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.
-------------------------------------------
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
