Exhibit 10(am)
SECURITIES PURCHASE AND SUPPLEMENTAL
EXCHANGE RIGHTS AGREEMENT
SECURITIES PURCHASE AND SUPPLEMENTAL EXCHANGE RIGHTS AGREEMENT (the
"Agreement"), dated as of September 29, 2000 by and among Pro Tech
Communications, Inc., a Florida Corporation, with headquarters located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Pro Tech"), NCT Group,
Inc., a Delaware corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("NCT"), Balmore Funds, S.A.
("Balmore"), Austost Anstalt ▇▇▇▇▇▇ ("Austost") and Zakeni Limited ("Zakeni",
"Balmore" and "Austost" are referred to herein collectively as the "Buyers" and
individually as the "Buyer").
WHEREAS, Pro Tech, NCT and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Section 4(2) and/or Regulation D ("Regulation D") as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
WHEREAS, Pro Tech has authorized a new series of Preferred Stock, par value
$0.01 per share (the "Preferred Stock"), designated the Series A Convertible
Preferred Stock (the "Series A Preferred Shares") with a stated value of $1,000
per share ("Stated Value") and an accretion rate of 4% per annum on the Stated
Value ("4% Accretion"), which shall be convertible into shares of Pro Tech's
common stock, $0.001 par value per share (the "Common Stock") (as converted, the
"Conversion Shares"), in accordance with the terms of Pro Tech's Articles of
Amendment to Articles of Incorporation dated as of September 29, 2000 (the
"Articles of Amendment"), to be filed by Pro Tech with the Secretary of State of
the State of Florida on or prior to the Closing (as defined herein)
substantially in the form attached hereto as Exhibit "A";
WHEREAS, Pro Tech shall issue Warrants (as defined below) to Buyers on the
Closing Date to purchase shares of Common Stock ("Warrant Shares") as additional
consideration to induce Buyers to enter into this Agreement;
WHEREAS, the Buyers desire to purchase from Pro Tech, and Pro Tech desires
to issue and sell to the Buyers, upon the terms and conditions stated in this
Agreement, an aggregate amount of 1,500 shares of Series A Preferred Stock in
the respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers attached hereto;
WHEREAS, NCT is granting the Buyers supplemental exchange rights whereby
the Buyers may, in accordance with and subject to the terms of this Securities
Purchase Agreement, exchange Series A Preferred Shares for shares of NCT's
common stock, $0.01 par value per share (the "NCT Common Stock") (as exchanged,
the "Exchange Shares"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, (1) Pro Tech and the Buyers are executing and delivering a
Registration Rights Agreement substantially in the form attached hereto as
Exhibit "B" (the "Pro Tech Registration Rights Agreement") pursuant to which Pro
Tech has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated thereunder, and applicable state
securities laws, and (2) NCT and the Buyers are executing and delivering a
Registrations Rights Agreement substantially in the form hereto as Exhibit "C"
(the "NCT Registration Rights Agreement") pursuant to which NCT has agreed, as
the case may arise, to provide certain registration rights under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, in consideration of the premises hereof and the mutual
covenants, representations and warranties contained herein, Pro Tech, NCT and
the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.
a. Purchase of Series A Preferred Shares. Subject to the satisfaction (or
waiver) of the conditions precedent to Closing (as defined below) as
set forth in Sections 9, 10 and 11 below, on the Closing Date (as
defined below), Pro Tech shall issue and sell to the Buyers, and the
Buyers shall purchase from Pro Tech, an aggregate amount of 1,500
shares of Series A Preferred Shares, in consideration for an aggregate
of $1,500,000 cash (the "Purchase Price") in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers.
b. Closing Date. The date and time of the closing (the "Closing Date")
shall be 10:00 a.m. Eastern Daylight Savings Time, within five (5)
business days following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions precedent to Closing set
forth herein (or such later date as is mutually agreed to in writing
by Pro Tech, NCT and the Buyers). The closing (the "Closing") shall
occur on the Closing Date at the offices of Steel ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP,
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
c. Form of Payment. On the Closing Date, (i) each Buyer shall pay the
Purchase Price for the Series A Preferred Shares to be issued and sold
to such Buyer at the Closing, in United States dollars by wire
transfer of immediately available funds to an account designated in
writing by Pro Tech for such purpose. Pro Tech shall deliver share
certificates representing such Series A Preferred Shares, which such
Buyer is then purchasing (as indicated opposite such Buyer's name on
the Schedule of Buyers), duly executed on behalf of Pro Tech and
registered in the name of such Buyer or its designee (the "Series A
Certificates").
2. WARRANTS.
a. Pro Tech will issue to Balmore Funds, S.A. a warrant ("Balmore
Warrant") to purchase 1,500,000 shares of Common Stock at an exercise
price of $0.50 per share, substantially in the form attached hereto as
Exhibit "D" ("Balmore Warrant Agreement").
b. Pro Tech will issue to Austost Anstalt ▇▇▇▇▇▇ a warrant ("Austost
Warrant" ) to purchase 1,500,000 shares of Common Stock at an exercise
price of $0.50 per share, substantially in the form attached hereto as
Exhibit "E" ("Austost Warrant Agreement").
c. Pro Tech will issue to Zakeni Limited a warrant ("Zakeni Warrant" and
together with the Balmore Warrant and the Austost Warrant, the
"Warrants") to purchase 1,500,00 shares of Common Stock at an exercise
price of $0.50 per share, substantially in the form attached hereto as
Exhibit "F" ("Zakeni Warrant Agreement" and together with the Balmore
Warrant Agreement and the Austost Warrant Agreement, the "Warrant
Agreements").
3. BUYER'S SUPPLEMENTAL RIGHTS TO EXCHANGE SERIES A PREFERRED SHARES FOR
NCT COMMON STOCK
Any Buyer of Series A Preferred Shares shall be entitled, at its sole
election and in lieu of a Buyer's conversion rights provided for in the Articles
of Amendment, to exchange shares of Series A Preferred Stock for shares of NCT
Common Stock on the following terms and conditions:
a. Exchange Rights. At any time on or after six (6) months after the
Issuance Date (as defined below), a Buyer of Series A Preferred Shares
shall have the right, at such Buyer's option, to exchange up to and
including fifty percent (50%) of such Series A Preferred Shares for
fully paid and nonassessable shares of NCT Common Stock at the
Exchange Rate (as defined below). Furthermore, at any time on or after
twelve (12) months after the Issuance Date (as defined below), a Buyer
of Series A Preferred Shares shall also have the right, at such
Buyer's option, to exchange up to and including one hundred percent
(100%) of such Series A Preferred Shares for fully paid and
nonassessable shares of NCT Common Stock at the Exchange Rate (as
defined below).
b. Exchange Rate. The number of shares of NCT Common Stock issuable upon
exchange of each of the Series A Preferred Shares pursuant to this
Section 3 shall be determined according to the following formula (the
"Exchange Rate"):
Face Value = Number of Shares of
Exchange Price NCT Common Stock
provided that NCT shall have the option to pay the 4% Accretion
accrued on each Series A Preferred Share in either cash or cash
equivalents. If NCT elects to pay the 4% Accretion accrued in cash or
cash equivalents, the Exchange Rate shall be:
Stated Value = Number of Shares of
Exchange Price NCT Common Stock
For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Face Value" equals the Stated Value plus the 4% Accretion
accrued on each share of Series A Preferred Stock;
(ii) "Exchange Price" means the amount obtained by multiplying
0.8 by the lowest average of the average Closing Bid Price (as
defined below) for the NCT Common Stock for any consecutive five
(5) day trading period out of the fifteen (15) trading days
preceding such relevant date;
(iii) "Closing Bid Price" means, for any security as of any date,
the last closing bid price on the Nasdaq National Market System
(the "Nasdaq-NM") as reported by Bloomberg Financial Markets
("Bloomberg"), or, if the Nasdaq-NM is not the principal trading
market for such security, the last closing bid price of such
security on the principal securities exchange or trading market
where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of
such security in the over-the-counter market on the pink sheets
or bulletin board for such security as reported by Bloomberg, or,
if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as
reported by Bloomberg. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing
bases, the Closing Bid Price of such security on such date shall
be the fair market value as reasonably determined in good faith
by the Board of Directors of the issuer of the security (all as
appropriately adjusted for any stock dividend, stock split or
other similar transaction during such period); and
(iv) "Issuance Date" means the Closing Date.
c. Buyer's Delivery Requirements. To exchange Series A Preferred Shares
into full shares of NCT Common Stock on any date (such date, an
"Exchange Date") in accordance with and subject to the terms and
conditions set forth in Section 3(a) hereof, the Buyer thereof shall
(A) deliver or transmit by facsimile, for receipt on or prior to 11:59
p.m., Eastern Time, on such date, a copy of a fully executed notice of
exchange in the form attached hereto as Exhibit "G" (the "Notice of
Exchange") to NCT (c/o ▇▇ ▇▇▇▇▇▇▇, NCT Group, Inc., ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, with a
copy to Pro Tech at the address given in Section 14(g) herein, and (B)
surrender to a common carrier for delivery to NCT as soon as
practicable following such notice, the original certificates
representing the Series A Preferred Shares, duly endorsed for transfer
or accompanied by a duly executed assignment, being exchanged (or an
indemnification undertaking with respect to such certificates in the
case of their loss, theft or destruction) (the "Preferred Stock
Certificates") and the originally executed Notice of Exchange.
d. NCT Response. Upon receipt by NCT of a facsimile copy of a Notice of
Exchange, NCT shall immediately send, via facsimile, a confirmation of
receipt of such Notice of Exchange to such Buyer ("Confirmation of
Receipt"). Upon receipt by NCT of the Preferred Stock Certificates to
be exchanged pursuant to a Notice of Exchange, together with the
originally executed Notice of Exchange (such date, "NCT's Receipt"),
NCT or NCT's Transfer Agent (as applicable) shall, within five (5)
business days following NCT's Receipt, issue and surrender to a common
carrier for overnight delivery to the address as specified in the
Notice of Exchange, a certificate, duly executed on behalf of NCT and
registered in the name of the Buyer or its designee, for the number of
shares of NCT Common Stock (the "Exchange Shares") to which the Buyer
shall be entitled.
e. Record Holder. The person or persons entitled to receive the Exchange
Shares shall be treated for all purposes as the record holder or
holders of such shares of NCT Common Stock on the Exchange Date. NCT
shall be treated by Pro Tech for all purposes as the record holder of
such shares of Series A Preferred Shares on the Exchange Date, and Pro
Tech shall amend its records to so reflect.
f. NCT's Failure to Timely Exchange. If NCT shall fail to issue to a
Buyer within seven (7) business days following NCT's Receipt, a
certificate for the Exchange Shares, in addition to all other
available remedies which such Buyer may pursue hereunder, (i) NCT
shall pay additional damages to such Buyer on each day after the
seventh (7th) business day following NCT's Receipt until the day
delivery is effected or a Redemption (as defined below) has occurred,
an amount equal to 1.0% of the product of (A) the number of shares of
NCT Common Stock not issued to the Buyer and to which such Buyer is
entitled and (B) the Closing Bid Price (the "Redemption Price") of the
NCT Common Stock on the business day following NCT's Receipt, and (ii)
with respect to the unexchanged shares of Series A Preferred Stock, a
Buyer shall have the right, in its sole discretion, to require NCT to
redeem for cash from such Buyer those Series A Preferred Shares for
which NCT has failed to issue Exchange Shares in accordance with such
Buyer's Notice of Exchange (a "Redemption"), at the Redemption Price.
The parties agree (i) that the timely exchange of Series A Preferred
Shares for Exchange Shares is a material element of this Agreement,
(ii) that the Buyers will suffer damages which may be difficult to
quantify if NCT fails, for any reason, to timely deliver the Exchange
Shares, and (iii) that any amount paid under this subsection shall be
paid as liquidated damages and not as a penalty.
4. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer, with respect to only itself, represents and warrants to Pro
Tech and NCT that:
a. Investment Purpose. Such Buyer is acquiring (A) the Series A Preferred
Shares, and (i) upon conversion of the Series A Preferred Shares, will
acquire the Conversion Shares then issuable or (ii) upon any exchange
of the Series A Preferred Shares, will acquire the Exchange Shares
then issuable and (B) the Warrants, pursuant to the terms and
conditions of the Warrant Agreements, and upon exercise of the
Warrants, will acquire Warrant Shares, for its own account for
investment purposes only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does
not agree to hold any Series A Preferred Shares, Conversion Shares,
Exchange Shares, Warrants or Warrant Shares for any minimum or other
specific term and reserves the right to dispose of Series A Preferred
Shares, Conversion Shares, Exchange Shares, Warrants or Warrant Shares
at any time in accordance with or pursuant to an effective
registration statement under the 1933 Act and in compliance with
applicable state securities laws or an exemption from such
registration.
b. Accredited Investor Status. Such Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D. As such, the
Buyer is able to bear the economic risk of an investment in the Series
A Preferred Shares and, as of the date hereof, is able to afford a
total and complete loss of its investment.
c. Sophisticated Investors. Such Buyer has such knowledge, skill and
experience in business, financial and investment matters so that it is
capable of evaluating the merits and risk of an investment in the
Series A Preferred Shares, the Conversion Shares, the Exchange Shares
and the Warrant Shares and, to the extent necessary, has retained, at
its own expense, and relied upon appropriate professional advice
regarding the investment, tax and legal merits and consequences of
such Buyer's investments in the Series A Preferred Shares, the
Conversion Shares, the Exchange Shares and the Warrant Shares.
d. Reliance on Exemptions. Such Buyer understands and acknowledges that
the Series A Preferred Shares, the Conversion Shares, the Exchange
Shares, the Warrants and the Warrant Shares are being offered and sold
to it in a private placement in reliance on specific exemptions from
the registration requirements of United States federal and state
securities laws and that Pro Tech and NCT are relying in part upon the
truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
e. Information. Such Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations
of Pro Tech and NCT and materials relating to the offer and sale of
the Series A Preferred Shares, the Conversion Shares, the Exchange
Shares, the Warrants and the Warrant Shares which have been requested
by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of Pro Tech and NCT. Neither such
inquiries nor any other due diligence investigations conducted by the
Buyer or its advisors, if any, or their representatives shall modify,
amend or affect the Buyer's right to rely on Pro Tech's
representations and warranties contained in Section 5 below or NCT's
representations and warranties contained in Section 6 below. Such
Buyer understands that its investment in the Series A Preferred
Shares, the Conversion Shares, the Exchange Shares, the Warrants and
the Warrant Shares involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Series A Preferred Shares, the Conversion Shares,
the Exchange Shares, the Warrants and the Warrant Shares.
f. No Governmental Review. Such Buyer understands that no United States
federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Series
A Preferred Shares, the Conversion Shares, the Exchange Shares, the
Warrants or the Warrant Shares, or the fairness or suitability of the
investment in the Series A Preferred Shares, the Conversion Shares,
the Exchange Shares, the Warrants or the Warrant Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the
Series A Preferred Shares, the Conversion Shares, the Exchange Shares,
the Warrants or the Warrant Shares.
g. No Broker Commissions or Finder Fees. To the best of its knowledge,
such Buyer has taken no action which would give rise to any claim by
any person for brokerage commissions, finders' fees or the like
relating to this Agreement or the transactions contemplated hereby.
h. Buyer Liquidity. Such Buyer has adequate means of providing for its
current needs and foreseeable financial contingencies.
i. Transfer or Resale of Series A Preferred Shares, Conversion Shares,
Warrants and Warrant Shares. Such Buyer understands that except as
provided in the Pro Tech Registration Rights Agreement: (i) the Series
A Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned, transferred or otherwise disposed of by such
Buyer unless (a) subsequently registered under the 1933 Act and state
securities laws, if applicable, (b) such Buyer shall have delivered to
Pro Tech an opinion of counsel, in form and substance reasonably
satisfactory to Pro Tech, to the effect that such securities to be
sold, assigned, transferred or otherwise disposed of may be sold,
assigned, transferred or otherwise disposed of pursuant to an
exemption from such registration, (c) such Buyer provides Pro Tech
with written customary assurance that such securities can be sold,
assigned, transferred or otherwise disposed of pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule
144"), or (d) such Buyer exchanges the Series A Preferred Shares for
Exchange Shares pursuant to Section 3 above; (ii) any sale of such
securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable,
any resale of such securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) neither Pro Tech nor
any other person is under any obligation to register such securities
under the 1933 Act or any state securities laws, if applicable, or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the registration or qualification of the Series A
Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares of such Buyer in accordance with Section 4(i)(i)(a) through
Section 4(i)(i)(d), such Buyer agrees not to knowingly sell, transfer,
assign, pledge, exchange, hypothecate or otherwise dispose of such
Series A Preferred Stock, the Conversion Shares, the Warrants and the
Warrant Shares and any registration rights thereto to a Competitor (as
defined in Section 12(b) hereof ) of Pro Tech or its affiliates (as
defined in Rule 501 of Regulation D of the ▇▇▇▇ ▇▇▇) ("Affiliates").
j. Transfer or Resale of Exchange Shares. Such Buyer understands that
except as provided in the NCT Registration Rights Agreement: (i) the
Exchange Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned, transferred or otherwise disposed of by such
Buyer unless (a) subsequently registered under the 1933 Act and state
securities laws, if applicable, (b) such Buyer shall have delivered to
NCT an opinion of counsel, in form and substance reasonably
satisfactory to NCT, to the effect that such securities to be sold,
assigned, transferred or otherwise disposed of may be sold, assigned,
transferred or otherwise disposed of pursuant to an exemption from
such registration, or (c) such Buyer provides NCT written customary
assurance that such securities can be sold, assigned, transferred or
otherwise disposed of pursuant to Rule 144; (ii) any sale of such
securities made in reliance on Rule 144 may be made only in accordance
with the terms of Rule 144 and further, if Rule 144 is not applicable,
any resale of such securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) neither NCT nor any
other person is under any obligation to register such securities under
the 1933 Act or any state securities laws, if applicable, or to comply
with the terms and conditions of any exemption thereunder.
k. Legends on Series A Preferred Shares, Conversion Shares, Warrants and
Warrant Shares. Such Buyer understands that the certificates or other
instruments representing (A) the Series A Preferred Shares and, until
such time as the sale of the Conversion Shares have been registered
under the 1933 Act as contemplated by the Pro Tech Registration Rights
Agreement, the stock certificates representing the Conversion Shares
and (B) the Warrants and, until such time as the sale of the Warrant
Shares have been registered under the 1933 Act as contemplated by the
ProTech Registration Rights Agreement, the stock certificates
representing the Warrant Shares, shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN CUSTOMARY
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
The legend set forth above shall be removed and Pro Tech shall issue a
certificate or other instrument without such legend to the holder of
the Series A Preferred Shares, the Conversion Shares, and the Warrant
Shares, upon which it is stamped, if, unless otherwise required by
state securities laws, (i) with respect to the Conversion Shares and
the Warrant Shares only, the sale of the Conversion Shares or the
Warrant Shares is registered under the 1933 Act, respectively, (ii) in
connection with a sale transaction, such holder provides Pro Tech with
an opinion of counsel, in form and substance reasonably acceptable to
Pro Tech, to the effect that a public sale, assignment, transfer or
other disposition of the Series A Preferred Shares, the Conversion
Shares, the Warrants and the Warrant Shares may be made without
registration under the 1933 Act, or (iii) such holder provides Pro
Tech with written customary assurance that the Series A Preferred
Shares, the Conversion Shares, the Warrants and the Warrant Shares can
be sold pursuant to Rule 144.
l. Legends on Exchange Shares. Such Buyer understands that the
certificates or other instruments representing the Exchange Shares
and, until such time as the sale of the Exchange Shares have been
registered under the 1933 Act as contemplated by the NCT Registration
Rights Agreement, the stock certificates representing the Exchange
Shares shall bear a restrictive legend in substantially the following
form (and a stop transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN CUSTOMARY
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SAID ACT.
The legend set forth above shall be removed and NCT shall issue a
certificate without such legend to the holder of the Exchange Shares,
upon which it is stamped, if, unless otherwise required by state
securities laws, (i) with respect to the Exchange Shares, the sale of
the Exchange Shares is registered under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides NCT with an
opinion of counsel, in form and substance reasonably acceptable to
NCT, to the effect that a public sale, assignment, transfer or other
disposition of the Exchange Shares may be made without registration
under the 1933 Act, or (iii) such holder provides NCT with written
customary assurance that the Exchange Shares can be sold pursuant to
Rule 144.
▇. ▇▇▇▇▇▇; Authorization; Enforceability. Such Buyer has all corporate or
company power and authority to enter into and perform this Agreement.
This Agreement has been duly and validly authorized, executed and
delivered on behalf of such Buyer and is a valid and binding agreement
of such Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity and
bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally the enforcement
of, applicable creditors' rights and remedies.
n. Conflicts. Except as disclosed in Schedule 4(n), the execution,
delivery and performance of this Agreement by such Buyer and the
consummation by such Buyer of the transactions contemplated hereby
will not (i) conflict with or violate its organizational charters or
by-laws, (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such
Buyer is a party, or (iii) to such Buyer's knowledge, result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer
or any of its subsidiaries, or by which any property or asset of such
Buyer or any of its subsidiaries is bound or affected.
5. REPRESENTATIONS AND WARRANTIES OF PRO TECH.
Pro Tech represents and warrants to each of the Buyers and NCT that:
a. Organization and Qualification. Pro Tech is a corporation duly
organized and validly existing in good standing under the laws of the
state of Florida, and has the requisite corporate power and authority
to own and lease its properties (if any) and assets and to carry on
its business as now being conducted. Pro Tech is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the business, operations,
properties, financial condition or results of operations of Pro Tech.
As of the date hereof, Pro Tech has no Subsidiaries. For purposes of
this Agreement, "Subsidiaries" or "Subsidiary" of a person or entity
shall mean any corporation, partnership, limited liability company,
association or other business entity at least fifty percent (50%) of
the outstanding voting power of which is at the time owned or
controlled directly or indirectly by such person or entity or by one
or more of such subsidiary entities, or both.
b. Authorization, Enforcement, Compliance with Other Instruments. Pro
Tech has the requisite corporate power and authority to enter into and
perform this Agreement, the Pro Tech Registration Rights Agreement and
any related agreements (collectively, the "Transaction Documents"),
and to issue the Series A Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares in accordance with and subject to the
terms and conditions hereof and thereof. The Articles of Amendment
have been duly authorized by the Board of Directors of Pro Tech and
shall be filed with the Secretary of State of the State of Florida on
or prior to the Closing. The execution and delivery of the Transaction
Documents by Pro Tech and the consummation by it of the transactions
contemplated thereby, including, without limitation, the issuance of
the Series A Preferred Shares and the Warrants and the reservation for
issuance and subsequent issuance of the Conversion Shares and the
Warrant Shares issuable upon conversion or exercise thereof, have been
duly authorized by Pro Tech's Board of Directors and no further
consent or authorization is required by Pro Tech, its Board of
Directors or its shareholders. The Transaction Documents have been
duly executed and delivered by Pro Tech and, when delivered,
constitute the valid and binding obligations of Pro Tech enforceable
against Pro Tech in accordance with their terms, except as such
enforceability may be limited by general principles of equity and
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies, and subject to the
limitation that the indemnification and contribution provisions of the
Pro Tech Registration Rights Agreement may be unenforceable as a
matter of public policy. On or prior to the Closing Date, the Articles
of Amendment will be filed with the Secretary of State of the State of
Florida and will be in full force and effect, enforceable against Pro
Tech in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized capital stock of
Pro Tech consists of 40,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock, of which as of September 14, 2000,
4,266,000 shares of Common Stock were issued and outstanding (as
reflected in the Pro Tech's Quarterly Report on Form 10-QSB filed on
September 14, 2000, as amended) and, except for (i) that certain
Promissory Note dated March 27, 2000, in the amount of One Hundred
Fifty Thousand Dollars ($150,000), executed by Pro Tech payable to
Westek Communications ("Westek Note"), (ii) that certain Promissory
Note dated June 6, 2000, in the amount of One Hundred Thousand Dollars
($100,000), executed by Pro Tech payable to Balmore, S.A. ("Balmore
Note"), (iii) that certain Promissory Note dated June 7, 2000, in the
amount of One Hundred Thousand Dollars ($100,000), executed by Pro
Tech payable to Austost Anstalt ▇▇▇▇▇▇ ("Austost Note"), and (iv) that
certain Promissory Note dated July 6, 2000, in the amount of
Ninety-Nine Thousand Nine Hundred Seventy-Five Dollars ($99,975),
executed by Pro Tech payable to Zakeni Limited ("Zakeni Note"), no
shares of preferred stock, debentures or notes were issued and
outstanding. All of such outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 5(c), no shares of Common Stock or Preferred
Stock are subject to preemptive or similar rights or any liens or
encumbrances suffered or permitted by Pro Tech. Except as disclosed in
Schedule 5(c), as of the effective date of this Agreement:
(i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of Pro Tech, or contracts, commitments,
understandings or arrangements by which Pro Tech is or may become
bound to issue additional shares of capital stock of Pro Tech;
(ii) there are no outstanding debt securities; and
(iii) there are no unperformed agreements or arrangements under
which Pro Tech is obligated to register the sale of any of their
securities under the 1933 Act (except the Pro Tech Registration
Rights Agreement).
Pro Tech has furnished to each Buyer true and correct copies of Pro
Tech's Amended and Restated Articles of Incorporation, as amended and
as in effect on the date hereof (the "Articles of Incorporation"), and
Pro Tech's Bylaws, as in effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Series A Preferred Shares are duly
authorized and, when issued and paid for in accordance with the terms
hereof, shall be (i) validly issued, fully paid and nonassessable,
(ii) free from all taxes, liens, encumbrances, security interests and
charges with respect to the issue thereof, and (iii) entitled to the
rights and preferences set forth in the Articles of Amendment. The
Conversion Shares issuable upon conversion of the Series A Preferred
Shares have been duly authorized. Upon conversion or exercise in
accordance with the Articles of Amendment, the Conversion Shares will
be validly issued, fully paid and nonassessable, free from all taxes,
liens, encumbrances, security interests and charges with respect to
the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The Warrants and the Warrant
Shares issuable upon exercise of the Warrants have been duly
authorized. Upon exercise of the Warrants in accordance with the
Warrant Agreements, the Warrant Shares will be validly issued, fully
paid and nonassessable, free from all taxes, liens, encumbrances,
security interests and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of
Common Stock.
e. No Conflicts. Except as disclosed in Schedule 5(e), the execution,
delivery and performance of this Agreement by Pro Tech and the
consummation by Pro Tech of the transactions contemplated hereby will
not (i) conflict with or violate the Articles of Incorporation or
By-laws, or (ii) conflict with or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which Pro Tech is a party, which conflict or default
would have a material adverse effect on the business, operations,
properties, financial condition or results of operations of Pro Tech,
or (iii) to Pro Tech's knowledge, result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of
the principal market or exchange on which the Common Stock is traded
or listed) applicable to Pro Tech, or by which any property or asset
of Pro Tech is bound or affected.
f. No Default or Violation. Except as disclosed in Schedule 5(f), Pro
Tech is not in violation of any term of or in default under its
Articles of Incorporation or By-laws, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to Pro
Tech. To Pro Tech's knowledge, the business of Pro Tech is not being
conducted, and shall not be conducted in violation of any law,
ordinance or regulation of any governmental entity.
g. Consents. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and applicable state securities laws, Pro
Tech is not required to obtain any consent, waiver, authorization or
order of, or make any filing or registration with, any court or
governmental agency in connection with the execution, delivery or
performance of any of its obligations under or contemplated by this
Agreement or the Pro Tech Registration Rights Agreement in accordance
with the terms hereof or thereof. Except as disclosed in Section 7(f)
and Schedule 5(g), all consents, authorizations, orders, filings and
registrations which Pro Tech is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof.
h. SEC Documents: Financial Statements. Since January 1, 1998, Pro Tech
has timely filed all reports, schedules, forms, statements and other
documents, except for Pro Tech's last filed Quarterly Report on Form
10-QSB for the period ended July 31, 2000, required to be filed by it
with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing materials filed prior to the date hereof and all exhibits
included therein and financial statements, schedules and documents
incorporated by reference therein, being hereinafter collectively
referred to as the "SEC Documents"). Pro Tech has delivered to each
Buyer or its representative true and complete copies of the SEC
Documents. As of their respective dates, the financial statements of
Pro Tech contained in the SEC Documents (the "Financial Statements")
complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto as in effect at the time of filing. Such
Financial Statements have been prepared in accordance with United
States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated
in such Financial Statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of Pro Tech as
of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other
information provided by or on behalf of Pro Tech to each Buyer which
is not included in the SEC Documents, including, without limitation,
information referred to in Section 4(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light
of the circumstance under which they are or were made, not misleading.
i. Absence of Certain Changes. Except as disclosed in Schedule 5(i),
since the date of the financial statements included in Pro Tech's last
filed Quarterly Report on Form 10-QSB for the period ended July 31,
2000, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, results of operations or prospects of Pro Tech. Pro Tech
has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law, nor does Pro
Tech have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
j. Absence of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to Pro Tech's
knowledge, threatened against or affecting Pro Tech or the Common
Stock wherein an unfavorable decision, ruling or finding would (i)
have a material adverse effect on the transactions contemplated
hereby; (ii) adversely affect the validity or enforceability of, or
the authority or ability of Pro Tech to perform its obligations under,
the Transaction Documents; or (iii) except as expressly set forth in
Schedule 5(j), reasonably be expected to have a material adverse
effect on the business, operations, properties, financial condition or
results of operation of Pro Tech.
k. Acknowledgment Regarding Buyer's Purchase of Series A Preferred
Shares. Pro Tech acknowledges and agrees, based upon each Buyer's
representations, that each Buyer is acting solely in the capacity of
an arms-length purchaser with respect to this Agreement and the
transactions contemplated hereby. Pro Tech further acknowledges that
each Buyer is not acting as a financial advisor or fiduciary of Pro
Tech (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by each
Buyer or any of its respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to such Buyer's purchase of the Series A Preferred Shares,
the Conversion Shares or the Warrant Shares. Pro Tech further
represents to each Buyer that Pro Tech's decision to enter into this
Agreement has been based solely on the independent evaluation by Pro
Tech and its representatives.
l. No Undisclosed Events, Liabilities, Developments or Circumstances. To
Pro Tech's knowledge, no event, liability, development or circumstance
has occurred or exists, or is contemplated to occur, with respect to
Pro Tech or its business, properties, prospects, operations or
financial condition, which could be material but which has not been
publicly announced or disclosed in writing to the Buyer.
m. No General Solicitation. Neither Pro Tech, nor any of its Affiliates,
nor any person acting on its or their behalf, has distributed any
offering materials or engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the ▇▇▇▇
▇▇▇) in connection with the offer or sale of the Series A Preferred
Shares, the Conversion Shares, the Warrants or the Warrant Shares.
n. Employee Relations. Pro Tech is not involved in any labor dispute nor,
to Pro Tech's knowledge is any such dispute threatened. None of Pro
Tech's employees is a member of a union and Pro Tech believes that its
relations with its employees are satisfactory.
o. Environmental Laws. Pro Tech, to Pro Tech's knowledge, (i) is in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"); (ii) has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business; and (iii) is in
compliance with all material terms and conditions of any such permit,
license or approval.
p. Title. Pro Tech has good and marketable title to, or the right to use,
all personal property owned or leased by it which is material to the
business of Pro Tech, in each case free and clear of all liens,
encumbrances and defects, except as described in Schedule 5(p) and
except for those which do not materially affect the value of such
property or interfere with the use made and proposed to be made of
such property by Pro Tech. Pro Tech does not own any real property.
Any real property and facilities held under lease by Pro Tech are held
by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by Pro Tech .
q. Insurance. Pro Tech is insured by insurers which Pro Tech believes are
of recognized financial responsibility against such losses and risks
and in such amounts as management of Pro Tech believes to be prudent
and customary in the businesses in which Pro Tech is engaged. Pro Tech
has no knowledge that it will not be able to renew its existing
insurance coverage as and when such coverage expires or obtain similar
coverage from like insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or
operations of Pro Tech.
r. Regulatory Permits. Pro Tech, to Pro Tech's knowledge, possesses all
certificates, authorizations, licenses and permits required by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct its business, except where failure to have such
certificates, authorizations, licenses or permits would not have a
material adverse effect on the condition, financial or otherwise, or
the earnings, business or operations of Pro Tech. Pro Tech has no
knowledge of, or has not received notice of, proceedings relating to
the revocation or modification of any such certificate, authorization,
license or permit.
s. Internal Accounting Controls. Pro Tech maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
t. No Materially Adverse Contracts, etc. Pro Tech is not subject to any
charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which, in the judgment of Pro Tech's
officers, has or is reasonably expected in the future to have a
material adverse effect on the businesses, properties, operations,
financial condition, results of operations or prospects of Pro Tech.
Pro Tech is not a party to any contract or agreement which, in the
judgment of Pro Tech's officers, has or is reasonably expected to have
a material adverse effect on the businesses, properties, operations,
financial condition, results of operations or prospects of Pro Tech.
u. Tax Status. Except as set forth on Schedule 5(u), Pro Tech has made or
filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that Pro Tech has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations (except
those being contested in good faith) and has set aside on its books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of Pro Tech have no knowledge of, and know of no basis for,
any such claim.
v. Certain Transactions. Except as set forth on Schedule 5(v), in the SEC
Documents and arms-length transactions pursuant to which Pro Tech
makes payments in the ordinary course of business upon terms no less
favorable than Pro Tech could obtain from third parties and other than
the grant of stock options disclosed on Schedule 5(c), none of the
officers, directors, or employees of Pro Tech is presently a party to
any transaction with Pro Tech (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such
employee or, to Pro Tech's knowledge, any corporation, partnership,
trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
w. Dilutive Effect. Pro Tech understands and acknowledges that the number
of Conversion Shares and Warrant Shares issuable upon conversion of
the Series A Preferred Shares and exercise of the Warrants will
increase in certain circumstances. Pro Tech further acknowledges that
its obligation to issue Conversion Shares upon the conversion of the
Series A Preferred Shares in accordance with this Agreement and the
Articles of Amendment is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests
of other shareholders of Pro Tech. Pro Tech further acknowledges that
its obligation to issue Warrant Shares upon the exercise of the
Warrants in accordance with this Agreement and the Warrants is
absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of
Pro Tech.
x. Fees and Rights of First Refusal. Pro Tech is not obligated to offer
the securities offered hereunder on a right of first refusal basis or
similar right to any third parties including, but not limited to,
current or former shareholders of Pro Tech, underwriters, brokers,
agents or other third parties.
y. Investment Company. Pro Tech is not, and is not controlled by or under
common control with an Affiliate of, an "investment company" within
the meaning of the Investment Company of Act of 1940, as amended.
z. No Broker Commissions or Finder Fees. Pro Tech has taken no action
which would give rise to any claim by any person for brokerage
commissions, finders' fees or the like relating to this Agreement or
the transactions contemplated hereby.
aa. Pro Tech's Representations and Warranties Generally. To Pro Tech's
knowledge, neither this Agreement nor the Schedules attached hereto
furnished by or on behalf of Pro Tech contain any untrue statement of
a material fact or omit to state any material fact necessary in order
to make the statements made therein not misleading.
bb. Pro Tech's Knowledge Generally. Where any representation, warranty or
statement contained herein regarding a specific matter relating to Pro
Tech or its business or affairs is qualified by the phrase "to Pro
Tech's knowledge" or any similar phrase relating to the knowledge of
Pro Tech, it is intended to mean the actual knowledge of any
executive, manager or director of Pro Tech, and an individual shall be
deemed to have "knowledge" of a particular fact, circumstance or other
matter if: (a) such person is actually aware of such fact or matter or
(b) a prudent individual would be expected to discover or otherwise
become aware of such fact, circumstance or other matter in the course
of conducting a reasonable inquiry concerning the truth or existence
of such fact, circumstance, or other matter.
6. REPRESENTATIONS AND WARRANTIES OF NCT
NCT represents and warrants to each of the Buyers that:
a. Organization and Qualification. NCT is a corporation duly organized
and validly existing in good standing under the laws of the state of
Delaware, and has the requisite corporate power and authority to own
and use its properties (if any) and assets and to carry on its
business as now being conducted. NCT has no material subsidiaries
other than as set forth on NCT's most recently filed Annual Report on
Form 10-K. Each of such subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable),
with the full corporate power and authority to carry on its business
as currently conducted. Each of NCT and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on NCT and its
subsidiaries taken as a whole.
b. Authorization, Enforcement, Compliance with Other Instruments. NCT has
the requisite corporate power and authority to enter into and perform
this Agreement, the NCT Registration Rights Agreement and any related
agreements (collectively, the "NCT Transaction Documents"), and to
issue the Exchange Chares in accordance with the terms hereof and
thereof. The execution and delivery of the NCT Transaction Documents
by NCT and the consummation by it of the transaction contemplated
thereby, including, without limitation, the reservation for issuance
of the Exchange Shares issuable upon exchange thereof, have been duly
authorized by NCT's Board of Directors and no further consent or
authorization is required by NCT, its Board of Directors or its
stockholders. The NCT Transaction Documents have been duly executed
and delivered by NCT and, when delivered, constitute the valid and
binding obligations of NCT enforceable against NCT in accordance with
their terms, except as such enforceability may be limited by general
principles of equity and applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and
remedies, and subject to the limitation that the indemnification and
contribution provisions of the NCT Registration Rights Agreement may
be unenforceable as a matter of public policy.
c. Capitalization. As of the date hereof, the authorized capital stock of
NCT consists of 450,000,000 shares of NCT Common Stock and 10,000,000
shares of NCT Preferred Stock, of which approximately 322,000,000
shares of NCT Common Stock were issued and outstanding as of September
13, 2000, and, except for 924 shares of Series G Preferred Stock, no
shares of preferred stock were issued and outstanding. All of such
outstanding shares have been duly authorized and validly issued and
are fully paid and nonassessable. Except as disclosed in Schedule
6(c), no shares of NCT Common Stock or NCT Preferred Stock are subject
to preemptive or similar rights or any liens or encumbrances suffered
or permitted by NCT. Except as disclosed in Schedule 6(c), as of the
effective date of this Agreement:
(i) there are no outstanding options, warrants, scrip, notes or
debentures, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of NCT or any of
its subsidiaries, or contracts, commitments, understandings or
arrangements by which NCT or any of its subsidiaries is or may
become bound to issue additional shares of capital stock of NCT
or any of its subsidiaries;
(ii) there are no outstanding debt securities; and
(iii) there are no unperformed agreements or arrangements under
which NCT or any of its subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the
NCT Registration Rights Agreement).
NCT has furnished to the Buyer true and correct copies of NCT's
Restated Certificate of Incorporation, as amended and as in effect on
the date hereof (the "Certificate of Incorporation"), and NCT's
By-laws, as in effect on the date hereof (the "NCT By-laws").
d. Issuance of Securities. The Exchange Shares issuable upon exchange of
the Series A Preferred Shares have been duly authorized. Upon the
exchange and against delivery of the Series A Preferred Shares as
provided herein, the Exchange Shares will be validly issued, fully
paid and nonassessable, free from all liens, encumbrances, security
interests and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of NCT
Common Stock. NCT shall pay any stamp transfer tax that may be due in
connection with any such exchange.
e. No Conflicts. Except as disclosed in Schedule 6(e), the execution,
delivery and performance of this Agreement by NCT and the consummation
by NCT of the transactions contemplated hereby will not (i) conflict
with or violate the Certificate of Incorporation or NCT By-laws, or
(ii) conflict with or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which NCT
or any of its subsidiaries is a party, or (iii) to NCT's knowledge,
result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations
and the rules and regulations of the principal market or exchange on
which the NCT Common Stock is traded or listed) applicable to NCT or
any of its subsidiaries, or by which any property or asset of NCT or
any of its subsidiaries is bound or affected.
f. No Default or Violation. Except as disclosed in Schedule 6(f), neither
NCT nor its subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation
applicable to NCT or its subsidiaries. To NCT's knowledge, the
business of NCT and its subsidiaries is not being conducted, and shall
not be conducted in violation of any law, ordinance or regulation of
any governmental entity.
g. Consents. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and applicable state securities laws, NCT
is not required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or governmental
agency in connection with the execution, delivery or performance of
any of its obligations under or contemplated by this Agreement or the
NCT Registration Rights Agreement in accordance with the terms hereof
or thereof. Except as disclosed in Section 7(f) and Schedule 6(g), all
consents, authorizations, orders, filings and registrations which Pro
Tech is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. NCT and its
subsidiaries have no knowledge of any facts or circumstances which
might give rise to any of the foregoing.
h. SEC Documents: Financial Statements. Since January 1, 1998, NCT has
timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing materials
filed prior to the date hereof and all exhibits included therein and
financial statements, schedules and documents incorporated by
reference therein, being hereinafter collectively referred to as
"NCT's SEC Documents"). NCT has delivered to the Buyer or its
representative true and complete copies of NCT's SEC Documents. As of
their respective dates, the financial statements of NCT contained in
NCT's SEC Documents (the "NCT Financial Statements") complied as to
form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such NCT Financial
Statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such
NCT Financial Statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes
or may be condensed or summary statements) and fairly present in all
material respects the financial position of Pro Tech as of the dates
thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). No other information provided by
or on behalf of NCT to the Buyer which is not included in NCT's SEC
Documents, including, without limitation, information referred to in
Section 4(d) of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
i. Absence of Certain Changes. Except as disclosed in Schedule 6(i),
since the date of the financial statements included in NCT's last
filed Quarterly Report, as amended, on Form 10-Q for the period ended
June 30, 2000, there has been no material adverse change and no
material adverse development in the business, properties, operations,
financial condition, results of operations or prospects of NCT or its
subsidiaries. NCT has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any
bankruptcy law, nor does NCT or its subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
j. Absence of Litigation. Except as disclosed in NCT's registration
statement on Form S-1 (Registration No. 333-87757) originally filed
with the SEC on September 24, 1999, as amended by Pre-effective
Amendment No. 1 filed on October 28, 1999, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
or, to the knowledge of NCT or any of its subsidiaries, threatened
against or affecting NCT, the NCT Common Stock or any of NCT's
subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated
hereby; (ii) adversely affect the validity or enforceability of, or
the authority or ability of NCT to perform its obligations under, the
Transaction Documents; or (iii) except as expressly set forth in
Schedule 6(j), would reasonably be expected to have a material adverse
effect on the business, operations, properties, financial condition or
results of operation of NCT and its subsidiaries taken as a whole.
k. Acknowledgment Regarding Buyer's Purchase of Series A Preferred
Shares. NCT acknowledges and agrees, based upon Buyer's
representations, that the Buyer is acting solely in the capacity of an
arms-length purchaser with respect to this Agreement and the
transactions contemplated hereby. NCT further acknowledges that the
Buyer is not acting as a financial advisor or fiduciary of NCT (or in
any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by the Buyer or
any of its respective representatives or agents in connection with
this Agreement and the transactions contemplated hereby is merely
incidental to such Buyer's purchase of the Series A Preferred Shares
or exchange of the Series A Preferred Shares for the Exchange Shares.
NCT further represents to the Buyer that NCT's decision to enter into
this Agreement has been based solely on the independent evaluation by
NCT and its representatives.
l. No Undisclosed Events, Liabilities, Developments or Circumstances. To
NCT's knowledge, no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur, with respect to NCT
or its subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which could be material
but which has not been publicly announced or disclosed in writing to
the Buyer.
m. No General Solicitation. Neither NCT, nor any of its Affiliates, nor
any person acting on its or their behalf, has distributed any offering
materials or engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the ▇▇▇▇ ▇▇▇) in
connection with the offer or sale of the Exchange Shares.
n. Employee Relations. Neither NCT nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of NCT or any of
its subsidiaries, is any such dispute threatened. None of NCT's or its
subsidiaries' employees is a member of a union and NCT and its
subsidiaries believe that their relations with their employees are
satisfactory.
o. Environmental Laws. NCT and its subsidiaries, to NCT's knowledge, (i)
are in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"); (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and conditions
of any such permit, license or approval.
p. Title. NCT and its subsidiaries have good and marketable title to, or
the right to use, all personal property owned or leased by them which
is material to the business of NCT and its subsidiaries, in each case
free and clear of all liens, encumbrances and defects, except as
described in Schedule 6(p) and except for those which do not
materially affect the value of such property or interfere with the use
made and proposed to be made of such property by NCT and its
subsidiaries. Neither NCT nor its subsidiaries own any real property.
Any real property and facilities held under lease by NCT and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by NCT and its subsidiaries.
q. Insurance. NCT and each of its subsidiaries are insured by insurers
which NCT believes are of recognized financial responsibility against
such losses and risks and in such amounts as management of NCT
believes to be prudent and customary in the businesses in which NCT
and its subsidiaries are engaged. Neither NCT nor any such subsidiary
has been refused any insurance coverage sought or applied for, and
neither NCT nor any such subsidiary has any knowledge that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or obtain similar coverage from like insurers as may
be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of NCT and its subsidiaries,
taken as a whole.
r. Regulatory Permits. NCT and its subsidiaries possess all certificates,
authorizations, licenses and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, except where failure to have such
certificates, authorizations, licenses or permits would not have a
material adverse effect on the condition, financial or otherwise, or
the earnings, business or operations of NCT and its subsidiaries,
taken as a whole. Neither NCT nor any such subsidiary has no knowledge
of, and has received no notice of, proceedings relating to the
revocation or modification of any such certificate, authorization,
license or permit.
s. Internal Accounting Controls. NCT and each of its subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
t. No Materially Adverse Contracts, etc. Neither NCT nor any of its
subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which,
in the judgment of NCT's officers, has or is expected in the future to
have a material adverse effect on the businesses, properties,
operations, financial condition, results of operations or prospects of
NCT or its subsidiaries. Neither NCT nor any of its subsidiaries is a
party to any contract or agreement which, in the judgment of NCT's
officers, has or is expected to have a material adverse effect on the
businesses, properties, operations, financial condition, results of
operations or prospects of NCT or its subsidiaries.
u. Tax Status. Except as set forth on Schedule 6(u), NCT and each of its
subsidiaries has made or filed all federal and state income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent
that NCT and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations (except
those being contested in good faith) and has set aside on its books
provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of NCT have no knowledge of, and know of no basis for, any
such claim.
v. Certain Transactions. Except as set forth on Schedule 6(v), in the
NCT's SEC Documents and arms-length transactions pursuant to which NCT
makes payments in the ordinary course of business upon terms no less
favorable than NCT could obtain from third parties and other than the
grant of stock options disclosed on Schedule 6(c), none of the
officers, directors, or employees of NCT is presently a party to any
transaction with NCT (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of NCT, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
w. Dilutive Effect. NCT understands and acknowledges that the number of
Exchange Shares issuable upon exchange of the Series A Preferred
Shares will increase in certain circumstances. NCT further
acknowledges that its obligation, if any, to issue NCT Common Stock
upon the exchange of the Series A Preferred Stock in accordance with
this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests
of other stockholders of NCT.
x. Fees and Rights of First Refusal. NCT is not obligated to offer the
securities offered hereunder on a right of first refusal basis or
similar right to any third parties including, but not limited to,
current or former shareholders of NCT, underwriters, brokers, agents
or other third parties.
y. Investment Company. NCT is not, and is not controlled by or under
common control with an Affiliate of, an "investment company" within
the meaning of the Investment Company of Act of 1940, as amended.
7. COVENANTS.
a. Commercially Reasonable Efforts. Each party shall use its commercially
reasonable efforts to timely satisfy each of the conditions precedent
to Closing as provided in Sections 9, 10 and 11 of this Agreement.
b. Form D. Pro Tech agrees to file a Form D with respect to the Series A
Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares as required under Regulation D promulgated under the 1933 Act
and to provide a copy thereof to each Buyer promptly after such
filing. Pro Tech shall, on or before the Closing Date, take such
action as Pro Tech shall reasonably determine is necessary to qualify
the Series A Preferred Shares, the Conversion Shares, the Warrants and
the Warrant Shares for, or obtain exemption for the Series A Preferred
Shares, the Conversion Shares, the Warrants and the Warrant Shares
for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the State of Florida
and shall provide evidence of any such action so taken to the Buyers
as soon as practicable following the Closing Date.
NCT agrees to file a Form D with respect to the Exchange Shares as
required under Regulation D promulgated under the 1933 Act and to
provide a copy thereof to each Buyer promptly after such filing. NCT
shall, on or before the Exchange Date (as defined in Section 3 above),
take such action as NCT shall reasonably determine is necessary to
qualify the Exchange Shares for, or obtain exemption for the Exchange
Shares for, exchange to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the state
of Delaware and shall provide evidence of any such action so taken to
the Buyers as soon as practicable following the Exchange Date (as
defined in Section 3 above).
c. Reporting Status. Until the earlier of (i) one year after the date as
of which the Investors (as that term is defined in the Pro Tech
Registration Rights Agreement) may sell all of the Conversion Shares
and the Warrant Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Investors shall have sold all the Conversion
Shares and the Warrant Shares and (B) none of the Series A Preferred
Shares or Warrants is outstanding (the "Pro Tech Registration
Period"), Pro Tech shall file all reports required to be filed with
the SEC pursuant to the 1934 Act, and Pro Tech shall not terminate its
status as an issuer required to file reports under the 1934 Act even
if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
Until the earlier of (i) one year after the date as of which the
Investors (as that term is defined in the NCT Registration Rights
Agreement) may sell all of the Exchange Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold
all the Exchange Shares and (B) none of the Series A Preferred Shares
is outstanding (the "NCT Registration Period"), NCT shall file all
reports required to be filed with the SEC pursuant to the 1934 Act,
and NCT shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. Pro Tech shall use all of the proceeds from the sale
of the Series A Preferred Stock purchased hereunder for working
capital and general corporate purposes and not for the satisfaction of
any portion of Pro Tech borrowings outside the normal course of
business. Subject to Section 7(h) hereof, while any shares of Series A
Preferred Stock or any Conversion Shares remain outstanding, Pro Tech
shall not satisfy any obligation or liability of any kind, except that
Pro Tech may use the proceeds from the sale of the Series A Preferred
Stock purchased hereunder to satisfy the $150,000 loan from Westek
Communications, the $100,000 loan from Balmore, S.A., the $100,000
loan from Austost Anstalt ▇▇▇▇▇▇ and the $99,975 loan from Zakeni
Limited to Pro Tech as evidenced by the Westek Note, the Balmore Note,
the Austost Note and Zakeni Note, respectively, including, but not
limited to, those owed to a shareholder, officer or director of Pro
Tech, or redeem Pro Tech equity or equity-equivalent securities.
e. Financial Information. Pro Tech agrees to send the following to each
Buyer upon such Buyer's request during the Pro Tech Registration
Period: (i) within five (5) days after the later of (A) the filing
thereof with the SEC or (B) the date Buyer's request was received by
Pro Tech, a copy of its Annual Reports on Form 10-KSB, its Quarterly
Reports on Form 10-QSB, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act;
(ii) within one (1) day after the later of (A) release thereof or (B)
the date Buyer's request was received by Pro Tech, copies of all press
releases issued by Pro Tech or any of its subsidiaries; and (iii)
copies of the same notices and other information given to the
shareholders of Pro Tech generally, contemporaneously with the giving
thereof to the shareholders.
NCT agrees to send the following to each Buyer upon such Buyer's
request during the NCT Registration Period: (i) within five (5) days
after the filing thereof with the SEC, a copy of its Annual Reports on
Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements or amendments filed pursuant
to the 1933 Act; (ii) within one (1) day after release thereof, copies
of all press releases issued by NCT or any of its subsidiaries; and
(iii) copies of the same notices and other information given to the
stockholders of NCT generally, contemporaneously with the giving
thereof to the stockholders.
f. Reservation of Shares. Pro Tech shall take all action necessary to, at
all times, have authorized and reserved for the purpose of issuance,
no less than 115% of the number of shares of Common Stock needed to
provide for the issuance of (i) the Conversion Shares to effect the
conversion of the Series A Preferred Shares then issued and
outstanding, and (ii) the Warrant Shares for which the Warrants may be
exercised.
NCT shall take all action necessary to, at all times, have authorized
and reserved for the purpose of issuance, no less than 115% of the
number of shares of NCT Common Stock needed to provide for the
issuance of the Exchange Shares to effect the exchange of the Series A
Preferred Shares then issued and outstanding.
g. Listings. Pro Tech shall take all steps reasonably necessary to cause
the Conversion Shares and the Warrant Shares to be approved for
quotation on the OTC Bulletin Board, subject to the terms and
conditions of the Pro Tech Registration Rights Agreement, and Pro Tech
shall use its commercially reasonable efforts to maintain the
quotation of its Common Stock on such market, as long as the rules
governing such quotation do not change. Pro Tech shall promptly
provide to each Buyer copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading on the facility
on which it is listed.
NCT shall also take all steps reasonably necessary to cause the
Exchange Shares to be approved for quotation on the OTC Bulletin
Board, and NCT shall use its best efforts to maintain the quotation of
its NCT Common Stock on such market, as long as the rules governing
such quotation do not change. NCT shall promptly provide to each Buyer
copies of any notices it receives regarding the continued eligibility
of the NCT Common Stock for trading on the facility on which it is
listed.
h. Expenses. Each of Pro Tech, NCT and the Buyers shall pay all costs and
expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction
Documents. Pro Tech and NCT shall pay all fees, costs and expenses of
their respective counsel in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction
Documents at Closing.
i. [LEFT INTENTIONALLY BLANK]
j. Corporate Existence. So long as any Series A Preferred Shares remain
outstanding, Pro Tech shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of Pro Tech's assets or any similar transaction or
related transactions (each such transaction, a "Sale of Pro Tech")
except if the surviving or successor entity in such transaction (i)
expressly assumes, in writing, Pro Tech's obligations hereunder and
under the Pro Tech Registration Rights Agreement, the Series A
Preferred Shares and any other agreements and instruments entered into
or delivered by Pro Tech in connection herewith; and (ii) is a
publicly traded corporation whose common stock is listed for trading
on the OTC Bulletin Board, New York Stock Exchange, Inc., the American
Stock Exchange or the NASDAQ Small Cap or National Market.
k. Transactions With Affiliates. So long as (i) twenty-five percent (25%)
of the originally issued shares of the Series A Preferred Shares
issued pursuant to this Agreement are outstanding or (ii) the Buyers
collectively own Conversion Shares with an aggregate Market Value (as
defined below) as of the date of the Transaction (as defined below)
equal to or greater than $375,000, Pro Tech shall not enter into,
amend, modify or supplement any transaction (the type of which is
required to be disclosed under Item 404 of Regulation S-B promulgated
under the ▇▇▇▇ ▇▇▇) ("Transaction") with any of its officers,
directors, persons who were officers or directors at any time during
the previous two years, shareholders who beneficially own 5% or more
of the Common Stock, affiliates (as defined below), any individual
related by blood, marriage, or adoption to any such individual or with
any entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b)
any Transaction on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than
such Related Party, and (c) any Transaction which is approved by a
majority of the disinterested directors of Pro Tech. For purposes
hereof, "Market Value" per share of Conversion Shares is equal to the
lowest average of the average of the Closing Bid Price (as defined in
Section 3(b) hereof) for the Common Stock for any consecutive five (5)
day trading period out of the fifteen (15) trading days preceding the
date of such Transaction. "Disinterested director" for purposes of
approving a Transaction pursuant to this Section 7(k) means a director
of Pro Tech who is not a party to such Transaction. "Affiliate" for
purposes of this Section 7(k) means, with respect to any person or
entity, another person or entity that, directly or indirectly, (i) has
a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that
person or entity, or (iv) share common control with that person or
entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or
govern the policies of another person or entity.
So long as (i) any Series A Preferred Shares are outstanding or (ii)
the Buyers collectively own Exchange Shares with a market value equal
to or greater than $375,000, NCT shall not, and shall cause each of
its subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or
any subsidiary's officers, directors, person who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the NCT Common Stock, affiliates, any
individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual
owns a 5% or more beneficial interest (each a "Related Party"), except
for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment, or
arrangement on an arms-length basis on terms no less favorable than
terms which would have been obtainable from a person other than such
Related Party, (c) any agreement, transaction, commitment, or
arrangement which is approved by a majority of the disinterested
directors of NCT. For purposes hereof, any director who is also an
officer of NCT or any subsidiary of NCT shall not be a disinterested
director with respect to any such agreement, transaction, commitment,
or arrangement.
l. No Short Sales of the Common Stock or NCT Common Stock. So long as a
Buyer has Conversion Shares, Exchange Shares or Warrant Shares
registered under a registration statement which have not been sold,
such Buyer or its Affiliates shall not engage in any short sales or
third party short sales of the Common Stock or NCT Common Stock in
violation of Regulation M promulgated under the 1934 Act, or hold a
"put equivalent position" with respect to the Common Stock or NCT
Common Stock (as defined in Rule 16a-1 under the 1934 Act); provided
however, that the Buyer's sale of Common Stock or NCT Common Stock
which the Buyer owned prior to such registration and which were
acquired outside of this Agreement shall not be deemed a short sale
under this Agreement.
8. TRANSFER AGENT INSTRUCTIONS.
a. Pro Tech shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of a Buyer or its
respective nominee(s), for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by such Buyer to Pro Tech
upon conversion of the Series A Preferred Shares ("Pro Tech's
Irrevocable Transfer Agent Instructions"). All such certificates shall
bear the restrictive legend specified in Section 4(k) of this
Agreement. Pro Tech warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 8,
and stop transfer instructions to give effect to Section 4(i) hereof
(in the case of the Conversion Shares and Warrant Shares prior to
registration of such shares under the ▇▇▇▇ ▇▇▇) will be given by Pro
Tech to its transfer agent and that the Series A Preferred Shares ,
the Conversion Shares, the Warrants and the Warrant Shares shall
otherwise be freely transferable on the books and records of Pro Tech
as and to the extent provided in the Transaction Documents. Nothing in
this Section 8 shall affect in any way such Buyer's obligations and
agreement to comply with all applicable federal and state securities
laws upon resale of the Series A Preferred Shares, Conversion Shares,
the Warrant or the Warrant Shares. If such Buyer provides Pro Tech
with an opinion of counsel, reasonably satisfactory in form and
substance to Pro Tech, that registration for resale by such Buyer of
any of the Series A Preferred Shares, Conversion Shares, the Warrant
or the Warrant Shares is not required under the 1933 Act, Pro Tech
shall permit the transfer, subject to the limitations and restrictions
set forth in this Agreement and the other Transaction Documents, and,
in the case of the Conversion Shares and the Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer. Pro Tech
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to such Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, Pro Tech
acknowledges that the remedy at law for a breach of its obligations
under this Section 8 will be inadequate and agrees, in the event of a
breach or threatened breach by Pro Tech of the provisions of this
Section 8, that such Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being
required.
b. NCT shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of the Buyer or its
respective nominee(s), for the Exchange Shares in such amounts as
specified from time to time by the Buyer to NCT upon exchange of the
Series A Preferred Shares for NCT Common Stock (the "NCT's Irrevocable
Transfer Agent Instructions"). Prior to registration of the Exchange
Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 4(l) of this Agreement. NCT
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 8, and stop transfer
instructions to give effect to Section 4(j) hereof (prior to
registration of such shares under the ▇▇▇▇ ▇▇▇) will be given by NCT
to its transfer agent and that the Exchange Shares shall otherwise be
freely transferable on the books and records of NCT as and to the
extent provided in this Agreement and the NCT Registration Rights
Agreement. Nothing in this Section 8 shall affect in any way the
Buyer's obligations and agreement to comply with all applicable
federal and state securities laws upon resale of the Exchange Shares.
If the Buyer provides NCT with an opinion of counsel, reasonably
satisfactory in form and substance to NCT, that registration for
resale by the Buyer of any of the Exchange Shares is not required
under the 1933 Act, NCT shall permit the transfer and promptly
instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Buyer. NCT
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, NCT
acknowledges that the remedy at law for a breach of its obligations
under this Section 8 will be inadequate and agrees, in the event of a
breach or threatened breach by NCT of the provisions of this Section
8, that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being
required.
9. CONDITIONS PRECEDENT TO PRO TECH'S OBLIGATION TO SELL.
The obligation of Pro Tech hereunder to issue and sell the Series A
Preferred Shares to the Buyers at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions may be waived by Pro Tech at any time in its sole discretion:
a. The Buyers shall have executed this Agreement, the Pro Tech
Registration Rights Agreement, the NCT Registration Rights Agreement
and delivered same to Pro Tech.
b. NCT shall have executed this Agreement and the NCT Registration Rights
Agreement and delivered same to Pro Tech.
c. The Buyers shall have delivered to Pro Tech, and Pro Tech shall have
received, the Purchase Price for the Series A Preferred Shares being
purchased by the Buyers at the Closing in United States dollars by
wire transfer of immediately available funds pursuant to the wire
instructions provided by Pro Tech or as otherwise provided in
paragraph 1(c) above.
d. Pro Tech shall have received the opinion of NCT's counsel, dated as of
the Closing Date, in form and substance reasonably satisfactory to Pro
Tech and in substantially the form of Exhibit "H" attached hereto
e. The representations and warranties of the Buyers shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyers shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by the Buyers at or prior to the Closing Date. Pro Tech shall have
received a certificate, executed by the Chief Financial Officer, or
other executive officer acting in such capacity, of each of the
Buyers, dated as of the Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by Pro Tech.
f. The representations and warranties of NCT shall be true and correct in
all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and
warranties that speak as of a specific date), and NCT shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by NCT at or prior to the
Closing Date. Pro Tech shall have received a certificate, executed by
the Chief Financial Officer, or other executive officer acting in such
capacity, of NCT, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
Pro Tech including, without limitation, an update as of the Closing
Date regarding the representation contained in Section 6(c) above.
10. CONDITIONS PRECEDENT TO THE BUYERS' OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Series A Preferred
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions may be
waived by the Buyers at any time in their sole discretion:
a. Pro Tech and NCT shall have executed this Agreement and delivered same
to the Buyers.
b. NCT shall have executed the NCT Registration Rights Agreement and
delivered same to the Buyers.
c. Pro Tech shall have executed the Pro Tech Registration Rights
Agreement and delivered same to the Buyers.
d. The Articles of Amendment shall have been duly authorized by the Board
of Directors of Pro Tech and filed with the Secretary of State of the
State of Florida.
e. Both the Common Stock and the NCT Common Stock shall be authorized for
quotation on the OTC Bulletin Board, over-the-counter market, AMEX,
the NASDAQ Small Cap or National Market or The New York Stock
Exchange, Inc., and trading in the Common Stock and NCT Common Stock
shall not have been suspended for any reason.
f. The representations and warranties of Pro Tech shall be true and
correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to
materiality in Section 5 above, in which case, such representations
and warranties shall be true and correct without further
qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date) and Pro Tech shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by Pro Tech at or prior to the Closing
Date. The Buyers shall have received a certificate, executed by the
Chief Financial Officer, or other executive officer acting in such
capacity, of Pro Tech, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by
the Buyers including, without limitation, an update as of the Closing
Date regarding the representation contained in Section 5(c) above.
g. The representations and warranties of NCT shall be true and correct in
all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality
in Section 6 above, in which case, such representations and warranties
shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date) and NCT shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with
by Pro Tech at or prior to the Closing Date. The Buyers shall have
received a certificate, executed by the Chief Financial Officer, or
other executive officer acting in such capacity, of NCT, dated as of
the Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by the Buyers including, without
limitation, an update as of the Closing Date regarding the
representation contained in Section 6(c) above.
h. The Buyers shall have received the opinion of Pro Tech's counsel,
dated as of the Closing Date, in form and substance reasonably
satisfactory to the Buyers and in substantially the form of Exhibit
"I" attached hereto.
i. The Buyers shall have received the opinion of NCT's counsel, dated as
of the Closing Date, in form and substance reasonably satisfactory to
the Buyers and in substantially the form of Exhibit "H" attached
hereto.
j. Pro Tech shall have executed and delivered to each of the Buyers (or
the Buyers' designees) the Series A Certificates (in such
denominations as the Buyers shall request) for the Series A Preferred
Shares being purchased by each such Buyer at the Closing.
k. The Board of Directors of Pro Tech shall have adopted the resolutions
in substantially the form of Exhibit "J" attached hereto.
l. Pro Tech's Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyers, shall have been delivered to and
acknowledged in writing by Pro Tech's transfer agent.
m. NCT's Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyers, shall have been delivered to and
acknowledged in writing by NCT's transfer agent.
11. CONDITIONS PRECEDENT TO NCT'S OBLIGATION TO EXCHANGE
The obligation of NCT hereunder to issue the Exchange Shares to each such
Buyer at an Exchange Date is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions may be waived by NCT at any time in its sole discretion:
a. Such Buyer shall have executed this Agreement, the Pro Tech
Registration Rights Agreement and the NCT Registration Rights
Agreement and delivered same to NCT.
b. Pro Tech shall have executed this Agreement and the Pro Tech
Registration Rights Agreement and delivered same to NCT.
c. The Articles of Amendment shall have been duly authorized by the Board
of Directors of Pro Tech and filed with the Secretary of State of the
State of Florida.
d. Such Buyer shall have delivered to Pro Tech the Purchase Price for the
Series A Preferred Shares being purchased by such Buyer at the Closing
in United States dollars by wire transfer of immediately available
funds pursuant to the wire instructions provided by Pro Tech or as
otherwise provided in paragraph 1(c) above.
e. NCT shall have received an opinion of Pro Tech's counsel, dated as of
the Closing Date, in form and substance reasonably satisfactory to NCT
and in substantially the form of Exhibit "I" attached hereto.
12. INDEMNIFICATION.
a. By Pro Tech.
(i) In consideration of the Buyers' execution and delivery of
this Agreement and acquisition of the Series A Preferred Shares,
the Conversion Shares, the Warrants and the Warrant Shares
hereunder, and in addition to all of Pro Tech's other obligations
under this Agreement, but subject to the limitations set forth in
Section 6 of the Pro Tech Registration Rights Agreement, Pro Tech
shall defend, protect, indemnify and hold harmless each Buyer
(each a "Buyer Indemnitee") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
(irrespective of whether such Buyer Indemnitee is a party to the
action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the
"Buyer Indemnified Liabilities") incurred by a Buyer Indemnitee
in connection with or as a result of any breach by Pro Tech of
any representation, warranty or covenant in the Transaction
Documents, including, but not limited to: (a) any
misrepresentation or breach of any representation or warranty
made by Pro Tech in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby; or (b) any breach of any covenant, agreement or
obligation of Pro Tech contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby
or thereby; provided, however, that this Section 12(a)(i) shall
not apply to the extent that it is finally judicially determined
that such actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in
connection therewith resulted solely from the gross negligence or
bad faith of such Buyer Indemnitee. To the extent that the
foregoing undertaking by Pro Tech may be unenforceable for any
reason, Pro Tech shall make the maximum contribution to the
payment and satisfaction of each of the Buyer Indemnified
Liabilities which is permissible under applicable law.
(ii) In consideration of NCT's execution and delivery of this
Agreement, and in addition to all of Pro Tech's other obligations
under this Agreement, Pro Tech shall defend, protect, indemnify
and hold harmless NCT and its respective officers, directors,
agents, and controlling persons thereof and permitted assigns
(each a "NCT Indemnitee"), from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
(irrespective of whether any such NCT Indemnitee is a party to
the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "NCT
Indemnified Liabilities") incurred by the NCT Indemnitees or any
of them in connection with or as a result of any breach by Pro
Tech of any representation, warranty or covenant in the
Transaction Documents, including, but not limited to: (a) any
misrepresentation or breach of any representation or warranty
made by Pro Tech in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby; or (b) any breach of any covenant, agreement or
obligation of Pro Tech contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby
or thereby; provided, however, that this Section 12(a)(ii) shall
not apply to the extent that it is finally judicially determined
that such actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in
connection therewith resulted solely from the gross negligence or
bad faith of such NCT Indemnitee. To the extent that the
foregoing undertaking by Pro Tech may be unenforceable for any
reason, Pro Tech shall make the maximum contribution to the
payment and satisfaction of each of the NCT Indemnified
Liabilities which is permissible under applicable law.
b. By NCT.
(i) In consideration of the Buyers' execution and delivery of
this Agreement and acquisition of Exchange Shares hereunder, and
in addition to all of NCT's other obligations under this
Agreement, but subject to the limitations set forth in Section 6
of the NCT Registration Rights Agreement, NCT shall defend,
protect, indemnify and hold harmless each Buyer Indemnitee from
and against the Buyer Indemnified Liabilities incurred by such
Buyer Indemnitee in connection with or as a result of any matter
referred to in the Transaction Documents, including, but not
limited to: (a) any misrepresentation or breach of any
representation or warranty made by NCT in the Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby; or (b) any breach of any
covenant, agreement or obligation of NCT contained in the
Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby; provided, however, that
this Section 12(b)(i) shall not apply to the extent that it is
finally judicially determined that such actions, causes of
action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
resulted solely from the gross negligence or bad faith of such
Buyer Indemnitee. To the extent that the foregoing undertaking by
NCT may be unenforceable for any reason, NCT shall make the
maximum contribution to the payment and satisfaction of each of
the Buyer Indemnified Liabilities which is permissible under
applicable law.
(ii) In consideration of Pro Tech's execution and delivery of
this Agreement and issuance of the Series A Preferred Shares
which may be exchanged for Exchange Share as described herein,
and in addition to all of NCT's other obligations under this
Agreement, NCT shall defend, protect, indemnify and hold harmless
Pro Tech and its directors, officers, agents and controlling
persons thereof (each a "Pro Tech Indemnitee"), from and against
any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Pro Tech
Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Pro Tech Indemnified Liabilities"),
incurred by the ProTech Indemnitees or any of them in connection
with or as a result of any matter referred to in the Transaction
Documents, including, but not limited to: (a) any
misrepresentation or breach of any representation or warranty
made by NCT in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby; or (b) any breach of any covenant, agreement or
obligation of NCT contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or
thereby; provided, however, that this Section 12(b)(ii) shall not
apply to the extent that it is finally judicially determined that
such actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith resulted solely from the gross negligence or
bad faith of such Pro Tech Indemnitee, as the case may be,
respectively. To the extent that the foregoing undertaking by NCT
may be unenforceable for any reason, NCT shall make the maximum
contribution to the payment and satisfaction of each of the Pro
Tech Indemnified Liabilities, as the case may be, which is
permissible under applicable law.
c. By the Buyers.
(i) In consideration of Pro Tech's execution and delivery of this
Agreement and issuance of the Series A Preferred Shares, the
Conversion Shares, Warrants and Warrant Shares hereunder, and in
addition to all of the Buyers' other obligations under this
Agreement, but subject to the limitations set forth in Section 6
of the Pro Tech Registration Rights Agreement, each Buyer,
severally and not jointly, shall defend, protect, indemnify and
hold harmless the Pro Tech Indemnitees from and against the Pro
Tech Indemnified Liabilities incurred by the Pro Tech Indemnitees
or any of them in connection with or as a result of any breach by
such Buyer of any representation, warranty or covenant in the
Transaction Documents, including, but not limited to: (a) any
misrepresentation or breach of any representation or warranty
made by such Buyer in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby; or (b) any breach of any covenant, agreement or
obligation of such Buyer contained in the Transaction Documents
or any other certificate, instrument or document contemplated
hereby or thereby; provided, however, that this Section 12(c)(i)
shall not apply to the extent that it is finally judicially
determined that such actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith resulted solely from the gross
negligence or bad faith of such Pro Tech Indemnitee. To the
extent that the foregoing undertaking by such Buyer may be
unenforceable for any reason, such Buyer shall make the maximum
contribution to the payment and satisfaction of each of the Pro
Tech Indemnified Liabilities which is permissible under
applicable law.
(ii) In consideration of NCT's execution and delivery of this
Agreement and issuance of the Exchange Shares hereunder, and in
addition to all of the Buyers' other obligations under this
Agreement, but subject to the limitations set forth in Section 6
of the NCT Registration Rights Agreement, as the case may be,
each Buyer, severally and not jointly, shall defend, protect,
indemnify and hold harmless the NCT Indemnitees from and against
the NCT Indemnified Liabilities incurred by the NCT Indemnitees
or any of them in connection with or as a result of any breach by
such Buyer of any representation, warranty or covenant in the
Transaction Documents, including, but not limited to: (a) any
misrepresentation or breach of any representation or warranty
made by such Buyer in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby; or (b) any breach of any covenant, agreement or
obligation of such Buyer contained in the Transaction Documents
or any other certificate, instrument or document contemplated
hereby or thereby; provided, however, that this Section 12(c)
shall not apply to the extent that it is finally judicially
determined that such actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith resulted solely from the gross
negligence or bad faith of such NCT Indemnitee. To the extent
that the foregoing undertaking by such Buyer may be unenforceable
for any reason, such Buyer shall make the maximum contribution to
the payment and satisfaction of each of the NCT Indemnified
Liabilities which is permissible under applicable law.
d. Promptly after receipt by a Buyer Indemnitee, a NCT Indemnitee or a
Pro Tech Indemnitee (each Buyer Indemnitee, NCT Indemnitee and Pro
Tech Indemnitee are sometimes referred to herein as "Indemnified
Party") under this Section of notice of the commencement of any action
or proceeding involving any breach of any representation, warranty or
covenant in the Transaction Documents ("Claim"), such Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party (the "Indemnifying Party") under this Section,
deliver to the Indemnifying Party a written notice of the commencement
thereof. The Indemnifying Party shall have the right to participate
in, and, to the extent the Indemnifying Party so desires, jointly with
any other Indemnifying Party similarly noticed, to assume control of
the defense thereof with counsel mutually satisfactory to the
Indemnifying Party and the Indemnified Party, as the case may be;
provided, however, that an Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the
Indemnifying Party, if, in the reasonable opinion of counsel retained
by the Indemnifying Party, the representation by such counsel of the
Indemnified Party and the Indemnifying Party would be inappropriate
due to actual or potential conflicts of interests between such
Indemnified Party and any other party represented by such counsel in
such proceeding. The Indemnified Party shall cooperate fully with the
Indemnifying Party in connection with any negotiation or defense of
any such action or claim by the Indemnifying Party and shall furnish
to the Indemnifying Party all information reasonably available to the
Indemnified Party which relates to such action or claim. The
Indemnifying Party shall keep the Indemnified Party fully apprised as
to the status of the defense or any settlement negotiations with
respect thereto. No Indemnifying Party shall be liable for any
settlement of any action, claim or proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the consent of the Indemnified
Party, consent to entry of any judgment or enter into any settlement
or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
Indemnifying Party shall be subrogated to all rights of the
Indemnified Party with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the Indemnifying Party
within a reasonable time of the commencement of any such action shall
not relieve such Indemnifying Party of any liability to the
Indemnified Party under this Section, except to the extent that the
Indemnifying Party is prejudiced in its ability to defend such action.
The indemnification required by this Section shall be made by periodic
payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Buyer Indemnified
Liabilities, NCT Indemnified Liabilities or Pro Tech Indemnified
Liabilities are incurred.
e. Limitation of Liability. No Buyer shall be liable to Pro Tech or NCT
pursuant to this Section 12 in an aggregate amount greater than the
ratable amount of the Purchase Price relating to the Series A
Preferred Shares, the Warrants, the Conversion Shares and the Warrant
Shares purchased by such Buyer. Pro Tech and NCT shall not be liable
to the Buyers pursuant to this Section 12 for any amount in excess of
the aggregate Purchase Price. No party may seek to limit their
liability pursuant to this subsection 12(e) in the event the liability
such party seeks to limit arises from (i) such party's knowing or
willful misconduct or gross negligence or (ii) in the case of
indemnification by Pro Tech or NCT, a third party claim or
governmental claim arising from Pro Tech's or NCT's violation or
alleged violation of federal or state securities laws.
13. GOVERNING LAW, MISCELLANEOUS.
a. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
b. Consent to Jurisdiction. The parties expressly consent to the
exclusive jurisdiction and venue of the federal courts whose districts
encompass any part of the City of New York, New York or the state
courts of the State of New York sitting in the City of New York, New
York, for the adjudication of any civil action related to or arising
out of, in whole or in part, this Agreement and the Transaction
Documents.
c. Counterparts. This Agreement may be executed in three or more
identical counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
parties. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause four
(4) additional originally executed signature pages to be physically
delivered to the other parties within five (5) days of the execution
and delivery hereof.
d. Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this Agreement.
e. Severability. If any term, provision, covenant or restriction of this
Agreement is held to be illegal, void, invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction.
f. Entire Agreement, Amendments. This Agreement supersedes all other
prior oral or written agreements among the Buyers, Pro Tech, NCT,
their Affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and, except as specifically set
forth herein, neither Pro Tech, NCT nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by each of the parties hereto.
g. Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided a copy is mailed by U.S. certified mail, return
receipt requested; (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested; or (iv) one (1) day after
deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to NCT: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Pro Tech: Pro Tech Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.A.
Steel ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyers, to their address and facsimile number on the signature
page hereof, with copies to the Buyers' counsel as set forth in a notice to
Pro Tech and NCT.
h. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective permitted
successors and assigns. None of the parties shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other parties.
i. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
j. Survival. Unless this Agreement is terminated under Section 13(m), the
representations and warranties of Pro Tech, NCT and the Buyers
contained in Sections 4, 5 and 6, the agreements and covenants set
forth in Sections 7, 8, and 13 and the indemnification provisions set
forth in Section 12 shall survive for a period of one (1) year from
the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
k. Publicity. Pro Tech, NCT and the Buyers shall have the right to
approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that Pro Tech or NCT shall each be entitled,
without the prior approval of the Buyers, to make any press release or
other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Buyers shall
be consulted by Pro Tech and NCT in connection with any such press
release or other public disclosure prior to its release and shall be
provided with a copy thereof).
l. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
m. Termination. In the event that the Closing shall not have occurred
with respect to the Buyers on or before five (5) business days from
the date hereof due to Pro Tech's, NCT's or any of the Buyer's failure
to satisfy the conditions precedent to Closing as set forth in
Sections 9, 10 and 11 above (and a nonbreaching party's failure to
waive such unsatisfied condition(s)), any nonbreaching party shall
have the option to terminate this Agreement with respect to such
breaching party at the close of business on such date without
liability of any party to any other party.
n. Construction of Agreement. This Agreement has been fully negotiated
among the parties, and none of the parties shall have any greater
burden than the other parties in construing this Agreement, including
one party being charged with the drafting of the Agreement.
IN WITNESS WHEREOF, the Buyer, Pro Tech and NCT have caused this Securities
Purchase and Supplemental Exchange Rights Agreement to be duly executed as of
the date first written above.
PRO TECH COMMUNICATIONS, INC.
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: President and Secretary
NCT GROUP, INC.
By: /s/ ▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇. ▇▇▇▇▇▇▇
Its: Senior Vice President and
Chief Financial Officer
[SIGNATURES CONTINUE ON NEXT PAGE]
"BUYER"
BALMORE FUNDS, S.A.
By: /s/▇▇▇▇▇▇ Kindle
Name: ▇▇▇▇▇▇ Kindle
Title: Director
Address: Balmore Funds, S.A.
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ BVI
Telephone:(▇▇▇) ▇▇▇▇-▇▇▇-▇▇▇▇
Facsimile:(▇▇▇)▇▇▇▇-▇▇▇-▇▇▇▇
AUSTOST ANSTALT ▇▇▇▇▇▇
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Representative
Address: Austost Anstalt ▇▇▇▇▇▇
744 Fuerstentum
Landstrusse, 163
Lichtestein
Telephone:(____) ___________________
Facsimile:(____) ___________________
ZAKENI LIMITED
By: /s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
Address: Zakeni Limited
Grand Bahamas
Telephone:(▇▇▇) ▇▇▇▇-▇▇▇-▇▇▇▇
Facsimile:(▇▇▇)▇▇▇▇-▇▇▇-▇▇▇▇
EXHIBIT "A"
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
OF PRO TECH COMMUNICATIONS, INC.
EXHIBIT "B"
REGISTRATION RIGHTS AGREEMENT
OF PRO TECH COMMUNICATIONS, INC.
EXHIBIT "C"
REGISTRATION RIGHTS AGREEMENT
OF NCT GROUP, INC.
EXHIBIT "D"
WARRANT FOR BALMORE FUNDS, S.A.
EXHIBIT "E"
WARRANT FOR AUSTOST ANSTALT ▇▇▇▇▇▇
EXHIBIT "F"
WARRANT FOR ZAKENI LIMITED
EXHIBIT "G"
NCT GROUP, INC.
NOTICE OF EXCHANGE
Reference is made to the Securities Purchase and Supplemental Exchange
Rights Agreement (the "Securities Purchase Agreement"). In accordance with and
pursuant to the Securities Purchase Agreement, the undersigned hereby elects to
exchange the number of shares of Series A Convertible Preferred Stock, $.01 par
value per share (the "Series A Preferred Shares"), of Pro Tech Communications,
Inc., a Florida corporation, indicated below for shares of Common Stock, $.01
par value per share, of NCT Group, Inc. (the "NCT Common Stock"), by tendering
the stock certificate(s) representing the share(s) of Series A Preferred Shares
specified below as of the date specified below, based on the Exchange Rate set
forth in Section 3(b) of the Securities Purchase Agreement.
The undersigned acknowledges that any sales by the undersigned of the
securities issuable to the undersigned upon exchange of the Series A Preferred
Shares shall be made only pursuant to (i) a registration statement effective
under the Securities Act of 1933, as amended (the "Act"), or (ii) an opinion of
counsel in form and content reasonably satisfactory to the Corporation that such
sale is exempt from registration required by Section 5 of the Act.
Date of Exchange:
Number of Series A Preferred Shares to be exchanged:
Stock certificate no(s). of Series A Preferred Shares to be exchanged:
Please confirm the following information:
Exchange Price:
Number of shares of NCT Common Stock to be issued:
Please issue the NCT Common Stock for which the Series A Preferred Shares are
being exchanged in the following name and to the following address:
Issue to:1
Facsimile Number:
EXHIBIT "H"
OPINION OF COUNSEL OF
NCT GROUP, INC.
EXHIBIT "I"
OPINION OF COUNSEL OF
PRO TECH COMMUNICATIONS, INC.
EXHIBIT "J"
BOARD RESOLUTIONS
SCHEDULE OF BUYERS
SCHEDULE 4(n)
Buyers: Conflicts
SCHEDULE 5(c)
Pro Tech: Capitalization
SCHEDULE 5(e)
Pro Tech: Conflicts
None.
SCHEDULE 5(f)
Pro Tech: Defaults, Violations
SCHEDULE 5(g)
Pro Tech: Consents
SCHEDULE 5(i)
Pro Tech: Subsequent Events
SCHEDULE 5(j)
Pro Tech: Litigation
SCHEDULE 5(p)
Pro Tech: Title
SCHEDULE 5(u)
Pro Tech: Tax Status
SCHEDULE 5(v)
Pro Tech: Certain Transactions
SCHEDULE 6(c)
NCT: Capitalization
SCHEDULE 6(e)
NCT: Conflicts
None.
SCHEDULE 6(f)
NCT: Defaults, Violations
SCHEDULE 6(g)
NCT: Consents
SCHEDULE 6(i)
NCT: Subsequent Events
SCHEDULE 6(j)
NCT: Litigation
SCHEDULE 6(p)
NCT: Title
SCHEDULE 6(u)
NCT: Tax Status
SCHEDULE 6(v)
NCT: Certain Transactions