Exhibit 4(a)
This Warrant has not been registered under the Securities Act of 1933, as
amended, or applicable state securities laws, nor the securities laws of any
other jurisdiction. This Warrant may not be sold or transferred in the absence
of an effective registration statement under those securities laws or an opinion
of counsel, in form and substance satisfactory to the Company, that the sale or
transfer is pursuant to an exemption to the registration requirements of those
securities laws.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
(void after 5:00 p.m., New York City time, on December 11, 2007)
No. KEQ-01 1,250,000 Shares Dated as of December 11, 2002
- ----------
FOR VALUE RECEIVED, NCT GROUP, INC., a Delaware corporation (the
"Company"), as of the date hereof (the "Grant Date"), hereby issues this warrant
(the "Warrant") and certifies that KEQ Partners III (the "Holder") is granted
the right, subject to the provisions of this Warrant, to purchase from the
Company, during the period commencing at 9:00 a.m. New York City local time on
the Grant Date and expiring, unless earlier terminated as hereinafter provided,
at 5:00 p.m. New York City local time on December 11, 2007 or, if such day is a
day on which banking institutions in the City of New York are authorized by law
to close, then on the next succeeding day that shall not be such a day (the
"Exercise Period"), up to One Million Two Hundred Fifty Thousand (1,250,000)
fully paid and non-assessable shares of common stock, par value $.01 per share,
of the Company at a price of $0.063 per share (the "Exercise Price"). As used
herein, "Common Stock" means the shares of common stock, par value $.01 per
share, of the Company as constituted on the Grant Date, together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor. The number of shares of Common Stock to be received upon
the exercise of this Warrant may be adjusted from time to time as hereinafter
set forth. The Common Stock deliverable upon such exercise, as adjusted from
time to time, is sometimes referred to herein as the "Warrant Stock." Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone. This Warrant is issued,
and all the rights hereunder are held, subject to all of the conditions,
limitations and provisions set forth herein.
1. Exercise of Warrant. This Warrant may be exercised in whole or in part,
at any time or from time to time, during the Exercise Period. Subject to the
restrictions and limitations set forth above, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal
office, together with a completed and duly executed Warrant Exercise Form in the
form attached hereto as Exhibit 1 (the "Exercise Form"), payment (either in cash
or by certified or official bank check, payable to the order of the Company) of
the Exercise Price for the number of shares of Common Stock specified in the
Exercise Form and instruments of transfer, if appropriate, duly executed by the
Holder. If this Warrant is exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new
1
Warrant evidencing the rights of the Holder to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant, an
executed Exercise Form, the Exercise Price and any appropriate instruments of
transfer, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder. The Company shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock upon exercise of this Warrant.
2. Reservation of Shares. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
of the Company from time to time receivable upon exercise of this Warrant. All
such shares shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid, non-assessable and free of all pre-emptive
rights.
3. Warrant Stock Transfers; Registration.
3.1 Warrant Stock Transfers. The Warrant Stock may not be sold,
exchanged, transferred, assigned or otherwise disposed of unless registered
pursuant to the provisions of the Securities Act of 1933, as amended (the
"1933 Act"), or an opinion of counsel in form and content satisfactory to
the Company is delivered to the Company stating that such sale or other
disposition is made in compliance with an available exemption from such
registration. Any sale or other disposition of the Warrant Stock must also
comply with all applicable state securities laws and regulations.
3.2 Registration. The Company shall include the Warrant Stock in the
next available registration statement filed with the Securities and
Exchange Commission by the Company and pertaining to Common Stock.
4. Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant, but the Company shall
issue one additional share of its Common Stock in lieu of each fraction of a
share otherwise called for upon any exercise of this Warrant.
5. Exchange, Transfer or Assignment of Warrant. This Warrant is not
registered under the 1933 Act nor under any state securities law or regulation.
This Warrant may not be sold, exchanged, transferred, assigned or otherwise
disposed of unless registered pursuant to the provisions of the 1933 Act or an
opinion of counsel in form and content satisfactory to the Company is delivered
to the Company stating that such disposition is in compliance with an available
exemption from registration. Any such disposition must also comply with
applicable state securities laws and regulations.
6. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
2
7. Redemption. This Warrant is not redeemable by the Company.
8. Anti-Dilution Provisions.
8.1 Adjustment for Certain Dividends and Reclassifications. In case at
any time or from time to time after the Grant Date the holders of Common
Stock (or any other securities at the time receivable upon the exercise of
this Warrant) shall have received, or on or after the record date fixed for
the determination of eligible stockholders shall have become entitled to
receive without payment therefor, (a) other or additional securities or
property (other than cash) by way of dividend, (b) any cash paid or payable
except out of earned surplus of the Company at the Grant Date as increased
(decreased) by subsequent credits (charges) thereto (other than credits in
respect of any capital or paid-in surplus or surplus created as a result of
a revaluation of property) or (c) other or additional (or less) securities
or property (including cash) by way of stock-split, spin-off, split-up,
reclassification, combination of shares or similar corporate rearrangement,
then, in each such case, the Holder, upon the exercise of this Warrant as
provided in Section 1 hereof, shall be entitled to receive, subject to the
limitations and restrictions set forth herein, the amount of securities and
property (including cash in the cases referred to in clauses (b) and (c)
above) that such Holder would hold on the date of such exercise if on the
Grant Date it had been the holder of record of the number of shares of
Common Stock (as constituted on the Grant Date) subscribed for upon such
exercise as provided in Section 1 hereof and had thereafter, during the
period from the Grant Date to and including the date of such exercise,
retained such shares and/or all other additional (or less) securities and
property (including cash in the cases referred to in clauses (b) and (c)
above) receivable by it as aforesaid during such period, giving effect to
all adjustments called for during such period by Section 8.2 hereof.
8.2 Adjustment for Reorganization, Consolidation, Merger, Etc. In case
of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this
Warrant) after the Grant Date or in case after such date the Company (or
any such other corporation) shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, then, in each such case, the Holder, upon the exercise of this
Warrant as provided in Section 1 hereof at any time after the consummation
of such reorganization, consolidation, merger or conveyance, shall be
entitled to receive, in lieu of the securities and property receivable upon
the exercise of this Warrant prior to such consummation, the securities or
property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in Section 8.1
hereof. In each such case, the terms of this Warrant shall be applicable to
the securities or property receivable upon the exercise of this Warrant
after such consummation.
8.3 Certificate as to Adjustments. In each case of an adjustment in
the number of shares of Common Stock (or other securities or property)
receivable upon the exercise of this Warrant, the Company shall promptly
compute such adjustment in accordance with the terms of this Warrant and
deliver to the Holder a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based, including
a statement of (a) the consideration received or to be received by the
Company for any additional shares of Common
3
Stock issued or sold or deemed to have been issued or sold, (b) the number
of shares of Common Stock outstanding or deemed to be outstanding and (c)
the pro forma adjusted Exercise Price.
8.4 Notices of Record Date, Etc. In the event (a) the Company takes a
record of the holders of Common Stock (or other securities at the time
receivable upon the exercise of this Warrant) for the purpose of entitling
them to receive any dividend (other than a cash dividend) or other
distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities, or to receive any
other right, (b) of any capital reorganization of the Company (other than a
stock split or reverse stock split), any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or
into another corporation (other than a merger for purposes of change of
domicile) or any conveyance of all or substantially all of the assets of
the Company to another corporation or (c) of any voluntary or involuntary
dissolution, liquidation or winding-up of the Company, then, in each such
case, the Company shall deliver to the Holder a notice specifying, as the
case may be, the date on which such record is to be taken for the purpose
of such dividend, distribution or right (and stating the amount and
character of such dividend, distribution or right) or the date on which
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place (and the time, if
any is fixed, in which the holders of record of Common Stock or such other
securities at the time receivable upon the exercise of this Warrant shall
be entitled to exchange their shares of Common Stock or such other
securities for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up). Such notice shall be mailed at
least twenty (20) days prior to the date of the corporate event to which it
relates, and this Warrant may be exercised no later than five (5) days
prior to the date of such corporate event (if during the Exercise Period).
9. Legend. In the event of the exercise of this Warrant and the issuance of
any Warrant Stock hereunder, all certificates representing Warrant Stock shall
bear on the face thereof substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE BORROWER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. ANY SUCH SALE, TRANSFER OR ASSIGNMENT MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
10. Governing Law and Jurisdiction. This Warrant shall be governed by the
internal laws of the State of Delaware, without regard to the conflicts of laws
principles thereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts
4
located in the state of New Jersey with respect to any dispute arising under
this Warrant.
11. Notices. Notices, demands and other communications given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered (if personally delivered), on the scheduled date of delivery (if
delivered via commercial courier), three days after mailed (if mailed by
certified or registered mail, return receipt requested) or when sent by
facsimile (if sent by facsimile with evidence of successful transmission
retained by the sender); provided, however, that failure to give proper and
timely notice as set forth in the "with a copy to" provisions below shall not
invalidate a notice properly and timely given to the associated party. Unless
another address or facsimile number is specified by notice hereunder, all
notices shall be sent as follows:
If to the Holder: with a copy to:
- ---------------- --------------
KEQ Partners III [N/A]
c/o Kalkines, Arky, Zall & Bernstein LLP
1675 Broadway, 27th Floor
New York, NY 10019
Attention: Steven M. Polan, Esq.
Facsimile: 212-541-9250
If to the Company: with a copy to:
- ----------------- --------------
NCT Group, Inc. NCT Group, Inc.
20 Ketchum Street 20 Ketchum Street
Westport, CT 06880 Westport, CT 06880
Attention: Chief Financial Officer Attention: General Counsel
Facsimile: 203-226-4338 Facsimile: 203-226-4338
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, as of the date
first set forth above.
NCT GROUP, INC.
By: /s/ Michael J. Parrella
------------------------------
Name: Michael J. Parrella
------------------------------
Title: Chairman & C.E.O.
------------------------------
5
EXHIBIT 1
---------
WARRANT EXERCISE FORM
(to be executed by the Holder in order to exercise the Warrant)
TO: NCT Group, Inc.
20 Ketchum Street
Westport, CT 06880
Attention: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing ____________ shares of common stock, par value $.01 per
share, of NCT Group, Inc. and hereby makes payment at the rate of $______ per
share, or an aggregate of $__________, in payment therefor.
The undersigned represents, warrants and certifies that all offers and
sales of the common stock received upon exercise of the within Warrant shall be
made (i) pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "1933 Act"), or pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the 1993 Act
and (ii) in compliance with applicable state securities laws and those of any
other applicable jurisdiction.
Instructions if stock is to be issued to other than to the registered holder of
the within Warrant:
- --------------------------------------------------------------------------------
Name:
----------------------------------------
Address:
----------------------------------------
Social Security or Taxpayer Identification Number:
------------------------------
Dated:
------------------, 20--
------------------------------
Name of Warrant Holder
------------------------------
Signature
6