<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10 , 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.
4(a) Form of Noise Cancellation Technologies, Inc. 8
8% Convertible Debenture due February 7, 2000.
Issued on February 10, 1997, to Sage Capital
Investments Limited.
4(b) Form of Noise Cancellation Technologies, Inc. 17
8% Convertible Debenture due February 21, 2000.
Issued on February 21, 1997, to Sage Capital
Investments Limited.
4(c) Form of Noise Cancellation Technologies, Inc. 26
8% Convertible Debenture due February 21, 2000.
Issued on February 21, 1997, to Optimum Fund.
<PAGE>
Item 9. Sales of Equity Securities Pursuant to Regulation S
FIRST SALE
(a) February 10, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due February 7, 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 - Sage Capital Investments Limited, Nassau, Bahamas (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 $0.14 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) February 21, 1997. Eight Percent (8%) Non-Voting Subordinated Convertible
Debentures Due February 21, 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 - Sage Capital Investments Limited, Nassau, Bahamas (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 $0.14 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) February 21, 1997. Eight Percent (8%) Non-Voting Subordinated
Convertible Debentures Due February 21, 2000, four (4) in the principal
amount of fifty thousand dollars ($50,000.00) and one (1) in the principal
amount of twenty-five thousand dollars ($25,000.00) (the "Debentures").
Aggregate principal amount of two hundred twenty-five thousand dollars
($225,000.00).
(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 - two hundred twenty-five thousand dollars
($225,000.00). Total commissions - twenty-four thousand seven hundred fifty
dollars ($24,750.00).
(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 $0.14 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: February 25, 1997
<PAGE>
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EXHIBIT 4(a)
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No. ___ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE February 7, 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 FEBRUARY 7, 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
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
February 7, 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 December 13, 1996 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 $0.14 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 three hundred seventy-five thousand (375,000)
shares of Common Stock for use in connection with conversion of the
Debentures. 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 February 7, 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: February 7, 1997
<PAGE>
EXHIBIT 1
Notice of Conversion
(To be executed by the Registered Holder in order to Convert the Debenture)
TO: Noise Cancellation Technologies, Inc.
1 Dock Street
Stamford, Connecticut 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:_____________________(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(b)
No. ___ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE February 21, 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 FEBRUARY 21, 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
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
February 21, 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 December 13, 1996 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 $0.14 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 three hundred seventy-five thousand (375,000)
shares of Common Stock for use in connection with conversion of the
Debentures. 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 February 21, 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
States 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: February 21, 1997
<PAGE>
EXHIBIT 1
Notice of Conversion
o be executed by the Registered Holder in order to Convert the Debenture)
TO: Noise Cancellation Technologies, Inc.
1 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:_____________________(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(c)
No. ___ USD$50,000.00
NOISE CANCELLATION TECHNOLOGIES, INC.
8% CONVERTIBLE DEBENTURE DUE February 21, 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 FEBRUARY 21, 2000, in an
aggregate principle amount of Two Hundred Twenty-five Thousand United States
Dollars (USD$225,000.00).
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
February 21, 2000
(the "Maturity Date"),
<PAGE>
30
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 December 13, 1996 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 $0.14 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 eight hundred forty-three thousand seven hundred fifty
(843,750) shares of Common Stock for use in connection with conversion
of the Debentures. 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 February 21, 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 States 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: February 21, 1997
<PAGE>
EXHIBIT 1
Notice of Conversion
(To be executed by the Registered Holder in order to Convert the Debenture)
TO: Noise Cancellation Technologies, Inc.
1 Dock Street
Stamford, Connecticut 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:__________________________(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 ____________________
