Exhibit 10(c)
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ARTERA GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE NOTE
FOR VALUE RECEIVED, ARTERA GROUP, INC., a Delaware corporation (hereinafter
called "Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT,
Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein, Fax: 011-42-32323196 (the
"Holder") or order, without demand, the sum of Five Hundred and Fifty Thousand
Dollars ($550,000.00), with simple interest accruing at the annual rate of 8%,
on January 10, 2004 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of eighteen percent (18%) per annum shall apply to the
amounts owed hereunder.
1.2 Interest Rate. Interest payable on this Note shall accrue at the annual
rate of eight percent (8%) and be payable on each annual anniversary of this
Note or sooner, and on the Maturity Date, accelerated or otherwise, when the
principal and remaining accrued but unpaid interest shall be due and payable, or
sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal due under this Note
into shares of common stock of NCT Group, Inc., a Delaware corporation ("NCT"),
as described in a subscription agreement entered into by Borrower, Holder and
NCT ("Subscription Agreement"), the terms of which are incorporated herein.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of principal or interest hereon when due and such failure continues
for a period of ten (10) days after the due date. The ten (10) day period
described in this Section 3.1 is the same ten (10) day period described in
Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of seven (7) days after written notice
to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement or in any
agreement, statement or certificate given in writing pursuant hereto or in
connection therewith shall be false or misleading in any material respect as of
the date made and the Closing Date (as defined in the Subscription Agreement).
3.4 Receiver or Trustee. The Borrower shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against Borrower or any of its property or other assets after
the date of this Note for more than $50,000, and shall remain unvacated,
unbonded or unstayed for a period of sixty (60) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower and if
instituted against Borrower are not dismissed within 75 days of initiation.
3.7 Failure to Deliver Common Stock or Replacement Note. Borrower's failure
to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Subscription Agreement, or if
required a replacement Note.
3.8 Non-Registration Event. The occurrence of a Non-Registration Event as
described in Section 10.4 of the Subscription Agreement.
3.9 Cross Default. A default by the Borrower of a material term, covenant,
warranty or undertaking of any other agreement to which the Borrower and Holder
are parties, or the occurrence of a material event of default under any such
other agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
Holder hereof in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
4.2 Notices. Any notice herein required or permitted to be given shall be
in writing and may be personally served or sent by fax transmission (with copy
sent by regular, certified or registered mail or by overnight courier). For the
purposes hereof, the address and fax number of the Holder is as set forth on the
first page hereof. A Conversion Notice shall be deemed delivered on (i) the
business day it is received by facsimile or otherwise by the Borrower if such
notice is received prior to 11:00 A.M. New York time, or (ii) the immediately
succeeding business day if it is received by facsimile or otherwise after 11:00
A.M. New York time on a business day or at any time on a day which is not a
business day. The address and fax number of the Borrower shall be Artera Group,
Inc., 20 Ketchum Street, Westport, CT 06880, attn: Chief Financial Officer,
telecopier number: (203) 226-4338, with a copy by telecopier only to: General
Counsel. Both Holder and Borrower may change the address and fax number for
service by service of notice to the other as herein provided. Notice of
Conversion shall be deemed given when made to the Company pursuant to the
Subscription Agreement.
4.3 Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder.
4.5 Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
4.8 Prepayment. This Note may not be paid prior to the Maturity Date or
after the occurrence of an Event of Default without the consent of the Holder.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its duly authorized officer as of the 10th day of January, 2002.
ARTERA GROUP, INC.
By:________________________________
Name:
Title:
NOTICE OF CONVERSION
(To be executed by the registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ARTERA GROUP, INC. on
January 10, 2002 into shares of common stock of NCT GROUP, INC. according to the
conditions set forth in such Note, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________