1
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): March 11 , 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
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(Former name or former address, if changes since last report)
<PAGE>
Item 7. Exhibits
Sequential
Exhibit No. Description Page
1(a) Agreement dated December 10, 1996, between
Noise Cancellation Technologies, Inc. and
Schwebel Capital Investments, Inc. incorporated
by reference to Exhibit 1(a) of Registrant's
Report on Form 8-K filed on January 27, 1997.
1(b) Agreement dated December 10, 1996, between
Noise Cancellation Technologies, Inc. and
Alexander Wescott and Co., Inc. incorporated
by reference to Exhibit 1(b) of Registrant's
Report on Form 8-K filed on January 27, 1997.
1(c) Agreement dated February 21, 1997, between
Noise Cancellation Technologies, Inc. and
VenGua Capital Markets Ltd.
4(a) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due March 11, 2000.
Issued on March 11, 1997, to UFH Endowment Ltd.
4(b) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due March 11, 2000.
Issued on March 11, 1997, to Austost Anstalt Schaan.
4(c) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due March 12, 2000.
Issued on March 12, 1997, to Optimum Fund.
4(d) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due March 14, 2000.
Issued on March 14, 1997, to Sage Capital
Investments Limited.
4(e) Form of Noise Cancellation Technologies, Inc.
8% Convertible Debenture due March 25, 2000.
Issued on March 25, 1997, to Optimum Fund.
<PAGE>
Item 9. Sales of Equity Securities Pursuant to Regulation S
FIRST SALE
(a) March 11, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due March 11, 2000, each in the principal amount of fifty thousand
dollars ($50,000.00) (the "Debentures"). Aggregate principal amount of two
hundred fifty thousand dollars ($250,000.00).
(b) Name of placement agents - VenGua Capital Markets Ltd. Identity of person to
which the Registrant sold the Debentures -UFH Endowment Ltd., Vadux,
Liechtenstein (the "Purchaser").
(c) Total offering price - two hundred fifty thousand dollars ($250,000.00).
Total commissions - twenty-five thousand dollars ($25,000.00).
(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 and said offer and sale
complied in all other respects with the provisions of Regulation S required to
permit the sale of the Debentures 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-five percent (75%) 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; provided, however,
that in no event shall the Conversion Price ever be less than $0.18 per share.
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 for the Five
(5) Trading Days immediately preceding the record date for the interest payment.
SECOND SALE
(a) March 11, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due March 11, 2000, each in the principal amount of fifty thousand
dollars ($50,000.00) (the "Debentures"). Aggregate principal amount of two
hundred fifty thousand dollars ($250,000.00).
(b) Name of placement agents - VenGua Capital Markets Ltd. Identity of person to
which the Registrant sold the Debentures -Austost Anstalt Schaan, Schaan,
Liechtenstein (the "Purchaser").
(c) Total offering price - two hundred fifty thousand dollars ($250,000.00).
Total commissions - twenty-five thousand dollars ($25,000.00).
(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 and said offer and sale
complied in all other respects with the provisions of Regulation S required to
permit the sale of the Debentures 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-five percent (75%) 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; provided, however,
that in no event shall the Conversion Price ever be less than $0.18 per share.
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 for the Five
(5) Trading Days immediately preceding the record date for the interest payment.
THIRD SALE
(a) March 12, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due March 12, 2000, each in the principal amount of fifty thousand
dollars ($50,000.00) (the "Debentures"). Aggregate principal amount of one
hundred thousand dollars ($100,000.00).
(b) Name of placement agents - Alexander, Wescott & Co., Inc.
and Schwebel Capital Investments, Inc. Identity of person to
which the Registrant sold the Debentures - Optimum Fund,
Georgetown, Grand Cayman, Grand Cayman Island, British Virgin
Islands (the "Purchaser").
(c) Total offering price - one hundred thousand dollars ($100,000.00). Total
commissions - eleven thousand dollars ($11,000.00).
(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 and said offer and sale
complied in all other respects with the provisions of Regulation S required to
permit the sale of the Debentures 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; provided, however,
that in no event shall the Conversion Price ever be less than $0.23 per share.
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 for the Five
(5) Trading Days immediately preceding the record date for the interest payment.
FOURTH SALE
(a) March 14, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due March 14, 2000, each in the principal amount of fifty thousand
dollars ($50,000.00) (the "Debentures"). Aggregate principal amount of one
hundred fifty thousand dollars ($150,000.00).
(b) Name of placement agents - Alexander, Wescott & Co., Inc.
and Schwebel Capital Investments, Inc. Identity of person to
which the Registrant sold the Debentures - Sage Capital
Investments Limited, Nassau, Bahamas (the "Purchaser").
(c) Total offering price - one hundred fifty thousand dollars ($150,000.00).
Total commissions - sixteen thousand five hundred dollars ($16,500.00).
(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 and said offer and sale
complied in all other respects with the provisions of Regulation S required to
permit the sale of the Debentures 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; provided, however,
that in no event shall the Conversion Price ever be less than $0.23 per share.
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 for the Five
(5) Trading Days immediately preceding the record date for the interest payment.
FIFTH SALE
(a) March 25, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due March 25, 2000, each in the principal amount of fifty thousand
dollars ($50,000.00) (the "Debentures"). Aggregate principal amount of five
hundred thousand dollars ($500,000.00).
(b) Name of placement agents - Schwebel Capital Investments, Inc. Identity of
person to which the Registrant sold the Debentures - Optimum Fund, Georgetown,
Grand Cayman, Grand Cayman Island, British Virgin Islands (the "Purchaser").
(c) Total offering price - five hundred thousand dollars ($500,000.00). Total
commissions - fifty-five thousand dollars ($55,000.00).
(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 and said offer and sale
complied in all other respects with the provisions of Regulation S required to
permit the sale of the Debentures 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; provided, however,
that in no event shall the Conversion Price ever be less than $0.23 per share.
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 for the Five
(5) Trading Days immediately preceding the record date for the interest payment.
<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: March 25, 1997
<PAGE>
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21
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EXHIBIT 1(c)
Amended Term Sheet
Between Noise Cancellation Technologies, Inc.
and VenGua Capital Markets Ltd.
21st February 1997
Amount Up to $1,000,000 (one million) USD closing in
increments.
Placement Fee 10% (ten percent).
Coupon 8% per annum (cash or stock) at the company's
discretion.
Type Convertible Debenture, maturing in 2 (two) years and
convertible
any time after 45 (forty-five) days.
Conversion Price At the lower of 15% under the bid on the day of subscription
or, 25%
under the bid on the day of conversion (using the five day
average).
However, in no event shall the conversion price be less than
18 cents per
share, as provided in the subscription agreement.
Condition Mutual agreement on the specific details of the investment.
The investors
receiving Investor Packs with latest 10K and 10Q's.
Closing Will close within seven (7) days.
The parties hereby acknowledge their mutual agreement to the above terms and
their intention to negotiate the contemplated transaction in an expedited manner
and in good faith. This term sheet represents our current agreement with respect
to the subject matter hereof and supersedes any prior agreement or understanding
with the respect of such subject matter. If this term sheet is not executed by
both parties at the close of business on the 28th February 1997 then this term
sheet will be considered void. By executing the term sheet Noise Cancellation
Technologies Inc. represents and warrants that it has obtained or within seven
(7) calendar days will obtain the necessary, Board of directors and/or other
approvals to cause this term sheet to be duly authorised, executed and delivered
by Noise Cancellation Technologies, Inc.
Agreed and Accepted by:
Company: NCT, Inc.
Officer: /s/ STEPHEN J. FOGARTY, CFO (Title)
Date: 2/21/97
VenGua Capital Markets Limited
/s/ KEITH BEASLEY
Date: 21/2/97
<PAGE>
EXHIBIT 4(a)
No. ___
USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE MARCH 11, 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, UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT, OR BY
MEANS OF ANOTHER SALE NOT REQUIRING REGISTRATION OF THE DEBENTURE OR SUCH
SECURITIES 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 MARCH 11, 2000,
in an aggregate principal amount of Two Hundred Fifty Thousand
United States Dollars (USD$250,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
UFH ENDOWMENT LTD.
C/O UNIVERSAL FINANZ HOLDING AG
DRESCHEWEG 2, POSTFACH 828
FL-9490 VADUX / LIECHTENSTEIN
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
March 11, 2000
(the "Maturity Date"),
<PAGE>
and to pay interest 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 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
the 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 shall be based on 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 fraction 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 record 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 March 11, 1997, or such other mutually agreed
to date, 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
thereof) 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 or shares of Common Stock 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 or shares of Common Stock 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 withheld under
the applicable provisions of the United States income tax 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 of
the Common Stock on the Closing Date or seventy-five percent (75%) 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 Conversion Price ever be less than $0.18 per share.
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 Closing Date as
defined in the Subscription Agreement, the Issuer will reserve on its
books one hundred eighty-seven thousand five hundred (187,500) shares of
Common Stock for use in connection with the conversion of this
Debenture. 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 with 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. 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 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. 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, 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 seven (7) 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 off 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 ninety (90) 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 nay 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 thereof 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
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.
12. In the case that there is any outstanding amount of the Debenture
unconverted on March 11, 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. Any
judicial proceedings relating to the interpretation and performance of the
terms and conditions of this Debenture shall be conducted in such state
and Federal courts located in the City, County and State of New York as
may be appropriate in each instance.
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 March 11, 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.
One Dock Street
Stamford, Connecticut 06902
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;
(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: UFH ENDOWMENT LTD.(seal)
By: ____________________________
Official Signatory of Holder
Title: ____________________ Country of Execution: Liechtenstein
<PAGE>
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)
No. ___
USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE MARCH 11, 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, UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT, OR BY
MEANS OF ANOTHER SALE NOT REQUIRING REGISTRATION OF THE DEBENTURE OR SUCH
SECURITIES 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 MARCH 11, 2000,
in an aggregate principal amount of Two Hundred Fifty Thousand
United States Dollars (USD$250,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
AUSTOST ANSTALT SCHAAN
LIECHTENSTEIN SCHAAN
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
March 11, 2000
(the "Maturity Date"),
<PAGE>
and to pay interest 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 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
the 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 shall be based on 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 fraction 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 record 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 March 11, 1997, or such other mutually agreed
to date, 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
thereof) 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 or shares of Common Stock 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 or shares of Common Stock 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 withheld under
the applicable provisions of the United States income tax 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 of the Common
Stock on the Closing Date or seventy-five percent (75%) 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 Conversion Price
ever be less than $0.18 per share. 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 Closing Date as defined in the Subscription
Agreement, the Issuer will reserve on its books one hundred eighty-seven
thousand five hundred (187,500) shares of Common Stock for use in
connection with the conversion of this Debenture. 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 with 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. 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
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. 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, 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 seven (7) 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 off 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 ninety (90) 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 nay 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 thereof 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
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.
12. In the case that there is any outstanding amount of the Debenture
unconverted on March 11, 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. Any
judicial proceedings relating to the interpretation and performance of the
terms and conditions of this Debenture shall be conducted in such state
and Federal courts located in the City, County and State of New York as
may be appropriate in each instance.
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 March 11, 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.
One Dock Street
Stamford, Connecticut 06902
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;
(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: AUSTOST ANSTALT SCHAAN(seal)
By: ____________________________
Official Signatory of Holder
Title: ______________________ Country of Execution: Liechtenstein
<PAGE>
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(c)
No. __ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE March 12, 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 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 MARCH 12, 2000, in an
aggregate principle amount of One Hundred Thousand United States Dollars
(USD$100,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
Optimum Fund
P.O. Box 2003
Georgetown, Grand Cayman
Grand Cayman Islands
British Virgin Islands
the registered holder hereof and its successors and assigns (the "Holder"),
the principle sum of
FIFTY THOUSAND
UNITED STATES DOLLARS (USD$50,000.00)
on
March 12, 2000
(the "Maturity Date"),
<PAGE>
and to pay interest on the principle sum outstanding at the rate of Eight
Percent (8%) per annum due and payable on March 31st, June 30th, September 30th
and December 31st 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
the shares of the Issuer's Common Stock ("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 Issuer's Common Stock as reported on NASDAQ for the
Five (5) Trading Days immediately preceding the record date for the interest
payment. The interest so payable will be paid to the person in whose name this
Debenture is registered on the record 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 March 12, 1997 between the Issuer and the Holder (the "Subscription
Agreement"). The principle 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 thereof) 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 or shares of Common Stock 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 or shares of Common Stock 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 principle
of, and interest on, this Debenture any amounts required to withheld under
the applicable provisions of the United States income tax 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 principle 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 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. Provided, however, that in no event shall
the Conversion Price ever be less than $0.23 per share. 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 Closing Date as defined in the
Subscription Agreement, the Issuer will reserve on its books one hundred
eighty-seven thousand five hundred (187,500) shares of Common Stock for
use in connection with conversion of this Debenture. 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 with 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. 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
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 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 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. 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, 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 seven (7) 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 off 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 ninety (90) 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 nay 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 thereof 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 Monies
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. Upon receipt of the
Repurchase Monies, 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.
12. In the case that there is any outstanding amount of the Debenture
unconverted on March 12, 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.
<PAGE>
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: March 12, 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.
One Dock Street
Stamford, Connecticut 06902
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;
(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: OPTIMUM FUND (seal)
By:__________________________
Official Signatory of Holder
Title:______________________________ Country of Execution:____________
<PAGE>
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(d)
No. __ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE March 14, 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 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 MARCH 14, 2000, in an
aggregate principle amount of One Hundred Fifty Thousand United States Dollars
(USD$150,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
Sage Capital Investments Limited
P.O. Box N-4826
Marron House, Virginia Street
Nassau, Bahamas
the registered holder hereof and its successors and assigns (the "Holder"),
the principle sum of
FIFTY THOUSAND
UNITED STATES DOLLARS (USD$50,000.00)
on
March 14, 2000
(the "Maturity Date"),
<PAGE>
and to pay interest on the principle sum outstanding at the rate of Eight
Percent (8%) per annum due and payable on March 31st, June 30th, September 30th
and December 31st 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
the shares of the Issuer's Common Stock ("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 Issuer's Common Stock as reported on NASDAQ for the
Five (5) Trading Days immediately preceding the record date for the interest
payment. The interest so payable will be paid to the person in whose name this
Debenture is registered on the record 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 March 14, 1997 between the Issuer and the Holder (the "Subscription
Agreement"). The principle 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 thereof) 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 or shares of Common Stock 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 or shares of Common Stock 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 principle
of, and interest on, this Debenture any amounts required to withheld under
the applicable provisions of the United States income tax 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 principle 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 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. Provided, however, that in no event shall the
Conversion Price ever be less than $0.23 per share. 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 Closing Date as defined in the
Subscription Agreement, the Issuer will reserve on its books one hundred
eighty-seven thousand five hundred (187,500) shares of Common Stock for
use in connection with conversion of this Debenture. 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 with 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. 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
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 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 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. 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, 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 seven (7) 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 off 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 ninety (90) 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 nay 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 thereof 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 Monies
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. Upon receipt of the
Repurchase Monies, 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.
12. In the case that there is any outstanding amount of the Debenture
unconverted on March 14, 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.
<PAGE>
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: March 14, 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.
One Dock Street
Stamford, Connecticut 06902
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;
(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: SAGE CAPITAL INVESTMENTS LIMITED (seal)
By:____________________________________
Official Signatory of Holder
Title:______________________________ Country of Execution:____________
<PAGE>
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(e)
No. __ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE March 25, 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 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 MARCH 25, 2000, in an
aggregate principle amount of Five Hundred Thousand United States Dollars
(USD$500,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to
Optimum Fund
P.O. Box 2003
Georgetown, Grand Cayman
Grand Cayman Islands
British Virgin Islands
the registered holder hereof and its successors and assigns (the "Holder"),
the principle sum of
FIFTY THOUSAND
UNITED STATES DOLLARS (USD$50,000.00)
on
March 25, 2000
(the "Maturity Date"),
<PAGE>
and to pay interest on the principle sum outstanding at the rate of Eight
Percent (8%) per annum due and payable on March 31st, June 30th, September 30th
and December 31st 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
the shares of the Issuer's Common Stock ("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 Issuer's Common Stock as reported on NASDAQ for the
Five (5) Trading Days immediately preceding the record date for the interest
payment. The interest so payable will be paid to the person in whose name this
Debenture is registered on the record 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 March 25, 1997 between the Issuer and the Holder (the "Subscription
Agreement"). The principle 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 thereof) 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 or shares of Common Stock 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 or shares of Common Stock 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 principle of,
and interest on, this Debenture any amounts required to withheld under the
applicable provisions of the United States income tax 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 principle 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 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. Provided,
however, that in no event shall the Conversion Price ever be less than $0.23
per share. 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 Closing
Date as defined in the Subscription Agreement, the Issuer will reserve on its
books one hundred thousand (100,000) shares of Common Stock for use in
connection with conversion of this Debenture. 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 with 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. 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 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 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 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. 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, which may be incurred by the Holder in collecting any amount
due or exercising the conversion rights under this Debenture.
<PAGE>
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 seven (7) 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 off 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 ninety (90) 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 nay 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 thereof
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 Monies 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. Upon receipt of the
Repurchase Monies, 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.
12.In the case that there is any outstanding amount of the Debenture
unconverted on March 25, 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.
<PAGE>
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: March 25, 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.
One Dock Street
Stamford, Connecticut 06902
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;
(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: OPTIMUM FUND (seal)
By:__________________________
Official Signatory of Holder
Title:______________________________ Country of Execution:____________
<PAGE>
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 __________________
