Exhibit 2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September 12, 2000
between NCT Hearing Products, Inc., a Delaware corporation with its principal
place of business at 00 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000 ("NCT
Hearing" or the "Buyer"), and Pro Tech Communications, Inc., a Florida
corporation, with headquarters located at 0000 Xxxxxxxxxx 00xx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxx 00000 ("Pro Tech", "Company" or the "Seller").
WHEREAS, Buyer and Seller 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, the Seller's authorized capital stock consists of (i) 40,000,000
shares of common stock, $0.001 par value per share and [$_____] stated value
(face value) per share (the "Seller's Common Stock"), of which immediately prior
to the date of this Agreement approximately [________] shares are issued and are
outstanding, and (ii) 1,000,000 shares of preferred stock (the "Seller's
Preferred Stock"), all as provided in Annex I (reflecting the authorized shares,
par value, stated value, liquidation preference, and currently outstanding
shares);
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to issue and sell to the Buyer, upon the terms and conditions stated in
this Agreement, shares of Seller's Common Stock in order to acquire a majority
ownership interest in the Seller; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Shareholder's
Agreement substantially in the form attached hereto as Annex II (the
"Shareholder's Agreement") pursuant to which the Seller will appoint three
executive officers of the Buyer to the Board of Directors of the Seller.
NOW THEREFORE, in consideration of the premises hereof and the mutual
covenants, representations and warranties contained herein, the Buyer and the
Seller hereby agree as follows:
1 . AGREEMENT TO PURCHASE.
a. Closing; Closing Date. The closing of the purchase and sale of the
Seller's Common Stock (the "Closing") shall take place at the offices of Steel
Xxxxxx & Xxxxx, LLP located at 000 Xxxxx Xxxxxxxx Xxxxxxxxx, 00xx xxxxx, Xxxxx,
Xxxxxxx 00000, immediately following the execution hereof or such later date or
different location as the parties shall agree in writing, but not prior to the
date that the conditions set forth in Sections 6 and 7 have been satisfied or
waived by the appropriate party. The date of the Closing is hereinafter referred
to as the "Closing Date."
b. Purchase of Seller's Common Stock. At the Closing, subject to the
satisfaction (or waiver) of the conditions precedent to Closing as set forth in
Sections 6 and 7 below, Seller shall issue and sell to Buyer, and Buyer shall
purchase from Seller, that number of unissued shares of Seller's Common Stock
such that, immediately following the Closing, Buyer will own, on a fully diluted
basis, sixty percent (60%) of the total number of issued and outstanding shares
of Seller's Common Stock, in consideration of the Buyer's execution of a license
agreement, substantially in the form attached hereto as Annex III (the "License
Agreement"). The License Agreement shall be executed by the parties on the
Closing Date.
2. REPRESENTATIONS AND WARRANTEES OF THE BUYER.
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The Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. The Buyer is acquiring shares of the Seller's Common
Stock 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, the Buyer does not
agree to hold any of the shares of Seller's Common Stock for any minimum or
other specific term and reserves the right to dispose of shares of the Seller's
Common Stock 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. The 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 Seller's Common Stock
and, as of the date hereof, is able to afford a total and complete loss of its
investment.
c. Sophisticated Investor. The Buyer has such knowledge, skill and
experience in business, financial and investment matters so that the Buyer is
capable of evaluating the merits and risk of an investment in the Seller's
Common Stock 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 its investment in the Seller's Common Stock.
d. Reliance on Exemptions. The Buyer understands and acknowledges that the
shares of Seller's Common Stock 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 the Seller is
relying in part upon the truth and accuracy of, and the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire such securities.
e. Information. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Seller and materials relating to the offer and sale of the shares of Seller's
Common Stock which have been requested by such Buyer. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Seller. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its advisors, if any, or its representatives shall
modify, amend or affect the Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the shares of Seller's Common Stock involves
a high degree of risk. 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 shares of Seller's Common Stock.
f. No Governmental Review. The 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 Seller's Common Stock
or the fairness or suitability of the investment in the shares of Seller's
Common Stock, nor have such authorities passed upon or endorsed the merits of
the offering of the shares of Seller's Common Stock.
g. No General Solicitation. At no time was the Buyer presented with or
solicited by or through any leaflet, public promotional meeting, published or
publicly available advertisement or any other form of general solicitation or
advertising relating to the Seller's Common Stock.
h. No Broker Commissions or Finders Fees. Except as otherwise provided in
Section 10(n) hereof, the 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.
i. Transfer or Resale. The Buyer understands that (i) the shares of
Seller's Common Stock have not been registered under the 1933 Act or any state
securities laws, and may not be offered by such Buyer for sale, sold, assigned,
transferred or otherwise disposed of unless (a) subsequently registered under
the 1933 Act and state securities laws, if applicable, (b) the Buyer shall have
delivered to the Seller an opinion of counsel, in form and substance reasonably
satisfactory to the Seller, 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) the Buyer provides the Seller with evidence satisfactory to
the Seller 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"); and (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 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder
j. Legends. The Buyer understands that the certificates or other
instruments representing the shares of Seller's Common Stock and, until such
time as the sale of the shares of Seller's Common Stock have been registered
under the 1933 Act, the stock certificates representing the shares of Seller's
Common Stock, 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 FORM AND CONTENT REASONABLY
ACCEPTABLE TO THE COMPANY, 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 the Seller shall issue a
certificate without such legend to the holder of the shares of Seller's Common
Stock, upon which it is stamped, if, unless otherwise required by state
securities laws, (i) the sale of the shares of Seller's Common Stock is
registered under the 1933 Act, (ii) in connection with a sale transaction, such
holder provides the Seller with an opinion of counsel, in form and substance
reasonably acceptable to the Seller, to the effect that a public sale,
assignment, transfer or other disposition of the shares of Seller's Common Stock
may be made without registration under the 1933 Act, or (iii) such holder
provides the Seller with evidence satisfactory to the Seller that the shares of
Seller's Common Stock can be sold pursuant to Rule 144.
k. Authorization, Enforcement. 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.
l. Conflicts. Except as disclosed in Schedule 2(l), the execution, delivery
and performance of this Agreement by the Buyer and the consummation by the Buyer
of the transactions contemplated hereby will not (i) conflict with or violate
the Buyer's organizational charter 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
the Buyer is a party, or (iii) to the Buyer's knowledge, result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to the Buyer or any of its subsidiaries, or by
which any property or asset of the Buyer or any of its subsidiaries is bound or
affected, which in the case of (ii) or (iii) would have a material adverse
effect on the business, financial condition or results of operations of Buyer.
3 . REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants to the Buyer that:
a. Organization and Qualification. The Seller 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. The Seller 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 the Seller. As of
the date hereof, the Seller 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 (50) percent 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. The
Seller has the requisite corporate power and authority to enter into and perform
this Agreement, the License Agreement and any related agreements (collectively,
the "Transaction Documents"), and to issue the Seller's Common Stock in
accordance with and subject to the terms and conditions hereof and thereof. The
execution and delivery of the Transaction Documents by the Seller and the
consummation by Seller of the transactions contemplated thereby, including,
without limitation, the issuance of the Seller's Common Stock have been duly
authorized by the Seller's Board of Directors and no further consent or
authorization is required by the Seller, its Board of Directors or its
shareholders. The Transaction Documents have been duly executed and delivered by
the Seller and, when delivered, constitute valid and binding obligations of the
Seller enforceable against the Seller 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.
c. Capitalization. As of the date of this Agreement, the authorized capital
stock of the Seller consists of 40,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock, of which immediately prior to the date of this
Agreement, approximately [_________] shares of Common Stock are issued and
outstanding, and, except for [__________], no shares of preferred stock,
debentures or notes are 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 3(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 the Seller. Except as disclosed in
Schedule 3(c), as of the 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 the Seller or contracts, commitments, understandings
or arrangements by which the Seller is or may become bound to issue
additional shares of capital stock of the Seller;
(ii) there are no outstanding debt securities; and
(iii) there are no unperformed agreements or arrangements under which
the Seller is obligated to register the sale of any of its securities
under the 1933 Act.
The Seller has furnished to the Buyer true and correct copies of: (i) the
Seller's Amended and Restated Articles of Incorporation, as amended and as in
effect on the date hereof (the "Articles of Incorporation"), (ii) the Seller's
Bylaws, as in effect on the date hereof (the "Bylaws") and (iii) the Articles of
Amendment to Articles of Incorporation of the Seller dated as of September __,
2000 which provides the terms of the Series A Convertible Preferred Stock of the
Seller convertible into or exercisable for Seller's Common Stock and the
material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The shares of Seller's Common Stock 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 all rights accorded to a holder of Seller's
Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of this Agreement by the Seller and the consummation by
the Seller 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 the Seller is a party, which conflict or default would have
a material adverse effect on the business, financial condition or results of
operations of the Seller, or (iii) to the Seller'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 Seller's Common Stock is traded
or listed) applicable to the Seller, or by which any property or asset of the
Seller is bound or affected, which would have a material adverse effect on the
business, financial condition or results of operations of Seller.
f. No Default or Violation. Except as disclosed in Schedule 3(f), the
Seller 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 the Seller. To the Seller's knowledge, the
business of the Seller 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, the Seller 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 in accordance with the terms hereof. Except as
disclosed in Section 4(f) and Schedule 3(g), all consents, authorizations,
orders, filings and registrations which the Seller 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, 1997, the Seller
has 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
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"). The Seller has delivered to the Buyer or its representative true
and complete copies of the SEC Documents. As of their respective dates, the
financial statements of the Seller 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 the Seller
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
the Seller to the Buyer which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(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 3(i), since
the date of the financial statements included in the Company's last filed
Quarterly Report on Form 10-QSB for the period ended April 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 the Seller. The Seller has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law, nor does the Seller 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 the knowledge of the Seller,
threatened against or affecting the Seller or the Seller's 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 the Seller to
perform its obligations under, the Transaction Documents; or (iii) except as
expressly set forth in Schedule 3(j), would reasonably be expected to have a
material adverse effect on the business, operations, properties, financial
condition or results of operation of the Seller.
k. Acknowledgment Regarding Buyer's Purchase of Seller's Common Stock. The
Seller 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. The Seller further
acknowledges that the Buyer is not acting as a financial advisor or fiduciary of
the Seller (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 shares of the Seller's Common Stock. The Seller further represents to the
Buyer that the Seller's decision to enter into this Agreement has been based
solely on the independent evaluation by the Seller and its representatives.
l. No Undisclosed Events, Liabilities, Developments or Circumstances. To
the Seller's knowledge, no event, liability, development or circumstance has
occurred or exists, or is contemplated to occur, with respect to the Seller 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 the Seller, nor any of its affiliates
(as defined in Rule 501 of Regulation D of the 0000 Xxx) ("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 0000 Xxx) in connection with the offer or sale
of the shares of Seller's Common Stock.
n. Employee Relations. The Seller is not involved in any labor dispute nor,
to the Seller's knowledge, is any such dispute threatened. None of the Seller's
employees is a member of a union and the Seller believes that its relations with
its employees are satisfactory.
o. Intellectual Property Rights. Schedule 3(o) describes all rights in
patents, patent applications, trademarks, service marks, trade names, corporate
names, copyrights, mask works, trade secrets, know-how or other intellectual
property rights owned by, licensed to or otherwise controlled by the Seller or
used in, developed for use in, or necessary to the conduct of the Seller's
business as now conducted or planned to be conducted (collectively, the "IP
Rights"). Schedule 3(o) describes all IP Rights which have been licensed to
third parties and those IP Rights which are licensed from third parties and
identifies all contracts containing the licenses to and from third parties. The
Seller has taken reasonably appropriate measures to protect the secrecy,
confidentiality and value of the IP Rights. The Seller has not received any
notice of, nor are there any facts known to the Seller that indicate a
likelihood of, any infringements or misappropriation by or conflict from any
third party with respect to the IP Rights. No claim by any third party
contesting the validity or ownership of any IP Rights has been made, is
currently outstanding or, to the best of the Seller's knowledge, is threatened.
The Seller has not received any notice of any infringement, misappropriation or
violation by the Seller of any intellectual property rights of any third party
and, to the best of the Seller's knowledge, the Seller's use of the IP Rights in
connection with its business, does not infringe, misappropriate or otherwise
violate any such intellectual property rights
p. Environmental Laws. The Seller, to the Seller'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 terms and conditions of any
such permit, license or approval.
q. Title. The Seller 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
the Seller, in each case free and clear of all liens, encumbrances and defects,
except as described in Schedule 3(q) 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 the Seller. The Seller does not own any
real property. Any real property and facilities held under lease by the Seller
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 the Seller.
r. Insurance. The Seller is insured by insurers which the Seller believes
are of recognized financial responsibility against such losses and risks and in
such amounts as management of the Seller believes to be prudent and customary in
the businesses in which the Seller is engaged. The Seller 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 the Seller.
s. Regulatory Permits. The Seller possesses all certificates,
authorizations, licenses and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct its respective 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 the Seller. The Seller 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.
t. Internal Accounting Controls. The Seller 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.
u. No Materially Adverse Contracts, etc. The Seller is not subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which, in the judgment of the Seller's officers, has or is
reasonably expected in the future to have a material adverse effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Seller. The Seller is not a party to any contract or agreement
which, in the judgment of the Seller's officers, has or is reasonably expected
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Seller.
v. Tax Status. Except as set forth on Schedule 3(v), the Seller 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 the Seller 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 the Seller have no
knowledge of, and know of no basis for, any such claim.
w. Certain Transactions. Except as set forth on Schedule 3(w), in the SEC
Documents and arms-length transactions pursuant to which the Seller makes
payments in the ordinary course of business upon terms no less favorable than
the Seller could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Seller is presently a party to any transaction with the Seller
(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 Seller'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.
x. Dilutive Effect. The Seller understands and acknowledges that its
obligation to issue the shares of Seller's Common Stock upon Closing, is,
subject to certain closing conditions as set forth in this Agreement, absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other shareholders of the Seller.
y. Fees and Rights of First Refusal. The Seller 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 the Seller, underwriters, brokers, agents or other third
parties.
z. Investment Company. The Seller 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.
aa. No Broker Commissions or Finder Fees. Except as otherwise
provided in Section 10(o) hereof, the Seller 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.
bb. No Untrue Statements. No representation, warranty or statement
made by Seller in this Agreement, nor any certificate furnished by the
Seller pursuant to this Agreement, contains or will contain on the Closing
Date, any untrue statement of a material fact, or omits or will omit, on
the Closing Date, to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading.
cc. Seller's Representations and Warranties Generally. Where any
representation, warranty or statement contained herein regarding a
specific matter relating to the Seller or its business or affairs is
qualified by the phrase "to the Seller's knowledge" or any similar phrase
relating to the knowledge of the Seller, it is intended to indicate that
each of the executive officers and directors of the Seller do not have,
without undertaking any investigation or inquiry, current actual knowledge
of the inaccuracy of such representation, warranty or statement.
4. 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 6 and 7 of this Agreement.
b. Form D. The Seller agrees to file a Form D with respect to the Seller's
Common Stock as required under Regulation D promulgated under the 1933 Act and
to provide a copy thereof to the Buyer promptly after such filing. The Seller
shall, on or before the Closing Date, take such action as the Seller shall
reasonably determine is necessary to qualify the Seller's Common Stock for, or
obtain exemption for the Seller's Common Stock for, sale to the Buyer at the
Closing pursuant to this Agreement under applicable securities or "Blue Sky"
laws of the state of Connecticut and shall provide evidence of any such action
so taken to the Buyer as soon as practicable following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date as of which the
Buyer may sell all of the Seller's Common Stock without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the
date on which (A) the Buyer shall have sold all the Seller's Common Stock and
(B) none of the shares of the Seller's Common Stock is outstanding (the
"Registration Period"), the Seller shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Seller 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. Financial Information. The Seller agrees to send the following to the
Buyer upon the Buyer's request during the Registration Period: (i) within five
(5) days after the later of (A) the filing thereof with the SEC or (B) the date
the Buyer's request was received by the Seller, 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) the release thereof or (B)
the date the Buyer's request was received by the Seller, copies of all press
releases issued by the Seller; and (iii) copies of the same notices and other
information given to the shareholders of the Seller generally, contemporaneously
with the giving thereof to the shareholders.
e. Reservation of Shares. The Seller shall take all action necessary to, at
all times, have authorized and reserved for the purpose of issuance, no less
than 100% of the number of shares of Seller's Common Stock needed to provide for
the issuance of the Seller's Common Stock at Closing.
f. Listings. The Seller shall take all steps reasonably necessary to cause
its Common Stock to be approved for quotation on the OTC Bulletin Board, and the
Seller 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. The Seller shall promptly provide to the Buyer copies
of any notices it receives regarding the continued eligibility of the Seller's
Common Stock for trading on the facility on which it is listed.
g. Expenses. Each of the Seller and the Buyer shall pay all costs and
expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of the Transaction Documents.
The Seller and the Buyer 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.
h. Corporate Existence. So long as any of the shares of the Seller's Common
Stock remain outstanding, the Seller shall not directly or indirectly consummate
any merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Seller's assets or any similar transaction or related
transactions (each such transaction, a "Sale of the Company") except if the
surviving or successor entity in such transaction expressly assumes, in writing,
the Seller's obligations hereunder, and any other agreements and instruments
entered into or delivered by the Company in connection herewith.
i. Transactions With Affiliates. So long as the Buyer owns Seller's Common
Stock with an aggregate Market Value (as defined below) as of the date of the
Transaction (as defined below) equal to or greater than [$200,000], the Seller
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-K promulgated
under the 0000 Xxx) ("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 Seller's 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, or (c) any Transaction which is approved by a majority of
the Disinterested Directors of the Seller.
For purposes of this Section 4(i), the following terms shall have
the following meanings:
(i) "Market Value" per share of Seller's Common Stock is equal to
the lowest average of the average of the Closing Bid Price and
the Closing Ask Price for the Seller's Common Stock for any
consecutive five (5) day trading period out of the fifteen
(15) trading days preceding the date of the Transaction.
(ii) "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 Seller (all as appropriately
adjusted for any stock dividend, stock split or other similar
transaction during such period);
(iii) "Closing Ask Price" means, for any security as of any date,
the last closing ask price on the Nasdaq-NM as reported by
Bloomberg, or, if the Nasdaq-NM is not the principal trading
market for such security, the last closing ask 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
ask 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 ask price is reported
for such security by Bloomberg, the last closing trade price
of such security as reported by Bloomberg. If the Closing Ask
Price cannot be calculated for such security on such date on
any of the foregoing bases, the Closing Ask 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);
(iv) "Disinterested Director" for purposes of approving of a
Transaction pursuant to this Section 4(k) means a director of
the Seller who is not a party, and who is not an Affiliate of
a party, to such Transaction;
(v) "Affiliate" 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) shares common
control with that person or entity; and
(vi) "Control" or "controls" means that a person or entity has the
power, direct or indirect, to conduct or govern the policies
of another person or entity.
j. At the Closing, the Board of Directors ("Board") of the Seller shall
appoint Xxxxx Xxxxxxxx, Xx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxx ("Designated
Persons") to the Board. The Seller makes no warranty or representation that the
Seller's shareholders will reelect the Designated Persons to the Board at the
next annual meeting of the Seller's shareholders.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
At Closing, the Seller 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 shares of the Seller's Common Stock (the
"Irrevocable Transfer Agent Instructions"). All such certificates shall bear the
restrictive legend specified in Section 2(j) of this Agreement. The Seller
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(i) hereof will be given by the Seller to its transfer
agent and that the Seller's Common Stock shall otherwise be freely transferable
on the books and records of the Seller as and to the extent provided in this
Agreement. Nothing in this Section 5 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 Seller's Common Stock. If the Buyer provides
the Seller with an opinion of counsel, reasonably satisfactory in form and
substance to the Seller, that registration for resale by the Buyer of any of the
Seller's Common Stock is not required under the 1933 Act, the Seller shall
permit the transfer, subject to the limitations and restrictions set forth in
this Agreement and the other Transaction Documents, and promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Seller 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, the Seller acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Seller of the provisions of this Section 5,
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.
6. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO SELL.
The obligation of the Seller hereunder to issue and sell the Seller's
Common Stock to the Buyer 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 Seller at any time in its sole discretion:
a. The Buyer shall have executed this Agreement, the Shareholder's
Agreement and the License Agreement and delivered same to the Company.
b. The representations and warranties of the Buyer 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 Buyer 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
Buyer at or prior to the Closing Date. The Seller shall have received a
certificate, executed by the Chief Financial Officer, or other executive officer
acting in such capacity, of the Buyer, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
the Seller.
7. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO PURCHASE.
----------------------------------------------------------
The obligation of the Buyer hereunder to purchase the Seller's Common Stock
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 Buyer at any time in its sole discretion:
a. The Seller shall have executed this Agreement, the Shareholder's
Agreement and the License Agreement, and delivered same to the Buyer.
b. The Seller's 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 NYSE, and trading in the Seller's Common Stock shall not have been
suspended for any reason.
c. The representations and warranties of the Seller 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
3 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 the Seller 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 Seller at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the President or Chairman of the Board
of the Seller, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
d. The Buyer shall have received the opinion of the Seller's counsel, dated
as of the Closing Date, in form and substance reasonably satisfactory to the
Buyer and in substantially the form of Annex V attached hereto.
e. The Seller shall have executed and delivered to the Buyer (or the
Buyer's designee) certificates (in such denominations as the Buyer shall
request) for the shares of the Seller's Common Stock being purchased by the
Buyer at the Closing.
f. The Board of Directors of the Seller shall have adopted the resolutions
in substantially the form of Annex VI attached hereto.
g. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and acknowledged in
writing by the Seller's transfer agent.
h. Shareholder Approval. The Seller shall have submitted to its
shareholders at a shareholder meeting a proposal for ratification of the
authorization for issuance of sufficient shares of Seller's Common Stock needed
to provide for the issuance of Seller's Common Stock to Buyer at the Closing,
and shareholders of Seller shall have adopted such proposal at the shareholder
meeting.
8. CONFIDENTIALITY, NONDISCLOSURE AND NONCOMPETITION.
-------------------------------------------------
a. The Seller agrees that for a period of three (3) years following the
Closing Date:
(i) The Seller and its current management (as defined below) will not
compete with the Buyer, without the prior written consent of the
Buyer, in any activity relating to the Buyer's active noise
cancellation and speech enhancement business. For purposes of the
preceding sentence, competition shall include, without limitation,
direct or indirect competition by the Seller or its employees.
(ii) The Seller's current management (as defined below) shall not compete
with the Seller, without the prior written consent of the Buyer, in
any activity relating to the Seller's headset business, whether or
not the Seller's current management is employed or is no longer
employed by Seller during such three (3) year period. For purposes
of the preceding sentence, competition shall include, without
limitation, direct or indirect competition by such individual or
other persons employed by him or her.
(iii) The Seller and its current management (as defined below) will not,
directly or indirectly, appropriate any of the Buyer's business
opportunities (as defined below) or any of the Buyer's clients (as
defined below).
(iv) The Seller's current management (as defined below) shall not,
directly or indirectly, appropriate any of Seller's business
opportunities (as defined below) or any of Seller's clients (as
defined below).
(v) For purposes of this Section 8, the following terms shall have the
following meanings:
(A) "Current management" shall include any present directors or officers of
the Seller;
(B) "Buyer's business opportunities" shall include existing opportunities
and prospective opportunities within the scope
of the Buyer's business which the Buyer has
reduced to a written business plan during the
twelve (12) month period immediately preceding
the Closing Date, whether such opportunities
arise in the United States or in any foreign
country in which the Buyer conducts business;
(C) "Seller's business opportunities" shall include existing opportunities
and prospective opportunities within the scope
of the Seller's business which the Seller has
reduced to a written business plan during the
twelve (12) month period immediately preceding
the Closing Date, whether such opportunities
arise in the United States or in any foreign
country in which the Seller conducts
business;
(D) "Buyer's clients" shall include both individuals and business entities
that were (x) existing clients of the Buyer as
of the Closing Date, (y) clients of the Buyer
at any time during the three-year period
immediately preceding the Closing Date, and
(z) prospective clients actively solicited by
the Buyer at any time during the six (6) month
period immediately preceding the Closing; and
(E) "Seller's clients" shall include both individuals and business entities
that were (x) existing clients of the Seller
as of the Closing Date, (y) clients of the
Seller at any time during the three-year
period immediately preceding the Closing Date,
and (z) prospective clients actively solicited
by the Seller at any time during the six (6)
month period immediately preceding the
Closing.
(v) The Seller will not hire, contract with or solicit for employment any
employee of the Buyer or any former employee of the Buyer who left such
employment less than six (6) months prior to the Closing.
b. The parties acknowledge and agree that each of their businesses is
specialized and not confined to any geographic market and agree that such
geographic scope is reasonable. The parties further acknowledge that the
identities and needs of their clients and prospective clients are not generally
known, and that such information is confidential and proprietary to the parties.
The parties agree that their services to each other have been unique and
extraordinary that in the context of the transaction contemplated by this
Agreement the parties have legitimate interests in ensuring that such special
skills and confidential information will not be used by the other party or any
competitor of the other party in competition with the other party, and that the
restrictions set forth herein are reasonable in their face.
c. The restrictions set forth in this Section are considered by the parties
to be reasonable for the purposes of protecting the legitimate business
interests of the parties. The parties acknowledge and agree that monetary
damages would not provide an adequate remedy in the event of a breach or
threatened breach of the provisions of this Section. The parties agree that, in
addition to any other remedies available to the parties, the parties shall be
entitled to injunctive relief, specific performance and other equitable relief
to secure the enforcement of these provisions, and shall be entitled to receive
reimbursement from the other party for all reasonable attorneys' fees and
expenses incurred by the party enforcing these provisions, should such party
enforcing these provisions prevail. If a party breaches the covenants set forth
in this Section, the running of the Restriction Period described herein shall be
tolled for so long as such breach continues. It is the desire and intent of the
parties that the provisions of this Section be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought. If any provisions of this Section relating to the time
period, scope of activities, geographic area of restrictions or otherwise is
declared by a court of competent jurisdiction to exceed the maximum permissible
time period, scope of activities, geographic area or other matter of public
policy, the maximum time period, scope of activities, geographic area or other
matter, as the case may be, shall be reduced to the maximum which such court
deems enforceable. If any provisions of this Section other than those described
in the preceding sentence are adjudicated to be invalid or unenforceable, the
invalid or unenforceable provisions shall be deemed amended (with respect only
to the jurisdiction in which such adjudication is made) in such manner as to
render them enforceable and to effectuate as nearly as possible the original
intentions and agreement of the parties.
d. The parties acknowledge that the restrictions set forth in this Section
are a material inducement to the parties entering into the other transactions
contemplated hereby.
9. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquisition of the Seller's Common Stock, and in addition to
all of the Seller's other obligations under this Agreement, the Seller
shall defend, protect, indemnify and hold harmless the Buyer and its
successors, permitted assigns, Affiliates, parents, subsidiaries,
directors, officers, employees, and controlling persons thereof, past and
present ("Buyer Indemnitees") 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 the
Buyer 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 the Buyer or any of them in
connection with or as a result of any breach by the Seller 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 the Seller 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 the
Seller contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; provided, however,
that this Section 9 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 the Buyer. To the extent that the foregoing undertaking by the
Seller may be unenforceable for any reason, the Seller shall make the
maximum contribution to the payment and satisfaction of each of the Buyer
Indemnified Liabilities which is permissible under applicable law.
b. In consideration of the Seller's execution and delivery of this
Agreement and issuance of the Seller's Common Stock, and in addition to
all of the Buyer's other obligations under this Agreement, the Buyer shall
defend, protect, indemnify and hold harmless the Seller and its
successors, assigns, Affiliates, parents, subsidiaries, directors,
officers, employees, and controlling persons thereof, past and present,
(collectively, the "Seller Indemnitees") 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 Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Seller Indemnified Liabilities")
or any of them in connection with or as a result of any breach by the
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 the 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 the Buyer contained in the Transaction
Documents or any other certificate, instrument or document contemplated
hereby or thereby; provided, however, that this Section 9 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 the Seller. To the extent
that the foregoing undertaking by the Buyer may be unenforceable for any
reason, the Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Seller Indemnified Liabilities which is
permissible under applicable law.
Promptly after receipt by a Seller Indemnitee or a Buyer Indemnitee
(each Buyer Indemnitee and Seller 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
or Seller Indemnified Liabilities are incurred.
10. 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 FLORIDA 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 and state courts located in the County of
Miami-Dade, Florida, for the adjudication of any civil action related to or
arising out of, in whole or in part, the Transaction Documents.
c. Counterparts. This Agreement may be executed in two 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 party. 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 party 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 between the Buyer, the Seller, 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 the Seller nor 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 the Seller: Pro Tech Communications, Inc.
0000 Xxxxxxxxxx 00xx Xxxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxx X. Xxxxxxx, P.A.
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxx.
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer: NCT Hearing Products, Inc.
00 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxxxx X. X'Xxxxx, Esq.
Xxxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX, 00xx xxxxx
Xxxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent: American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
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.
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. Neither party shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party.
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. The representations and warranties of the Buyer and the Seller
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 10 and the indemnification provisions set forth in Section 9
shall survive for a period of one (1) year from the Closing, provided that the
representations and warranties contained in Section 2(b), Section 2(c), Section
2(e), Sections 2(k) through 2(l), and Sections 3(a) through 3(e) shall survive
for a period of two (2) years from the Closing. The agreements and covenants set
forth in Section 8 shall survive for a period of three (3) years from the
Closing.
k. Publicity. The Seller and the Buyer 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 the Seller
shall be entitled, without the prior approval of the Buyer, to make any press
release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although the Buyer shall be
consulted by the Seller 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. 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.
n. Placement Agent. The Seller acknowledges that it has engaged a placement
agent, Union Atlantic LC, in connection with the sale of the Seller's Common
Stock, which placement agent may have formally or informally engaged other
agents on its behalf. At the Closing Date, the Seller and the Buyer shall each
be responsible for the payment of one-half of the placement fee to Union
Atlantic LC equaling in the aggregate two percent (2%) of the total number of
shares of Seller's Common Stock issued to Buyer as of the Closing Date relating
to or arising out of the transactions contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Stock
Purchase Agreement to be duly executed as of the date first written above.
"SELLER"
PRO TECH COMMUNICATIONS, INC.
/s/Xxxxxxx Xxxxxxxxx
----------------------------
By: Xxxxxxx Xxxxxxxxx
Its: President and Secretary
"BUYER"
NCT HEARING PRODUCTS, INC.
/s/Xxxxx Xxxxxxxx
-----------------------------
By: Xxxxx Xxxxxxxx
Its: President
ACKNOWLEDGED AND AGREED,
AS TO SECTION 8 ABOVE:
By: /s/Xxxxxxx Xxxxxxxxx
________________________________
Xxxxxxx Xxxxxxxxx, in his
individual capacity
By: /s/Xxxxx Xxxxxx
________________________________
Xxxxx Xxxxxx, in his
individual capacity
ANNEX I
Capitalization
ANNEX II
Shareholder's Agreement]
ANNEX III
License Agreement
ANNEX IV
Intentionally Omitted
ANNEX V
Opinion of Counsel of Seller
ANNEX VI
Board Resolutions
SCHEDULE 2(l)
Conflicts
None.
SCHEDULE 3(c)
Capitalization
SCHEDULE 3(e)
Conflicts
SCHEDULE 3(f)
Defaults, Violations
SCHEDULE 3(g)
Consents
SCHEDULE 3(i)
Subsequent Events
SCHEDULE 3(j)
Litigation
SCHEDULE 3(o)
Intellectual Property Rights
SCHEDULE 3(q)
Title
SCHEDULE 3(v)
Tax Status
SCHEDULE 3(w)
Certain Transactions
