REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 30,
2001, by and between Pro Tech Communications, Inc., a Florida corporation, with
headquarters at 0000 Xxxxxxxxxx 00xx Xxxxxx, Xxxx Xxxxxx, Xxxxxxx 00000, (the
"Company"), and Alpha Capital Aktiengesellschaft, a Xxxxxxxxxxxx corporation
("Buyer").
WHEREAS, in connection with and pursuant to the terms and conditions of the
Securities Purchase and Supplemental Exchange Rights Agreement by and among the
Buyer, the Company and NCT Group, Inc. ("NCT"), dated as of the date hereof (the
"Securities Purchase Agreement"), the Company has agreed to (i) issue and sell,
and the Buyer has agreed to purchase, shares of the Company's Series B
Convertible Preferred Stock (the "Preferred Stock"), which will be convertible
into shares of the Company's common stock (the "Common Stock") (as converted,
the "Conversion Shares"), in accordance with the terms of the Articles of
Amendment to Articles of Incorporation of the Company dated as of July 30, 2001
(the "Articles of Amendment"); and (ii) grant to the Buyer warrants ("Warrants")
to purchase shares of Common Stock ("Warrant Shares"), in accordance with the
terms and conditions of the Warrant Agreement (as defined in the Securities
Purchase Agreement) dated as of the date hereof, between the Company and the
Buyer.
WHEREAS, to induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(or any similar successor statute) (collectively, the "1933 Act"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations and warranties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investor" means the Buyer and any permitted transferee or assignee
of the Buyer (including NCT) who agrees to become bound by the provisions
of this Agreement in accordance with Section 9 hereof and who holds
Preferred Stock or Registrable Securities.
b. "Issuance Date" means the date of the Company's issuance of its
Series B Preferred Shares to the Buyer (as defined in accordance with the
Articles of Amendment).
c. "Person" means an individual, corporation, limited liability
company, incorporated or unincorporated association, partnership, trust,
joint venture, organization, business, governmental or political
subdivision thereof or a governmental agency.
d. "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under
the 1933 Act (or any successor rule providing for offering securities on a
continuous basis) ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
e. "Registrable Securities" means (i) the Conversion Shares and (ii)
the Warrant Shares and any shares of capital stock issued or issuable with
respect to the Warrant Shares as a result of any stock split, stock
dividend, recapitalization, exchange or similar event.
f. "Registration Statement" means a registration statement and any
additional registration statement(s) of the Company filed under the 1933
Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare and file with the
SEC a Registration Statement or Registration Statements (as is necessary)
on Form S-1 (or other equivalent registration statement) on or prior to a
date which is no more than sixty (60) days from the Closing Date (the "S-1
Filing Deadline"), covering the resale of all of the Registrable
Securities. The Registration Statement(s) (i) shall include only the
Registrable Securities and the shares referred to in Exhibit 1 annexed
hereto, and (ii) shall also state that, in accordance with Rule 416 and 457
promulgated under the 1933 Act, such Registration Statement(s) also covers
such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of the Preferred Stock to prevent dilution
resulting from stock splits, stock dividends or similar transactions. Such
Registration Statement shall initially register for resale at least
8,954,545 shares of Common Stock, subject to adjustment as provided in
Section 3(b). The Company shall use its commercially reasonable efforts to
cause the Registration Statement to be declared effective by the SEC within
one hundred twenty (120) days after the S-1 Filing Deadline (the
"Registration Deadline" or "Required Effective Date"). The Company shall
permit the Registration Statement to become effective within five (5)
business days after receipt of a "no review" notice from the SEC.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) involves an underwritten offering, the
Investor shall have the right to select one legal counsel and an investment
banker (or bankers) and manager (or managers) to administer their interest
in the offering, the costs of which shall be borne by the Investor, which
investment banker (or bankers) and manager (or managers) shall be
reasonably satisfactory to the Company.
c. Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company proposes to
file with the SEC a Registration Statement relating to an underwritten
offering for its own account or the account of others under the 1933 Act of
any of its securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to securities to be issued solely in connection with
any acquisition of any entity or business, or equity securities issuable in
connection with stock option or other employee benefit plans) the Company
shall promptly send to the Investor who is entitled to registration rights
under this Section 2(c) written notice of the Company's intention to file a
Registration Statement and of the Investor's rights under this Section
2(c). If within twenty (20) days after receipt of such notice, the Investor
shall so request in writing, the Company shall include in such Registration
Statement all or any part of the Registrable Securities the Investor
requests to be registered, subject to the priorities set forth in Section
2(d) below. No right to registration of Registrable Securities under this
Section 2(c) shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this Section 2(c) may be
waived by the Investor. If an offering in connection with which the
Investor is entitled to registration under this Section 2(c) is an
underwritten offering, then the Investor shall, unless otherwise agreed by
the Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters as selected by the
Company and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such
underwritten offering.
d. Priority in Piggy-Back Registration Rights in connection with
Registrations or Company Account. If the registration referred to in
Section 2(c) is to be an underwritten public offering for the account of
the Company and the managing underwriter(s) advise the Company in writing
that in their reasonable good faith opinion, marketing or other factors
dictate that a limitation on the number of shares of Common Stock which may
be included in the Registration Statement is necessary to facilitate and
not adversely affect the proposed offering, then the Company shall include
in such registration: (1) first, all securities the Company proposes to
sell for its own account, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of securities
entitled to inclusion of their securities in the Registration Statement by
reason of demand registration rights, and (3) third, the securities
requested to be registered by the Investor and other holders of securities
entitled to participate in the registration, drawn from them pro rata based
on the number each has requested to be included in such registration.
e. Payments by the Company. If (i) the Registration Statement covering
the Registrable Securities is not effective by the Required Effective Date
or (ii) the Company fails to maintain the effectiveness of the Registration
Statement continuously for a period of at least two (2) years after
Required Effective Date (with the exception of any permitted Black-Out
Period, as defined in Section 3(c) below), then the Conversion Price (as
defined in the Articles of Amendment) of the Series B Preferred Stock will
be reduced pursuant to and in accordance with the terms of the Articles of
Amendment. The parties acknowledge that the damages which may be incurred
by the Investor if the Registration Statement has not been declared
effective by the Required Effective Date, or if the Company fails to
maintain such Registration Statement's effectiveness continuously for two
(2) years after the Required Effective Date, may be difficult to ascertain.
The parties agree that the Periodic Amount Percentage (as defined in the
Articles of Amendment) represents a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of such damages.
3. RELATED OBLIGATIONS.
Whenever the Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its commercially reasonable efforts to effect the registration
of the Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have the following
obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or
prior to the S-1 Filing Deadline), for the registration of Registrable
Securities pursuant to Section 2(a) and shall use its commercially
reasonable efforts to cause such Registration Statement(s) relating to
Registrable Securities to become effective by the one hundred twentieth
(120th) ) day following the S-1 Filing Deadline and keep the Registration
Statement(s) effective pursuant to Rule 415 at all times, except as
otherwise provided in Section 3(c) hereof, until the earliest of (i) the
date that is three (3) years after the last day of the calendar month
following the month in which the Registration Statement becomes effective,
(ii) the date as of which the Investor may sell all of the Registrable
Securities without restriction pursuant to Rule 144(k) promulgated under
the 1933 Act (or successor thereto), or (iii) the date on which (A) the
Investor shall have sold all the Registrable Securities and (B) none of the
shares of Preferred Stock are outstanding (the "Registration Period"),
which Registration Statement(s) (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep the
Registration Statement(s) effective at all times, except as otherwise
provided in Section 3(c) hereof, during the Registration Period, and,
during such period, shall comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement(s) until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement(s). In the event the number of shares
available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities, the Company
shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both,
so as to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within sixty (60) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The
Company shall use its commercially reasonable efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement
shall be deemed "insufficient to cover all of the Registrable Securities"
if at any time the number of Registrable Securities issued or issuable upon
conversion of the Preferred Stock is greater than the number of shares of
Common Stock available for resale under such Registration Statement;
provided, in the case of the initial registration of the Registrable
Securities pursuant to Section 2(a), the Company shall be required to
register at least 8,954,545 shares of Common Stock for resale. For purposes
of the calculation set forth in the foregoing sentence, any restrictions on
the convertibility of the Preferred Stock shall be disregarded and such
calculation shall assume that the Preferred Stock are then convertible into
shares of Common Stock at the then prevailing Conversion Rate (as defined
in the Articles of Amendment).
c. Black-Out Periods for Registration Statement. Notwithstanding
anything to the contrary in this Agreement, commencing immediately after
the effectiveness of any Registration Statement, the Company shall have the
right, from time to time, but not more than twice per year, to direct the
Investor to suspend sales of Registrable Securities registered thereunder
for a period not to exceed fifteen (15) days (each such period a "Black-Out
Period"), upon the Company's notification of the Investor in writing of the
existence of a Potential Material Event (as defined below). The Company
must, if lawful, give the Investor notice of a Black-Out Period in writing
at least two (2) Trading Days (as defined below) prior to the first day of
such Black-Out Period. Upon receipt of such notice, Investor shall not
effect any sales of the Registrable Securities pursuant to such
Registration Statement for the period designated in the notice. "Potential
Material Event" means any of the following: (a) the possession by the
Company of material information not ripe for disclosure in a registration
statement, as determined in good faith by the Chief Executive Officer or
the Board of Directors of the Company that disclosure of such information
in a Registration Statement would be detrimental to the business and
affairs of the Company; or (b) any material engagement or activity by the
Company which would, in the good faith determination of the Chief Executive
Officer or the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination
shall be accompanied by a good faith determination by the Chief Executive
Officer or the Board of Directors of the Company that the applicable
Registration Statement would be materially misleading absent the inclusion
of such information. "Trading Day" shall mean (i) a day on which the Common
Stock is traded on The Nasdaq Small Cap Market, the Nasdaq National Market
or other registered national stock exchange on which the Common Stock has
been listed, or (ii) if the Common Stock is not listed on The Nasdaq Small
Cap Market, the Nasdaq National Market or any registered national stock
exchange, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board.
d. The Company shall furnish to the Investor and its legal counsel
without charge (i) promptly after the same is prepared and filed with the
SEC, at least one copy of the Registration Statement and any amendments
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus(es)
included in such Registration Statement(s) (including each preliminary
prospectus); (ii) upon the effectiveness of any Registration Statement, ten
(10) copies of the prospectus included in such Registration Statement and
all amendments and supplements thereto (or such other number of copies as
the Investor may reasonably request); and (iii) such other documents,
including any preliminary prospectus, as the Investor may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by the Investor.
e. The Company shall use commercially reasonable efforts to (i)
register or qualify the Registrable Securities covered by the Registration
Statement(s) for offer and sale under such other securities or "Blue Sky"
laws of such jurisdictions within the United States as the Investor
reasonably requests in writing, but no more than four (4) jurisdictions;
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof
during the Registration Period; (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at
all times, except as otherwise provided in Section 3(c) hereof, during the
Registration Period; and (iv) take all other actions reasonably necessary
or advisable to register or qualify the Registrable Securities for sale in
such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify
to do business in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d), (b) subject itself to general
taxation in any such jurisdiction, or (c) take any action that would
subject it to general service of process in any such jurisdiction. The
Company shall promptly notify the Investor who holds Registrable Securities
of the receipt by the Company of any notification with respect to the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or "Blue Sky" laws of any
jurisdiction within the United States or its receipt of actual notice of
the initiation or threatening of any proceeding for such purpose.
f. In the event the Investor selects an underwriter(s) for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the underwriters of such offering. The costs, commissions and fees of such
underwriters shall be borne by the Investor.
g. The Company shall promptly notify the Investor in writing of the
happening of any event, of which the Company has knowledge, as a result of
which the prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or fails to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to the Investor (or
such other number of copies as the Investor may reasonably request). The
Company shall also promptly notify the Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to the Investor by facsimile on the same day of such
effectiveness and by overnight mail); or (ii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement
would be appropriate.
h. The Company shall use its commercially reasonable efforts to
prevent the issuance of any stop order or other suspension of effectiveness
of a Registration Statement, or the suspension of the registration or
qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible time.
Further, the Company shall notify the Investor (and, in the event of an
underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.
i. At the request of the Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter (excluding
any one or more of the Investors who may be deemed an underwriter in the
offering under the Registration Statement), if any, for sale in connection
with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, the cost of which shall be borne
by the Investor; and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in
form and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investor, the cost of which
shall be borne by the Investor.
j. The Company shall make available for inspection by (i) the
Investor; (ii) any underwriter participating in any disposition pursuant to
a Registration Statement; (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors; and (iv) one firm of
attorneys retained by all such underwriters (collectively, the
"Inspectors"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector to
enable each Inspector to exercise its due diligence responsibility. The
Company shall cause its officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such
due diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to the Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court
or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Investor agrees
that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, the Records deemed confidential. All fee
costs and expenses of the foregoing shall be borne by the Investor.
k. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or
any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning the Investor is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give prompt written notice to the Investor and allow the Investor,
at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
l. The Company shall use its commercially reasonable efforts to cause
all of the Registrable Securities covered by a Registration Statement to be
listed and quoted on the OTC Bulletin Board and any other securities
exchange, trading or quotation facility or market, if any, on which
securities of the same class or series issued by the Company are then
listed, if the listing of such Registrable Securities is then permitted
under the rules of such exchange or facility. The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(l).
m. The Company shall cooperate with the Investor who holds Registrable
Securities being offered through an underwritten offering, any managing
underwriter or underwriters, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or
amounts, as the case may be, and in such names, as the managing underwriter
or underwriters.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or the Investor, the
Company shall (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the Company reasonably agrees
should be included therein relating to the sale and distribution of
Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering, (ii) make all required filings of such prospectus supplements or
post-effective amendments as soon as practicable after the Company has been
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) supplement or make amendments to any
Registration Statement if requested by a shareholder or any underwriter of
such Registrable Securities. The costs of preparation of filing of any such
post-effective amendments and supplements shall be borne by the Investor.
q. The Company shall use its commercially reasonable efforts to cause
the Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
r. The Company shall otherwise use its commercially reasonable efforts
to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify the Investor in
writing of the information the Company requires from the Investor,
including, but not limited to, their method of disposition, if the Investor
elects to have any of the Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement that the Investor furnish to the Company in a timely manner such
information regarding itself, the Registrable Securities held by it and its
intended method of disposition of the Registrable Securities as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. By acceptance of the Registrable Securities, the Investor agrees to
cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement(s)
hereunder, unless the Investor has notified the Company in writing of the
Investor's election to exclude all of the Investor's Registrable Securities
from the Registration Statement.
c. In the event the Investor determines to engage the services of an
underwriter, the Investor agrees to enter into and perform the Investor's
obligations under the underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless the Investor notifies
the Company in writing of the Investor's election to exclude all of the
Investor's Registrable Securities from the Registration Statement(s).
d. The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), the Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration
Statement(s) covering such Registrable Securities until the Investor's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of 3(f) and, if so
directed by the Company, the Investor shall deliver to the Company (at the
expense of the Company) or destroy all copies in the Investor's possession
of the prospectus covering such Registrable Securities current at the time
of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless the Investor (i) agrees to sell the Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved
by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements, and (iii) agrees to pay its pro
rata share of all underwriting discounts and commissions.
f. The Investor agrees that it will not sell any Registrable
Securities under a Registration Statement until it has obtained copies of
the related prospectuses as then amended or supplemented. The Investor
further agrees that it and its officers, directors or affiliates, if any,
will comply with the prospectus delivery requirements of the 1933 Act as
applicable to them in connection with sales of the Registrable Securities
pursuant to such Registration Statement.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting expenses, discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company, except as otherwise specifically provided herein.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company shall
indemnify, hold harmless and defend the Investor, the directors, officers,
employees, agents and each Person, if any, who controls the Investor within
the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), any underwriter (as defined in the 0000 Xxx) for
the Investors, and the directors and officers of each Person, if any, who
controls any such underwriter within the meaning of the 1933 Act or the
1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending
any action, claim, suit, inquiry, proceeding, investigation or appeal taken
from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto
("Indemnified Damages"), to which any of them may become subject insofar as
such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue or alleged
untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with
the qualification of the offering under the securities or other "Blue Sky"
laws of any jurisdiction in which Registrable Securities are offered ("Blue
Sky Filing"), or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made,
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other
law, including, without limitation, any state securities law, or any rule
or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not
apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to
the Company by any Indemnified Person or underwriter for such Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to
Section 3(c); (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject
thereof (or to the benefit of any person controlling such person) if the
untrue statement or mission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c), and the Indemnified Person was promptly advised
in writing not to use the incorrect prospectus prior to the use giving rise
to a violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is based on
a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company; and (iv) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9 for a period of three (3)
years from the S-1 Filing Deadline.
b. In connection with any Registration Statement in which the Investor
is participating, the Investor shall indemnify, hold harmless and defend,
to the same extent and in the same manner as is set forth in Section 6(a),
the Company, its directors, officers, agents, employees and each Person, if
any, who controls the Company within the meaning of the 1933 Act or the
1934 Act and the directors and officers of such controlling Persons
(collectively and together with an Indemnified Person, an "Indemnified
Party"), against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as
such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written
information furnished to the Company by the Investor expressly for use in
connection with such Registration Statement. Subject to Section 6(d), the
Investor further will promptly reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained
in this Section 6(b) and Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld; provided further, that the Investor shall be liable under this
Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the gross proceeds to the Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investor pursuant
to Section 9. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(b) with respect
to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same
extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party (the
"Indemnifying Party") under this Section 6, 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 Person or the
Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or 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
Person or Indemnified Party and the Indemnifying Party would be
inappropriate due to actual or potential conflicts of interests between
such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Company shall pay
reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party or Indemnified
Person 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 or Indemnified Person which
relates to such action or claim. The Indemnifying Party shall keep the
Indemnified Party or Indemnified Person 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 or Indemnified Person, 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 or Indemnified Person 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 or Indemnified Person
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 Person or Indemnified Party under this
Section 6, except to the extent that the Indemnifying Party is prejudiced
in its ability to defend such action.
e. The indemnification required by this Section 6 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 Indemnified
Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the Indemnifying Party or others, and (ii) any
liabilities the Indemnifying Party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an Indemnifying Party is prohibited or
limited by law, the Indemnifying Party agrees to contribute to the amount paid
or payable by such Indemnified Party with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that: (i) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (ii) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any Person who was not guilty of
fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and
c. furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the 1933
Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investor to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investor to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assignable by the
Investor to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within
five (5) business days after such assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being transferred
or assigned; (iii) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence, the transferee or assignee agrees
in writing with the Company to be bound by all of the provisions contained
herein; (iv) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement; (v) such
transferee shall be an "accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the 1933 Act; and (vi) in the event the
assignment occurs subsequent to the date of effectiveness of the Registration
Statement required to be filed pursuant to Section 2(a), the transferee (other
than NCT) agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended and the observance thereof
waived (either generally or in a particular instance and either retroactively or
prospectively), except with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon the Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
b. 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 the Company: Pro Tech Communications, Inc.
0000 Xxxxxxxxxx 00xx Xxxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx, President
With copies (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. X'Xxxxx, Esq.
Facsimile: (000) 000-0000
NCT Group, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
If to Buyer: Alpha Capital Aktiengesellschaft
Xxxxxxxxx 0, 0000 Xxxxxxxxxxx
Vaduz, Lichtenstein
Facsimile: (000-00) 0000-0000
with a copy to: Grushko & Xxxxxxx, P.C.
000 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number. Copies delivered only
to the Company's counsel shall not constitute adequate notice.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. 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.
e. 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.
f. If any provision of this Agreement shall be 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.
g. This Agreement and the Securities Purchase Agreement, together with
exhibits and schedules hereto and thereto, constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior
agreements and understandings, oral or written, among the parties hereto
with respect to such matters.
h. Subject to the requirements of Section 9, this Agreement shall be
binding upon and inure to the benefit of the parties and their permitted
successors and assigns.
i. 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. The headings in this Agreement are for convenience of reference
only, do not constitute a part of this Agreement, and shall not limit or
otherwise affect the meaning hereof.
k. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
l. 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. 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 parties have caused this Agreement to be duly
executed as of day and year first above written.
COMPANY:
PRO TECH COMMUNICATIONS, INC.
By: /s/ XXXXXXX XXXXXXXXX
--------------------------------
Name: Xxxxxxx Xxxxxxxxx
Its: Chief Financial Officer
BUYER:
ALPHA CAPITAL AKTIENGESELLSCHAFT
By: _______________________________
Name: ____________________________
Title: _____________________________
EXHIBIT 1
Shares Permitted to Be Included in Registration Statement
Shares of Owned Description of
Shareholder Name Common Stock Right to Acquire
----------------------------------- ----------------- ----------------------
Alpha Capital Aktiengesellschaft None 1,000,000 Warrants
(or designees) issued on Closing Date,
exercisable at
$0.13/share, with
registration rights
Subject to restrictions and limitations previously agreed to or existing, Pro
Tech Communications, Inc. (the "Company") reserves the right to include
additional selling shareholders, including the investor in this transaction, in
future Form S-1 Registration Statements filed by the Company.
