Exhibit 10(j)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September 29,
2000, by and between Pro Tech Communications, Inc., a Florida corporation, with
headquarters at 0000 Xxxxxxxxxx 00xx Xxxxxx, Xxxx Xxxxxx, Xxxxxxx 00000, (the
"Company"), and Balmore Funds, S.A., Austost Anstalt Xxxxxx and Zakeni Limited
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS, in connection with and pursuant to the terms and conditions of the
Securities Purchase and Supplemental Exchange Rights Agreement by and among the
Buyers, 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 Buyers have agreed to purchase, shares of the Company's Series A
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 September 29,
2000 (the "Articles of Amendment"); and (ii) granted to the Buyers warrants
("Warrants") to purchase shares of Common Stock ("Warrant Shares"), in
accordance with the terms and conditions of the Warrant Agreements (as defined
in the Securities Purchase Agreement) dated as of the date hereof, between the
Company and the Buyers.
WHEREAS, to induce the Buyers 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 Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
a. "Investors" or Investor" means the Buyers and any permitted transferee
or assignee of the Buyers (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 A
Preferred Shares to the Investors (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
SB-1 (or other equivalent short form registration statement) on or prior to a
date which is no more than ninety (90) days from the Closing Date (the "SB-1
Filing Deadline"), covering the resale of all of the Registrable Securities and
no other securities of any kind owned by any other person or entity. 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 8,088,000 [115% based on current price] shares of Common Stock,
subject to adjustment as provided in Section 3(b), and such registered shares of
Common Stock shall be allocated among the Investors pro rata based on the total
number of Registrable Securities issued or issuable as of each date that a
Registration Statement, as amended, relating to the resale of the Registrable
Securities is declared effective by the SEC. 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
SB-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
Investors 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 Investors, 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 each 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 such Investor's
rights under this Section 2(c). If within twenty (20) days after receipt of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
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 Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(c) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement 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 Investors 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 the Registration Statement covering the
Registrable Securities is not effective by the Required Effective Date, then the
Conversion Price (as defined in the Articles of Amendment) of the Series A
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 Investors if the Registration Statement has not been declared
effective by 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 an 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 SB-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 SB-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 Investors 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 Investors 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, (a) 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 8,088,000 [115% at current price] shares of Common
Stock for resale and (b) the maximum number of shares of Common Stock that the
Company shall be required to register hereunder shall not exceed 10,740,000
[200% at current price] shares. 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 Investors 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 Investors in writing of the existence of a
Potential Material Event (as defined below). The Company must, if lawful, give
the Investors 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, Investors 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 each Investor whose Registrable Securities
are included in the Registration Statement(s) 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 such Investor may reasonably
request); and (iii) such other documents, including any preliminary prospectus,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such 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 any 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 each 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 Investors who hold a majority of the Registrable Securities
being offered in the offering select underwriters 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 Investors.
g. The Company shall promptly notify each 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 each Investor (or such other number of copies as such
Investor may reasonably request). The Company shall also promptly notify each
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 each 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 each
Investor who holds Registrable Securities being sold (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 Investors who hold a majority of the Registrable
Securities being sold, 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 Investors; 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 Investors, the cost of
which shall be borne by the Investors.
j. The Company shall make available for inspection by (i) any 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 an 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. Each 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
Investors.
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 an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such 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 Investors who hold 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 Investors who hold a
majority of the Registrable Securities being sold, 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 Investors.
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 each Investor in writing of
the information the Company requires from each such Investor, including, but not
limited to, their method of disposition, if such Investor elects to have any of
such 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 with respect to the Registrable
Securities of a particular Investor that such 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, each 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 such Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from the
Registration Statement.
c. In the event Investors holding a majority of the Registrable Securities
being registered determine to engage the services of an underwriter, each
Investor agrees to enter into and perform such 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 such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each 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), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such 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, such Investor shall deliver
to the Company (at the expense of the Company) or destroy all copies in such
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 such Investor (i) agrees to sell such 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. Each 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. Each 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 each Investor who holds such Registrable Securities,
the directors, officers, employees, agents and each Person, if any, who controls
any 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 SB-1
Filing Deadline.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor shall severally and not jointly 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 such
Investor expressly for use in connection with such Registration Statement.
Subject to Section 6(d), such 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 such 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 such 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 Investors 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 each Investor so long as such 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 investors to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assignable by the
Investors 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 Investors who
hold two-thirds of the Registrable Securities. Any amendment or waiver effected
in accordance with this Section 10 shall be binding upon each 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 a copy to: Xxxxxx X. Xxxxxxx, P.A.
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
NCT Group, Inc.
Attn: Chief Financial Officer
00 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to a Buyer, to its address and facsimile number on the signature page
hereof, with copies to such Buyer's counsel as set forth in Buyer's notice to
the Company thereof. 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: BUYERS:
------- ------
PRO TECH COMMUNICATIONS, INC. BALMORE FUNDS, S.A.
By: /s/ XXXXXXX XXXXXXXXX By: /s/ XXXXXX KINDLE
Name: Xxxxxxx Xxxxxxxxx Name: Xxxxxx Kindle
Title: President and Secretary Title: Director
AUSTOST ANSTALT XXXXXX
By: /s/ XXXXXX XXXXXX
Name: Xxxxxx Xxxxxx
Title: Represenative
ZAKENI LIMITED
By: /s/ XXXXXXX XXXXXX
Name: Xxxxxxx Xxxxxx
Title: President
SCHEDULE OF BUYERS
Buyer Address, Telephone
Buyer Name and Facsimile Number
Austost Anstalt Xxxxxx
Xxxxxxx Funds, S.A.
Zakeni Limited
EXHIBIT 1
Shares Permitted to Be Included in Registration Statement
Shares of Owned Description of
Shareholder Name Common Stock Right to Acquire
------------------------------------- -------------- --------------------------------------
Austost Anstalt Xxxxxx (or designees) 1,196,000 1,500,000 Warrants issued on
Closing Date, exercisable at
$0.50/share, with registration rights
Balmore Funds, S.A. (or designees) 1,196,000 1,500,000 Warrants issued on
Closing Date, exercisable at
$0.50/share, with registration rights
Zakeni Limited (or designees) 1,196,000 1,500,000 Warrants issued
on Closing Date, exercisable at
$0.50/share, with registration rights
