<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 4, 1997
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Noise Cancellation Technologies, Inc.
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(Exact name of Registrant as specified in Charter)
Delaware 0-18267 59-2501025
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
1025 West Nursery Road, Suite 120, Linthicum, Maryland 2 1 0 9 0
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (410) 636-8700
None
- ------------------------------------------------------------------------------
(Former name or former address, if changes since last report)
<PAGE>
Item 7. Exhibits
Sequential
Exhibit No. Description Page
1(a) Offshore Debenture Securities Subscription
Agreement dated January 31, 1997, between
Noise Cancellation Technologies, Inc. and
Willora Company, Ltd.
4(a) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due January 31, 2000.
4(b) Form of Noise Cancellation Technologies, Inc.
Warrant to Purchase Common Stock Issued to
Willora Company, Ltd.
<PAGE>
Item 9. Sales of Equity Securities Pursuant to Regulation S
(a) February 4, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due January 31, 2000 each in the principal amount of fifty thousand
dollars ($50,000) (the "Debentures"). Debentures in the aggregate principal
amount of one million five hundred thousand dollars ($1,500,000.00) together
with a Warrant to purchase up to seventy-five thousand (75,000) shares of
Registrant's Common Stock and two hundred eighteen thousand one hundred
eighty-two (218,182) shares of Registrant's Common Stock were sold and delivered
on February 4, 1997. Debentures in the aggregate principal amount of five
hundred thousand dollars ($500,000.00) together with a Warrant to purchase up to
twenty-five thousand (25,000) shares of Registrant's Common Stock and the number
of shares to be determined as described in (c) below are to be sold and
delivered on the date the purchaser of the Debentures converts Debentures sold
and delivered on February 4, 1997, in an aggregate principal amount of seven
hundred fifty thousand dollars ($750,000.00) or more.
(b) Name of placement agents - None. Identity of person to which the Registrant
sold the Debentures and Warrants - Willora Company, Ltd., c/o Betuvo A.G.,
Baarestrasse 73, Zug, Switzerland (the "Purchaser").
(c) Total offering price - two million dollars ($2,000,000.00). Total
commissions None. In consideration of the Purchaser's undertaking to defend and
indemnify the Registrant against any and all claims by third parties for
placement fees, commissions or any other amounts relating to this sale of
securities, the Registrant issued the Purchaser one hundred fifty thousand
dollars ($150,000.00) of Registrant's Common Stock on February 4, 1997, at the
closing bid price of such Common Stock on that date and will either pay the
Purchaser fifty thousand dollars ($50,000.00) in cash or issue the Purchaser an
additional fifty thousand dollars ($50,000.00) of such Common Stock on the date
of the sale and delivery of the second tranche of Debentures in the aggregate
principal amount of five hundred thousand dollars ($500,000.00) at the closing
bid price of such Common Stock on that date.
(d) Exemption from registration claimed under Regulation S promulgated under the
Securities Act of 1933, as amended (respectively, "Regulation S" and the "Act").
To the best of the Registrant's knowledge and belief and in accordance with
representations and warranties made by the Purchaser of the Debentures, the
Purchaser is not a "U.S. Person" as defined under Regulation S, the Registrant
did not engage in any "directed selling efforts" as defined under Regulation S
in connection with the offer or sale of the Debentures, Warrants and Common
Stock and said offer and sale complied in all other respects with the provisions
of Regulation S required to permit the sale of the Debentures, Warrants and
Common Stock by the Registrant without compliance with the registration
requirements of the Act.
(e) The holder of the Debentures is entitled, at its option, at any time
commencing on or after forty-five (45) days after the closing date of the
purchase thereof (the "Closing Date") to convert the full unpaid principal
amount of the Debentures into shares of Common Stock of the Registrant (the
"Conversion Shares") at a conversion price (the "Conversion Price") for each
Conversion Share equal to the lesser of eighty-five percent (85%) of the closing
bid of the Common Stock on the Closing Date or seventy percent (70%) of the
average closing bid price of the Common Stock for the five (5) NASDAQ trading
days immediately preceding the date of conversion as reported by the National
Association of Securities Dealers Automated Quotation System (or, if not quoted
on NASDAQ, as reported by any other recognized quotation system on which the
price of the Common Stock is quoted). Provided, however, that in no event shall
the aggregate number of Conversion Shares issuable upon conversion of all of the
Debentures when added to the number of shares of Registrant's Common Stock
issuable upon exercise of the Warrants exceed eleven million (11,000,000) shares
of Common Stock. Provided further that in the event of the termination of the
inclusion of the Common Stock in The NASDAQ Stock Market National Market System,
(i) the Conversion Price shall be the lesser of eighty-five percent (85%) of the
closing bid price of the Common Stock on the Closing Date or sixty percent (60%)
of the average closing bid price of the Common Stock as reported on NASDAQ (or,
if not quoted on NASDAQ, as reported by any other recognized quotation system on
which the price of the Common Stock is quoted) for the five (5) NASDAQ Trading
Days immediately preceding the Conversion Date; and (ii) the maximum limit of
eleven million (11,000,000) shares on the aggregate number of Conversion Shares
and Warrant Shares that may be issued upon the conversion of the Debentures and
the exercise of the Warrants shall not be applicable. The number of Conversion
Shares to be received by the holder on conversion shall be the product of the
unpaid principal amount of the Debentures being converted divided by the
Conversion Price. The Registrant may, at its own option, cause the automatic
conversion into Conversion Shares of all or any part of the Debentures after
February 15, 1998 at the aforesaid Conversion Price. The Registrant may exercise
its option to cause the automatic conversion as set forth herein after sixty
(60) days notice to the holder during which sixty (60) days the holder may
convert in accordance with the holder's conversion privileges. After the sixty
(60) days and the exercise of said automatic conversion, Registrant may only
exercise further automatic conversion(s) in connection with not less than
twenty-five percent (25%) of the then remaining amounts of outstanding
Conversion Shares pertaining to all of the unconverted Debentures per automatic
conversion and only after thirty (30) days notice to the holder during which
thirty (30) days the holder may convert in accordance with the holder's
conversion privileges. Payment of each interest payment payable under the
Debentures may, at the Registrant's option, be made in cash or by delivery of
shares of the Registrant's Common Stock. The number of shares to be delivered
shall be based on one hundred percent (100%) of the average closing bid price of
the Registrant's Common Stock as reported on NASDAQ (or, if not quoted on
NASDAQ, as reported by any other recognized quotation system on which the price
of the Common Stock is quoted) for the Five (5) Trading Days immediately
preceding the record date for the interest payment.
The holder of the Warrants is entitled, at its option, at any time for a two (2)
year period commencing on the forty-sixth (46th) day after the Closing Date on
which the Warrant was granted and delivered to purchase up to the maximum number
of shares of Registrant's Common Stock covered by the Warrant at a price per
share equal to the closing bid of such Common Stock on the applicable Closing
Date.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOISE CANCELLATION TECHNOLOGIES, INC.
By: /s/ STEPHEN J. FOGARTY
Stephen J. Fogarty
Senior Vice President and
Chief Financial Officer
Dated: February 7, 1997
<PAGE>
EXHIBIT 1(a)
OFFSHORE DEBENTURE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Debenture Securities Subscription Agreement is executed
in reliance upon the transaction exemption afforded by Regulation S ("Regulation
S") as promulgated by the Securities and Exchange Commission ("SEC"), under the
Securities Act of 1933, as amended ("1933 ACT").
This Agreement has been executed by the undersigned in connection with
the private placement of Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures of
NOISE CANCELLATION TECHNOLOGIES, INC.
1025 West Nursery Road
Linthicum, Maryland 21090
National Association of Securities Dealers Automated Quotation System Symbol
("NCTI") a corporation organized under the laws of Delaware, United States of
America (hereinafter referred as the "ISSUER") The undersigned
NAME: WILLORA COMPANY, LTD.
ADDRESS: c/o Betuvo A.G.
Baarestrasse 73
Postfach 6302
Zug, Switzerland
a Corporation organized under the laws of The Bahamas, a non USA Jurisdiction
(hereinafter referred to as the "HOLDER") hereby represents and warrants to,
and agrees with ISSUER as follows:
1. Agreement to Subscribe; Purchase Price; Warrants; Indemnity.
a. Subscription. The undersigned hereby subscribes for and agrees to
purchase on the First Closing Date (as defined in Paragraph 7) thirty (30)
of the ISSUER's Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures in the principal amount of Fifty Thousand (USD $50,000.00)
United States Dollars each, in the form of the Debenture attached as
Exhibit A hereto (singly a "Debenture", and collectively the "Debentures")
for the aggregate purchase price of one million five hundred thousand (USD
$1,500,000) United States Dollars including all discounts, fees and
commissions, payable in United States Dollars.
The undersigned also hereby subscribes for and agrees to purchase on the
Second Closing Date (as defined in Paragraph 7) an additional ten (10)
Debentures for the aggregate purchase price of five hundred thousand (USD
$500,000) United States Dollars including all discounts, fees and
commissions, payable in United States Dollars.
b. Form of Payment. HOLDER shall pay the total consideration by delivering
good funds by wire transfer in United States Dollars in the amounts and on
or before the dates specified in Paragraph 7 into the escrow account of the
escrow agent (the "Escrow Agent") as follows:
For Credit To:
Clifford Brandeis, Esq.
Zuckerman, Gore & Brandeis, LLP
900 Third Avenue
New York, New York 10022
c. Warrants. On the First Closing Date (as defined in Paragraph 7), upon
receipt of the purchase price then payable hereunder, the Issuer will grant
to the Holder a warrant to purchase, at the Holder's option, at any time
during the two (2) year period commencing on the First Closing Date
seventy-five thousand (75,000) shares of common stock of the Issuer
("Common Stock") at an exercise price equal to the closing bid of the
Common Stock on the First Closing Date, subject to the further terms and
conditions set forth in the form of Warrant attached as Exhibit B hereto.
On the Second Closing Date (as defined in Paragraph 7), upon receipt of the
purchase price then payable hereunder, the Issuer will grant to the Holder
a warrant to purchase, at Holder's option, at any time during the two (2)
year period commencing on the Second Closing Date twenty-five thousand
(25,000) shares of Common Stock at an exercise price equal to the closing
bid of the Common Stock on the Second Closing Date subject to the further
terms and conditions set forth in the form of warrant attached as Exhibit B
hereto. The warrant issued on the First Closing Date is hereinafter
described at the "First Warrant", the warrant issued on the Second Closing
Date is hereinafter described as the "Second Warrant", collectively the
First Warrant and the Second Warrant are hereinafter described as the
"Warrants" and the shares of Common Stock issuable upon the exercise of the
Warrants are hereinafter described as the "Warrant Shares".
d. Indemnity. Holder shall defend, indemnify and hold Issuer harmless from
any and all claims, demands, suits or proceedings instituted or made by any
third party upon or against Issuer for placement fees, commissions or other
compensation or consideration claimed to be owing or payable to such third
party under or as a result of the transactions contemplated by this
Subscription Agreement including any and all losses, costs, damages or
expenses suffered by Issuer as a result thereof. Issuer represents and
warrants that Schwebel Capital Investments, Inc. and Alexander Wescott and
Co., Inc. are the only finders or placements agents with whom Issuer has
had any agreement or understanding with respect to the issuance and sale of
Debentures and that any and all of such agreements or understandings
terminated on or before January 15, 1997, and no monies are due or are to
become due thereunder.
In consideration of Holder's indemnification undertaking, on the First
Closing Date (as defined in Paragraph 7), upon receipt of the purchase price
then payable hereunder, the Issuer will pay the Holder a payment of one hundred
fifty thousand (USD$150,000) United States Dollars and on the Second Closing
Date (as so defined) upon receipt of the purchase price then payable hereunder,
the Issuer will pay the Holder a payment of fifty thousand (USD$50,000) United
States Dollars (respectively the "First Indemnity Payment" and the "Second
Indemnity Payment" and collectively the "Indemnity Payments"). Payment of the
Indemnity Payments in each instance may, at Issuer's option, be made in cash or
by delivery of shares of Common Stock, the number of shares delivered to be
based on one hundred percent (100%) of the closing bid of the Common Stock on
the applicable Closing Date. Shares of Common Stock delivered by the Issuer to
the Holder in payment of Indemnity Payments are hereafter described as
"Indemnity Shares".
2. HOLDER Representations; Access to Information; Independent
Investigation.
a. Offshore Transaction. HOLDER understands, represents and warrants to and
agrees with ISSUER (all such representations and warranties also being made
to and for the benefit of any transfer agent of Issuer employed for that
purpose) as follows:
(i) Neither the HOLDER nor any person or entity for whom the HOLDER is
acting as fiduciary is a U.S. person or an affiliate of the Issuer. A U.S.
person means one of the following:
(1) any natural person resident in the United States of America;
(2) any partnership or corporation organized or incorporated under the laws
of the United States;
(3) any estate of which any executor or administrator is a U.S. person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of foreign entity located in the United States;
(6) any non-discretionary account or similar (other that an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. person;
(7) any discretionary account or similar account (other than as estate or
trust held by a dealer or other fiduciary organized, incorporated, or (if
an individual) resident in the United States; and
(8) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign Jurisdiction;
and
(B) formed by a U.S. person, principally for the purpose of investing in
securities not registered under the 1933 Act. (Whenever such term is
used herein, it shall have the meaning given in Regulation S.)
ii) At the time the purchase hereunder was originated, HOLDER was not a
U.S. person and was not a U.S. Person as of the date of the execution and
delivery of this agreement and will not be a U.S. person on the First
Closing Date, the Second Closing Date and the dates on which the Holder
exercises the Warrants in whole or in part. No offer to purchase the
Debentures or acquire the Warrants was made in the United States.
(iii) HOLDER is purchasing the Debentures and acquiring the Warrants for
its own account or for the account of beneficiaries each of whom has
entered into an Offshore Debenture Securities Subscription Agreement with
the HOLDER in a form similar to this Agreement with the effect such that
all representations, warranties and agreements herein were made directly by
such beneficiary.
(iv) HOLDER agrees that all offers and sales of Debentures or the shares of
Common Stock of the Issuer issuable upon conversion of the Debentures (the
"Conversion Shares") or the Warrants or the Indemnity Shares prior to the
expiration of a period commencing on the date of the applicable closing of
the offering of Debentures and ending 40 days thereafter (the "Restricted
Period") shall only be made in compliance with the safe harbor contained in
Regulation S, pursuant to registration of Securities under the 1933 Act or
pursuant to an exemption from registration. The Holder further agrees that
with respect to the Warrants and the Warrant Shares, the Warrants may not
be exercised within the United States and the Warrant Shares may not be
delivered within the United States upon exercise other than pursuant to the
safe harbor contained in Regulation S, pursuant to registration of
Securities under the 1933 Act or pursuant to an exemption from
registration.
(v) HOLDER represents and warrants and hereby agrees that all offers and
sales of the Debentures, the Conversion Shares, the Warrants, the Warrant
Shares and the Indemnity Shares after the Restricted Period applicable
thereto shall be made only pursuant to registration under the 1933 Act or
pursuant to an exemption from registration.
(vi) All offering documents received by HOLDER include statements to the
effect that none of the Debentures, the Conversion Shares, the Warrants,
the Warrant Shares or the Indemnity Shares have been registered under the
1933 Act and may not be offered or sold in the United States or to U.S.
Persons or for the account or benefit of a U.S. person (other than
distributors as defined in Regulation S) during the Restricted Period
applicable thereto unless such Debentures, Conversion Shares, Warrants,
Warrant Shares and Indemnity Shares are registered under the 1933 Act or
any exemption from the registration requirements is available.
(vii) HOLDER acknowledges that the purchase of the Debentures, the Warrant
Shares and Fee Shares involves a high degree of risk and further
acknowledges that it can bear the economic risk of the purchase of the
Debentures, the Warrant Shares and Fee Shares, including the total loss of
its investment. HOLDER acknowledges that it has obtained the advice of
competent legal counsel in its domicile jurisdiction that it is qualified
under the laws of its domicile to purchase the Debentures acquire the
Warrants and purchase the Warrant Shares and Fee Shares offered hereunder
and that the offer and sale of said Debentures, Conversion Shares,
Warrants, Warrant Shares and Fee Shares will not violate the laws of its
domicile jurisdiction.
(viii) HOLDER understands that the Debentures and the Warrants are being
offered and sold to it and the Conversion Shares, the Warrant Shares and
the Indemnity Shares will be issued to it in reliance on specific
exemptions from the registration requirements of United States Federal and
State securities laws and that the ISSUER is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments
and understandings of HOLDER set forth herein in order to determine the
applicability of such exemptions and the suitability of HOLDER to acquire
the Debentures, the Warrants and the Indemnity Shares.
(ix) HOLDER is sufficiently experienced in financial and business matters
to be capable of evaluating the merits and risks of its investments, and to
make an informed decision relating thereto.
(x) In evaluating its investment, HOLDER has consulted its own investment
and/or legal and/or tax advisors.
(xi) HOLDER understands that in the view of the United States Securities
and Exchange Commission (the "SEC") the statutory basis for the exemption
claimed for this transaction would not be present if the offering of
Debentures and Warrants and the issuance of the Conversion Shares, the
Warrant Shares and the Indemnity Shares, although in technical compliance
with Regulation S, is part of a plan or scheme to evade to registration
provisions of the 1933 ACT. HOLDER is acquiring the Debentures, Conversion
Shares, Warrants, Warrant Shares and Indemnity Shares for investment
purposes and has no present intention to sell the Debentures, Conversion
Shares, Warrants, Warrant Shares or Indemnity Shares in the United States
or to a U.S. Person or for the account or benefit of a U.S. Person either
now or promptly after the expiration of the Restricted Period applicable
thereto.
(xii) HOLDER represents and warrants that, except in connection with its
normal trading activities, neither it nor any of its affiliates or
intermediaries will directly or indirectly maintain any short position in
Debentures or Common Stock of the ISSUER at any time when HOLDER directly
or indirectly owns or holds any of the Debentures, Warrants or Common Stock
of the Issuer.
(xiii) HOLDER has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
organization.
(xiv) This Offshore Debenture Securities Subscription Agreement has been
duly authorized, executed and delivered by HOLDER and is a valid and
binding agreement enforceable in accordance with its terms, subject to the
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws of general applicability relating to or affecting
creditor's rights generally and to general principles of equity; and HOLDER
has full corporate power and authority necessary to enter into to this
Offshore Debenture Securities Subscription Agreement and to perform its
obligations hereunder.
(xv) No consent, approval, authorization, or order of any court,
governmental agency or body, or arbitrator having jurisdiction over the
HOLDER is required for execution of this Offshore Debenture Securities
Subscription Agreement, including without limitation, the purchase of the
Debentures, the Warrant Shares or the Indemnity Shares, or the performance
of the HOLDER's obligations hereunder.
(xvi) The HOLDER acknowledges that, in making the decision to purchase the
Debentures, acquire the Warrants and Conversion Shares and purchase the
Warrant Shares and the Indemnity Shares, it has relied or will rely, as the
case may be, solely upon independent investigation made by it and not upon
any representations made the ISSUER with respect to the ISSUER or the
Debentures, the Warrants, the Conversion Shares, the Warrant Shares or the
Indemnity Shares, other than those representations set forth in Section 3
hereof.
(xvii) The HOLDER is aware that the Debentures, the Warrants, the
Conversion Shares, the Warrant Shares and the Indemnity Shares have not
been and will not be registered under the 1933 Act and may only be offered
or sold pursuant to registration under the 1933 Act or an available
exemption therefrom.
(xviii) The HOLDER: (A) will not, during the Restricted Period applicable
thereto, offer to sell the Debentures, the Warrants, the Conversion Shares,
the Warrant Shares or the Indemnity Shares in the United States, to a U.S.
person or for the account or benefit of a U.S. person or other than in
accordance with Rule 903 or 904 or Regulation S; and
(B) will, after the expiration of the Restricted Period applicable thereto,
offer, sell, pledge, or otherwise transfer the Debentures, the Warrants,
the Conversion Shares, the Warrant Shares or the Indemnity Shares only
pursuant to registration under the 1933 Act or an available exemption
therefrom and, in any case, in accordance with applicable United States
federal and state and foreign securities laws.
(xix) None of the HOLDER, its affiliates or any person acting on behalf of
the HOLDER or any such affiliate has engaged, or will engage, in any
Directed Selling Efforts with respect to the Debentures, the Warrants, the
Conversion Shares, the Warrant Shares or the Indemnity Shares or any
distribution by any Distributor, with respect to any of the same.
(Distributor for the purposes herein shall mean any underwriter, dealer or
other person who participates, pursuant to a contractual arrangement, in
the distribution of the Debentures, the Warrants, the Conversion Shares,
the Warrant Shares or the Indemnity Shares being offered or sold hereunder
in reliance on Regulation S.)
(xxi) The transactions contemplated by this Offshore Debenture Securities
Subscription Agreement:
(A) have not been pre-arranged with a purchaser located in the United
States or who is a U.S. person; and
(B) are not part of a plan or scheme to evade registration provisions of
the Act.
(xxii) The following are all put options and short positions or other
similar instruments that the HOLDER has entered, or has the intention
of entering into (except in connection with its normal trading
activities) with respect to the Debentures or the Common Stock of
Issuer:
None
(xxiii) If the HOLDER offers and sells the Debentures, the Warrants,
the Conversion Shares, the Warrant Shares or the Indemnity Shares
during or after the Restricted Period applicable thereto, then it will
do so only; in accordance with the provisions of Regulation S;
pursuant to registration of the Debentures, the Warrants, the
Conversion Shares, the Warrant Shares or the Indemnity Shares under
the 1933 Act; or pursuant to an available exemption from the
registration requirements of the 1933 Act.
If HOLDER is purchasing the Debentures, the Warrants, the Conversion
Shares, the Warrant Shares or the Indemnity Shares subscribed for
hereby in representative or fiduciary capacity, the representations and
warranties in this Offshore Securities Subscription Agreement shall be
deemed to have been made on behalf of the person or persons to whom
HOLDER is so purchasing.
The foregoing representations and warranties are true and accurate as
of the date hereof, shall be true and accurate as to the date of the
acceptance by the ISSUER of HOLDER's subscription, and shall survive
thereafter. If HOLDER has knowledge, prior to the acceptance of the
Offshore Debenture Securities Subscription Agreement by the ISSUER, or
prior to the Escrow Agent's delivery of the Debentures to the HOLDER,
or prior to the Issuer's delivery of the Conversion Shares or the
Warrant Shares to the Holder, that any such representations and
warranties shall not be true and accurate in any respect, the HOLDER,
prior to such acceptance or delivery, will give written notice of such
fact to the ISSUER specifying which representations and warranties are
not true and accurate and the reasons therefor and the ISSUER shall
have the right to prohibit delivery of the Debentures, Warrants,
Conversion Shares, Warrant Shares or Indemnity Shares, as the case may
be.
b. Current Public Information. HOLDER acknowledges that HOLDER has
been furnished with or has acquired copies of the ISSUER's most recent
Annual Report on Form 10-K and any Form 10-Q filed thereafter
(collectively the "SEC Filings"), and other publicly available
documents.
c. Independent Investigation; Access. HOLDER acknowledges that HOLDER
in making the decision to purchase the Debentures subscribed for and
acquire the Warrants, has relied upon independent investigations made
by it and its HOLDERS representatives, if any, and HOLDER and such
representatives, if any, have, prior to any sale to it, been given
access and the opportunity to examine all material books and records
of the ISSUER, all material contracts and documents relating to this
offering and an opportunity to ask questions of, and to receive
answers from ISSUER or any person acting on its behalf concerning the
terms and conditions of this offering. HOLDER and its advisors, if
any, have been furnished with access to all publicly available
materials relating to the business, finances and operation of the
ISSUER and materials relating to the offer and sale of the Debentures,
the Warrants, the Conversion Shares, the Warrant Shares and the
Indemnity Shares which have been requested. HOLDER and is advisors, if
any, have received complete and satisfactory answers to any such
inquiries.
d. No Government Recommendation or Approval. HOLDER understands that
no United States federal or state agency or non-United States
governmental agency has made or will make any finding or determination
relating to the fairness for public investment of the Debentures, the
Warrants, the Conversion Shares, the Warrant Shares or the Indemnity
Shares, or has passed or made, or will pass on or make, or will pass
on or make, any recommendation or endorsement of any of such
securities.
e. Entity Purchase. If HOLDER is a partnership, corporation or trust,
the person executing this Offshore Securities Subscription Agreement
on its behalf represents and warrants that;
(i) He or she has made due inquiry to determine the truthfulness of
the representations and warranties made pursuant to this Offshore
Securities Subscription Agreement; and
(ii) He or she is duly authorized (if the undersigned is a trust, by
the trust agreements) to make this investment and to enter into and
execute this Offshore Securities Subscription Agreement on behalf of
such entity.
(f) Legend: The HOLDER understands that until such time as the
applicable restricted period under Regulation S has expired, the
Debentures, the Warrants, the Conversion Shares, the Warrant Shares
and the Indemnity Shares may bear a restrictive legend in
substantially the following form or such other form as ISSUER may
reasonably deem necessary or appropriate (and a stop-transfer order
may be placed against the transfer of the certificates for such
securities).
THE DEBENTURE [WARRANT] REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON CONVERSION [EXERCISE] HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE DEBENTURE
[WARRANT] HAS BEEN ACQUIRED FOR INVESTMENT AND NEITHER THE DEBENTURE
[WARRANT] NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE DEBENTURES [WARRANTS] OR SUCH
SECURITIES, AS THE CASE MAY BE, UNDER THE SECURITIES ACT, 1933, AS
AMENDED, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY
SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE
STATE SECURITIES LAWS.
3. ISSUER Representations
The ISSUER relying on the truth and accuracy of the foregoing
representations and warranties of the HOLDER and without independent
investigation with respect thereto, represents and warrants to the
HOLDER as follows:
a. Reporting Company Status. The ISSUER is a reporting issuer as defined by
rule 902 of Regulation S and will use its best efforts to maintain its status as
such a reporting issuer.
b. Offshore Transaction. The ISSUER has not offered the Debentures or the
Warrants or the Indemnity Shares to any person in the United States or to any
U.S. person or for the account or benefit of any U.S. person.
c. No Directed Selling Efforts. In regard to this transaction, ISSUER has
not conducted any "directed selling efforts" as that term is defined in rule 902
of Regulation S nor has ISSUER conducted any general solicitation relating to
the offer and sale of the within Debentures, Warrants and Indemnity Shares to
U.S. persons resident within the United States or elsewhere.
d. Securities. The Debentures, the Warrants, the Conversion Shares, the
Warrant Shares and the Indemnity Shares, when issued and delivered, will be duly
and validly authorized and issued, fully paid and non-assessable.
e. Subscription Agreement. The Offshore Debenture Securities Subscription
Agreement, when acknowledged by the signature of an officer of the Issuer, has
been duly authorized, validly executed and delivered on behalf of the ISSUER and
is a valid and binding agreement in accordance with its terms.
f. Non-contravention. The execution and delivery of the Offshore Debenture
Securities Subscription Agreement and the consummation of the issuance of the
Debentures, the Warrants, the Conversion Shares, the Warrant Shares and the
Indemnity Shares, and the transactions contemplated by the Offshore Debentures
Securities Subscription Agreement do not and will not conflict with or result in
a breach by the ISSUER of any of the terms or provisions, of, or constitute a
default under, the certificate of incorporation or by-laws of the ISSUER, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the ISSUER is a party or by which it or any of its properties or assets
are bound, or any existing applicable law, rule, or regulation or any applicable
decrees, judgment or order of any court, Federal or State regulatory body,
administrative agency or other governmental body having jurisdiction over the
ISSUER or any of its properties or assets.
g. Prior Share Issues Under Regulation S. The ISSUER has not issued any
securities under Regulation S subsequent to December 31, 1996 except for any
securities which may be issued in connection with ISSUER's current financing
activities and securities issued as an adjustment to prior sales under
Regulation S. For purposes of this and the subsequent paragraph "Issuer's
current financing activities" are limited to the ISSUER's efforts to issue and
sell up to four million dollars ($4,000,000) aggregate principal amount of the
Debentures (including the Debentures being sold hereunder).
h. Subsequent Share Issues Under Regulation S/ or Regulation D. The ISSUER
will not issue any securities under Regulation S until sixty (60) days after the
Second Closing Date; provided, however, that if the Second Closing Date has not
occurred within one hundred twenty (120) days of the First Closing Date, the
prohibition against any such issuance of securities shall terminate on such one
hundred twentieth (120th) day. The Issuer will not issue any Securities under
Regulation S during the period beginning on the date on which the prohibition
specified in the preceding sentence terminates and ending one hundred eighty
(180) days after the First Closing Date unless it shall have first delivered to
the Holder, at least five (5) business days prior to the closing of such issue
of securities, written notice describing the proposed issue of securities under
Regulation S, including the terms and conditions thereof, and providing the
Holder an option during such five (5) day period to purchase all but not part of
the securities to be issued on the same terms.
If the Issuer Issues any Common Stock or other securities convertible into
Common Stock under Regulation D promulgated under the 1933 Act ("Regulation D")
while the Holder holds unpaid or unconverted Debentures (the "Outstanding
Debentures") the Issuer on the date of such issuance under Regulation D (" the
Regulation D Closing Date") shall either.
(i) reserve on its books an additional two million five hundred thousand
(2,500,000) shares of Common Stock for use in connection with the conversion of
the Outstanding Debentures, or (ii) purchase the Outstanding Debentures from the
Holder at a price which will give the Holder a return on its investment in the
Outstanding Debentures equivalent to that which the Holder would realize if the
Holder converted the Outstanding Debenture and sold the Conversion Shares
received therefrom at the closing bid price of the Common Stock on the
Regulation D Closing Date.
The foregoing right of first refusal in the event of certain issues of
securities under Regulation S and obligations of the Issuer in the event of
certain issues of Securities under Regulation D, shall not apply to any
transaction involving issuances of securities in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or in connection with the payment for services, the
acquisitions of a business, product or license by the Issuer or to any issuance
of securities by a subsidiary of the Issuer. Neither the foregoing restriction
nor right of first refusal shall apply to any securities which may be issued in
connection with ISSUER's current financing activities and securities issued as
an adjustment to prior sales under Regulation S or Regulation D, as the case may
be.
i. Filings. The Issuer undertakes and agrees pursuant to the sale of its
securities under Regulation S to make all necessary filings in connection with
the sale of its securities as required by the laws and regulations of all
appropriate jurisdictions.
j. Attached hereto as Exhibit C is a true and correct table dated as of the
First Closing Date, setting forth the total authorized shares of Common Stock of
the Issuer, the number of such shares that are issued and outstanding and the
number of such shares that are reserved for issuance upon the exercise of
warrants and options to purchase shares of Common Stock of the Issuer.
4. Expiration of Restricted Period.
The transaction restriction in connection with this offshore offer and sale
restricts the HOLDER from offering and selling to U.S. persons or for the
account or benefit of an U.S. person for a forty (40) day period. The rules do
not require the placement of a restrictive legend on the share certificate
issued pursuant to conversion of the Debentures. Rule 903 (c) (2) governs the
forty (40) day transaction restriction. In the event that two or more sequential
closings are provided for, each separate closing shall be deemed to be a
separate offering under Regulation S and the forty (40) day restriction period
shall begin for each transaction separately on the date the Debentures covered
thereunder are delivered to the HOLDER and payment is made to the ISSUER for
that specific transaction. Paragraphs (m)(1)(2) and (3) or Rule 902 sets forth
additional requirements with respect to the exercise of the Warrants and the
issuance of the Warrant Shares. Title to the Debentures and the Conversion
Shares may be transferred by HOLDER to other Non United States persons or
entities in accordance with Regulation S.
5. Exemption: Reliance on Representations.
HOLDER understands that the offer and sale of the Debentures, the Warrants,
the Conversion Shares, the Warrant Shares and the Indemnity Shares are not being
and will not be registered under the 1933 Act. ISSUER is relying on the rules
governing offers and sales made outside the United States pursuant to Regulation
S. Rules 901 through 904 of Regulation S govern this transaction. ISSUER
acknowledges that the HOLDER may resell the foregoing securities outside of the
United States to non U.S. Persons in reliance of Regulation S at the same or a
different price than the purchase price hereunder, and that the HOLDER is under
no obligation to purchase or retain any of the foregoing securities for its own
accounts provided all offers and sales by HOLDERS are made in accordance with
Regulation S and this Agreement.
6. Transfer Agent Instructions
a. Debenture. Upon the conversion of the Debentures, the HOLDER thereof
shall submit such Debentures to ISSUER and ISSUER shall, instruct ISSUER's
Transfer Agent to issue one or more certificates representing that number of
shares of Common Stock into which the Debenture or Debentures are convertible in
accordance with the provisions regarding conversion set forth in Exhibit A.
b. Warrants. Upon the exercise of the Warrants, the HOLDER thereof shall
submit such Warrants and the purchase price in immediately available New York,
New York funds to ISSUER and ISSUER shall, instruct ISSUER's Transfer Agent to
issue one or more certificates representing that number of shares of Common
Stock issuable upon the exercise of such Warrants in accordance with the
provisions regarding exercise set forth in Exhibit B.
c. Legend on Indemnity Share Certificates. Upon the First Closing Date and
the Second Closing Date (as defined in Paragraph 7) ISSUER's Transfer Agent will
be instructed to issue one or more share certificates representing the Indemnity
Shares deliverable on the Closing Date in question in the name of the Holder in
such denominations to be specified at or before the Closing Date in question.
All of such share certificates will bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against the transfer
of such certificates).
THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE COMMON STOCK HAS BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE COMMON STOCK, UNDER THE SECURITIES ACT,
1933, AS AMENDED, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
d. No Legends on Other Certificates. Upon conversion of any Debenture or
exercise of any Warrant in conformance with the terms and conditions of this
Agreement and Exhibit A or B hereto, as the case may be, and in compliance with
Regulation S, ISSUER's Transfer Agent will be instructed to issue one or more
share certificates representing Conversion Shares or Warrant Shares, as the case
may be, in the names of HOLDERS or "Street Names" to be specified prior to
conversion or exercise in such denominations to be specified at conversion or
exercise representing the number of shares of Common Stock issuable upon such
conversion or exercise. Provided conversion of a Debenture has occurred after
the expiration of the Restricted Period applicable to such Debenture and in
conformance with the terms and conditions of Exhibit A hereto and compliance
with Regulation S, share certificates issuable upon conversion will be issued
without legend. Provided exercise of a Warrant has occurred after expiration of
the Restricted Period applicable to such Warrant and in conformance with the
terms and conditions of Exhibit B hereto and in compliance with Regulation S
share certificates issuable upon exercise will be issued without legend. ISSUER
further warrants that no stop transfer instructions other than a stop transfer
for the Debentures and the Warrants for 40 days to U.S. persons or instructions
other than instructions to issue the Conversion Shares and the Warrant Shares
have been given to the Transfer Agent and that the Conversion Shares and the
Warrant Shares, when issued upon conversion or exercise after the expiration of
the Restricted Period applicable to the Debenture or Warrant in question in
accordance with the terms of the Debenture or Warrant, shall be freely
transferable on the books and records of the ISSUER subject to compliance with
applicable securities laws. Nothing in this paragraph shall affect in any way
HOLDER's obligations and agreements set forth in paragraph 2 hereof to comply
with all applicable securities laws upon the sale or other disposition of the
Conversion Shares or the Warrant Shares.
7. Closing Dates.
This Agreement shall be effective from the date of execution by the HOLDER.
Closing with respect to the purchase of thirty (30) Debentures shall be effected
through delivery of funds, Debentures, Warrants and Indemnity Shares to the
designated Escrow Agent and shall be completed on January 27, 1997, or such
other mutually agreed to date (the "First Closing Date"). Closing with respect
to the purchase of an additional ten (10) Debentures shall be effected through
delivery of funds, Debentures, Warrants and Indemnity Shares to the designated
Escrow Agent and shall be completed within five (5) days of the date on which
Holder has converted Debentures in an aggregate principal amount of seven
hundred fifty thousand (USD$750,000) United States Dollars or more, or such
other mutually agreed to date (the "Second Closing Date"). In each instance,
HOLDER shall forthwith deliver the necessary funds as indicated in Paragraph 1.
8. Conditions to the Issuer's Obligations to Sell.
ISSUER shall have the right to reject any given Offshore Debenture
Securities Subscription Agreement which is tendered to the ISSUER, but only for
the reason that the ISSUER reasonably believes any representations and
warranties of such HOLDER to be untrue and in such event ISSUER shall provide
HOLDER written notice of such rejection and the reason therefor and shall
provide reasonable opportunity for a response to such stated reason. HOLDER
understands that ISSUER's obligation to sell the Debentures and issue the
Warrants and Fee Shares is conditioned upon:
(i) The receipt and acceptance by ISSUER of the Offshore Debenture
Securities Subscription Agreement for all of the Debentures as evidence by
execution of this Agreement by the ISSUER or ISSUER's duly authorized agent.
HOLDER understands this Offshore Debenture Securities Subscription Agreement is
irrevocable.
(ii) Delivery into the designated Escrow Agent by HOLDER of good funds as
payment in full for the purchase of the Debentures in accordance with Paragraphs
1 and 7 above.
(iii) The representations and warranties of HOLDER shall be true and
correct in all material respects as of the date when made and as of the First
and Second Closing Dates as though made at those times (except those that speak
as of specific date) and the HOLDER shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
to be performed, satisfied or complied with by the HOLDER at or prior to the
First Closing Date and the Second Closing Date.
9. Covenant of ISSUER.
ISSUER hereby covenants and agrees until such time as HOLDER has converted
One Hundred Percent (100%) of the Debentures into Common Stock, ISSUER shall not
repurchase its shares of Common Stock or otherwise enter into any transaction
which would cause a decrease in the number of its shares of Common Stock issued
and outstanding (other than transactions that similarly decrease the number of
shares of Common Stock that the Debentures are convertible into).
10. Confidentiality.
The parties hereto agree to maintain the confidentiality of this Agreement
and not to disclose to any person or entity information concerning the
transaction contemplated hereby unless required by law to do so.
11. Conditions to HOLDER's Obligation to Purchase.
ISSUER understands that HOLDER's obligation to purchase the Debentures is
conditioned upon delivery of the Debentures as described herein and the absence
of any event or circumstance that could reasonably be expected to have a
material adverse effect on the financial condition of the ISSUER, or the market
price of the ISSUER's Common Stock.
12. Governing Law
This Agreement shall be governed by and construed under the laws of the
State of Delaware and of the United States of America without regard to its
choice of law principles.
13. Entire Agreement
This Offshore Debenture Securities Subscription Agreement constitutes the
entire agreement among the parties hereof with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous representations,
warranties, agreements and understandings in connection therewith. This Offshore
Debenture Securities Subscription Agreement may be amended only by a writing
executed by all parties hereto. This Agreement may be executed in counterparts
and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
14. Issuer's Undertaking
The ISSUER agrees to pay all costs and expenses, including reasonable
attorneys' fees and disbursements, which may be incurred by the HOLDER if the
HOLDER has to initiate legal proceedings to enforce its rights under this
Agreement, the Debenture or the Warrant.
15. Full Name and Address of HOLDER for Registration Purposes:
NAME: ________________________________
ADDRESS ________________________________
Tel No. ________________________________
Fax. No. ________________________________
Contact Name: ________________________________
<PAGE>
16. Delivery Instructions: (if different from Registration Name):
NAME: ______________________________________________________
ADDRESS: ______________________________________________________
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Tel. No. ______________________________________________________
Fax. No. ______________________________________________________
Contact Name: ______________________________________________________
Special
Instructions ______________________________________________________
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<PAGE>
IN WITNESS WHEREOF, this Offshore Debenture Securities Subscription
Agreement was duly executed or the date first written below.
Dated this 31st day of the month of January, 1997.
Company Name: WILLORA COMPANY, LTD.
By: /s/
Name (Printed): __________________________
Title: __________________________
Country of Execution __________________________
Accepted this 31st day of the month of January, 1997.
NOISE CANCELLATION TECHNOLOGIES, INC.
By: /s/ STEPHEN J. FOGARTY
Official Signatory of Issuer
I have the full authority to bind NOISE CANCELLATION TECHNOLOGIES,
INC.____________________(initial)
Name(Printed): Stephen J. Fogarty
Title: Senior Vice-President and Chief Financial Officer
<PAGE>
EXHIBIT 4(a)
No._______________ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE JANUARY 31, 2000
THE DEBENTURE REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND NEITHER THIS
DEBENTURE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE DEBENTURE OR SUCH SECURITIES, AS THE CASE MAY BE, UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE
REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAW.
THIS DEBENTURE is one of a duly authorized issue (the "Issue") of Debentures of
NOISE CANCELLATION TECHNOLOGIES, INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Issuer") designated as its Eight
Percent (8%) Non-Voting Subordinated Convertible Debentures due JANUARY 31,
2000, in an aggregate principal amount of Two Million United States Dollars
(USD$2,000,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
Willora Company, Ltd.
c/o Betuvo A.G.
Baarestrasse 73
Postfach 6302
Zug, Switzerland
the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of
FIFTY THOUSAND
UNITED STATES DOLLARS (USD$50,000.00)
on
January 31, 2000
(the "Maturity Date"),
and to pay interest to the Holder on the principal sum outstanding at the rate
of Eight Percent (8%) per annum due and payable on March 31st, June 30th,
September 30th and December 31st (each a "Record Date") of each year until
maturity. Interest shall begin to accrue on the closing date applicable to the
issuance of this Debenture as provided in the "Subscription Agreement" defined
below (the "Closing Date"). Payment of each interest payment may, at the
Issuer's option, be made in cash or by delivery of shares of the Issuer's Common
Stock ("Common Stock"). In the event an interest payment is made in shares of
Common Stock the number of shares of Common Stock to be delivered to Holder
shall equal 1,000 divided by one hundred percent (100%) of the average closing
bid price of the Issuer's Common Stock as reported on NASDAQ (or, if not quoted
on NASDAQ, as reported by any other recognized quotation system on which the
price of the Common Stock is quoted) for the Five (5) Trading Days immediately
preceding the Record Date for the interest payment. No fractional shares or
scrip representing fractional shares will be issued for an interest payment, but
the number of shares issuable shall be rounded to the nearest whole share. The
interest so payable will be paid to the person in whose name this Debenture is
registered on the records of the Issuer regarding registration and transfers of
the Debenture (the "Debenture Register"); provided, however, that the Issuer's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Offshore Debenture Securities Subscription Agreement dated as of January 31,
1997 between the Issuer and the Holder (the "Subscription Agreement"). The
principal of, and interest of this Debenture (to the extent not payable by
delivery of shares of Issuer's Common Stock in accordance with the terms hereof)
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Issuer as designated in
writing by the Holder hereof from time to time. The Issuer will pay the
principal of and accrued and unpaid interest due upon this debenture on the
Maturity Date, less any amounts required by law to be deducted or withheld, to
the Holder at the last address on the Debenture Register. The receipt of such
check and shares of Common Stock, if any, shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the liability
for principal and interest on this Debenture to the extent of the sum
represented by such check and shares of Common Stock, if any, plus any amounts
so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand United
States Dollars (USD$50,000.00).
2. The Issuer shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment and other
representations of the original Holder hereof as set forth in the Subscription
Agreement and may be transferred or exchanged in the United States only in
compliance with the Securities Act of 1933, as amended (the "Act") and
applicable state securities laws. Prior to the due presentment for such transfer
of this Debenture, the Issuer and any agent of the Issuer may treat the person
in whose name this Debenture is duly registered on the Issuer's Debenture
Register as the owner hereof for the purpose of receiving payment as provided
and all other purposes, whether or not this Debenture be overdue, and neither
the Issuer nor any agent shall be affected by notice to contrary.
4. The Holder of this Debenture is entitled, at its option, at any time
commencing on or after forty-five (45) days after the Closing Date to convert
the full unpaid principal amount of this Debenture into shares of Common Stock
of the Issuer (the "Conversion Shares") at a conversion price (the "Conversion
Price") for each Conversion Share equal to the lesser of eighty-five percent
(85%) of the closing bid price of the Common Stock on the Closing Date or
seventy percent (70%) of the average closing bid price of the Common Stock for
the five (5) NASDAQ Trading Days immediately preceding the Conversion Date (as
hereinafter defined), as reported by the National Association of Securities
Dealers Automated Quotation System (or, if not quoted on NASDAQ, as reported by
any other recognized quotation system on which the price of the Common Stock is
quoted). Provided, however, that in no event shall the aggregate number of
Conversion Shares issuable upon conversion of all of the Debentures of the Issue
when added to the number of Warrant Shares issuable upon exercise of the
Warrants as defined and provided for under the Subscription Agreement exceed
eleven million (11,000,000) shares of Common Stock. Provided further that in the
event of the termination of the inclusion of the Common Stock in The NASDAQ
Stock Market National Market System, (i) the Conversion Price shall be the
lesser of eighty-five percent (85%) of the closing bid price of the Common Stock
on the Closing Date or sixty percent (60%) of the average closing bid price of
the Common Stock as reported on NASDAQ (or, if not quoted on NASDAQ, as reported
by any other recognized quotation system on which the price of the Common Stock
is quoted) for the five (5) NASDAQ Trading Days immediately preceding the
Conversion Date, and (ii) the maximum limit of eleven million (11,000,000)
shares on the aggregate number of Conversion Shares and Warrant Shares that may
be issued upon the conversion of the Debentures of the Issue and the exercise of
the Warrants shall not be applicable. The number of Conversion Shares to be
received by Holder on conversion shall be the product of the unpaid principal
amount of the Debenture being converted divided by the Conversion Price. On the
First Closing Date as defined in the Subscription Agreement, the Issuer will
reserve on its books five million six hundred twenty-five thousand (5,625,000)
shares of Common Stock and on the Second Closing Date, as so defined, the Issuer
will reserve an additional one million eight hundred seventy-five thousand
(1,875,000) of such shares for use in connection with the conversion of the
Debentures. The Issuer agrees that as long as any Debentures issued under the
Issue remain unconverted, it will reserve on its books a number of shares of
Common Stock for issuance upon conversion of such Debentures that is not less
than one hundred and fifty percent (150%) of the number of Conversion Shares
that would be issuable upon the full conversion of all of such unconverted
Debentures, provided, however, that the Issuer shall not be obligated to change
the number of shares of Common Stock reserved for such purpose until so notified
by the Holder. The Issuer does hereby irrevocably agree to instruct its Transfer
Agent to provide Common Stock Certificates representing Conversion Shares to the
Holder in accordance with the terms of conversion hereinafter set out. Holder
shall not sell any Conversion Shares so converted until forty-five (45) days
after the Closing Date. Such conversion by the Holder shall be effected by the
Holder surrendering to the Issuer this Debenture with the form of Conversion
Notice attached hereto as Exhibit 1, executed by the Holder of this Debenture
and accompanied, if required by the Issuer, by proper assignment hereof in blank
delivered in the manner and time period as hereinafter set out. The Issuer shall
then instruct its Transfer Agent to deliver the appropriate Common Stock
Certificate to the Holder. For purposes of this Debenture, the "Conversion Date"
shall be deemed to be the date on which the Holder has sent by facsimile the
executed and completed Conversion notice together with a copy of this Debenture
and any applicable executed assignment to the Issuer. In order to convert, this
Debenture together with the Original Conversion Notice duly executed, must be
delivered by express courier to the Issuer within Two (2) NASDAQ Trading Days of
the Conversion Date. The Conversion Shares must be issued and returned by the
Transfer Agent to the Holder by express courier within Five (5) NASDAQ Trading
Days after the Conversion Date. Accrued but unpaid interest shall, at the option
of the Issuer, be subject to conversion under the terms and conditions
concerning the payment of interest set forth above at the time of conversion of
this Debenture or at the time any quarterly interest payments are due. Issuer
shall pay Holder a penalty equal to one percent (1%) of the principal amount of
the Debentures converted for each day beyond such Five (5) NASDAQ Trading Days
required for Conversion Shares to be issued and returned to the Holder. No
fractional shares or scrip representing fractional shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The Issuer may, at its own option, cause the automatic conversion
into Conversion Shares of the whole or part of the full unpaid amount of this
Debenture after February 15, 1998 at the aforesaid Conversion Price. The Issuer
may exercise its option to cause the automatic conversion as set forth herein
after said sixty (60) days notice to Holder during which sixty (60) days Holder
may convert in accordance with Holder's conversion privileges hereunder. After
the sixty (60) days and the exercise of said automatic conversion, Issuer may
only exercise further automatic conversion(s) in connection with not less than
twenty-five percent (25%) of the then remaining amounts of outstanding
Conversion Shares pertaining to all of the unconverted Debentures of the Issue
per automatic conversion and only after thirty (30) days notice to Holder during
which thirty (30) days Holder may convert in accordance with Holder's conversion
privileges hereunder. The automatic conversion option shall be effectively
exercised on the date on which the Issuer transmits by facsimile transmission
and mails notice of said conversion to the registered Holder of the effected
Debentures. To effect such conversion by the Issuer, the Conversion Shares must
be issued and delivered by the Transfer Agent to the Holder by express courier
on or before the fifth (5th) NASDAQ Trading Day after the last day of such sixty
(60) or thirty (30) day notice period, as the case may be, or the date on which
the Holder notifies the Issuer that the Holder elects not to exercise the
Holder's conversion privileges hereunder, whichever is sooner. Upon receipt of
the Conversion Shares and the payment (in cash or Common Stock as herein
provided) of any unpaid interest, the Holder shall immediately deliver the
Debenture, appropriately marked to indicate payment in full thereof, to the
Issuer or its assignee pursuant to Issuer or its assignee's instructions.
5. No provision of this Debenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the place, time and rate, and in the coins or
currency, herein prescribed.
6. The Issuer hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, bringing of suit and diligence in taking
any action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
7. The Issuer agrees to pay all cost and expenses, including reasonable
attorneys' fees and disbursements, which may be incurred by the Holder in
collecting any amount due or exercising the conversion rights under this
Debenture.
8. If one or more of the following described "Events of Default" shall
occur:
(a) The Issuer shall default in the payment of principal or interest
on this Debenture; or
(b) Any of the representations or warranties made by the Issuer
herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished by or
on behalf of the Issuer in connection with the execution and delivery
of this Debenture or the Subscription Agreement shall be false or
misleading in any material respect at the time; or
(c) The Issuer shall fail to issue the Conversion Shares in accordance
with the terms of conversion set out in Section 4 above or to perform
or observe any other covenant, term, provision, condition, agreement
or obligation of the Issuer under this Debenture and such failure
shall continue uncured for a period of five (5) NASDAQ Trading Days
after notice from the Holder of such failure; or
(d) The Issuer shall (1) become insolvent; (2) admit in writing its
inability to pay its debt generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for
its dissolution; or (4) apply for or consent to the appointment of a
trustee, liquidator or receiver for it or for a substantial part of
its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Issuer or a substantial part of its property or business without its
consent and shall not be discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or
assets of the Issuer and shall not be dismissed within thirty (30)
calendar days thereafter; or
(g) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the
Issuer, and if instituted against the Issuer, shall not be dismissed
within thirty (30) calendar days after such institution or the Issuer
shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or audit the material allegations of, or default
in answering a petition filed in such proceeding; or
(h) The Issuer's Common Stock shall cease to be quoted on any of the
New York Stock Exchange, American Stock Exchange, NASDAQ-National
Market, NASDAQ-Small Cap or OTC Electronic Bulletin Board for a period
in excess of thirty (30) Calendar Days.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider this Debenture immediately due
and payable,
without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, anything herein or in any note or
other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein
or any other rights or remedies afforded by law.
9. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Issuer or any successor corporation,
whether by virtue of any constitution, statue or rule of law, or by enforcement
by any assessment or penalty or otherwise, all such liability being, by
acceptance hereof and as part of the consideration for the issue hereof
expressly waived and released.
10. The Holder of this Debenture, by execution of the Subscription
Agreement and acceptance hereof agrees that this Debenture is being acquired for
investment purposes and that such Holder will not offer, sell or otherwise
dispose of this debenture or the shares of Common Stock issuable upon conversion
hereof except under circumstances which shall not result in a violation of the
Act or any applicable State Blue Sky law or similar laws relating to the sale of
securities.
11. By acceptance of this Debenture, the Holder hereby grants to the Issuer
or its assignee the option ("Prepayment Option"), for a period beginning after
February 15, 1998 to repurchase all of the outstanding portion of the Debenture
plus accrued interest, after sixty (60) days notice to Holder during which sixty
(60) days Holder may convert in accordance with Holder's conversion privileges
hereunder. The repurchase price of this Debenture (the "Repurchase Price") shall
be equal to One Hundred and Five Percent (105%) of the full unpaid principal
amount of the Debenture, plus accrued interest payable in cash. This Prepayment
Option may be exercised by written notice via telecopy transmission to the
Holder (with written notice to the registered address by overnight courier)
after February 15, 1998 and delivery of the Repurchase Price to the Holder on or
before the fifth (5th) NASDAQ trading day after the last day of such sixty (60)
day notice period or the date on which the Holder notifies the Issuer that the
Holder elects not to exercise the Holder's conversion privileges hereunder,
whichever is sooner. Upon receipt of the Repurchase Price, Holder shall
immediately deliver the Debenture, appropriately marked to indicate payment in
full thereof, to the Issuer or its assignee pursuant to Issuer's or its
assignee's instructions. The foregoing constitutes Issuer's sole prepayment
right under this Debenture.
12. In the case that there is any outstanding amount of the Debenture
unconverted on January 31, 2000, the outstanding unconverted portion of the
Debenture will be subject to automatic conversion pursuant to the provisions of
the last four sentences in Section 4 hereunder.
13. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable such
provision shall be adjusted rather than voided, if possible, so that such is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this debenture will not in any way be affected or
impaired thereby.
14. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the Issuer
and the Holder with respect hereof. Neither this Debenture nor any terms hereof
may be amended, waived, discharged or terminated other than by a written
statement signed by the Issuer and the Holder.
15. This Debenture shall be governed by and construed in accordance with
the laws of the state of Delaware and the United State of America.
IN WITNESS WHEREOF the Issuer has caused this instrument to be duly
executed by an officer thereunto duly authorized.
ISSUER:
NOISE CANCELLATION
TECHNOLOGIES, INC.
By: /s/ STEPHEN J. FOGARTY
Official Signatory of Issuer
Name (Printed): Stephen J. Fogarty
Title: Senior Vice-President and Chief Financial Officer
Date: January 31, 1997
<PAGE>
EXHIBIT 1
Notice of Conversion
(To be executed by the Registered Holder in order to Convert the Debenture)
TO: Noise Cancellation Technologies, Inc.
1 Dock Street
Stamford, Connecticut 06903
Attention: John Horton, General Counsel
Fax: (203) 348-4106
Tel: (203) 961-0500 ext. 388
The undersigned (the "Holder") hereby irrevocably elects to convert Fifty
Thousand (USD $50,000.00) of the Debenture No___of NOISE CANCELLATION
TECHNOLOGIES, INC. (the "Issuer") according to the conditions set forth in such
Debenture, as of the date written below. The shares are to be issued in the
"Street Name" written below:
The undersigned represents and warrants as follows:
(a) The offer to convert the Debenture was made to the Issuer outside of the
United States and the undersigned was, at the time the subscription form was
executed and delivered, and is now outside the United States;
(b) It is not a U.S. person (as such term is defined in Section 902(a)
of Regulation S ("Regulation S") promulgated under the United States
Securities Act of 1933 (the "Securities Act"); and it is converting the
Debenture for its own account and not for the account or benefit
of any U.S. person;
(c) All offers and sales of the Common Stock shall be made pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act;
<PAGE>
(d) It is familiar with and understands the terms and conditions, and
requirements contained in Regulation S and definitions of U.S. persons
contained in Regulation S.
Holder:____________________________(seal)
By:_______________________________
Official Signatory of Holder
Title:________________________ Country of Execution:____________
Conversion Date (See Section 4) ______________________
Closing Bid on the Closing Date (See Section 4) ______________________
Average Closing Bid Price (See Section 4) ______________________
Conversion Price (See Section 4) ______________________
Number of common shares to be
received by Holder (see Section 4) ______________________
Name of Holder for Registration ______________________
Address for Registration ______________________
----------------------
"Street Name" for certificate ______________________
<PAGE>
EXHIBIT 4(b)
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT
ACT OR UNLESS SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION
FROM SUCH REGISTRATION.
THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY "U.S.
PERSON", AS DEFINED UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED UNLESS REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
-----------------
NOISE CANCELLATION TECHNOLOGIES, INC.
(Incorporated under the laws of the State of Delaware)
Void after 5:00 p.m., New York City time, on January 31, 1999
Warrant to Purchase
75,000 Shares of
Common Stock
Warrant for the Purchase of Shares of Common Stock
No. 97001
FOR VALUE RECEIVED, NOISE CANCELLATION TECHNOLOGIES, INC. (the
"Company"), a Delaware corporation, on this 31st day of January, 1997 (the
"Grant Date") hereby issues this warrant (the "Warrant") and certifies that
Willora Company, Ltd. (the "Holder") is granted the right, subject to the
provisions of the Warrant, to purchase from the Company, at any time, or
from time to time during the period commencing at 9:00 a.m. New York City
local time on March 18, 1997 (the forty-sixth (46th) day after the Grant
Date), and expiring, unless earlier terminated as hereinafter provided, at
5:00 p.m. New York City local time on January 31, 1999 up to seventy-five
thousand (75,000) fully paid and nonassessable shares of Common Stock, $.01
par value, of the Company at a price of $_.__ per share (such exercise
price per share, as so adjusted, being hereinafter referred to as the
"Exercise Price").
The term "Common Stock" means the shares of Common Stock, $.01 par
value, of the Company as constituted on the Grant Date of this Warrant,
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 shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "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.
The Holder agrees with the Company that this Warrant is issued, and
all the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
1. Exercise of Warrant. This Warrant shall not be exercised within the
United States and shares of Common Stock issuable upon the exercise of this
Warrant shall not be delivered within the United States upon exercise,
other than in offerings deemed to meet the definition of "offshore
transaction" pursuant to paragraph (i)(3) of Rule 902 of Regulation S
promulgated under the Securities Act of 1933, as amended (the "1933 Act"),
unless registered under the 1933 Act or an exemption from such registration
is available.
Subject to the foregoing, this Warrant may be exercised in whole or in
part at any time, or from time to time, during the period commencing at
9:00 a.m., New York City local time, on January 31, 1997, and expiring at
5:00 p.m., New York City local time, on January 31, 1999, 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.
Subject to the restrictions and limitations set forth above, this
Warrant may be exercised by presentation and surrender hereof to the
Company at its principal office with the Warrant Exercise Form attached
hereto duly executed and accompanied by 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 specified in such Form and
instruments of transfer, if appropriate, duly executed by the Holder. If
this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder. Upon receipt by the Company of this
Warrant, together with the Warrant Exercise Form and the Exercise Price, at
its office, in proper form for exercise, 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 on exercise of this Warrant.
2. Reservation of Shares. The Company will 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 and nonassessable and
free of all preemptive rights.
3. Warrant Stock Transfer to Comply with the Securities Act of 1933.
The Warrant Stock may not be sold or otherwise disposed of unless
registered pursuant to the provisions of the 1933 Act or unless 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.
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, Assignment of Loss of Warrant. This Warrant is
not registered under the 1933 Act nor under any applicable state securities
law or regulation. This Warrant cannot be sold, exchanged, transferred,
assigned or otherwise disposed of unless registered pursuant to the
provisions of the 1933 Act or unless 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.
7. Redemption. This Warrant is not redeemable by the Company.
<PAGE>
8. Anti-Dilution Provisions.
8.1 Adjustment for dividends in Other Securities, Property, Etc.:
Reclassification, Etc. 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, and in each such case, the Holder of
this Warrant, upon the exercise thereof as provided in Section 1, shall be
entitled to receive, subject to the limitations and restrictions set froth
above, the amount of securities and property (including cash in the cases
referred to in clauses (b) and (c) above) which 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 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.
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, and in each such case, the Holder of this Warrant upon
the exercise thereof as provided in Section 1 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; 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 on the exercise of the Warrant, the Company at its expense will
promptly compute such adjustment in accordance with the terms of the
Warrant and prepare 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 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. The Company will forthwith mail a copy of each such
certificate to the holder of this Warrant.
8.4 Notices of Record Date, Etc.
In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other securities at the time receivable upon the exercise of the
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; or
(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, and in each such case, the Company shall
mail or cause to be mailed to each holder of the Warrant at the time
outstanding a notice specifying, as the case may be, (i) the date on which
a 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 (ii) 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 to be fixed, as to which the
holders of record of Common Stock (or such other securities at the time
receivable upon the exercise of the 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
therein specified and the Warrant may be exercised prior to said date
during the term of the Warrant no later than five (5) days prior to said
date.
9. Legend. In the event of the exercise of this Warrant and the
issuance of any of the Warrant Stock hereunder not in compliance with the
first paragraph of Section 2 hereof, all certificates representing Warrant
Stock shall bear on the face thereof substantially the following legends,
insofar as is consistent with Delaware law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of, unless registered pursuant to the provisions of that Act
or an opinion of counsel acceptable to the Corporation is obtained
stating that such disposition is in compliance with an available
exemption from such registration."
10. Applicable Law. This Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the
State of Delaware and of the United States of America.
11. Notice. Notices and other communications to be given to the Holder
of the Warrant evidenced by this certificate shall be deemed to have been
sufficiently given, if delivered or mailed, addressed in the name and at
the address of such owner appearing on the records of the Company, and if
mailed, sent registered or certified mail, postage prepaid. Notices or
other communications to the Company shall be deemed to have been
sufficiently given if delivered by hand or mailed, by registered or
certified mail, postage prepaid, to the Company at One Dock Street, Suite
300, Stamford, CT 06902, Attn: General Counsel, or at such other address as
the Company shall have designated by written notice to such registered
owner as herein provided, Notice by mail shall be deemed given when
deposited in the United States mail as herein provided.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its duly authorized officer, all
as of the day and year set forth below.
Dated: January 31, 1997
NOISE CANCELLATION TECHNOLOGIES, INC.
/s/ STEPHEN J. FOGARTY
Stephen J. Fogarty, Chief Financial Officer
<PAGE>
WARRANT EXERCISE FORM
(To be executed by the Holder in order to Exercise the Warrant)
TO: Noise Cancellation Technologies, Inc.
1 Dock Street, Suite 300
Stamford, Connecticut 06902
Attention: John Horton, General Counsel
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _________ shares of Common Stock of
Noise Cancellation Technologies, Inc. and hereby makes payment at the rate
of $__.___ per share, or an aggregate of $________, in payment therefor.
The undersigned represents, warrants and certifies as follows:
(a) The election to exercise the Warrant and purchase the Warrant
Stock was made outside of the United States and the undersigned was,
at the time this Warrant Exercise Form was executed and delivered, and
is now outside the United States;
(b) It is not a U.S. person (as such term is defined in Section 902(a)
of Regulation S ("Regulation S") promulgated under the United States
Securities Act of 1933, as amended (the "1933 Act") and it is
exercising the Warrant for its own account and not for the account or
benefit of any U.S. person;
(c) All offers and sales of the Warrant Stock shall be made pursuant
to an effective registration statement under the 1933 Act or pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the 1933 Act;
<PAGE>
(d) It is familiar with and understands the terms and conditions, and
requirements contained in Regulation S including, but not limited to,
the definitions of "U.S. person" and "offshore transactions" contained
in Regulation S.
Dated: January 31, 1997
--------------------------
Name of Warrant Holder
--------------------------
Signature
INSTRUCTIONS FOR ISSUANCE OF STOCK
(IF OTHER THAN TO THE REGISTERED HOLDER OF THE WITHIN WARRANT)
Name: ________________________________________________________
(Please type or print in block letters)
Address:_______________________________________________________
Social Security or Taxpayer Identification Number:_____________
