STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "Agreement") is made and entered into as
of this 27th day of February 2001 by and among (i) NCT Group, Inc., a Delaware
corporation ("NCT"), (ii) the holders of Series A Preferred Stock of NCT
Networks, Inc. signatory hereto ( the "Series A Holders"), and (iii) NCT
Networks, Inc., a Delaware corporation (the "Company").
RECITALS
A. In connection with the proposed issuance of Series A Preferred Stock,
par value $0.10 per share (the "Preferred Stock") of the Company for the benefit
of Teltran International Group, Ltd., a Delaware corporation, pursuant to a
Stock and Asset Purchase Agreement dated January 24, 2001 (the "Purchase
Agreement"), the parties hereto would like to accommodate their interests and
relationship in the matters as set forth in the Purchase Agreement with respect
to the holding, voting, acquisition and transfer by the Stockholders (as defined
below) of the Preferred Stock and the common stock of the Company, par value
$0.001 per share (the "Common Stock") issuable upon conversion of the Preferred
Stock (the "Restricted Common" and collectively with the Preferred Stock, the
"Covered Securities"). The Company and the signatories hereto intend and agree
that this Agreement shall become effective and be binding upon them upon the
closing of the Purchase Agreement.
B. All terms not defined herein, shall have the meanings set forth in the
Purchase Agreement and the Certificate of Designations (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Application to Stockholders. For purposes of this Agreement, the term
"Stockholders" as used herein shall mean (i) the Series A Holders and (ii) any
successors or assigns thereof that receive Covered Securities other than through
transfers on a Principal Market.
2. Voting of Restricted Common. Each Stockholder shall cause the Restricted
Common to be voted at any meeting of the stockholders of the Company or, in any
consent in lieu of such a meeting, as recommended by a majority of the Board of
Directors of the Company to the common stockholders of the Company, including
with respect to the election of Directors.
3. Standstill Agreement. The Stockholders covenant and agree that, without
the prior written consent of the Board of Directors of the Company and other
than with respect to the conversion of the Preferred Stock, the Stockholders
shall not, directly or indirectly, alone or through or with others: (a) acquire,
offer to acquire, or agree to acquire, directly or indirectly, by purchase or
otherwise, any securities or direct or indirect rights to acquire any securities
of the Company, or any successor to or person in control of the Company, or any
subsidiary or division thereof or of any such successor or controlling person;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the rules of the
U.S. Securities and Exchange Commission ("SEC")), or seek to advise or influence
any person or entity with respect to the voting of any voting securities of the
Company, or seek to influence or control the policies or management of the
Company or any subsidiary or a division thereof; (c) make any public
announcement with respect to a proposal for, or submit an offer of (with or
without conditions), any extraordinary transaction involving the Company, any of
its subsidiaries or divisions or of any of their respective securities or
assets; (d) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), in connection with any of the foregoing; (e) publicly request the Company
or any of its Representatives, directly or directly, to amend or waive any
provision of this paragraph; or (f) enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of the
foregoing. The references in this paragraph to the rules of the SEC and the
Exchange Act shall apply for all purposes under this Agreement whether or not
the Company has registered a class of securities under Section 12 of the
Exchange Act.
As used in this Agreement, the term "Representative" means, as to any
person, such person's subsidiaries and other affiliates and its, his or her
directors, officers, employees, partners, agents, advisors (including, without
limitation, financial advisors, counsel and accountants) and controlling
persons, and the term "person" shall be broadly interpreted to include, without
limitation, any corporation, company, partnership or other entity or individual.
4. Private Transactions. Nothing herein shall restrict a Stockholder from
selling, transferring or otherwise disposing of any Covered Securities in any
privately negotiated transactions, provided that the purchaser, transferee or
other successor or assignee of such Stockholder execute and deliver a copy of
this Agreement to the Company as a signatory hereto. Any person or entity
acquiring Covered Securities in any privately negotiated transaction shall be
deemed a successor of a Stockholder for purposes of this Section 4 whether as a
direct, indirect or multiple successor of such Stockholder.
5. Principal Market Transactions. Notwithstanding anything to the contrary
in this Agreement, the Stockholders are permitted to transfer (an "Exempt
Transfer") Restricted Common in transactions negotiated through and reported on,
any Principal Market in accordance with the terms of the Certificate of
Designations, Preferences and Rights of Series A Convertibles Preferred Stock of
the Company as filed with the Delaware Secretary of State on February 23, 2001
(the "Certificate of Designations"). The term "Principal Market" as used herein
shall mean any exchange or other market for the trading of securities by the
public anywhere in the world, and as to which the Company has listed its Common
Stock for trading.
6. Legends; Removal. To assist in effectuating the provisions of this
Agreement, certificates for all Covered Securities will contain a legend to
reflect that such shares of the Covered Securities are subject to this
Agreement, which shall remain thereon until such shares of Restricted Common
have been sold, transferred, or disposed of in an Exempt Transfer. The Company
shall deliver, or cause its Transfer Agent to deliver, unlegended certificates
for shares of Restricted Common to a Stockholder or its designees within the
settlement period for transactions in securities on any Principal Market on
which such shares of Restricted Common have been sold or transferred in an
Exempt Transfer, upon receipt from the Stockholder or its broker-dealer of
written confirmation that the sale or transfer of such shares of Restricted
Common was conducted in accordance with the rules, regulations and applicable
laws of such Principal Market.
7. Termination of Agreement. This Agreement shall be in effect until such
time when all shares of Restricted Common held by the Stockholders or their
successors and assigns have been transferred through an Exempt Transfer.
8. Special Remedy and Specific Performance.
(a) In the event of a Breach (as hereinafter defined), the Company may, at
its option, purchase (or, at its option, cause a Representative designated by
the Company to purchase) any number of shares of Restricted Common then
beneficially owned, directly or indirectly, by the Stockholder in Breach at a
price per share equal to the average final trading price (or if the final
trading price is not available, the final bid price) as reported on the
Principal Market, by Bloomberg (or if applicable the London SEATS System) for
the five consecutive trading days ending the last trading day before the Breach
Date (as hereinafter defined) (or if the Common Stock did not trade for five
consecutive days on the Principal Market, the five most recent trading days
prior to the Breach Date); such purchase to be effected within 30 calendar days
following the Breach Date. If the Common Stock is listed for trading on more
than one Principal Market, the determination of the price per share shall be
based upon the Principal Market that reported the highest average daily trading
volume for the period from the date the Common Stock was initially listed for
trading on any Principal Market through the Breach Date. The Company may
purchase such shares for, at the Company's option, cash, a promissory note
having a maturity date no later than one year following the Breach Date and
carrying simple interest on principal at a per annum rate of 9%, or any
combination thereof. The term "Breach" means any material violation of any
provisions of paragraph 2 or paragraph 3 of this Agreement. The term "Breach
Date" means the date on which the Company properly gives written notice to the
Stockholder of a violation which constitutes a Breach. The right contained in
this subparagraph 8(a) shall not be deemed to be the exclusive remedy for a
breach of this Agreement, it being understood that such right shall not be
deemed to prejudice, or to operate as a waiver of, any other remedy contained in
this Agreement or any other remedy to which the Company may be entitled at law
or in equity.
(b) The Stockholders acknowledge and agree that the Company and its
stockholders would be irreparably injured in the event that any provision of the
Agreement is breached or not performed by the Stockholders in accordance with
their specific terms. Accordingly, it is agreed that each party shall be
entitled to temporary and permanent injunctive relief with respect to each and
any breach or purported repudiation of this Agreement by the other and to
specifically enforce strict adherence to this Agreement and the terms and
provisions hereof against the other in any action instituted in a court of
competent jurisdiction, in addition to any other remedy which such aggrieved
party may be entitled to obtain. Moreover, in the event of the breach of any of
the provisions of this Agreement, timeliness in obtaining relief is of the
essence.
9. Amendments; Waiver of Terms. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated orally or in writing, except
that any term of this Agreement may be amended by a writing signed by the
parties, and the observance of any such term may be waived (either generally or
in a particular instance and either retroactively or prospectively) solely by a
writing signed by the party against whom such waiver is to be asserted.
10. Notices. All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, prepaid first-class mail, telex, or
telecopier:
(a) if to the Company, to:
NCT Group, Inc.
40 Ketchum St.
Westport, CT 06880
Fax: (203) 226- 4338
Attention: Cy E. Hammond
with a copy to:
Latham & Watkins
555 Eleventh Street, N.W.
Washington, D.C. 20004
Fax (202) 637-2201
Attention: William P. O'Neill
(b) if to the Stockholders, to:
Teltran International Group, Inc.
One Penn Plaza, Suite 3632
New York, New York 10119
Fax: (212) _____-______
With a copy to:
Parker Duryee Rosoff & Haft
529 Fifth Avenue
New York, New York 10017
Attn: Michael DiGiovanna, Esq.
Fax: (212) 972-9487
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; two business days after
being deposited in the mail, postage prepaid, if mailed as aforesaid; when
answered back, if telexed; and when receipt acknowledged, if telecopied. Any
party from time to time may change its address for the purpose of notices to
that party by giving a similar notice specifying a new address, but no such
notice shall be deemed to have been given until it is actually received by the
party sought to be charged with the contents thereof.
11. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company and NCT and upon
the successors and assigns of the Stockholders that receive Covered Securities
other than by way of an Exempt Transfer. This Agreement shall not be binding
upon a successor or assigns of the Stockholders that receive Restricted Common
in any Exempt Transfer.
12. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
13. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law; Choice of Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to agreements made and to be performed within that state.
15. No Implied Waiver; Remedies. No delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor shall any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The remedies
provided herein are cumulative and non-exclusive, and shall not preclude a party
from seeking any other remedy available to it in law or equity.
16. Entire Agreement. This Agreement, the Purchase Agreement and the
Certificate of Designations of even date between the parties are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding in respect of the
subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the Purchase Agreement and the Certificate
of Designations of even date between the parties supersede all prior agreements
and understandings between the parties with respect to such subject matter.
17. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
18. Severability. In the event that any provision contained herein, or the
application thereof in any circumstances, is held invalid, illegal, or
unenforceable in any respect for any reason, the validity, legality and
enforceability of such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
In witness whereof, the parties have executed this agreement as of the date
hereof.
The Company
By:______________________________
Irene Lebovics, Secretary
NCT Group, Inc.
By:______________________________
Irene Lebovics, Secretary
The Stockholders:
Teltran International Group, Ltd.
By:______________________________