closing Date and, with respect to the Second Tranche
Shares, the Second Closing Date.
c. Buyer's Delivery Requirements. To exchange Shares for shares of NCT
Common Stock on any date (an "Exchange Date"), the Buyer thereof shall
(A) deliver or transmit by facsimile, for receipt on or prior to 11:59
p.m., Eastern Time, on such date, a copy of a fully executed notice of
exchange in the form attached hereto as Exhibit 2 (the "Notice of
Exchange") to NCT (c/o Chief Financial Officer, NCT Group, Inc., 00
Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, facsimile number (203)
226-4338) and (B) surrender to a common carrier for delivery to NCT as
soon as practicable following such notice, the original certificates
representing the Shares being exchanged (or an indemnification
undertaking with respect to such certificates in the case of their
loss, theft or destruction) (the "ConnectClearly Common Stock
Certificates") and the originally executed Notice of Exchange.
d. NCT and ConnectClearly Response. NCT shall, no later than the
Business Day following receipt of a facsimile copy of a Notice of
Exchange, send via facsimile, a confirmation of receipt of such Notice
of Exchange to such Buyer ("Confirmation of Receipt"). Upon receipt by
NCT of the ConnectClearly Common Stock Certificate(s) representing the
Shares to be exchanged pursuant to a Notice of Exchange, together with
the originally executed Notice of Exchange (such date, "NCT's
Receipt"), (i) NCT shall within three Business Days, make any payments
due to the Buyer pursuant to Section 2(ii)(b) pursuant to wire
instructions provided by the Buyer and (ii) NCT or NCT's Transfer
Agent (as applicable) shall, within five (5) Business Days following
NCT's Receipt, issue and surrender to a common carrier for overnight
delivery to the address as specified in the Notice of Exchange, a
certificate or certificates, registered in the name of the Buyer or
its designee, for the number of Exchange Shares to which the Buyer
shall be entitled under this Agreement. ConnectClearly or
ConnectClearly's Transfer Agent (as applicable) shall, and NCT shall
cause ConnectClearly to, within five (5) Business Days following NCT's
Receipt, issue and surrender to a common carrier for overnight
delivery to the address as specified in the Notice of Exchange, a
certificate or certificates, registered in the name of the Buyer or
its designee, for the number of shares of ConnectClearly Common Stock
represented by the surrendered ConnectClearly Common Stock
Certificate(s) which were not subject to the Notice of Exchange. As
used in this Agreement, "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.
e. Record Buyer. The person or persons entitled to receive the
Exchange Shares shall be treated for all purposes as the record holder
or holders of such shares of NCT Common Stock as of the Exchange Date.
NCT shall be treated by ConnectClearly for all purposes as the record
holder of such Shares as of the Exchange Date, and NCT and
ConnectClearly shall amend their respective records to so reflect.
f. NCT's Failure to Timely Exchange. If NCT shall fail to deliver to a
Buyer, within seven (7) Business Days following NCT's Receipt, then,
in addition to all other available remedies which such Buyer may
pursue hereunder, NCT shall pay to such Buyer, on and for each day
after such seventh (7th) Business Day until the day delivery is
effected, an amount equal to 1.0% of the product of (A) the number of
shares of NCT Common Stock not delivered to such Buyer and to which
such Buyer is entitled (without regard to the application of the Floor
Price) and (B) the highest Closing Bid Price of the NCT Common Stock
during the period beginning on the first Business Day after NCT's
Receipt and ending on the day NCT delivers to such Buyer Exchange
Shares as set forth in the Notice of Exchange (including any payments
due to such Buyer pursuant to Section 2(ii)(b)) (such period, the
"Non-delivery Period"). The parties agree that the timely exchange of
Shares into Exchange Shares is a material element of this Agreement
and further agree that the Buyers will suffer damages which may be
difficult to quantify if NCT fails, for any reason, to timely deliver
the Exchange Shares. Accordingly, the amount of such payments shall be
aggregated daily and interest will accrue on such aggregated amount at
the rate of 15% per annum, until such aggregate amount and any accrued
interest thereon is paid in full (any amount paid under this
subsection shall be paid as liquidated damages and not as a penalty).
2A. CERTAIN ADJUSTMENTS.
a. (i) ConnectClearly hereby grants to each holder of Shares (each
such person a "Holder," and collectively, the "Holders") so long as it
shall own, of record or beneficially, at least 125 Shares, the right
to purchase all or part of its pro rata share of New Securities (as
defined below) which ConnectClearly, from time to time, proposes to
issue and sell. Such Holder's pro rata share, for purposes of this
preemptive right (the "Preemptive Right"), is the ratio of (x) the
number of shares of ConnectClearly Common Stock which such Holder of
Shares owns or has the right to acquire from ConnectClearly upon
exercise of options or warrants then exercisable or upon conversion of
convertible securities then outstanding to (y) the sum of the number
shares of ConnectClearly Common Stock then outstanding and the number
of such shares issuable upon exercise of options or warrants then
exercisable or upon conversion of any other convertible securities
then outstanding. The Holders who are entitled to a preemptive right
hereunder shall have a right of over-allotment pursuant to this
Section 2A such that, to the extent any such Holder does not exercise
its or his Preemptive Right in full hereunder, such additional shares
of New Securities which such Holder did not purchase may be purchased
by the other Holders who have a Preemptive Right in proportion to the
total number of shares of ConnectClearly Common Stock which each such
other Holder owns or has the right to acquire from ConnectClearly
compared to the total number of shares of Common Stock which all such
other Holders exercising their right of over-allotment own or have the
right to acquire from ConnectClearly.
(ii) "New Securities" shall mean any capital stock of
ConnectClearly whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become convertible into or
exchangeable for capital stock, issued on or after the Initial
Closing Date; provided, that the term "New Securities" does not
include (a) securities purchased under this Agreement, (b) shares
of ConnectClearly Common Stock issuable upon exercise of stock
awards granted pursuant to ConnectClearly's option plans
described in Schedule 4(c), (c) shares of ConnectClearly Common
Stock issued pursuant to registered public offerings and (d) debt
securities that are not, and will not become, directly or
indirectly convertible into or exchangeable for capital stock.
(iii) In the event ConnectClearly proposes to undertake an
issuance of New Securities, it shall give each Holder written
notice of its intention, describing the type of New Securities
and the price and the terms upon which ConnectClearly proposes to
issue the same. Each such Holder shall have 20 Business Days from
the date of receipt of any such notice to agree to purchase up to
such Holder's pro-rata share of such New Securities for the price
and upon the terms specified in the notice by giving written
notice to ConnectClearly and stating therein the quantity of New
Securities to be purchased.
(iv) In the event any Holder entitled to a preemptive right
hereunder fails to exercise in full its Preemptive Right (after
giving effect to the over-allotment provision of Section 2A(a)(i)
hereof), ConnectClearly shall have 90 days thereafter to sell the
New Securities with respect to which such Holder's option was not
exercised, so long as such New Securities are first offered to
any other Holders with a Preemptive Right, at a price and upon
terms no more favorable to the purchasers thereof than specified
in ConnectClearly's notice to the Holders pursuant to Section
2A(a)(iii). To the extent ConnectClearly shall not issue or sell
such New Securities in such 90-day period, ConnectClearly shall
not thereafter issue or sell such New Securities without first
again offering such securities in the manner provided above.
b. A Holder may deliver a Notice of Exchange to NCT and the
obligations of NCT with respect to such notice shall be triggered
under the terms and conditions described below:
(i) If any of the following (each, a "Triggering Event") shall
occur after the Initial Closing Date: (1) NCT consolidates with
or merges into any other Person and NCT shall not be the
continuing or surviving corporation of such consolidation or
merger, (2) another Person consolidates with or merges into NCT
and NCT shall be the continuing or surviving Person but, in
connection with such consolidation or merger, any capital stock
of NCT shall be changed into or exchanged for securities of any
other Person or cash or any other property, (3) NCT transfers all
or substantially all of its properties or assets to any other
Person, or (4) NCT effects a capital reorganization or
reclassification of its capital stock, then, and in the case of
each such Triggering Event, proper provision shall be made so
that, upon the basis and the terms and in the manner provided in
this Agreement, each Holder holding Shares on the date of the
entry by NCT into an agreement in principle to accomplish any of
such Triggering Event shall be entitled to written notice from
NCT, delivered at least 30 days prior to such Triggering Event,
describing in detail the terms of such Triggering Event. Within
20 days of receipt of such notice a Holder may elect, by written
notice to NCT, to exchange any Shares, notwithstanding any other
restriction on the right to exchange contained herein, at any
time prior to such Triggering Event at the Exchange Ratio (using
the Actual Closing Bid Price) in effect at the time immediately
prior to the date of the consummation of such Triggering Event
(the "Distribution Date").
(ii) Notwithstanding anything contained in this Agreement to the
contrary, NCT will not effect any Triggering Event unless, prior
to the consummation thereof, each Person (other than NCT) which
may deliver or issue any securities, cash and/or property (any
such delivery or issuance, a "Distribution") in connection with
the Triggering Event, shall assume, by written instrument
delivered to, and reasonably satisfactory to, each Holder, (1)
the obligations of NCT under this Agreement (and if NCT shall
survive the consummation of such Triggering Event, such
assumption shall be in addition to, and shall not release NCT,
any continuing obligations of NCT under this Agreement) and (2)
the obligation to deliver to such Distribution to the Holders,
and such Person shall have delivered to each Holder an opinion of
counsel to such Person, which counsel shall be reasonably
satisfactory to such Holder, stating that the obligations to
exchange any outstanding Shares after such Triggering Event shall
thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this
subsection) shall be applicable to the Distribution which such
Person may be required to deliver upon any exchange of Shares
prior to such triggering Event or the exercise of any rights
pursuant this Agreement.
(iii) If, at any time while Shares are outstanding, NCT shall (1)
pay a dividend on, or make any distribution of its assets upon or
with respect to (including, but not limited to, a distribution of
its property as a dividend in liquidation or partial liquidation
or by way of return of capital) NCT Common Stock, (2) offer
options or rights to subscribe for shares of NCT Common Stock, or
(3) issue any Common Stock Equivalents, to any of its holders of
Common Stock, then, at least 30 days prior to the record date for
such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer,
each Holder holding Shares shall receive notice of such payment
or dividend and the right, notwithstanding any other restriction
on the right to exchange contained herein, to exchange some or
all of its Shares for Exchange Shares at the Exchange Ratio
(using the Actual Closing Bid Price) in effect immediately prior
to the record date of such payment, distribution or offer or, in
the absence of a record date, immediately prior to the date of
such payment, distribution or offer.
"Additional Shares" means, (a) with respect to ConnectClearly, all shares
of ConnectClearly Common Stock issued by ConnectClearly after the Initial
Closing Date, and all shares of Other Common, if any, issued by ConnectClearly
after the Initial Closing Date, except any Warrant Shares and (b) with respect
to NCT all shares of NCT Common Stock issued by NCT after the Initial Closing
Date, and all shares of Other Common, if any, issued by NCT after the Initial
Closing Date, except the Exchange Shares.
"Common Stock Equivalents" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any additional shares of NCT
or ConnectClearly Common Stock, as applicable, or any Convertible Security.
"Convertible Security" mean evidences of indebtedness, shares of capital
stock or other securities which are or may be at any time convertible into or
exchangeable for Additional Shares.
"Other Common" means (a) with respect to ConnectClearly, any capital stock
of ConnectClearly of any class which shall be authorized at any time after the
Initial Closing Date (other than the Shares) and which shall have the right to
participate in the distribution of earnings and assets of ConnectClearly without
limitation as to amount and (b) with respect to NCT, any capital stock of NCT of
any class which shall be authorized at any time after the Initial Closing Date
(other than the NCT Common Stock) and which shall have the right to participate
in the distribution of earnings and assets of NCT without limitation as to
amount.
3. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. The Buyer is acquiring the Securities (as
defined in Section 4(d)) for its own account for investment purposes
only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold
any Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or
pursuant to an effective registration statement under the 1933 Act and
in compliance with applicable state securities laws or an exemption
from such registration.
b. Accredited Investor Status. As of the Closing Date, such Buyer is
an "accredited investor" as that term is defined in Regulation D. As
such, the Buyer is able to bear the economic risk of an investment in
the Securities and, as of the date hereof, is able to afford a total
and complete loss of its investment.
c. Reliance on Exemptions. Such Buyer understands and acknowledges
that the Securities are being offered and sold to it in a private
placement in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that ConnectClearly and NCT are relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations and
warranties of such Buyer set forth above in order to determine the
availability of such exemptions and the eligibility of such Buyer to
acquire such securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of ConnectClearly and NCT and materials relating to the
offer and sale of the Securities which have been requested by such
Buyer. Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of ConnectClearly and NCT. Neither such
inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify,
amend or affect such Buyer's right to rely on ConnectClearly's
representations and warranties contained in Section 4 below or NCT's
representations and warranties contained in Section 5 below. Such
Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
e. [Intentionally left Blank]
f. Transfer or Resale of the Securities. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the
Securities issued have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned, transferred or otherwise disposed of unless (a)
subsequently registered under the 1933 Act and state securities laws,
if applicable, (b) such Buyer shall have delivered to ConnectClearly
an opinion of counsel, in customary form, to the effect that such
securities to be sold, assigned, transferred or otherwise disposed of
may be sold, assigned, transferred or otherwise disposed of pursuant
to an exemption from such registration, (c) such Buyer provides
ConnectClearly with customary assurance that such securities can be
sold, assigned, transferred or otherwise disposed of pursuant to Rule
144 promulgated under the 1933 Act (or a successor rule thereto)
("Rule 144"), or (d) such Buyer exchanges the Shares for Exchange
Shares pursuant to Section 2 above; (ii) any sale of such securities
made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) except as provided in
Section 6A herein, neither ConnectClearly nor any other person is
under any obligation to register the Shares under the 1933 Act or any
state securities laws, if applicable, or to comply with the terms and
conditions of any exemption thereunder.
g. Transfer or Resale of Exchange Shares. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the
Exchange Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned, transferred or otherwise disposed of unless (a)
subsequently registered under the 1933 Act and state securities laws,
if applicable, (b) such Buyer shall have delivered to NCT an opinion
of counsel, in customary form, to the effect that such securities to
be sold, assigned, transferred or otherwise disposed of may be sold,
assigned, transferred or otherwise disposed of pursuant to an
exemption from such registration, or (c) such Buyer provides NCT with
customary assurance that such securities can be sold, assigned,
transferred or otherwise disposed of pursuant to Rule 144; (ii) any
sale of such securities made in reliance on Rule 144 may be made only
in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the 0000 Xxx)
may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither NCT
nor any other person is under any obligation to register such
securities under the 1933 Act or any state securities laws, if
applicable, or to comply with the terms and conditions of any
exemption thereunder.
h. Legends on Shares of ConnectClearly Common Stock. Such Buyer
understands that the certificates or other instruments representing
the Securities shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against
transfer of such certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN CUSTOMARY
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
The legend set forth above shall be removed and ConnectClearly shall
issue a certificate without such legend to the holder of the
Securities, upon which it is stamped, if, unless otherwise required by
state securities laws, (i) the sale of such Securities is registered
under the 1933 Act, (ii) in connection with a sale transaction
ConnectClearly shall have received a written opinion of its counsel
(such opinion to be furnished at the sole expense of ConnectClearly at
the request of a Buyer), to the effect that a public sale, assignment,
transfer or other disposition of any of such Securities may be made
without registration under the 1933 Act, or (iii) such holder provides
ConnectClearly with customary assurances that such Securities can be
sold pursuant to Rule 144.
i. Legends on Exchange Shares. Such Buyer understands that, until
such time as the sale of the Exchange Shares have been registered
under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Exchange
Shares shall bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed against
transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN CUSTOMARY
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
The legend set forth above shall be removed and NCT shall issue a
certificate without such legend to the holder of the Exchange Shares,
upon which it is stamped, if, unless otherwise required by state
securities laws, (i) with respect to the Exchange Shares only, the
Exchange Shares are registered under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides NCT with an opinion of
counsel, in customary form, to the effect that a public sale,
assignment, transfer or other disposition of the Exchange Shares may
be made without registration under the 1933 Act, or (iii) such holder
provides NCT with customary assurances that the Exchange Shares can be
sold pursuant to Rule 144.
j. Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and
is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, except as such enforceability may be
limited by general principles of equity and bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally the enforcement of, applicable
creditors' rights and remedies.
4. CONNECTCLEARLY'S REPRESENTATIONS AND WARRANTIES
ConnectClearly represents and warrants to each of the Buyers and NCT that:
a. Organization and Qualification. ConnectClearly is a corporation
duly organized and validly existing in good standing under the laws of
the state of Delaware, and has the requisite corporate power and
authority to own and use its properties (if any) and assets and to
carry on its business as now being conducted. ConnectClearly has no
subsidiaries other than as set forth in Schedule 4(a) (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 ConnectClearly 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 any of
the Transaction Documents (as defined below), (y) have or result in a
material adverse effect on the results of operations, assets,
prospects or condition (financial or otherwise) of ConnectClearly or
(z) adversely impair the ConnectClearly'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, Compliance with Other Instruments.
ConnectClearly has the requisite corporate power and authority to
enter into and perform this Agreement and any related agreements
(collectively, the "Transaction Documents"), to issue the Securities
issued by it accordance with the terms hereof and otherwise to carry
out its obligations under the Transaction Documents. The execution and
delivery of the Transaction Documents by ConnectClearly and the
consummation by it of the transactions contemplated thereby,
including, without limitation, the issuance of the Securities, have
been duly authorized and no further consent or authorization is
required by ConnectClearly. Each of the Transaction Documents has been
duly executed and delivered by ConnectClearly and constitutes a valid
and binding obligation of ConnectClearly enforceable against
ConnectClearly in accordance with its terms, except as such
enforceability may be limited by general principles of equity and
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies. ConnectClearly is not
in violation of any of the provisions of its certificate of
incorporation, bylaws or other organizational documents.
c. Capitalization. As of the date hereof, the authorized capital stock
of ConnectClearly consists of 10,000,000 shares of ConnectClearly
Common Stock and 1,000,000 shares of Preferred Stock, of which as of
July 31, 2000, 18,000 shares of ConnectClearly Common Stock were
issued and outstanding and no shares of preferred stock or notes were
issued and outstanding. All of such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 4(c), as of the effective date of this
Agreement:
(i) no shares of ConnectClearly's capital stock is subject to
preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by ConnectClearly, nor is any
holder of capital stock of ConnectClearly entitled to preemptive
or similar rights arising out of any agreement or understanding
with ConnectClearly by virtue of any of the Transaction
Documents;
(ii) except as set forth on Schedule 4(c)(ii), there are no
outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any
shares of capital stock of ConnectClearly, or contracts,
commitments, understandings or arrangements by which
ConnectClearly is or may become bound to issue additional shares
of capital stock of ConnectClearly;
(iii) there are no outstanding debt securities;
(iv) there are no agreements or arrangements under which
ConnectClearly is obligated to register the sale of any of its
securities under the 1933 Act;
(v) there are no outstanding securities of ConnectClearly which
contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which
ConnectClearly is or may become bound to redeem a security of
ConnectClearly;
(vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement;
(vii) ConnectClearly does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or
agreement; and
(viii) to the best knowledge of ConnectClearly, 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) or has the right to acquire by agreement
with or by obligation binding upon ConnectClearly beneficial
ownership of in excess of 5% of the ConnectClearly 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.
ConnectClearly has furnished to the Buyers true and correct copies of
ConnectClearly's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "ConnectClearly Certificate of
Incorporation"), and ConnectClearly's By-laws, as in effect on the
date hereof (the "By-laws").
d. Issuance of Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the terms hereof, shall be
(i) validly issued, fully paid and nonassessable, and (ii) free from
all taxes, liens, encumbrances, security interests, rights of first
refusal and charges with respect to the issue thereof. Such
securities, upon issuance, will not subject the holders thereof to
personal liability by reason of being such holders. The holder of
Securities shall be entitled to all rights accorded to a holder of
ConnectClearly Common Stock. The shares of ConnectClearly Common Stock
issuable upon exercise of the Warrants are referred to herein as the
"Warrant Shares." When issued and paid for in accordance with the
Warrants, the Warrant Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all liens. The Shares,
the Warrants and the Warrant Shares are referred to herein as the
"Securities."
e. No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by ConnectClearly and
the consummation by ConnectClearly of the transactions contemplated
hereby and thereby will not (i) conflict with or violate the
Certificate of Incorporation or By-laws, or (ii) conflict with or
constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument (evidencing a ConnectClearly debt
or otherwise) to which ConnectClearly is a party or by which any
property or asset of ConnectClearly 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 ConnectClearly is subject (including federal and
state securities laws and regulations and the rules and regulations of
the principal market or exchange on which the Common Stock is traded
or listed), or by which any property or asset of ConnectClearly is
bound or affected or (iv) result in the creation of imposition of a
lien or other restriction upon the Securities purchased hereunder or
any of the assets of ConnectClearly, or any of its Affiliates (as such
term is defined under Rule 405 promulgated under the Securities Act.
f. No Default or Violation. Except as disclosed in Schedule 4(f),
ConnectClearly is not in violation of any term of or in default under
its Certificate of Incorporation or By-laws or its organizational
charter or by-laws, respectively, or any material contract, agreement,
mortgage, lease, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to
ConnectClearly. The business of ConnectClearly is not being conducted,
and shall not be 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.
g. Consents. Except as specifically contemplated by this Agreement and
as required under the 1933 Act and applicable state securities laws,
neither ConnectClearly nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, or make any filing or
registration with, any court or governmental agency in connection with
the execution, delivery or performance of any of its obligations under
or contemplated by this Agreement and/or the other Transaction
Documents in accordance with the terms hereof and/or thereof. Except
as disclosed in Section 6(f) and Schedule 4(g), all consents,
authorizations, orders, filings and registrations which ConnectClearly
is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. ConnectClearly
has no knowledge of any facts or circumstances which might give rise
to any of the foregoing.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to
the knowledge of ConnectClearly, threatened against or affecting
ConnectClearly or any of the Subsidiaries or any of their respective
properties, or ConnectClearly Common Stock.
i. Acknowledgment Regarding Buyer's Purchase of Shares of
ConnectClearly Common Stock. ConnectClearly acknowledges and agrees,
based upon Buyer's representations, that the Buyer is acting solely in
the capacity of an arms-length purchaser with respect to this
Agreement and the transactions contemplated hereby. ConnectClearly
further acknowledges that the Buyer is not acting as a financial
advisor or fiduciary of ConnectClearly (or in any similar capacity)
with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Securities. ConnectClearly further represents to the
Buyer that ConnectClearly's decision to enter into this Agreement has
been based solely on the independent evaluation by ConnectClearly and
its representatives.
j. No Undisclosed Events, Liabilities, Developments or Circumstances.
To the best of ConnectClearly's knowledge, no event, liability,
development or circumstance has occurred or exists, or is contemplated
to occur, with respect to ConnectClearly or its businesses,
properties, prospects, operations or financial condition, which could
be material but which has not been publicly announced or disclosed in
writing to the Buyer.
k. No General Solicitation. Neither ConnectClearly, nor any of its
Affiliates, nor any Person acting on its or their behalf, has made, or
will make, offers or sales of ConnectClearly Common Stock, or any
securities that might be integrated with offers and sales of
ConnectClearly 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 ConnectClearly to
the Buyers of the Securities is exempt from the registration
requirements of the Securities Act.
l. Title. Each of ConnectClearly and the Subsidiaries have good title
to, or the right to use, all personal property owned or leased by them
which is material to the business of ConnectClearly and the
Subsidiaries, in each case free and clear of all liens, encumbrances
and defects, except for those which do not materially affect the value
of such property or interfere with the use made and proposed to be
made of such property by ConnectClearly and the Subsidiaries. Neither
ConnectClearly nor any of the Subsidiaries owns any real property. Any
real property and facilities held under lease by ConnectClearly 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 ConnectClearly and the Subsidiaries.
m. Rights of First Refusal. ConnectClearly is not obligated to offer
the securities offered hereunder on a right of first refusal basis or
similar right to any third parties including, but not limited to,
current or former shareholders of ConnectClearly, underwriters,
brokers, agents or other third parties.
n. Investment Company. ConnectClearly 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 of Act of 1940, as
amended.
o. Disclosure. To the best of ConnectClearly's knowledge, neither this
Agreement nor the Schedules attached hereto furnished by or on behalf
of ConnectClearly contain any untrue statement of a material fact or
omit to state any material fact relating to ConnectClearly necessary
in order to make the statements made therein not misleading.
p. Patents and Trademarks. ConnectClearly 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
which the failure to so have would have a Material Adverse Effect.
q. Regulatory Permits. ConnectClearly 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 except where the failure to possess such permits would not,
individually or in the aggregate, have a Material Adverse Effect
("Material Permits"), and neither ConnectClearly nor any such
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
r. Insurance. ConnectClearly and each Subsidiary maintains property
and casualty, general liability, workers' compensation, personal
injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry
standards. Neither ConnectClearly nor any Subsidiary has received
notice from, and has any knowledge of any threat by, any insurer (that
has issued any insurance policy to ConnectClearly or any Subsidiary)
that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force. To
the best of its knowledge, ConnectClearly is not exposed to liability
for environmental hazards.
s. Taxes. All applicable tax returns required to be filed by
ConnectClearly 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 ConnectClearly, the Subsidiaries, or
upon any of their respective properties, income or franchises, shown
in such returns and on assessments received by ConnectClearly 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.
t. No Integrated Offering. Other than to the Buyers, neither
ConnectClearly, 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
Securities pursuant to this Agreement to be integrated with prior
offerings by Connect Clearly for purposes of the Securities Act.
u. Registration Rights; Rights of Participation. Except as described
on Schedule 4(u) attached hereto, (A) ConnectClearly has not granted
or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of ConnectClearly
registered with the Securities and Exchange Commission or any other
governmental authority which has not been satisfied and (B) except as
set forth on Schedule 4(c) attached hereto, no Person, including, but
not limited to, current or former shareholders of ConnectClearly,
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 any
other Transaction Document.
v. Certain Fees. Except as specifically set forth in Schedule 4(v), no
fees or commissions will be payable by ConnectClearly to any broker,
financial advisor, finder, investment banker, or bank with respect to
the transactions contemplated by this Agreement. The Buyers 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 4(v) that may be due in connection with the
transactions contemplated by this Agreement. ConnectClearly shall
indemnify and hold harmless each of the Buyers, 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.
w. Seniority. No class of equity securities of ConnectClearly is
senior to the Securities in right of payment, whether upon
liquidation, dissolution or otherwise.
x. Solicitation Materials. ConnectClearly has not distributed any
offering materials in connection with the offering and sale of the
shares of ConnectClearly purchased hereunder. ConnectClearly confirms
that it has not provided the Buyers or their agents or counsel with
any information that constitutes or might constitute material
non-public information. ConnectClearly understands and confirms that
the Buyers shall be relying on the foregoing representations in
effecting transactions in securities of ConnectClearly.
5. NCT'S REPRESENTATIONS AND WARRANTIES
NCT represents and warrants to each of the Buyers that:
a. Organization and Qualification. NCT is a corporation duly organized
and validly existing in good standing under the laws of the state of
Delaware, and has the requisite corporate power and authority to own
and use its properties (if any) and assets and to carry on its
business as now being conducted. NCT has no material subsidiaries
other than as set forth on NCT's most recently filed Annual Report on
Form 10-K (collectively, the "NCT Subsidiaries"). Each of the NCT
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 NCT and the NCT Subsidiaries
is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except to the extent that the failure to be so qualified or
be in good standing would not (x) adversely affect the legality,
validity or enforceability of any of the NCT Transaction Documents (as
defined below), (y) have or result in a material adverse effect on the
results of operations, assets, prospects or condition (financial or
otherwise) of NCT or the NCT Subsidiaries or (z) adversely impair the
NCT's ability to perform fully on a timely basis its obligations under
any NCT Transaction Document (any of (x), (y) or (z), being a "NCT
Material Adverse Effect").
b. Authorization, Enforcement, Compliance with Other Instruments. NCT
has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement and any
related agreements (collectively, the "NCT Transaction Documents"), to
issue the Exchange Shares in accordance with the terms hereof and
otherwise to carry out its obligations under the NCT Transaction
Documents. The execution and delivery of the NCT Transaction Documents
by NCT and the consummation by it of the transaction contemplated
thereby, including, without limitation, the reservation for issuance
of the Exchange Shares issuable upon exchange thereof, have been duly
authorized by NCT's Board of Directors and no further consent or
authorization is required by NCT, its Board of Directors or its
stockholders. Each of the NCT Transaction Documents has been duly
executed and delivered by NCT and, when delivered, constitutes a valid
and binding obligation of NCT enforceable against NCT in accordance
with its terms, except as such enforceability may be limited by
general principles of equity and applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and
remedies, and subject to the limitation that the indemnification and
contribution provisions of the Registration Rights Agreement may be
unenforceable as a matter of public policy. NCT is not in violation of
any of the provisions of its certificate of incorporation, bylaws or
other organizational documents.
c. Capitalization. As of the date hereof, the authorized capital stock
of NCT consists of 450,000,000 shares of NCT Common Stock and
10,000,000 shares of NCT Preferred Stock, of which, as of June 30,
2000, approximately 275,014,933 shares of NCT Common Stock were issued
and outstanding, and, except for 3,464 shares of Series F Preferred
Stock and 2,004 shares of Series G Preferred Stock, no shares of
preferred stock, NCT Common Stock or notes were issued and
outstanding. All of such outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. Except as
disclosed in NCT's SEC Documents (as defined below) and in Schedule
5(c), as of the effective date of this Agreement:
(i) no shares of NCT's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by NCT, nor is any holder of capital stock
of NCT entitled to preemptive or similar rights arising out of
any agreement or understanding with NCT by virtue of any of the
NCT Transaction Documents;
(ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of NCT, or
contracts, commitments, understandings or arrangements by which
NCT is or may become bound to issue additional shares of capital
stock of NCT;
(iii) there are no outstanding debt securities;
(iv) there are no agreements or arrangements under which NCT or
any of its subsidiaries is obligated to register the sale of any
of its securities under the 1933 Act (except the Registration
Rights Agreement);
(v) there are no outstanding securities of NCT which contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which NCT is or
may become bound to redeem a security of NCT;
(vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the
issuance of the NCT Common Stock as described in this Agreement;
(vii) NCT does not have any stock appreciation rights or "phantom
stock" plans or agreements or any similar plan or agreement; and
(viii) to the best knowledge of NCT, 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) or has the right to acquire by agreement with or by
obligation binding upon NCT beneficial ownership of in excess of
5% of the NCT Common Stock.
NCT has furnished to the Buyers true and correct copies of NCT's
Restated Certificate of Incorporation, as amended and as in effect on
the date hereof (the "NCT Certificate of Incorporation"), and NCT's
By-laws, as in effect on the date hereof (the "NCT By-laws").
d. Issuance of Exchange Shares. The Exchange Shares issuable upon
exchange of the Shares have been duly authorized. Upon exchange, the
Exchange Shares will be validly issued, fully paid and nonassessable,
free from all taxes, liens, encumbrances, security interests, rights
of first refusal and charges with respect to the issue thereof. The
holders of the Exchange Shares will not be subject to personal
liability by reason of being such holders. The holders of Exchange
Shares shall be entitled to all rights accorded to a holder of NCT
Common Stock.
e. No Conflicts. The execution, delivery and performance of this
Agreement and the other NCT Transaction Documents by NCT and the
consummation by NCT of the transactions contemplated hereby and
thereby will not (i) conflict with or violate the NCT Certificate of
Incorporation or NCT By-laws, or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture
or instrument (evidencing a NCT debt or otherwise) to which NCT or any
of its subsidiaries is a party or by which any property or asset of
NCT 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 NCT or any
NCT Subsidiary is subject (including federal and state securities laws
and regulations and the rules and regulations of the principal market
or exchange on which the NCT Common Stock is traded or listed) or by
which any property or asset of NCT or any NCT Subsidiary is bound or
affected or (iv) result in the creation of imposition of a lien or
other restriction upon the Exchange Shares or any of the assets of
NCT, or any of its Affiliates (as such term is defined in Section 6(k)
hereof).
f. No Default or Violation. Except as disclosed in Schedule 5(f),
neither NCT nor its subsidiaries is in violation of any term of or in
default under the NCT Certificate of Incorporation or NCT By-laws or
their organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, lease, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or
regulation applicable to NCT or its subsidiaries. The business of NCT
and the NCT Subsidiaries is 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 NCT Material Adverse Effect.
g. Consents. Except as specifically contemplated by this Agreement and
as required under the 1933 Act and applicable state securities laws,
neither NCT nor any of the NCT Subsidiaries is required to obtain any
consent, waiver, authorization or order of, or make any filing or
registration with, any court or governmental agency in connection with
the execution, delivery or performance of any of its obligations under
or contemplated by this Agreement and/or the other NCT Transaction
Documents in accordance with the terms hereof and/or thereof. Except
as disclosed in Section 6(f) and Schedule 5(g), all consents,
authorizations, orders, filings and registrations which ConnectClearly
is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. NCT and its
subsidiaries have no knowledge of any facts or circumstances which
might give rise to any of the foregoing.
h. SEC Documents: Financial Statements. Since January 1, 1998, NCT has
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act, including pursuant to Section 13(a) or
15(d) thereof (all of the foregoing materials filed prior to the date
hereof and all exhibits included therein and financial statements,
schedules and documents incorporated by reference therein, being
hereinafter collectively referred to as "NCT's 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, NCT's SEC Documents
complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC 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
NCT is a party or to which the property or assets of NCT are subject
have been filed as exhibits to the NCT SEC Documents as required;
neither NCT nor any of the NCT Subsidiaries is in breach of any
agreement where such breach would reasonably be expected to,
individually or in the aggregate, have a NCT Material Adverse Effect.
As of their respective dates, the financial statements of NCT
contained in NCT's SEC Documents (the "NCT Financial Statements")
complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto as in effect at the time of filing. Such NCT Financial
Statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such
NCT Financial Statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of NCT and the NCT
Subsidiaries as of and for the dates thereof and the results of its
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 NCT's last
filed Quarterly Report on Form 10-Q for the period ended March 31,
2000, there has been no event, occurrence or development that has had,
or would reasonably be expected to have, a NCT Material Adverse Effect
which has not been specifically disclosed to the Buyers by NCT. No
other information provided by or on behalf of NCT to the Buyer which
is not included in NCT's SEC Documents, including, without limitation,
information referred to in Section 3(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light
of the circumstance under which they are or were made, not misleading.
i. Absence of Certain Changes. Except as disclosed in Schedule 5(i)
and in NCT's SEC Documents (as defined in Section 5(h) above), there
has been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition, results of operations or prospects of NCT or the NCT
Subsidiaries. NCT has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any
bankruptcy law, nor does NCT or its subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
j. Absence of Litigation. Except as disclosed in NCT's SEC Documents
(as defined in section 5(h) above), there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
or, to the knowledge of NCT or any of its subsidiaries, threatened
against or affecting NCT, the NCT Common Stock or any of the NCT
Subsidiaries, wherein an unfavorable decision, ruling or finding
would, except as expressly set forth in Schedule 5(j), would
reasonably be expected to have a NCT Material Adverse Effect.
k. Acknowledgment Regarding Buyer's Purchase of Shares of
ConnectClearly Common Stock. NCT acknowledges and agrees, based upon
Buyers' representations, that the Buyers are acting solely in the
capacity of an arms-length purchaser with respect to this Agreement
and the transactions contemplated hereby. NCT further acknowledges
that the Buyers are not acting as a financial advisor or fiduciary of
NCT (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby. NCT further represents to the
Buyers that NCT's decision to enter into this Agreement has been based
solely on the independent evaluation by NCT and its representatives.
l. No Undisclosed Events, Liabilities, Developments or Circumstances.
To the best of NCT's knowledge, no event, liability, development or
circumstance has occurred or exists, or is contemplated to occur, with
respect to NCT or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition, which could
be material but which has not been publicly announced or disclosed in
writing to the Buyer.
m. No General Solicitation. Neither NCT, nor any of its affiliates,
nor any Person acting on its or their behalf, has made, or will make,
offers or sales of NCT Common Stock, or any securities that might be
integrated with offers and sales of NCT Common Stock, except to
"accredited investors" without any general solicitation or advertising
and otherwise in compliance with the conditions of Regulation D. The
offer and sale by ConnectClearly to the Buyers of the Securities
purchased hereunder and the shares of NCT Common Stock issuable upon
exchange of the Shares is exempt from the registration requirements of
the Securities Act.
n. Employee Relations. Neither NCT nor any of the NCT Subsidiaries is
involved in any labor dispute nor, to the knowledge of NCT or any of
the NCT Subsidiaries, is any such dispute threatened. None of NCT's or
the NCT Subsidiaries' employees is a member of a union and NCT
believes its and the NCT Subsidiaries' relations with their employees
are satisfactory. Each of NCT and each of the NCT Subsidiaries 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 NCT or any NCT Subsidiary would have any liability; neither NCT
nor any NCT 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 NCT 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.
o. Environmental Laws. NCT and the NCT Subsidiaries, to NCT's
knowledge, (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"); (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
p. Title. Each of NCT and the NCT Subsidiaries have good title to, or
the right to use, all personal property owned or leased by them which
is material to the business of NCT and the NCT Subsidiaries, in each
case free and clear of all liens, encumbrances and defects, except as
described in Schedule 5(p) and except for those which do not
materially affect the value of such property or interfere with the use
made and proposed to be made of such property by NCT and the NCT
Subsidiaries. Neither NCT nor the NCT Subsidiaries owns any real
property. Any real property and facilities held under lease by NCT and
the NCT 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 NCT and the NCT Subsidiaries.
q. Insurance. NCT and each NCT Subsidiary maintains property and
casualty, general liability, workers' compensation, personal injury
and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry
standards. Neither NCT nor any NCT Subsidiary has received notice
from, and has any knowledge of any threat by, any insurer (that has
issued any insurance policy to NCT or any NCT Subsidiary) that such
insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force. To the best of its
knowledge, NCT is not exposed to liability for environmental hazards.
r. Regulatory Permits. NCT and the NCT Subsidiaries possess all
franchises, certificates, authorizations, licenses, permits or similar
authority issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective
businesses, except where failure to have such franchises,
certificates, authorizations, licenses, permits or similar authorities
would not have a NCT Material Adverse Effect on the condition,
financial or otherwise, or the earnings, business or operations of NCT
and the NCT Subsidiaries, taken as a whole have a NCT Material Adverse
Effect ("NCT Material Permits"). NCT and each NCT Subsidiary has no
knowledge of, and has received no notice of, proceedings relating to
the revocation or modification of any NCT Material Permits.
s. Internal Accounting Controls. NCT and each of the NCT Subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
t. No Materially Adverse Contracts, etc. Neither NCT nor any of the
NCT Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which,
in the judgment of NCT's officers, has or is expected in the future to
have a NCT Material Adverse Effect on the businesses, properties,
operations, financial condition, results of operations or prospects of
NCT or the NCT Subsidiaries. Neither NCT nor any of the NCT
Subsidiaries is a party to any contract or agreement which, in the
judgment of NCT's officers, has or is expected to have a NCT Material
Adverse Effect on the businesses, properties, operations, financial
condition, results of operations or prospects of NCT or the NCT
Subsidiaries.
u. Tax Status. Except as set forth on Schedule 5(u), NCT and each of
the NCT Subsidiaries has made or filed all federal and state income
and all other tax returns, reports and declarations required by any
jurisdiction to which they are subject (unless and only to the extent
that NCT and each of the NCT Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental
assessments and charges, shown or determined to be due on such
returns, reports and declarations (except those being contested in
good faith) and has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply; or if
any of such tax returns have not been filed of 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 NCT Material Adverse
Effect. There are no unpaid taxes claimed to be due by the taxing
authority of any jurisdiction, and the officers of NCT have no
knowledge of, and know of no basis for, any such claim.
v. Certain Transactions. Except as set forth on Schedule 5(v), in
NCT's SEC Documents, arms-length transactions pursuant to which NCT
makes payments in the ordinary course of business upon terms no less
favorable than NCT could obtain from third parties and other than the
grant of stock options disclosed on Schedule 5(c), none of the
officers, directors, or employees of NCT is presently a party to any
transaction with NCT (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of NCT, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
w. Dilutive Effect. NCT understands and acknowledges that the number
of Exchange Shares issuable upon exchange of the Shares will increase
in certain circumstances. NCT further acknowledges that its obligation
to issue NCT Common Stock upon the exchange of the Shares in
accordance with this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of NCT.
x. Rights of First Refusal. NCT is not obligated to offer NCT Common
Stock on a right of first refusal basis or similar right to any third
parties including, but not limited to, current or former shareholders
of NCT, underwriters, brokers, agents or other third parties.
y. Investment Company. NCT 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 of Act of 1940, as amended.
z. Disclosure. To the best of NCT's knowledge, neither this Agreement
nor the Schedules attached hereto furnished by or on behalf of NCT
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.
aa. Patents and Trademarks. NCT and each NCT Subsidiary has, or has
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
rights which are necessary for use in connection with its business, as
currently conducted and which the failure to so have would have a NCT
Material Adverse Effect.
6. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions precedent to Closing as provided in
Sections 8, 9 and 10 of this Agreement.
b. Form D. ConnectClearly agrees to file a Form D with respect to the
Securities as required under Regulation D promulgated under the 1933
Act and to provide a copy thereof to each Buyer promptly after such
filing.
NCT agrees to file a Form D with respect to the Exchange Shares as required
under Regulation D promulgated under the 1933 Act and to provide a copy thereof
to each Buyer promptly after such filing. NCT shall, on or before an applicable
Exchange Date (as defined in Section 2 above), take such action as the Buyers
shall reasonably request to qualify the sale of Exchange Shares to the Buyers
for exemption from applicable securities laws of the state of Delaware and New
York, or other applicable "Blue Sky" laws, and shall provide evidence of any
such action so taken to the Buyers as soon as practicable following the Exchange
Date.
c. Until the earlier of (i) the date as of which the Investors (as
that term is defined in the Registration Rights Agreement) may sell
all of the Exchange Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which the Investors shall have sold all the Exchange Shares
(the "Registration Period"), NCT shall file all reports required to be
filed with the SEC pursuant to the 1934 Act, and NCT shall not
terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. Use of Proceeds. ConnectClearly shall use all of the proceeds from
the sale of the Securities purchased hereunder for working capital and
general corporate purposes and not for the satisfaction of any portion
of ConnectClearly borrowings outside the normal course of business.
While Shares remain outstanding, ConnectClearly shall not satisfy any
obligation or liability of any kind, including, without limitation,
those owed to a shareholder, officer or director of ConnectClearly, or
redeem ConnectClearly equity or equity-equivalent securities.
e. Financial Information. As long as any Buyer owns Shares and/or
Exchange Shares, NCT covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all
reports required to be filed by NCT after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the
Buyers with true and complete copies of all such filings. As long as
any Buyer owns Shares and/or Exchange Shares, if NCT 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 Buyers 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. NCT further covenants that
it will take such further action as any holder of Shares and/or
Exchange Shares may reasonably request, all to the extent required
from time to time to enable such Person to sell Shares and/or Exchange
Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act. Upon the request of any such Person, NCT shall
deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with such requirements.
f. Reservation of Shares. NCT shall take all action necessary to, at
all times, have authorized and reserved for the purpose of issuance,
no less than 115% of the number of shares of NCT Common Stock needed
to provide for the issuance of the Exchange Shares to effect the
exchange of the Shares then issued and outstanding.
g. Listings. NCT shall cause the Exchange Shares to be approved for
quotation on the OTC Bulletin Board or if NCT Common Stock is not
currently listed thereon, on the national exchange on which such stock
is currently listed, and NCT shall maintain the quotation of its NCT
Common Stock on such market. NCT shall promptly provide to each Buyer
copies of any notices it receives regarding the continued eligibility
of NCT Common Stock for trading on the facility on which it is listed.
h. Expenses. Except as provided in Section 12(p), each of
ConnectClearly, NCT and the Buyer shall pay all costs and expenses
incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction
Documents and the NCT Transaction Documents.
i. [INTENTIONALLY LEFT BLANK]
j. Corporate Existence. So long as any of the Securities remain
outstanding, ConnectClearly shall not directly or indirectly
consummate any merger, reorganization, restructuring, consolidation,
sale of all or substantially all of ConnectClearly's assets or any
similar transaction or related transactions (each such transaction, a
"Sale of ConnectClearly") except if the surviving or successor entity
in such transaction expressly assumes, in writing, ConnectClearly's
obligations hereunder and under any other agreements and instruments
entered into or delivered by ConnectClearly in connection herewith.
k. Transactions With Affiliates. So long as (i) any of the Securities
are outstanding or (ii) any Buyer owns Shares with an aggregate Stated
Value equal to or greater than [$250,000], ConnectClearly shall not
enter into, amend, modify or supplement any agreement, transaction,
commitment, or arrangement with any of its officers, directors, person
who were officers or directors at any time during the previous two
years, stockholders who beneficially own 5% or more of the Common
Stock, Affiliates, any individual related by blood, marriage, or
adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a
"Related Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms (b) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person
other than such Related Party, (c) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the
disinterested directors of ConnectClearly. For purposes hereof, any
director who is also an officer of ConnectClearly or any subsidiary of
ConnectClearly shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement.
"Affiliate" for purposes hereof means, with respect to any person or
entity, another person or entity that, directly or indirectly, (i) has
a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls or is
controlled by that person or entity, or (iv) is under common control
with that person or entity. "Control" or "controls" for purposes
hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.
So long as (i) any Securities purchased pursuant to this Agreement are
outstanding or (ii) any Buyer owns Exchange Shares with a market value
equal to or greater than [$250,000], NCT shall not, and shall cause
each of its subsidiaries not to, enter into, amend, modify or
supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement with
any of its or any subsidiary's officers, directors, person who were
officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the NCT Common Stock,
Affiliates, any individual related by blood, marriage, or adoption to
any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each an "NCT Related
Party"), except for (a) customary employment arrangements and benefit
programs on reasonable terms, (b) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person
other than such NCT Related Party, (c) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the
disinterested directors of NCT. For purposes hereof, any director who
is also an officer of NCT or any subsidiary of NCT shall not be a
disinterested director with respect to any such agreement,
transaction, commitment, or arrangement.
l. [Intentionally left Blank]
m. No Buyer shall engage in "short sales" of NCT Common Stock so long
as such Buyer owns Shares; provided, however, that the foregoing shall
not prevent any Buyer from selling any shares of NCT Common Stock
which it is otherwise permitted to sell pursuant to any other
agreement to which both NCT and such Buyer are parties.
n. [INTENTIONALLY LEFT BLANK]
o. Permitted Transfers of Shares. Notwithstanding any provision herein
to the contrary, (i) ConnectClearly hereby consents to and agrees to
register (A) any transfer of Shares by one Buyer to another Buyer, and
agrees that no documentation other than executed transfer documents
shall be required for any such transfer, and (B) any transfer by any
Buyer to an Affiliate of such Buyer or to an Affiliate of another
Buyer, or any transfer among any such Affiliates, provided such
transfer is otherwise in accordance with applicable law and that such
transferee certifies in writing to ConnectClearly 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 of a Buyer under this Agreement
and the Registration Rights Agreement; and (ii) NCT hereby consents to
and agrees to register (A) any transfer of Exchange Shares by one
Buyer to another Buyer, and agrees that no documentation other than
executed transfer documents shall be required for any such transfer,
and (B) any transfer by any Buyer to an Affiliate of such Buyer or to
an Affiliate of another Buyer, or any transfer among any such
Affiliates, provided such transfer is otherwise in accordance with
applicable law and that such transferee certifies in writing to NCT
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 of a Buyer under this
Agreement and the Registration Rights Agreement.
p. Stop Transfer Orders; Suspension of Qualification. ConnectClearly
and NCT may not make any notation on their respective records or give
instructions to any transfer agent of ConnectClearly or NCT, as the
case may be, which enlarge the restrictions of transfer set forth in
this Agreement. ConnectClearly and NCT will advise the Buyers,
promptly after either of them receives notice of issuance by the SEC,
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 ConnectClearly and/or NCT, or of the
suspension of the qualification of ConnectClearly Common Stock and/or
NCT Common Stock for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
q. Blue Sky Laws. In accordance with the Registration Rights
Agreement, NCT shall qualify the Exchange Shares under the securities
or Blue Sky laws of such jurisdictions as the Buyers may reasonably
request and shall continue such qualification at all times through the
third anniversary of the Closing Date, unless a valid exemption is
otherwise available and applicable under such laws.
r. Integration. ConnectClearly and NCT 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 or Exchange Shares, as
the case may be, in a manner that would require the registration under
the Securities Act of the sale of any or all of such securities to any
Buyer.
s. Certain Agreements. As long as any Buyer owns Shares, NCT shall not
and shall cause ConnectClearly 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 Buyer; (ii) repay, repurchase or
offer to repay, repurchase or otherwise acquire shares of capital
stock in any manner; (iii) 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
the Exchange Shares; or (v) enter into any agreement with respect to
any of the foregoing.
t. Listing and Reservation of Exchange Shares; Compliance with Law.
(i) NCT shall, (a) take all steps necessary to cause the Exchange
Shares to be approved for listing on any other national securities
exchange or market on which NCT Common Stock is listed, and (b)
provide to the Buyers evidence of such listing, if applicable and (c)
NCT shall maintain the listing of NCT Common Stock on at least one
national securities exchange or market.
(ii) NCT shall at all times have authorized and reserved for
issuance upon exchange of the Shares purchased hereunder the
number of Exchange Shares required to provide for the exchange of
115% of the outstanding Shares.
(iii) Until the earlier to occur of the fifth anniversary of the
Initial Closing Date or the second anniversary of the date no
Shares purchased hereunder remained outstanding (if all Shares
are exchanged), (A) NCT will cause NCT 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 (B) NCT will take all action within its
power to continue the listing or trading of NCT Common Stock on
the OTC Bulletin Board.
u. Notice of Breaches. (i) Each of ConnectClearly, NCT and the each
Buyer shall give prompt written notice to the other parties hereto of
any breach of any representation, warranty or other agreement
contained in this Agreement, the other Transaction Documents or the
other NCT Transaction Documents, as well as any events or occurrences
arising after the date hereof and prior to any 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 such Closing Date. However, no
disclosure by any party pursuant to this Section shall be deemed to
cure any breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
(ii) Notwithstanding the generality of this Section,
ConnectClearly and NCT shall promptly notify each Buyer of any
notice or claim (written or oral) that it receives from any
lender of ConnectClearly or NCT to the effect that the
consummation of the transactions contemplated hereby or by the
other Transaction Documents and NCT Transaction Documents
violates or would violate any written agreement or understanding
between such lender and ConnectClearly or NCT, as the case may
be, and ConnectClearly and NCT shall promptly furnish by
facsimile to each Buyer a copy of any written statement in
support of or relating to such claim or notice.
(iii) The default by any Buyer of any of its obligations,
representations or warranties under any Transaction Document or
any NCT Transaction Document shall not be imputed to, and shall
have no effect upon, any other Buyer or affect ConnectClearly's
or NCT's obligations under the Transaction Documents or the NCT
Transaction Documents to any non-defaulting Buyer or to the
defaulting Buyer with respect to any outstanding Shares purchased
hereunder or Exchange Shares.
(iv) Exchange Obligations of NCT. NCT covenants to convert Shares
and to deliver the Exchange Shares in accordance with the terms
and conditions and within the time period set forth herein.
6A. PIGGYBACK REGISTRATION RIGHTS. If, at any time when Shares are
outstanding and there is no effective registration statement covering the
Shares, ConnectClearly shall determine to prepare and file with the
Securities Exchange 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,
ConnectClearly shall send to each holder of 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 Shares intended to be disposed of by such holders), ConnectClearly will
cause the registration under the Securities Act of all Shares which
ConnectClearly has been so requested to register by the holder, to the
extent requisite to permit the disposition of the 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,
ConnectClearly shall determine for any reason not to register or to delay
registration of such securities, ConnectClearly 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 Shares in connection with such registration, and
(ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Shares being registered pursuant to this
Section for the same period as the delay in registering such other
securities. ConnectClearly shall include in such registration statement all
or any part of such Shares such holder requests to be registered. The terms
and conditions governing any and all registrations of Shares under this
Section 6A, and the rights and obligations of the Holders in connection
therewith, shall be substantially similar to the terms and conditions
prescribed in the Registration Rights Agreement.
7. TRANSFER AGENT INSTRUCTIONS.
a. Prior to any registration of the Shares under the 1933 Act, all
such certificates shall bear the restrictive legend specified in
Section 3(g) of this Agreement. ConnectClearly warrants that no
instruction and stop transfer instructions to give effect to Section
3(f) hereof (prior to registration of such shares under the 0000 Xxx)
will be given by ConnectClearly to its transfer agent and that the
Shares shall otherwise be freely transferable on the books and records
of ConnectClearly as and to the extent provided in this Agreement.
Nothing in this Section 7 shall affect in any way the Buyers'
obligations and agreement to comply with all applicable federal and
state securities laws upon resale of the Shares. If a Buyer provides
ConnectClearly with an opinion of counsel (which may apply to multiple
Buyers), in customary form, that registration for resale by such Buyer
of any of the Shares is not required under the 1933 Act,
ConnectClearly shall permit the transfer, and promptly instruct its
transfer agent to issue one or more certificates in such name and in
such denominations as specified by the Buyer free from such legend.
ConnectClearly acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, ConnectClearly acknowledges that the remedy at law for a
breach of its obligations under this Section 7 will be inadequate and
agrees, in the event of a breach or threatened breach by
ConnectClearly of the provisions of this Section 7, that the Buyer
shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without
any bond or other security being required.
b. NCT shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of the Buyer or its
respective nominee(s), for the Exchange Shares in such amounts as
specified from time to time by the Buyer to NCT upon exchange of the
Shares for NCT Common Stock (the "NCT's Irrevocable Transfer Agent
Instructions"). Prior to registration of the Exchange Shares under the
1933 Act, all such certificates shall bear the restrictive legend
specified in Section 3(g) of this Agreement. NCT warrants that no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 7, and stop transfer instructions to give
effect to Section 3(f) hereof (prior to registration of such shares
under the 0000 Xxx) will be given by NCT to its transfer agent and
that the Exchange Shares shall otherwise be freely transferable on the
books and records of NCT as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this
Section 7 shall affect in any way the Buyer's obligations and
agreement to comply with all applicable federal and state securities
laws upon resale of the Exchange Shares. If the Buyer provides NCT
with an opinion of counsel, reasonably satisfactory in form and
substance to NCT, that registration for resale by the Buyer of any of
the Exchange Shares is not required under the 1933 Act, NCT shall
permit the transfer and promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as
specified by the Buyer, free from such legend. NCT acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm
to the Buyer by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, NCT acknowledges that the remedy at
law for a breach of its obligations under this Section 7 will be
inadequate and agrees, in the event of a breach or threatened breach
by NCT of the provisions of this Section 7, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without
any bond or other security being required.
8. CONDITIONS PRECEDENT TO CONNECTCLEARLY'S OBLIGATION TO SELL.
The obligation of ConnectClearly hereunder to issue and sell the Shares to
the Buyers at the Closing is subject to the satisfaction, at or before each
Closing Date, of each of the following conditions, provided that these
conditions may be waived by ConnectClearly at any time in its sole discretion:
a. The Buyers shall have executed this Agreement, the Registration
Rights Agreement and delivered same to ConnectClearly.
b. NCT shall have executed this Agreement and the Registration Rights
Agreement and delivered same to ConnectClearly.
c. The Buyers shall have delivered to ConnectClearly the applicable
Purchase Price for the Shares being purchased by the Buyer at the
Closing in United States dollars by wire transfer of immediately
available funds pursuant to the wire instructions provided by
ConnectClearly. The amount of any such wire transfer shall be reduced
by the outstanding amount of unpaid principle and interest due and
owing under any promissory note issued by ConnectClearly which is
surrendered to ConnectClearly.
d. The representations and warranties of the Buyers shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyers shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Buyers at or prior to the Closing Date.
9. CONDITIONS PRECEDENT TO the BUYER'S OBLIGATIONS TO PURCHASE.
a. Initial Closing. The obligation of each Buyer hereunder to purchase
the Initial Shares at the Initial Closing is subject to the
satisfaction, at or before the Initial Closing Date, of each of the
following conditions, provided that these conditions may be waived
with respect to solely to such Buyer at any time in its sole
discretion:
i. ConnectClearly and NCT shall have executed this Agreement and
delivered same to Buyers.
ii. NCT and ConnectClearly shall have executed the Registration
Rights Agreement and delivered same to the Buyers.
iii. NCT Common Stock shall be authorized for quotation on the
OTC Bulletin Board, over-the-counter market, AMEX, the NASDAQ
Small Cap or National Market or The New York Stock Exchange,
Inc., and trading in NCT Common Stock shall not have been
suspended for any reason.
iv. The representations and warranties of ConnectClearly shall be
true and correct in all material respects (except to the extent
that any of such representations and warranties is already
qualified as to materiality in Section 4 above, in which case,
such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of
the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and ConnectClearly shall have performed, satisfied and complied
in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by ConnectClearly at or prior to the Initial
Closing Date. The Buyers shall have received a certificate,
executed by the President or Chief Financial Officer of
ConnectClearly, dated as of the Initial Closing Date, to the
foregoing effect.
v. The representations and warranties of NCT shall be true and
correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 5 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and NCT shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by ConnectClearly at or prior to the Initial Closing Date.
The Buyer shall have received a certificate, executed by the
Chief Financial Officer of NCT, dated as of the Initial Closing
Date, to the foregoing effect.
vi. Since the date of the financial statements included in NCT's
Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect, an NCT
Material Adverse Effect and/or a material adverse change in the
financial condition of NCT shall have occurred (for purposes
hereof changes in the market price of the NCT Common Stock may be
considered as a factor in determining whether there has occurred
an event which has had a Material Adverse Effect or whether a
material adverse change has occurred).
vii. 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, the Warrants or
the Registration Rights Agreement.
viii. The Buyer shall have received the opinion of NCT's counsel,
dated as of the Initial Closing Date, in form and substance
reasonably satisfactory to the Buyers and in substantially the
form of Exhibit 3 attached hereto.
ix. ConnectClearly shall have executed and delivered to the Buyer
(or the Buyer's designee) (i) the Initial ConnectClearly Common
Stock Certificates (in such denominations as the Buyer shall
request) for the Initial Shares being purchased by the Buyers at
the Initial Closing and (ii) warrant certificate(s) representing
the Initial Warrants, registered in the name of such Buyer, in
form satisfactory to the Buyer.
x. On or prior to the Initial Closing Date, ConnectClearly shall
have duly reserved the number of Exchange Shares and Warrant
Shares required by this Agreement to be reserved for issuance
upon exchange of the Shares and upon exercise of the Warrants.
xi. NCT's Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyers, shall have been delivered
to and acknowledged in writing by NCT's transfer agent.
b. Second Closing. The obligation of each Buyer hereunder to purchase
the Second Tranche Shares at the Second Closing is subject to the
satisfaction, at or before the Second Closing Date, of each of the
following conditions, provided that these conditions may be waived
with respect to solely to such Buyer at any time in its sole
discretion:
i. The Initial Closing shall have occurred.
ii. The registration statement with respect to the Exchange
Shares shall have been declared effective under the Securities
Act by the SEC, shall not be subject to any stop order or any
suspension.
iii. NCT Common Stock shall be authorized for quotation on the
OTC Bulletin Board, over-the-counter market, AMEX, the NASDAQ
Small Cap or National Market or The New York Stock Exchange,
Inc., and trading in NCT Common Stock shall not have been
suspended for any reason.
iv. The representations and warranties of ConnectClearly shall be
true and correct in all material respects (except to the extent
that any of such representations and warranties is already
qualified as to materiality in Section 4 above, in which case,
such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of
the Second Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and ConnectClearly shall have performed, satisfied and complied
in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by ConnectClearly at or prior to the Second
Closing Date. The Buyers shall have received a certificate,
executed by the President or Chief Financial Officer of
ConnectClearly, dated as of the Second Closing Date, to the
foregoing effect.
v. The representations and warranties of NCT shall be true and
correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to
materiality in Section 5 above, in which case, such
representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the
Second Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and NCT shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by ConnectClearly at or prior to the Second Closing Date.
The Buyer shall have received a certificate, executed by the
Chief Financial Officer of NCT, dated as of the Second Closing
Date, to the foregoing effect.
vi. Since the date of the financial statements included in NCT's
Quarterly Report on Form 10-Q or Annual Report on Form 10-K,
whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect, an NCT
Material Adverse Effect and/or a material adverse change in the
financial condition of NCT shall have occurred (for purposes
hereof changes in the market price of the NCT Common Stock may be
considered as a factor in determining whether there has occurred
an event which has had a Material Adverse Effect or whether a
material adverse change has occurred).
vii. 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, the Warrants or
the Registration Rights Agreement.
viii. The Buyer shall have received the opinion of NCT's counsel,
dated as of the Second Closing Date, in form and substance
reasonably satisfactory to the Buyers and in substantially the
form of Exhibit 3 attached hereto.
ix. ConnectClearly shall have executed and delivered to the Buyer
(or the Buyer's designee) (i) the Second ConnectClearly Common
Stock Certificates (in such denominations as the Buyer shall
request) for the Second Tranche Shares being purchased by the
Buyers at the Second Closing and (ii) warrant certificate(s)
representing the Second Tranche Warrants, registered in the name
of such Buyer, in form satisfactory to the Buyer.
x. NCT's Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyers, shall have been delivered
to and acknowledged in writing by NCT's transfer agent.
xi. No Change of Control shall have occurred since the Initial
Closing Date. "Change of Control" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or
legal entity or "group" (as described in Rule 13d5(b)(1)
promulgated under the Exchange Act) of in excess of 50% of the
voting securities of ConnectClearly and/or NCT, (ii) a
replacement of more than one-half of the members of the Boards of
Directors of ConnectClearly and/or NCT which is not approved by
those individuals who are members of such Boards of Directors on
the date hereof in one or a series of related transactions, (iii)
the merger of ConnectClearly and/or NCT with or into another
entity, consolidation or sale of all or substantially all of the
assets of ConnectClearly and/or NCT in one or a series of related
transactions or (iv) the execution by ConnectClearly and/or NCT
of an agreement to which ConnectClearly and/or NCT is a party or
by which it is bound, providing for any of the events set forth
above in (i), (ii) or (iii).
10. CONDITIONS PRECEDENT TO NCT'S OBLIGATION TO EXCHANGE
The obligation of NCT hereunder to issue the Exchange Shares to a Buyer on
an Exchange Date is subject the occurrence of the Initial Closing Date with
respect to the Initial Shares and the Second Closing Date with respect to the
Second Tranche Shares.
11. INDEMNIFICATION.
a. By NCT and ConnectClearly. In consideration of the Buyers'
execution and delivery of this Agreement and acquisition of the Shares
hereunder, and in addition to all of ConnectClearly's and NCT's other
obligations under this Agreement, ConnectClearly and NCT, jointly and
severally, shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Shares and/or Exchange Shares
(collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities") incurred by the Indemnitees or any of them in connection
with or as a result of any matter referred to in the Transaction
Documents and/or the NCT Transaction Documents, including, but not
limited to: (a) any misrepresentation or breach of any representation
or warranty made by ConnectClearly and/or NCT in the Transaction
Documents and/or the NCT Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; or
(b) any breach of any covenant, agreement or obligation of
ConnectClearly and/or NCT contained in the Transaction Documents
and/or the NCT Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; provided,
however, that this Section 11 shall not apply to the extent that it is
finally judicially determined that such actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith resulted solely from the
gross negligence or bad faith of the Buyers. If for any reason the
foregoing indemnification is unavailable to one or more Buyers or is
insufficient to hold any such Indemnitee harmless, then ConnectClearly
and NCT shall contribute to the amount paid or payable by such Buyer
or Buyers as a result of such actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in such proportion as is appropriate to reflect the relative
economic interests of ConnectClearly and NCT and their respective
shareholders on the one hand and the Buyers on the other hand in the
matters contemplated by the Transaction Documents and the NCT
Transaction Documents as well as the relative fault of ConnectClearly
and NCT and the Buyers with respect to such actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses and any other relevant equitable considerations.
The reimbursement, indemnity and contribution obligations of
ConnectClearly and NCT under this paragraph shall be in addition to
any liability which ConnectClearly and NCT may otherwise have, shall
extend upon the same terms and conditions to any Affiliate of the
Buyers and the partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Buyers and any such
Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of
ConnectClearly, NCT, the Buyers, any such Affiliate and any such
Person. ConnectClearly and NCT also agree that neither the Buyers nor
any of such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to ConnectClearly and NCT
or any Person asserting claims on behalf of or in right of
ConnectClearly and/or NCT in connection with or as a result of any
matter referred to in this Agreement except to the extent that it is
finally judicially determined that any losses, claims, damages,
liabilities or expenses incurred by ConnectClearly and/or NCT result
solely from the gross negligence or bad faith of, or knowing breach of
this Agreement by, the Buyers. Promptly after receipt by the Buyers or
any Affiliate, partners, directors, agents, employees and 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 ConnectClearly and NCT in writing of
the receipt or commencement thereof and ConnectClearly and NCT 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 ConnectClearly
and NCT and their counsel in the defense of such claim or action. The
Buyers understand that ConnectClearly and NCT 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 ConnectClearly and NCT do not
promptly assume the defense of a claim or action, the indemnified
parties shall have the right to employ counsel reasonably satisfactory
to ConnectClearly, at ConnectClearly'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 ConnectClearly and NCT
so long as they are reasonably contesting or defending the same in
good faith. ConnectClearly and NCT shall not compromise, settle or
discharge any claim or action without the Buyers' 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 ConnectClearly and NCT. Any right to trial by jury with
respect to any action or proceeding arising in connection with or as a
result of either our engagement or any matter referred to in this
Agreement is hereby waived by the parties hereto. The provisions of
this Section 11 shall survive any termination or completion of the
Transaction Documents and the NCT Transaction Documents.
b. By the Buyers. Each Buyer, severally and not jointly, shall
indemnify each of ConnectClearly and NCT from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(including reasonable attorneys' fees and disbursements) incurred by
them in connection with or as a result of such Buyer's breach of any
representation or warranty made by such Buyer in the Transaction
Documents and the NCT Transaction Documents.
c. Limitation of Liability. No Buyer shall be liable to ConnectClearly
or NCT pursuant to this Section 11 in an aggregate amount greater than
the ratable amount of the Purchase Price relating to the Securities
purchased by such Buyer. ConnectClearly and NCT shall not be liable to
the Buyers pursuant to this Section 11 for any amount in excess of the
aggregate Purchase Price. No party may seek to limit their liability
pursuant to this subsection 11(c) in the event the liability such
party seeks to limit arises from (i) such party's knowing or willful
misconduct or gross negligence or (ii) in the case of indemnification
by NCT or ConnectClearly, a third party claim or governmental claim
arising from NCT or ConnectClearly's violation or alleged violation of
federal or state securities laws.
12. GOVERNING LAW, MISCELLANEOUS.
a. 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.
b. Consent to Jurisdiction. (1) The parties expressly consent to the
exclusive jurisdiction and venue of the federal courts whose districts
encompass any part of the City of New York, New York or the state
courts of the State of New York sitting in the City of New York, New
York, for the adjudication of any civil action related to or arising
out of, in whole or in part, this Agreement, the other Transaction
Documents and the other NCT Transaction Documents.
(2) In connection with any dispute between ConnectClearly, NCT
and/or any Buyer related to, connected with or arising out of, in
whole or in part, the Transaction Documents and/or the NCT
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 presumed
reasonable.
(3) In the event that any Buyer becomes involved in any capacity
in any action, proceeding or investigation brought by or against
any person, including shareholders of ConnectClearly or NCT, in
connection with or as a result of any matter referred to in the
Transaction Documents and/or the NCT Transaction Documents,
ConnectClearly will reimburse such Buyer for its legal fees and
expenses and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith;
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 a judgment
adverse to the Buyer is entered, then in that event, such party
and/or any other person having received such advances of fees and
expenses shall reimburse ConnectClearly in full for the sums
advanced.
c. Waiver of Jury Trial. (1) 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
and/or the NCT Transaction Documents, or the transactions contemplated
by the Transaction Documents and/or the NCT 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 12(c) 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, the
NCT 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 and/or the NCT
Transaction Documents.
(2) The provisions of this Section 12(c) shall survive any
termination or completion of the Transaction Documents and the
NCT Transaction Documents.
d. Counterparts. This Agreement may be executed in three or more
identical counterparts, all of which 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
parties. 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.
e. Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this Agreement.
f. Severability. If any term, provision, covenant or restriction of
this Agreement is held to be illegal, void, invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of
any provision of this Agreement in any other jurisdiction.
g. Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements between the Buyer, ConnectClearly,
NCT, their Affiliates and persons acting on their behalf with respect
to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and, except as
specifically set forth herein, neither ConnectClearly, NCT nor any
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by each of
the parties hereto. 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.
h. Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered on the
earlier of (i) receipt, when delivered personally; (ii) receipt, when
sent by facsimile, provided a copy is mailed by U.S. certified mail,
return receipt requested; (iii) three (3) days after being sent by
U.S. certified mail, return receipt requested; (iv) the date of
transmission, if such notice or communication is delivered on a
Business Day via facsimile to the facsimile telephone number specified
below prior to 5:00 p.m., New York City time, or (v) one (1) day after
deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to NCT : 00 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx X. X'Xxxxx, Esq.
Xxxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX, 00xx xxxxx
Xxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to ConnectClearly: 00 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Treasurer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx X. X'Xxxxx, Esq.
Xxxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX, 00xx xxxxx
Xxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer, to its address and facsimile number on the signature page
hereof, with copies to the Buyer's counsel as set forth in a notice to
ConnectClearly or NCT. Each party shall provide five (5) days' prior written
notice to the other parties of any change in address or facsimile number.
i. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and
permitted assigns. NCT and/or ConnectClearly may not assign this
Agreement, or any rights or obligations hereunder without the prior
written consent of the Buyers. Each Buyer may assign this Agreement,
or any rights or obligations hereunder (i) to its Affiliates or to
another Buyer without the prior written consent of ConnectClearly,
(ii) to any other person with the prior written consent of
ConnectClearly, such consent not to be unreasonably withheld and (iii)
to a permitted transferee of the Shares or the Exchange Shares to the
extent permitted by applicable law. This provision shall not limit the
Buyer's right to transfer securities or transfer or assign rights
under any Registration Rights Agreement to which it is a party.
j. 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.
k. Survival. Unless this Agreement is terminated under Section 12(n),
the representations and warranties of ConnectClearly, NCT and the
Buyer contained in Sections 3, 4 and 5 shall survive for a period of
three (3) years from the Closing. Any covenants or agreements relating
to the Shares or Exchange Shares shall expire only when no such shares
remain outstanding. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
l. Publicity. ConnectClearly, NCT and the Buyer shall have the right
to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that ConnectClearly or NCT shall each be entitled,
without the prior approval of the Buyer, to make any press release or
other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Buyer shall
be consulted by ConnectClearly and NCT in connection with any such
press release or other public disclosure prior to its release and
shall be provided with a copy thereof).
m. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
n. Termination. In the event that the Closing shall not have occurred
with respect to the Buyer on or before five (5) Business Days from the
date hereof due to ConnectClearly's, NCT's or the Buyer's failure to
satisfy the conditions precedent to Closing as set forth in Sections 8
and 9 above (and a non-breaching party's failure to waive such
unsatisfied condition(s)), any non-breaching party shall have the
option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any
party to any other party.
o. Effect and Construction of Agreement. Except as expressly provided
herein, this Agreement shall remain in full force and effect in
accordance with its respective terms, and shall not be construed to
(i) waive or impair any rights, powers or remedies of the Buyers under
this Agreement and the related documents, or (ii) require the Buyers
to make any investments, loans or other extensions of credit to
ConnectClearly or NCT.
p. Certain Fees and Expenses. ConnectClearly shall pay the reasonable
legal fees and expenses of Stroock & Stroock & Xxxxx LLP, counsel to
the Buyers, incident to the negotiation, preparation, execution,
delivery and performance of the Transaction Documents and the NCT
Transaction Documents to a maximum amount of $30,000. ConnectClearly
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 and the NCT Transaction
Documents. ConnectClearly shall pay all stamp and other taxes and
duties levied in connection with the issuance of its securities
pursuant to the Transaction Documents.
q. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Buyers will be entitled to specific performance of the obligations of
NCT and ConnectClearly under the Transaction Documents and the NCT
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.
r. Joint and Several Liability. NCT and ConnectClearly shall be
jointly and severally liable for the performance of this Agreement.
IN WITNESS WHEREOF, the Buyers, ConnectClearly and NCT have caused this
Securities Purchase and Supplemental Exchange Rights Agreement to be duly
executed as of the date first written above.
XXXXXXXXXXXXXX.XXX, INC.
By: /S/XX X. Xxxxxxx
----------------------------------
Name: Xx X. Xxxxxxx
Its: Senior Vice President
and Treasurer
NCT GROUP, INC.
By: /s/XX X. XXXXXXX
----------------------------------
Name: Xx X. Xxxxxxx
Its: Senior Vice President and
Chief Financial Officer
[SIGNATURES CONTINUE ON NEXT PAGE]
"BUYER"
BALMORE FUNDS, S.A.
By: /s/Xxxxxx Kindle
Name: Xxxxxx Kindle
Title: Director
Address: Balmore Funds, S.A.
Trident Xxxxxxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxx BVI
Telephone:(000) 0000-000-0000
Facsimile:(000)0000-000-0000
AUSTOST ANSTALT XXXXXX
By: /s/Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Representative
Address: Austost Anstalt Xxxxxx
744 Fuerstentum
Landstrusse, 163
Lichtestein
Telephone:(____) ___________________
Facsimile:(____) ___________________
ZAKENI LIMITED
By: /s/XXXXXXX XXXXXX
Name: Xxxxxxx Xxxxxx
Title: President
Address: Zakeni Limited
Grand Bahamas
Telephone:(000) 0000-000-0000
Facsimile:(000)0000-000-0000
EXHIBIT 1
NCT GROUP, INC.
NOTICE OF EXCHANGE
Reference is made to the Securities Purchase and Supplemental Exchange
Rights Agreement (the "Securities Purchase Agreement"). In accordance with and
pursuant to the Securities Purchase Agreement, the undersigned hereby elects to
exchange the number of shares of common stock, $0.01 par value per share, of
XxxxxxxXxxxxxx.xxx, a Delaware corporation (the "Shares"), indicated below for
shares of common stock, $.01 par value per share, of NCT Group, Inc. (the
"Exchange Shares"), by tendering the stock certificate(s) representing the
share(s) of ConnectClearly Common Stock specified below as of the date specified
below.
The undersigned acknowledges that no sale by the undersigned of the
securities issuable to the undersigned upon exchange of the Shares shall be made
unless (i) a registration statement for such shares under the Securities Act of
1933, as amended (the "Act") is in effect, (ii) the Corporation has received an
opinion of counsel, in customary form, that such sale is exempt from
registration required by Section 5 of the Act.
Date of Exchange:
Number of Shares to be exchanged:
Stock certificate no(s). representing Shares to be exchanged:
Please confirm the following information:
Exchange Rate:
Number of shares of NCT Common Stock to be issued:
Wire Instructions:
Please issue the NCT Common Stock for which the Shares are being exchanged
in the following name and to the following address:
Issue to:
Facsimile Number:
Authorization:
By:______________________________________
Title:_____________________________________
Dated:
ACKNOWLEDGED AND AGREED:
NCT GROUP, INC.
By: _____________________________
Name:___________________________
Title:____________________________
Date:____________________________
SCHEDULE 4(a)
Organization and Qualification
None.
SCHEDULE 4(c)
Capitalization
SCHEDULE 4(f)
Defaults, Violations
None.
SCHEDULE 4(g)
Consents
None.
SCHEDULE 4(u)
Registration Rights; Rights of Participation
None.
SCHEDULE 4(v)
Certain Fees
SCHEDULE 5(c)
Capitalization
Xxxxxx Xxxxxxx: beneficial ownership of 10.77% of the outstanding Common Stock
as of June 30, 2000.
SCHEDULE 5(f)
Defaults, Violations
None.
SCHEDULE 5(g)
Consents
None.
SCHEDULE 5(i)
Absence of Certain Changes
SCHEDULE 5(j)
Litigation
None.
SCHEDULE 5(p)
Title
Xxxxxxx Secured Convertible Notes:
Security interest in the NCT's now owned and after acquired inventory or
receivables in respect thereof and all products and proceeds thereof.
SCHEDULE 5(u)
Tax Status
None.
SCHEDULE 5(v)
Certain Transactions
None.
125
SCHEDULE I
BUYERS
Name and Address of Buyer Purchase Price Second Purchase Price Second
Initial for Initial Tranche for Second Initial Tranche
Shares Shares Shares Tranche Shares Warrants Warrants
-------------------------------------------------------------------------------------------------------------------------
Austost Anstalt Xxxxxx 375 $375,000 375 $375,000 375 375
744 Fuerstentum
Xxxxxxxxxxx 000,
Xxxxxxxxxxxx
-------------------------------------------------------------------------------------------------------------------------
Balmore Funds S.A. 375 $375,000 375 $375,000 375 375
Trident Xxxxxxxx
P.O. Box 146
Roadstown Tortola, BVI
-------------------------------------------------------------------------------------------------------------------------
Zakeni, Ltd 250 $250,000 250 $250,000 250 250
Grand Bahamas
-------------------------------------------------------------------------------------------------------------------------
