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nct ____________________________________________________________ NCT GROUP, INC.
June 22, 1999
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
Pro Tech Communications, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, Florida 34946
Dear ▇▇. ▇▇▇▇▇▇▇▇▇:
The purpose of this letter is to set forth the basic terms by which Pro
Tech communications, Inc. or an entity succeeding to its assets and liabilities
(collectively, the "Seller") would be willing to sell to NCT Hearing Products,
Inc. ("NCT") or an entity created by it (collectively, such entity and NCT are
herein referred to as the "Buyer") all of the ownership interests in Seller. We
are writing to you in order to seek you approval of the following basic terms
around which we would proceed to develop terms and conditions of a definitive
agreement (the "Definitive Agreement") under which the acquisition would be
consummated. Except as specifically set forth herein, this Letter of Intent
shall be non-binding and in the event that the parties are unable to reach a
Definitive Agreement, neither party shall have any claims against the other
except for breach of the parties' respective obligations in the confidentiality
agreement referred to in paragraph 11 hereof.
1. PURCHASED INTERESTS. Buyer will acquire the majority ownership interest
in Seller, via a purchase by Buyer from Seller of stock of Seller (the
"Purchased Interest"). Pursuant to such purchase, Buyer will succeed to
the indirect ownership of Seller's assets and shall assume Seller's
liabilities.
2. PURCHASE PRICE. In consideration for the Purchased Interests to be
acquired by Buyer, Buyer shall license to Seller its technology for use
with Products in the Market as defined in Schedule B for shares of the
Seller's common stock having a value of $0.31 per share, or an aggregate
value of Six Million One Hundred Thirty Six Thousand Dollars ($6,136,000)
(the "Purchase Price"). The Buyer also agrees to raise Two Million dollars
($2,000,000) of additional equity. Schedule A outlines the structure of the
ownership after the transaction is completed.
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3. SELLER'S EMPLOYEES. Buyers shall provide employment opportunities to
Seller's management employees listed on Exhibit A attached hereto upon
terms and conditions no less favorable than those in existence as of the
date hereof. In addition, Buyer shall employ sufficient numbers of
Seller's non-management employees after Closing to ensure that Seller is
not in violation of the worker Adjustment and Retaining Notification Act
and/or any similar state law.
4. DIRECTORSHIP. The Buyer and Seller agree that pursuant to an agreed
upon Shareholder Agreement the Seller and Buyer will each have three
Directors on the BOD.
5. RESTRICTIVE COVENANT. At the Closing, the management of Seller shall
deliver to Buyer non-competition agreements prohibiting management of
Seller from competing with Buyer, the terms of which shall be mutually
agreed upon by ▇▇▇▇▇ and Seller.
6. DUE DILIGENCE. The parties hereto acknowledge that ▇▇▇▇▇ has not had
ample opportunity to engage in due diligence review of Seller, and,
consequently, additional due diligence period shall be available to Buyer,
and the Definitive Agreement shall be conditional to Closing based on
Buyer's investigation of Seller. Seller will make available to Buyer and
its representatives all information and records relating to the Seller and
the Purchased Interests and shall provide access to management personnel
to discuss such information. Buyer shall conduct its due diligence as
expeditiously as possible after execution of this letter and in a manner
so as not to interfere with the Seller or its business. The Buyer will
bear primary responsibility for drafting the Definitive Agreement.
7. CONDUCT OF BUSINESS. From the date hereof until August 23, 1999, the
Seller shall continue to conduct its business in the ordinary course and
shall not engage in any sale of its assets or shares of its capital stock,
enter into any transaction, contact or commitment, incur any liability or
obligation, or make any disbursement not in the ordinary course of
business. Buyer shall not be obligated to close if there is nay material
adverse change in the financial or operational condition of the Seller
after the date executed hereof. The Seller and the Buyer will agree to
limitations on the occurrence prior to closing of any new indebtedness,
the issuance of any new securities, debt or equity, and similar status quo
limitations as are customary for an acquisition of this nature.
8. BROKERAGE. Seller has not and will not retain any broker, finder,
placement agent or other party who would be entitled to any fee,
commission or other compensation, except for Union Atlantic LC, whose fee
of two percent (2%) of the total number of the Seller's shares of common
stock issued and outstanding at the completion of the transaction will be
paid equally by Seller and Buyer at the Closing. It is understood and
agreed by the parties hereto that with respect to such shares, Union
Atlantic LC shall have the piggyback registration rights as set forth in
Addendum "A" to the Consulting Agreement between the Seller and
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Union Atlantic LC. This paragraph shall not apply to any parties
furnishing legal services or accounting services to Buyer or Seller in
connection with the acquisition nor shall it apply to the Buyer's
obligation to raise $2,000,000 of additional equity.
9. EXCLUSIVITY. Neither the Seller nor its board of directors or
shareholders shall solicit, discuss, negotiate or provide information to
any party in connection with, or consider ay other proposal for, the
purchase or sale of any capital stock or assets of Seller. This
restriction shall remain in effect for a period commencing on the date of
execution hereof and shall continue until such time as (i) the Definitive
Agreement is signed by the parties, or (ii) sixty days from the date of
execution hereof.
10. EXPENSES. Each of the Buyer and Seller shall pay all of its own
expenses incidental to the negotiation and preparation of this document
and of all other documentation, including financial statements relating
to the acquisition, regardless of whether the acquisition is consummated.
11. CONFIDENTIALITY. In order to provide for the confidentiality and
non-disclosure of information exchanged by the parties in connection with
the negotiation and closing of the acquisition, the parties shall execute
a mutually-binding confidentiality agreement.
12. CONDITIONS PRECEDENT TO CLOSING. The consummation of the acquisition
of the Purchased Interests is subject to the following conditions:
a. The execution by the parties, on or before August 22, 1999, of
the Definitive Agreement containing customary terms and
provisions applicable to transaction similar to that discussed
herein, unless such terms and provisions are limited herein.
b. The entering into of the non-competition agreements described
in Section 5 hereto.
c. The Buyer shall have raised the Two Million Dollars ($2,000,000)
of equity referred to in Section 2 hereof.
d. The Seller shall have received an opinion from Union Atlantic LC
that the transactions referred to herein are fair, from a
financial point of review, to the Seller and its shareholders.
e. The Closing shall have taken place on or before August 22, 1999.
If the closing has not occurred by such date, the Seller shall
have the right to pursue alternative transactions with other
parties and shall have no further obligations to the Buyer,
except for the
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obligations in the confidentiality agreement referred to in
paragraph 11 hereof.
If the proposal described in this Letter is acceptable, please indicate by
signing and dating the duplicate copies in the space provided below and return
all but two (2) originally executed copies to the undersigned. Closing will be
held as soon as possible after execution of the Definitive Agreement and the
fulfillment of the other conditions precedent, but in no event later than
August 22, 1999.
Sincerely,,
NCT Hearing Products, Inc.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
▇▇▇▇▇▇ and accepted this 22nd day of June, 1999
Pro Tech Communications, Inc.
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
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