[Execution Copy]
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 6,
2004, by and among Natural Health Trends Corp., a Florida corporation, with
headquarters located at 00000 Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000 (the "Company"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company wishes to sell, upon the terms and conditions
stated in this Agreement, units ("Units") consisting of (i) one (1) share of the
Company's common stock, par value $.001 per share ("Common Stock"), and (ii) one
(1) common stock purchase warrant, in substantially the form attached hereto as
Exhibit A (the "Warrants");
B. Each Buyer wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, that aggregate number of
Units consisting of (i) the number of shares (the "Common Shares") of Common
Stock set forth opposite each Buyer's name in column (3) on the schedule of
Buyers attached hereto (the "Schedule of Buyers"), and (ii) the number of
Warrants set forth opposite each Buyer's name in column (4) on the Schedule of
Buyers (as exercised, the "Warrant Shares");
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws; and
D. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and
Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
E. The Common Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "Securities".
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
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(a) Purchase of Units.
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(i) Units. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
agrees to purchase from the Company on the Closing Date (as defined below), the
number of Units consisting of the Common Shares as is set forth opposite such
Buyer's name in column (3) on the Schedule of Buyers and Warrants to acquire
that number of Warrant Shares opposite such Buyer's name in column (4) on the
Schedule of Buyers (the "Closing").
(ii) Closing. The Closing shall occur at the
offices of Xxxxx Xxxxxxx Berlack Israels LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000.
(iii) Purchase Price. The purchase price for each
Unit (the "Purchase Price") to be purchased by each
such Buyer at the Closing shall be equal to $12.595.
(b) The Closing Date. The date and time of the Closing
(the "Closing Date") shall be 4 p.m., New York Time, on the date hereof, subject
to notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6(a) and 7(a) below (or such later date as is mutually agreed
to by the Company and each Buyer).
As used herein, "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York
are authorized or required by law to remain closed.
(c) Form of Payment. On the Closing Date, (i) each Buyer
shall pay its Purchase Price to the Company for the Units to be issued and sold
to such Buyer at the Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, and (ii) the Company
shall (a) authorize its transfer agent to issue to each Buyer one or more stock
certificates (the "Certificates") registered in the name of each Buyer (or in
such nominee names as designated by such Buyer) representing the number of
Common Shares set forth opposite such Buyer's name on the Schedule of Buyers,
and (b) issue the number of Warrants in the name of each Buyer (or in such
nominee names as designated by such Buyer) representing the number of Warrants
set forth opposite such Buyer's name on the Schedule of Buyers.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself
that:
(a) No Public Sale or Distribution. Such Buyer is (i)
acquiring the Units and (ii) upon exercise of the Warrants will acquire the
Warrant Shares for its own account 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, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act. Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business.
(b) Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that
the Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
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securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained herein. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such 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 Securities.
(e) No Governmental Review. Such 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 Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Hedging Restrictions. Such Buyer and its affiliates
shall not purchase, offer, sell (including by effecting any short sale), grant
any option for the sale of, transfer or gift any Securities or shares of Common
Stock prior to the earlier of (i) the public announcement by the Company of the
transactions contemplated by this Agreement, or (ii) the termination of this
Agreement in accordance with Section 8 hereof.
(g) Transfer or Resale. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act, as amended, (or a successor rule thereto) (collectively, "Rule 144"); (ii)
any sale of the 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 the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(q)) 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; and (iii) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
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(h) Legends. Such Buyer understands that the certificates
or other instruments representing the Securities and, until such time as the
resale of the Common Shares and Warrant Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Common Shares and Warrant Shares, except as set
forth below, shall bear any legend as required by the "blue sky" laws of any
state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN] [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 MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144.
(i) Validity; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and shall constitute the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(j) No Conflicts. The execution, delivery and performance
by such Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event which with notice or
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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 such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to such Buyer, except
in the case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Buyer to perform its obligations hereunder.
(k) Residency. Such Buyer is a resident of that
jurisdiction specified below its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers
that:
(a) Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authorization to own their properties and
to carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted 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. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).
(b) Authorization; Enforcement; Validity. The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Warrant, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5(b)) and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Common Shares, the Warrant and the reservation for issuance and the issuance
of the Warrant Shares issuable upon exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders. This
Agreement and the other Transaction Documents of even date herewith have been
duly executed and delivered by the Company, and constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
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with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. As of the Closing, the Transaction Documents dated after the date
hereof and required to have been executed and delivered shall have been duly
executed and delivered by the Company, and shall constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditor's rights and
remedies.
(c) Issuance of Securities. The Units are duly authorized
and, upon issuance in accordance with the terms hereof, shall be free from all
taxes, liens and charges with respect to the issue thereof. As of the Closing, a
number of shares of Common Stock shall have been duly authorized and reserved
for issuance which equals the number of shares of Common Stock issuable upon
exercise of the Warrants to be issued at the Closing. Upon exercise of the
Warrants, the Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby will not (i) result in a
violation of the Articles of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock or bylaws of
the Company or any of its Subsidiaries 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, material agreement, indenture or instrument to
which the Company or any of its Subsidiaries is a party, or (iii) 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 Nasdaq OTC Bulletin Board (the "Principal Market")) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected.
(e) Consents. Except as disclosed in Schedule 3(e), the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the Closing Date, and the Company and its
Subsidiaries are unaware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence. The Company is not in violation of
the listing requirements of the Principal Market and has no knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
in the foreseeable future.
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(f) Acknowledgment Regarding Buyer's Purchase of
Securities. The Company acknowledges and agrees that each Buyer is acting solely
in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that to the
Company's knowledge no Buyer is (i) an officer or director of the Company, (ii)
an "affiliate" of the Company (as defined in Rule 144) or (iii) a "beneficial
owner" of more than 10% of the Common Stock (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934 Act")). The
Company further acknowledges that no Buyer is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
(g) No General Solicitation; Placement Agent's Fees.
Neither the Company, nor any of its affiliates, nor any Person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities. The Company shall be responsible for the payment of any
placement agent's fees, financial advisory fees, or brokers' commissions (other
than for persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim. The Company acknowledges that it has engaged
Avondale Partners, LLC and Sprott Securities (USA) Limited as placement agents
(the "Agents") in connection with the sale of the Units. Other than the Agents,
the Company has not engaged any placement agent or other agent in connection
with the sale of the Units.
(h) No Integrated Offering. None of the Company, its
Subsidiaries, any of their affiliates, and any Person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed or designated. None of the Company, its Subsidiaries, their affiliates
and any Person acting on their behalf will take any action or steps referred to
in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(i) SEC Documents; Financial Statements. Since December
31, 2003, the Company 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 1934 Act (all of the foregoing filed prior to the
date hereof, or in connection with any Closing subsequent to the date hereof,
filed prior to the date of such Closing, and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
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reference therein being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the XXXXX
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
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 Company 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 Company to the Buyers 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.
(j) Absence of Certain Changes. Except as disclosed in
Schedule 3(j), since December 31, 2003, there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company or its Subsidiaries. Since December 31, 2003, the
Company has not (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, in excess of $250,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $250,000. The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at each
Closing will not be, Insolvent (as defined below). For purposes of this Section
3(j), "Insolvent" means (i) the present fair saleable value of the Company's
assets is less than the amount required to pay the Company's total Indebtedness
(as defined in Section 3(q)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
(k) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company or its
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Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable securities laws on a registration statement on Form S-1 filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(l) Conduct of Business; Regulatory Permits. Neither the
Company nor its Subsidiaries is in violation of any term of or in default under
its Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or Bylaws or
their organizational charter or bylaws, respectively. Except as disclosed in
Schedule 3(l), neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or its Subsidiaries, and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(m) Foreign Corrupt Practices. Neither the Company, nor
any of its Subsidiaries, nor any director, officer, agent, employee or other
Person acting on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.
(n) Xxxxxxxx-Xxxxx Act. The Company is in compliance with
any and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof, except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.
(o) Transactions With Affiliates. Except as set forth on
Schedule 3(o) and in the SEC Documents filed at least ten days prior to the date
hereof and other than the grant of stock options disclosed on Schedule 3(p),
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any of its Subsidiaries (other than for
ordinary course services as employees, officers or 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 such officer, director or
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner.
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(p) Equity Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (x) 500,000,000 shares of
Common Stock, of which as of the date hereof, 5,449,869 are issued and
outstanding, 1,225,000 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and 1,200,000 shares are reserved for
issuance pursuant to securities (other than the Warrants) exercisable or
exchangeable for, or convertible into, shares of Common Stock, and (y) 1,500,000
shares of preferred stock, of which as of the date hereof, none are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(p): (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company; (ii) 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, or exercisable
or exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its Subsidiaries; (iii) there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or
instruments evidencing Indebtedness of the Company or any of its Subsidiaries or
by which the Company or any of its Subsidiaries is or may become bound; (iv)
there are no financing statements securing obligations in any material amounts,
either singly or in the aggregate, filed in connection with the Company; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its Subsidiaries' respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect. The Company has
furnished to the Buyer true, correct and complete copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
"Articles of Incorporation"), and the Company's Bylaws, as amended and as in
effect on the date hereof (the "Bylaws"), and the terms of all securities
convertible into, or exercisable or exchangeable for, Common Stock and the
material rights of the holders thereof in respect thereto.
(q) Indebtedness and Other Contracts. Except as disclosed
in Schedule 3(q), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness, (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
10
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the aggregate,
in a Material Adverse Effect, or (iv) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company's officers, has or is expected to have a Material
Adverse Effect. Schedule 3(q) provides a detailed description of the material
terms of any such outstanding Indebtedness. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and (z)
"Person" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
(r) Absence of Litigation. Except for the pending
investigation by The Nasdaq Stock Market in connection with the Company's
listing application, there is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such,
except as set forth in Schedule 3(r).
(s) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
11
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(s) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them 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
Company and its Subsidiaries.
(t) Intellectual Property Rights. Except as set forth in
Schedule 3(t), the Company and its Subsidiaries own or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights ("Intellectual Property Rights") necessary to
conduct their respective businesses as now conducted. Except as set forth in
Schedule 3(t), none of the Company's Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate, within three years from
the date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. Except as set forth in Schedule 3(t), there is no claim, action or
proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its Intellectual
Property Rights. The Company is unaware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(u) Environmental Laws. The Company and its Subsidiaries
(i) are in compliance with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(v) Subsidiary Rights. The Company or one of its
Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all
capital securities of its material Subsidiaries as owned by the Company or such
Subsidiary.
12
(w) Tax Status. The Company and each of its Subsidiaries
(i) 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,
(ii) 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 (iii) has set aside
on its books provision 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 Company know of no
basis for any such claim.
(x) Internal Accounting and Disclosure Controls. The
Company and each of its Subsidiaries maintain 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 and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management's
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 0000 Xxx) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the 1934 Act is accumulated and communicated to the
Company's management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.
4. COVENANTS.
---------
(a) Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a
Form D with respect to the Securities as required under Regulation D. The
Company, on or before the Closing Date, shall take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for or
to qualify the Units for sale to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyers on or prior to the
Closing Date. The Company shall make all filings and reports relating to the
offer and sale of the Securities required under applicable securities or "Blue
Sky" laws of the states of the United States following the Closing Date.
(c) Reporting Status. Until the date on which the
Investors (as defined in the Registration Rights Agreement) shall have sold all
the Warrant Shares and none of the Warrants is outstanding (the "Reporting
Period"), the Company shall file all reports required to be filed with the SEC
13
pursuant to the 1934 Act, and the Company 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) Use of Proceeds. The Company will use the proceeds
from the sale of the Securities for working capital purposes and not for the (i)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (ii) redemption or repurchase of any of its equity securities.
(e) Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period unless the following are
filed with the SEC through XXXXX and are available to the public through the
XXXXX system, within one (1) Business Day after the filing thereof with the SEC,
a copy of its Annual Reports on Form 10-K or on Form 10-KSB, as applicable, its
Quarterly Reports on Form 10-Q or Form 10-QSB, as applicable, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act.
(f) Listing. The Company shall promptly secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon the primary national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f).
(g) Fees. The Company shall be responsible for the
payment of any placement agent's fees, financial advisory fees, or broker's
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby, including, without limitation, any
fees or commissions payable to the Agent. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney's fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment. Except as otherwise set
forth in this Agreement or in the Transaction Documents, each party to this
Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.
(h) Pledge of Securities. The Company acknowledges and
agrees that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin agreement
or other loan or financing arrangement that is secured by the Securities. The
pledge of Securities shall not be deemed to be a transfer, sale or assignment of
the Securities hereunder, and each Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document, including, without limitation, Section 2(g) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(g) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.
14
(i) Disclosure of Transactions and Other Material
Information. On or before 8:30 a.m., New York Time, on the fourth Business Day
following the Closing Date, the Company shall file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of each of the Warrants, and the Registration Rights Agreement) as exhibits to
such filing (including all attachments, the "8-K Filing"). From and after the
filing of the 8-K Filing with the SEC, no Buyer shall be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents.
(j) Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, the number of shares of Common Stock issuable upon exercise of the
Warrants.
(k) Conduct of Business. The business of the Company and
its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
5. REGISTER; TRANSFER AGENT INSTRUCTIONS.
-------------------------------------
(a) Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Units), a register for the Units, in which
the Company shall record the name and address of the Person in whose name the
Units have been issued (including the name and address of each transferee), the
number of Common Shares and Warrants held by such Person and the number of
Warrant Shares issuable upon exercise of the Warrants held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.
(b) Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of each Buyer or
its respective nominee(s), for the Warrant Shares in such amounts as specified
from time to time by each Buyer to the Company upon exercise of the Warrants in
the form of Exhibit C attached hereto (the "Irrevocable Transfer Agent
Instructions"). The Company represents and warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5(b), and stop transfer instructions to give effect to Section 2(h) hereof, will
be given by the Company to its transfer agent with respect to the Securities,
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents. If a Buyer effects a sale, assignment or transfer
of the Securities in accordance with Section 2(g), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves Common Shares or Warrant Shares sold, assigned or transferred pursuant
to an effective registration statement or pursuant to Rule 144, the transfer
15
agent shall issue such shares to the Buyer, assignee or transferee, as the case
may be, without any restrictive legend. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5(b) will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available
remedies, to an order and/or 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 TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
(a) Closing Date. The obligation of the Company hereunder
to issue and sell the Units to each 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 are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.
(ii) Such Buyer and each other Buyer shall have
delivered to the Company the Purchase Price for the Units being purchased by
such Buyer and each other Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such
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 such 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 such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
(a) Closing Date. The obligation of each Buyer hereunder
to purchase the Units at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for each Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
(i) The Company shall have executed and
delivered to such Buyer (i) each of the Transaction Documents and (ii) the
Warrants (in such principal amounts as such Buyer shall request) being purchased
by such Buyer at the Closing pursuant to this Agreement.
(ii) The Company shall have delivered to such
Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form of
Exhibit C attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent; provided however, that
the Company shall deliver to each Buyer the original of such Certificates
16
representing the Common Shares purchased by such Buyer within four (4) business
days following the Closing Date.
(iii) Such Buyer shall have received the opinion
of Xxxxx Xxxxxxx Berlack Israels LLP, the Company's outside counsel, dated as of
the Closing Date, in substantially the form of Exhibit D attached hereto.
(iv) The Company shall have delivered to such
Buyer a certificate evidencing the incorporation and good standing of the
Company and each of its U.S. Subsidiaries in such corporation's state of
incorporation issued by the Secretary of State of such state of incorporation,
as of a date within 10 days of the Closing Date.
(v) The Company shall have delivered to such
Buyer a certificate evidencing the Company's qualification as a foreign
corporation and good standing issued by the Secretary of State of the State of
Texas, as of a date within 10 days of the Closing Date.
(vi) The Company shall have delivered to such
Buyer a copy of the Articles of Incorporation as certified by the Secretary of
State of the State of Florida within 10 days of the Closing Date.
(vii) The Company shall have delivered to such
Buyer a certificate, executed by the Secretary of the Company and dated as of
the Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company's Board of Directors in a form reasonably acceptable to
such Buyer (the "Resolutions"), (ii) the Articles of Incorporation and (iii) the
Bylaws, each as in effect at the Closing.
(viii) The representations and warranties of the
Company 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 Company
shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer.
(ix) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Units.
8. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, this if this Agreement is terminated pursuant to
this Section 8, the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(g) above.
17
9. MISCELLANEOUS.
-------------
(a) Governing Law; Jurisdiction; Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b) Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. 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.
(e) Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, 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 therein and, except as specifically set forth herein
or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the holders of the Common Shares representing at least a
18
majority of the Common Shares, or, if prior to the Closing Date, the Company and
the Buyers listed on the Schedule of Buyers as being obligated to purchase at
least a majority of the Common Shares, and any amendment to this Agreement made
in conformity with the provisions of this Section 9(e) shall be binding on all
Buyers and holders of Common Shares, as applicable. No provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Units then outstanding. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, or holders of Units, as the case may be. The Company has
not, directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
(f) 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 confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business Day
after deposit with an overnight courier 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:
Natural Health Trends Corp.
00000 Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxx Xxxxxxx Berlack Israels LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
19
If to the Transfer Agent:
Continental Stock Transfer and Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.
(g) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Common Shares or
Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of a
majority of the Units. A Buyer may not assign some or all of its rights
hereunder without the prior written consent of the Company.
(h) 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.
(i) Survival. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive each Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) 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 any 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.
(k) Indemnification. In consideration of each Buyer's
execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
20
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and
out-of-pocket 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
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any material misrepresentation or material
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any material breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 9(k) shall be the same as those set
forth in Section 6 of the Registration Rights Agreement.
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(m) Remedies. Each Buyer and each holder of the
Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages and without posting a bond or other security.
(n) Independent Nature of Buyers' Obligations and Rights.
The obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Buyers are
in any way acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each Buyer confirms
that it has independently participated in the negotiation of the transaction
21
contemplated hereby with the advice of its own counsel and advisors. Each Buyer
shall be entitled to independently protect and enforce its rights, including,
without limitations, the rights arising out of this Agreement or out of any
other Transaction Documents, and it shall not be necessary for any other Buyer
to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
22
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
NATURAL HEALTH TRENDS CORP. BURLINGAME ASSET MANAGEMENT, LLC
By: /s/ XXXX X. XXXXXXXX By: /s/ XXXXX XXXXXXX
---------------------------------- ----------------------------------
Name: Xxxx X. Xxxxxxxx Name: Xxxxx Xxxxxxx
Title: President Title: Analyst
ARROW CLOCKTOWER
CLOCKTOWER PARTNERS, L.P.
STIRLING CAPITAL PARTNERS, G.P.
XXXXXXX X. & XXXX RADAR LIVING TRUST
By: /s/ XXXXX XXXXXXX
----------------------------------
Name: Xxxxx Xxxxxxx
Title: General Partner
MILLENIUM PARTNERS, L.P.
By: /s/ XXXXX XXXXXX
----------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Operating Officer
CASCADE CAPITAL PARTNERS, L.P.
CASCADE CAPITAL PARTNERS, II, L.P.
By: /s/ XXXXXX X. XXXXXXX, III
----------------------------------
Name: Xxxxxx X. Xxxxxxx, III
Title: Manager of Gryphon Capital
Management
General Partner of Cascade
Capital Partners, L.P.
By: /s/ XXXXX X. XXXXX, III
----------------------------------
Name: Xxxxx X. Xxxxx, III
MMCAP INTERNATIONAL INC
By: /s/ XXX XXXXXX
----------------------------------
Name: Xxx Xxxxxx
Title: Associate
BTR GLOBAL GROWTH TRADING LIMITED
BTR GLOBALOPPORTUNITY TRADING LTD.
By: /s/ XXXXX XXX
----------------------------------
Name: Xxxxx Xxx
Title: Director
AVONDALE PARTNERS, LLC
By: /s/ R. XXXXXXX XXXXXXX
----------------------------------
Name: R. Xxxxxxx Xxxxxxx
Title: Sr. Managing Director
/s/ XXX XXXXX XXXXXXX
----------------------------------
Name: Xxx Xxxxx Xxxxxx
/s/ XXXXX XXXXXX
----------------------------------
Name: Xxxxx XxXxxx
/s/ XXXXXX XXXXX
----------------------------------
Name: Xxxxxx Xxxxx
/s/ XXXX XXXXXXXX
----------------------------------
Name: Xxxx Xxxxxxxx
/s/ XXXXX XXXXXX
----------------------------------
Name: Xxxxx Xxxxxx
/s/ XXXX X. XXXXXXXXX
----------------------------------
Name: Xxxx X. Xxxxxxxxx
SCHEDULE OF BUYERS
(1) (2) (3) (4) (5)
Aggregate Aggregate
Number of Number of Legal Representative's
Buyer Address Common Shares Warrant Shares Address and Facsimile Number
-------------------------------------------------------------------------------------------------------------------------------
Acuity Global Equity Fund 2,400 2,400
Acuity Clean Environment Science 900 900
& Technology
Acuity Social Values Global 6,000 6,000
Equity Fund
Acuity Clean Environment Balanced 20,000 20,000
Fund
Acuity Clean Environment Global 11,000 11,000
Equity Fund
Acuity Clean Environment Equity 35,000 35,000
Fund
Acuity Pooled Environment Science 300 300
& technology Fund
Acuity Pooled Global Balanced Fund 200 200
Acuity Pooled Global Equity Fund 2,000 2,000
Acuity Pooled Venture Fund 1,000 1,000
Acuity NT Special Equity Fund 25,000 25,000
MMI Group Inc. 103,000 103,000
(1) (2) (3) (4) (5)
Aggregate Aggregate
Number of Number of Legal Representative's
Buyer Address Common Shares Warrant Shares Address and Facsimile Number
-------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 119,000 119,000
Burlingame Asset Management LLC 23,800 23,800
Front Street Investment 51,600 51,600
Management Inc.
Arrow Clocktower 10,000 10,000
Clocktower Partners L.P. 23,000 23,000
Stirling Capital Partners, G.P. 17,500 17,500
Xxxxxxx X. & Xxxx Radar Living 12,500 12,500
Trust
Epic Limited Partnership 7,920 7,920
Epic Limited Partnership II 7,920 7,920
Millenium Partners, L.P. 3,960 3,960
Goodwood Fund 63,427 63,427
Arrow Goodwood Fund 40,341 40,341
Goodwood Fund 2.0 4,998 4,998
KBSH Goodwood Fund 3,213 3,213
Goodwood Capital Fund 7,021 7,021
Cascade Capital Partners, L.P. 149,178 149,178
Cascade Capital Partners II, L.P. 9,522 9,522
(1) (2) (3) (4) (5)
Aggregate Aggregate
Number of Number of Legal Representative's
Buyer Address Common Shares Warrant Shares Address and Facsimile Number
-------------------------------------------------------------------------------------------------------------------------------
X. Xxxxxxx Associates Inc. 6,000 6,000
Xxxxx X. Xxxxx, III 7,900 7,900
Xxxx Xxxxxxx 79,000 79,000
K2 Principal Fund LP 20,600 20,600
MMCap International Inc. 59,500 59,500
Altairis Investments Limited 8,240 8,240
Partnership
Altairis Offshore c/o Citco Fund 94,760 94,760
Services (Cayman Islands) Ltd.
Xxxx Xxxxx 60,000 60,000
BTR Global Growth Trading Ltd 78,540 78,540
BTR Global Opportunity Trading 40,460 40,460
Ltd.
Xxxxx Xxxxxxx 79,000 79,000
Avondale Partners LLC 22,500 22,500
Xxx Xxxxx Xxxxxxx 1,984 1,984
Xxxxx XxXxxx 1,984 1,984
Xxxxxx Xxxxx 1,984 1,984
Xxxx Xxxxxxxx 1,984 1,984
Xxxxx Xxxxxx 1,984 1,984
Xxxx X. Xxxxxxxxx 1,984 1,984
Sprott Securties Ltd 19,800 19,800
Xxxxx Xxxxxxxxx 19,800 19,800
EXHIBITS
--------
Exhibit A Form of Common Stock Purchase Warrant
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Irrevocable Transfer Agent Instructions
Exhibit D Form of Company Counsel Opinion
SCHEDULES
---------
Schedule 3(a) Subsidiaries
Schedule 3(e) Consents
Schedule 3(j) Absence of Certain Changes
Schedule 3(l) Conduct of Business; Regulatory Permits
Schedule 3(o) Transactions with Affiliates
Schedule 3(p) Capitalization
Schedule 3(q) Indebtedness and Other Contracts
Schedule 3(r) Litigation
Schedule 3(s) Title
Schedule 3(t) Intellectual Property
EXHBIT A
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISTRIBUTION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
NATURAL HEALTH TRENDS CORP.
FORM OF COMMON STOCK PURCHASE WARRANT
Warrant No. : _______
Number of Shares: ____________
Date of Issuance: October 6, 2004 ("Issuance Date")
Natural Health Trends Corp., a Florida corporation (the "Company"),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, [INSERT NAME OF BUYER], the
registered holder hereof or its permitted assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, upon surrender of this Common
Stock Purchase Warrant (including all Common Stock Purchase Warrants issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or times
on or after the date hereof, but not after 11:59 P.M., New York Time, on the
Expiration Date (as defined below), _________________ (____) fully paid
nonassessable shares of Common Stock (as defined below) (the "Warrant Shares").
Except as otherwise defined herein, capitalized terms in this Warrant shall have
the meanings set forth in Section 13. This Warrant is one of the Common Stock
Purchase Warrants (the "SPA Warrants") issued pursuant to (i) Section 1 of that
certain Securities Purchase Agreement, or (ii) Article 3 of that certain
Subscription Agreement, each dated as of October 6, 2004 (the "Subscription
Date"), among the Company and the investors (the "Buyers") referred to therein
(the "Purchase Agreements").
1. EXERCISE OF WARRANT.
(a) MECHANICS OF EXERCISE. Subject to the terms and conditions
hereof, this Warrant may be exercised by the Holder on any day on or after the
date hereof, in whole or in part, by (i) delivery of a written notice, in the
form attached hereto as EXHIBIT A (the "Exercise Notice"), of the Holder's
election to exercise this Warrant and (ii) payment to the Company of an amount
equal to the applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "Aggregate Exercise
Price") in cash or by wire transfer of immediately available funds. The Holder
shall not be required to deliver the original Warrant in order to effect an
exercise hereunder. Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares. On or before the
first Business Day following the date on which the Company has received each of
the Exercise Notice and the Aggregate Exercise Price (the "Exercise Delivery
Documents"), the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Delivery Documents to the Holder and the
Company's transfer agent (the "Transfer Agent"). On or before the tenth Business
Day following the date on which the Company has received all of the Exercise
Delivery Documents (the "Share Delivery Date"), the Company shall (X) provided
that the Transfer Agent is participating in The Depository Trust Company ("DTC")
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the
Holder is entitled pursuant to such exercise. Upon delivery of the Exercise
Notice and Aggregate Exercise Price referred to in clause (ii) above, the Holder
shall be deemed for all corporate purposes to have become the holder of record
of the Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing such Warrant
Shares. If this Warrant is submitted in connection with any exercise pursuant to
this Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 6(d)) representing the
right to purchase the number of Warrant Shares purchasable immediately prior to
such exercise under this Warrant, less the number of Warrant Shares with respect
to which this Warrant is exercised. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number.
(b) EXERCISE PRICE. For purposes of this Warrant, "Exercise Price"
means $12.47, subject to adjustment as provided herein.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and the number of Warrant Shares shall be adjusted from time to
time as follows:
(a) ADJUSTMENT UPON SUBDIVISION OR COMBINATION OF COMMON STOCK. If
the Company at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased. If
the Company at any time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
2
number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2(a) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
3. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTION.
(a) PURCHASE RIGHTS. In addition to any adjustments pursuant to
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(b) FUNDAMENTAL TRANSACTIONS. The Company shall not enter into or
be party to a Fundamental Transaction unless the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(b)
pursuant to written agreements in form and substance reasonably satisfactory to
the Required Holders and approved by the Required Holders prior to such
Fundamental Transaction. Upon consummation of the Fundamental Transaction, the
Successor Entity shall deliver to the holder of this Warrant in exchange
therefor, a warrant substantially identical in form and substance to this
Warrant, except that there shall be issuable upon exercise of such warrant at
any time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Company's Common Stock (or other
securities, cash, assets or other property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had the Warrant been
exercised immediately prior to such Fundamental Transaction, as adjusted in
accordance with the provisions of this Warrant. Provisions made pursuant to this
Section shall be in a form and substance reasonably satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without regard to any
limitations on the exercise of this Warrant.
4. NONCIRCUMVENTION. The Company hereby covenants and agrees that
the Company will not, by amendment of its Articles of Incorporation, as amended
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the Company (i) will
not increase the par value of any shares of Common Stock receivable upon the
3
exercise of this Warrant above the Exercise Price then in effect, (ii) will take
all such actions as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (iii) will, so long as any of the
SPA Warrants are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the SPA Warrants, the number of shares of
Common Stock as shall from time to time be necessary to effect the exercise of
the SPA Warrants then outstanding (without regard to any limitations on
exercise).
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, the Holder, solely in such Person's capacity as a
holder, of this Warrant shall not be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person's capacity as a holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is then entitled
to receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on such Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 5, the Company will
provide the Holder with copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously with the giving
thereof to the stockholders.
6. REISSUANCE OF WARRANTS.
(a) TRANSFER OF WARRANT. The Holder may transfer this Warrant and
the rights hereunder only in accordance with applicable securities laws. If this
Warrant is to be transferred, the Holder shall surrender this Warrant to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of the Holder a new Warrant (in accordance with Section 6(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 6(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b) LOST, STOLEN OR MUTILATED WARRANT. Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form, in the case of mutilation, upon surrender and cancellation of
this Warrant, the Company shall execute and deliver to the Holder a new Warrant
(in accordance with Section 6(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.
4
(c) WARRANT EXCHANGEABLE FOR MULTIPLE WARRANTS. This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Warrant or Warrants (in accordance with Section 6(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
(d) ISSUANCE OF NEW WARRANTS. Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent, as indicated on
the face of such new Warrant, the right to purchase the Warrant Shares then
underlying this Warrant (or in the case of a new Warrant being issued pursuant
to Section 6(a) or Section 6(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying this Warrant), (iii) shall have an issuance
date, as indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.
7. NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) promptly upon
any adjustment of the Exercise Price or number of Warrant Shares or number or
kind of securities purchasable upon exercise of this Warrant, setting forth in
reasonable detail, and certifying, the facts requiring such adjustment and the
calculation of such adjustment and (ii) prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grants, issues or
sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of Common Stock or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.
8. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the SPA Warrants then outstanding.
9. GOVERNING LAW. This Warrant shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
5
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
10. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be
jointly drafted by the Company and all the Buyers and shall not be construed
against any person as the drafter hereof. The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.
11. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant or any other Transaction Document
(as defined in the Purchase Agreements), at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit the right of the holder of this Warrant right to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holder and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
12. TRANSFER. This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, subject to
applicable securities laws; provided however, in no event shall the Holder
effect a public distribution of this Warrant without the prior written consent
of the Company which consent maybe withheld in the Company's sole discretion.
13. CERTAIN DEFINITIONS. For purposes of this Warrant, the
following terms shall have the following meanings:
(a) "COMMON STOCK" means (i) the Company's common stock, par value
$.001 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(b) "CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(c) "EXPIRATION DATE" means the date sixty months after the
Issuance Date or, if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a "Holiday"), the
next date that is not a Holiday.
(d) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person (except for a migratory merger pursuant to which the Company
6
changes its state of incorporation), or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of the
Company to another Person, or (iii) allow another Person to make a purchase,
tender or exchange offer that is accepted by the holders of more than the 50% of
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, or spin-off)
with another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination).
(e) "OPTIONS" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
(f) "PARENT ENTITY" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(g) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.
(h) "PRINCIPAL MARKET" means the principal exchange or market on
which the Common Stock is listed and trades, which initially is the OTC Bulletin
Board.
(i) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement by and among the Company and the Buyers.
(j) "REQUIRED HOLDERS" means the holders of the SPA Warrants
representing at least a majority of the shares of Common Stock underlying the
SPA Warrants then outstanding.
(k) "SUCCESSOR ENTITY" means the Person, which may be the Company,
formed by, resulting from or surviving any Fundamental Transaction or the Person
with which such Fundamental Transaction shall have been made, provided that if
such Person is not a publicly traded entity whose common stock or equivalent
equity security is quoted or listed for trading on an Eligible Market, Successor
Entity shall mean such Person's Parent Entity.
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.
7
NATURAL HEALTH TRENDS CORP.
By:
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
8
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
NATURAL HEALTH TRENDS CORP.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("Warrant Shares") of Natural
Health Trends Corp., a Florida corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Warrant.
1. Payment of Exercise Price. The holder shall pay the Aggregate
Exercise Price in the sum of $________ in immediately available funds to the
Company in accordance with the terms of the Warrant.
2. Accredited Investor. The Holder is an "accredited investor" as
defined in Rule 501(c) under the Securities Act of 1933, as amended.
3. Delivery of Warrant Shares. The Company shall deliver to the
holder _______ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By:
-------------------------------
Name:
Title:
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Continental Stock Transfer and Trust Company to issue the above indicated number
of shares of Common Stock in accordance with the Transfer Agent Instructions
dated October 6, 2004 from the Company and acknowledged and agreed to by
Continental Stock Transfer and Trust Company.
NATURAL HEALTH TRENDS CORP.
By:
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
October 6, 2004, by and among Natural Health Trends Corp. a Florida corporation,
with headquarters located at 0000 Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000 (the
"Company"), and the undersigned buyers (each, a "Buyer" and collectively, the
"Buyers").
WHEREAS:
A. In connection with (i) the Securities Purchase
Agreement and (ii) the Subscription Agreements, by and among the Company and the
parties hereto of even date herewith (the "Purchase Agreements"), the Company
has agreed, upon the terms and subject to the conditions of the Purchase
Agreements, to issue and sell to each Buyer units ("Units") consisting of (i)
shares (the "Common Shares") of the Company's common stock, par value $0.001 per
share (the "Common Stock"), and (ii) common stock purchase warrants (the
"Warrants") exercisable for shares of Common Stock (the "Warrant Shares");
B. To induce the Buyers to execute and deliver the
Purchase Agreements, 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 contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "Business Day" means any day other than
Saturday, Sunday or any other day on which commercial banks in The City of New
York are authorized or required by law to remain closed.
b. "Investor" means a Buyer, any transferee or
assignee thereof to whom a Buyer assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a transferee or
assignee assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9.
c. "Person" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and governmental or any department or agency
thereof.
1
d. "register," "registered," and "registration"
refer to a registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the 1933 Act and
pursuant to Rule 415 and the declaration or ordering of effectiveness of such
Registration Statement(s) by the SEC.
e. "Registrable Securities" means (i) the
Common Shares included in the Units, (ii) the Warrant Shares issued or issuable
upon exercise of the Warrants, and (iii) any shares of capital stock issued or
issuable with respect to the Common Shares, the Warrant Shares or the Warrants
as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise.
f. Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering the Registrable Securities.
g. "Rule 415" means Rule 415 under the 1933 Act
or any successor rule providing for offering securities on a continuous or
delayed basis.
h. "SEC" means the United States Securities and
Exchange Commission.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Purchase Agreements.
2. Registration.
------------
a. Initial Mandatory Registration. The Company
shall prepare, and, as soon as practicable but in no event later than 60 days
after the Closing Date (as defined in the Purchase Agreements) (the "Filing
Deadline"), file with the SEC the Registration Statement on Form S-1 covering
the resale of all Registrable Securities. The Registration Statement shall
contain (except if otherwise directed by the holders of at least a majority of
the Registrable Securities) the "Selling Stockholders" section in substantially
the form attached hereto as Exhibit B and the "Plan of Distribution" section
attached hereto as Exhibit B. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as practicable, but
in no event later than the date which is 180 days after the Closing Date (the
"Effectiveness Deadline").
b. Allocation of Registrable Securities. The
initial number of Registrable Securities included in any Registration Statement
and each increase in the number of Registrable Securities included therein shall
be allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering
such initial number of Registrable Securities or increase thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
2
Investors which are covered by such Registration Statement. The Company may
include Company securities held by other security holders on any Registration
Statement without the prior written consent of Buyers.
c. Legal Counsel. Subject to Section 5 hereof,
the Buyers holding at least a majority of the Registrable Securities shall have
the right to select one legal counsel to review and oversee any registration
pursuant to this Section 2 ("Legal Counsel"), which shall be Xxxx Xxxxx & Xxxx
PLC, or such other counsel as thereafter designated by the holders of at least a
majority of the Registrable Securities. The Company and Legal Counsel shall
reasonably cooperate with each other in performing the Company's obligations
under this Agreement.
d. Effect of Failure to File and Obtain and
Maintain Effectiveness of Registration Statement. If (i) a Registration
Statement covering all the Registrable Securities required to be covered thereby
and required to be filed by the Company pursuant to this Agreement is not
declared effective by the SEC on or before the Effectiveness Deadline or (ii) on
any day after such Registration Statement has been declared effective by the SEC
sales of all the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(l)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock), then, as full and entire relief for any damages to any holder
by reason of any such delay in or reduction of its ability to sell any
Registrable Securities, the Company shall pay to each holder of Registrable
Securities an amount in cash equal to the product of (i) the Purchase Price paid
by such Buyer (as such term is defined in the Purchase Agreements) multiplied by
(ii) 0.005. The payment to which a holder shall be entitled pursuant to this
Section 2(d) is referred to herein as a "Registration Delay Payment." A
Registration Delay Payment shall be paid on the last day of the calendar quarter
during which such Registration Delay Payment is incurred. In the event the
Company fails to make a Registration Delay Payment in a timely manner, such
Registration Delay Payment shall bear interest at the rate of 10% per annum
until paid in full. A Registration Delay Payment due and owing by the Company to
an Investor shall be Investor's sole remedy for a breach by the Company of its
obligations under Section 2 of this Agreement.
3. Related Obligations.
-------------------
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 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 submit to the SEC, within
ten (10) Business Days after the Company learns that no review of the
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement to a
time and date not later than 48 hours after the submission of such request. The
Company shall keep the Registration Statement effective pursuant to Rule 415 at
all times until the earlier of (i) the date as of which the Investors may sell
all of the Registrable Securities covered by such Registration Statement without
3
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period").
b. The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement 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 such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 Act"), the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel
to review and comment upon (i) a Registration Statement at least five (5) days
prior to its filing with the SEC and (ii) all amendments and supplements to all
Registration Statements (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and any similar or
successor reports) within a reasonable number of days prior to their filing with
the SEC, and (B) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (ii) promptly after the same is prepared
and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to this Section
3.
d. The Company shall furnish to each Investor
whose Registrable Securities are included in any Registration Statement, without
charge, (i) upon the effectiveness of any Registration Statement, five (5)
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 (ii) such other documents, including copies
4
of any preliminary or final prospectus, as such Investor may reasonably request
from time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
e. The Company shall use its best efforts to
(i) register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable Securities
covered by a Registration Statement under such other securities or "blue sky"
laws of all applicable jurisdictions in the United States, (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 during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to 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 (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and 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 in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
f. The Company shall notify Legal Counsel and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, 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 omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic
information), and, subject to Section 3(l), promptly prepare a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as Legal Counsel or
such Investor may reasonably request). The Company shall also promptly notify
Legal Counsel and 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 Legal Counsel and each
Investor by facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
g. The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the 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 moment and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
5
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
h. 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 Agreement
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.
i. The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, 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, as the Investors may
reasonably request and registered in such names as the Investors may request.
j. The Company shall use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
k. Within five (5) Business Days after a
Registration Statement which covers Registrable Securities is ordered effective
by the SEC, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as Exhibit A.
l. Notwithstanding anything to the contrary
herein, at any time after the Registration Statement has been declared effective
by the SEC, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "Grace Period"); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of material,
non-public information giving rise to a Grace Period (provided that in each
notice the Company will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace Period will begin,
and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed forty-five (45)
consecutive days (an "Allowable Grace Period") and during any three hundred
sixty-five (365) day period there shall be no more than two (2) Allowable Grace
Periods.
6
4. Obligations of the Investors.
----------------------------
a. At least seven (7) Business Days prior to
the first anticipated filing date of a Registration Statement, the Company shall
notify each Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such 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 shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the effectiveness of the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance
of the Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement 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 such Registration Statement.
c. 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 any 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) or receipt of notice that no supplement or
amendment is required. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Purchase
Agreements in connection with any sale of Registrable Securities with respect to
which an Investor has entered into a contract for sale prior to the Investor's
receipt of a 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) and for which the
Investor has not yet settled.
5. Expenses of Registration.
------------------------
All reasonable expenses, other than underwriting 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 paid by the Company.
The Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $5,000
for the Registration Statement.
6. Indemnification.
---------------
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
7
a. To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor 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, reasonable 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
statement 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
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 the light of the circumstances under which the statements therein
were made, not misleading, (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 or (iv) any material violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being, collectively,
"Violations"). Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, 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 by an Indemnified
Person 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 such
Indemnified Person 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(d); (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 omission 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(d), 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 or failed to deliver
the correct prospectus as required by the 1933 Act and such correct prospectus
was timely made available pursuant to Section 3(d); (iii) shall not be available
8
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, including a
corrected prospectus, if such prospectus or corrected prospectus was timely made
available by the Company pursuant to Section 3(d); 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 or delayed. 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.
b. In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
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, each
of its directors, each of its officers who signs the Registration Statement and
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act (each, 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; and, subject to Section 6(c),
such Investor will reimburse any legal or other expenses reasonably incurred by
an Indemnified Party in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this Section
6(b) and the agreement with respect to contribution contained in 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 or delayed; provided, further, however, 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 net 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. 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 under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and 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 of not more than one counsel
for such Indemnified Person or Indemnified Party to be paid by the indemnifying
9
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 differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In the case of an Indemnified Person, legal counsel referred to in
the immediately preceding sentence shall be selected by the Investors holding at
least two-thirds 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 reasonably apprised at all times 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 prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written 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.
d. 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.
e. 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 make the maximum
contribution 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 Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
10
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.
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, if true, 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 under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of such
Investor's 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 a reasonable time 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) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) 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; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreements, as applicable.
10. Amendment of Registration Rights.
--------------------------------
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
11
and Investors who then hold at least a majority of the Registrable Securities.
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.
11. Miscellaneous.
-------------
a. A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the such record 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 confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Business 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:
Natural Health Trends Corp.
00000 Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000)000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxx Xxxxxxx Berlack Israels LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
12
If to Legal Counsel:
Xxxx Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: J. Page Davidson, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
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. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non- exclusive jurisdiction of the state and federal courts
sitting The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
13
e. This Agreement, the Purchase Agreements, the
Warrant and the instruments referenced herein and therein 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, the
Securities Purchase Agreement, the Warrant and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
h. This Agreement may be executed in 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.
i. 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
any 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.
j. All consents and other determinations
required to be made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by Investors holding at least a
majority of the Registrable Securities, determined as if all of the Warrants
held by Investors then outstanding have been exercised for Registrable
Securities.
k. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party.
l. 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.
* * * * * *
14
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
-------------------------------
OF REGISTRATION STATEMENT
-------------------------
Continental Stock Transfer and Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxx
Re: Natural Health Trends Corp.
---------------------------
Ladies and Gentlemen:
We are counsel to Natural Health Trends Corp., a Florida
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "Securities Purchase Agreement")
entered into by and among the Company and the buyers named therein
(collectively, the "Holders") pursuant to which on October 6, 2004 the Company
issued to the Holders units consisting of shares (the "Common Shares") of the
Company's Common Stock, par value $0.001 per share (the "Common Stock"), and
common stock purchase warrants ("Warrants") exercisable for shares of Common
Stock (the "Warrant Shares"). Pursuant to the Securities Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Common Shares and Warrant Shares,
as amended (the "1933 Act"). In connection with the Company's obligations under
the Registration Rights Agreement, on ____________ ___, 200_, the Company filed
a Registration Statement on Form S-1 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
XXXXX XXXXXXX BERLACK ISRAELS LLP
By:
-------------------------------
Name:
Title:
CC: [LIST NAMES OF HOLDERS]
A-1
EXHIBIT B
SELLING STOCKHOLDERS
The shares of common stock being offered by the selling stockholders
are shares of common stock, and shares of common stock issuable upon exercise of
the warrants which were sold by the Company in a private placement transaction.
[Add description of sales by selling stockholders having piggyback registration
rights from the MarketVision transaction] For additional information regarding
the common shares and warrants, see "Private Placement of Units" above. We are
registering the shares of common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the
ownership of the shares and warrants, the selling stockholders have not had any
material relationship with us within the past three years.
The table below lists the selling stockholders and other information
regarding the beneficial ownership of the common stock by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by each selling stockholder, based on its ownership of the
common shares and warrants, as of _____ __, 200_, assuming exercise of all
warrants held by the selling stockholders on that date, without regard to any
limitations on warrants exercise.
The third column lists the shares of common stock being offered by this
prospectus by the selling stockholders.
In accordance with the terms of registration rights agreements with the
holders of the Company's shares of common stock and warrants, this prospectus
generally covers the resale of a number of shares of common stock equal to the
number of shares of common stock issued to the selling stockholders plus the
number of shares of common stock issuable upon exercise of the warrants,
determined as if the outstanding warrants were exercised in full, as of the
trading day immediately preceding the date this registration statement was
initially filed with the SEC. Because the exercise price of the warrants may be
adjusted for anti-dilution protection, the number of shares that will actually
be issued may be more or less than the number of shares being offered by this
prospectus. The fourth column assumes the sale of all of the shares offered by
the selling stockholders pursuant to this prospectus.
The selling stockholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."
Maximum Number of Shares
Number of Shares Owned to be Sold Pursuant to this Number of Shares Owned
Name of Selling Stockholder Prior to Offering Prospectus After Offering
--------------------------- ----------------- ---------- --------------
[___] [___] [0]
[Other Buyers] [___] [___] [0]
B-1
PLAN OF DISTRIBUTION
We are registering the shares of common stock owned by the selling
stockholders, and the shares of common stock issuable upon exercise of the
warrants owned by the selling stockholders, to permit the resale of these shares
of common stock by the holders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of common stock. We will bear all fees and expenses
incident to our obligation to register the shares of common stock.
The selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of common stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of common stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,
o on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of
sale,
o in the over-the-counter market,
o in transactions otherwise than on these exchanges or systems
or in the over-the-counter market,
o through the writing of options, whether such options are
listed on an options exchange or otherwise,
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o through the settlement of short sales
o pursuant to Rule 144 under the Securities Act;
B-2
o broker-dealers may agree with the selling securityholders to
sell a specified number of such shares at a stipulated price
per share
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares
of common stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the common stock or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of common stock short and deliver
shares of common stock covered by this prospectus to close out short positions.
The selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in
some or all of the warrants or shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the warrants or shares of common stock from time to
time pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The selling stockholders also may transfer and donate the
shares of common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of common stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
B-3
There can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement, estimated to be $[ ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreements, or we may be
entitled to contribution.
Once sold under the shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.
B-4
EXHIBIT C
TRANSFER AGENT INSTRUCTIONS
NATURAL HEALTH TRENDS CORP.
October 6, 2004
Continental Stock Transfer and Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention:
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase
Agreement dated as of October 6, 2004 (the "Agreement"), by and among Natural
Health Trends Corp., a Florida corporation (the "Company"), and the respective
investors named on the Schedule of Buyers attached thereto (collectively, the
"Holders"), pursuant to which the Company is issuing to the Holders units
("Units") consisting of one (1) share of common stock of the Company, par value
$0.001 per share (the "Common Stock") and one (i) common stock purchase warrant
(the "Warrant").
(i) This letter shall serve as our irrevocable
authorization and direction to you (provided that you are the transfer agent of
the Company at such time) to issue shares of Common Stock upon exercise of the
Warrants (the "Warrant Shares") to or upon the order of a Holder from time to
time upon delivery to you of a properly completed and duly executed Conversion
Notice, in the form attached hereto as Exhibit I, which has been acknowledged by
the Company as indicated by the signature of a duly authorized officer of the
Company thereon.
You acknowledge and agree that so long as you have previously
received (a) written confirmation from the Company outside legal counsel that
either (i) a registration statement covering resales of the Warrant Shares or
the Interest Shares has been declared effective by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), or (ii) sales of the Warrant Shares may be made in conformity with Rule
144 under the 1933 Act and (b) if applicable, a copy of such registration
statement, then within two (2) business days of your receipt of the Exercise
Notice, you shall issue the certificates representing the Warrant Shares, and
such certificates shall not bear any legend restricting transfer of the Warrant
Shares thereby and should not be subject to any stop-transfer restriction;
provided, however, that if such Warrant Shares are not registered for resale
under the 1933 Act or able to be sold under Rule 144, then, the certificates for
such Conversion Shares shall bear the following legend:
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN][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 MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR (B)
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
A form of written confirmation from the Company's outside
legal counsel that a registration statement covering resales of the Conversion
Shares has been declared effective by the SEC under the 1933 Act is attached
hereto as Exhibit II.
Please be advised that the Holders are relying upon this
letter as an inducement to enter into the Agreement and, accordingly, each
Holder is a third party beneficiary to these instructions.
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Please execute this letter in the space indicated to
acknowledge your agreement to act in accordance with these instructions. Should
you have any questions concerning this matter, please contact me at (972)
000-0000.
Very truly yours,
NATURAL HEALTH TRENDS CORP.
By:
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this ___ day of October, 2004
CONTINENTAL STOCK TRANSFER AND
TRUST COMPANY
By:
--------------------------------
Name:
Title:
Enclosures
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EXHIBIT I
NATURAL HEALTH TRENDS CORP.
EXERCISE WARRANTS
Reference is made to the Common Stock Purchase Warrants (the "Warrants") issued
to the undersigned by Natural Health Trends Corp. (the "Company"). In accordance
with and pursuant to the Warrant, the undersigned hereby elects to exercise the
Warrant for Warrant Shares (as defined in the Warrant), of the Company as of the
date specified below.
Date of Exercise:
------------------------------------------------------
Aggregate Warrant Shares to be issued:
---------------------------------
Please confirm the following information:
Exercise Price:
--------------------------------------------------------
Number of Warrant Shares:
----------------------------------------------
Please issue the Common Stock into which the Warrant is being exercised in the
following name and to the following address:
Issue to:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
Facsimile Number:
------------------------------------------------------
Authorization:
---------------------------------------------------------
By:
---------------------------------------------------------
Title:
Dated:
--------------------------------------------------------------------------
Account Number:
--------------------------------------------------------
(if electronic book entry transfer)
Transaction Code Number:
-----------------------------------------------
(if electronic book entry transfer)
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Continental Stock Transfer & Trust Company to issue the above indicated number
of shares of Common Stock in accordance with the Transfer Agent Instructions
dated October 6, 2004 from the Company and acknowledged and agreed to by
Continental Stock Transfer & Trust Company.
NATURAL HEALTH TRENDS CORP.
By:
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
EXHIBIT II
FORM OF NOTICE OF EFFECTIVENESS
-------------------------------
OF REGISTRATION STATEMENT
-------------------------
Continental Stock Transfer and Trust Company
00 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn:
Re: Natural Health Trends Corp.
---------------------------
Ladies and Gentlemen:
We are counsel to Natural Health Trends Corp., a Florida
corporation (the "Company"), and have represented the Company in connection with
that certain (i) Securities Purchase Agreement (the "Securities Purchase
Agreement") and (ii) Subscription Agreement, each entered into by and among the
Company and the respective buyers named therein (collectively, the "Holders")
pursuant to which on October 6, 2004 the Company issued to the Holders units
consisting of shares of the Company's Common Stock, par value $0.01 per share
(the "Common Stock") and common stock purchase warrants (the "Warrants").
Pursuant to the Securities Purchase Agreement, the Company also has entered into
a Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock included in the units and
issuable upon exercise of the Warrants, under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 200_, the Company filed a
Registration Statement on Form S-1 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
XXXXX XXXXXXX XXXXXXX ISRAELS, LLP
By:
-------------------------------
Name:
Title:
CC: [LIST NAMES OF HOLDERS]
[Form of Xxxxx Xxxxxxx Legal Opinion]
Exhibit D
October 6, 2004
To: The Investors Listed on Exhibit A
Attached Hereto
Ladies and Gentlemen:
We have acted as special legal counsel to Natural Health Trends Corp.,
a Florida corporation (the "Company"), in connection with the private offering
("Offering") by the Company of up to 1,367,720 units (the "Units"), each Unit
consisting of 1 share of the Company's common stock, $.001 par value (the
"Common Stock"), and 1 common stock purchase warrant (the "Warrants"). This
opinion letter, including the schedules hereto (the "Opinion Letter"), is being
rendered (a) pursuant to (i) Section 7(a)(iii) of that certain Securities
Purchase Agreement, dated as of the date hereof, among the Company and the
investors signatories thereto (the "Securities Purchase Agreement") and (ii)
pursuant to Article 9.2(iii) of that certain Subscription Agreement, dated as of
the date hereof, among the Company and the investors signatory thereto (the
"Subscription Agreement"; together with the Securities Purchase Agreement, the
"Agreements") and (b) in connection with the Company's closing on the sale of
1,367,720 Units consisting of 1,367,720 shares of Common Stock and 1,367,720
Warrants.
In connection with this Opinion Letter, we have examined the documents
listed on Schedule A attached hereto (collectively, the "Documents"). The
closing Documents listed in paragraphs (i) through paragraph (iv), inclusive, on
Schedule A are referred to herein as the "Transaction Documents".
We have, without independent investigation, relied upon the
representations and warranties of the various parties as to matters of objective
fact contained in the Documents.
We have not made any independent review or investigation of orders,
judgments, rules or other regulations or decrees by which the Company or any of
its property may be bound, nor have we made any independent investigation as to
the existence of actions, suits, investigations or proceedings, if any, pending
or threatened against the Company.
With your concurrence, the opinions hereafter expressed, whether or not
qualified by language such as "to our knowledge", are based solely upon (1) our
review of the Documents, (2) such review of published sources of law as we have
deemed necessary and (3) facts and matters which have come to the conscious
awareness of those attorneys in our firm who have rendered legal services to the
Company in connection with the Offering.
This firm, in rendering legal opinions, customarily makes certain
assumptions which are described in Schedule B hereto. In the course of our
representation of the Company, nothing has come to our attention which causes us
to believe reliance upon any of those assumptions is inappropriate, and, with
your concurrence, the opinions hereafter expressed are based upon those
assumptions.
1
Our opinions hereafter expressed are limited to the laws of the State
of New York and Federal law of the United States of America, except with respect
to the opinions hereafter expressed in numbered opinion 1) below as to
incorporation, existence and good standing of the Company in the State of
Florida for which we have relied exclusively on a certificate listed on Schedule
A of the Secretary of State of the State of Florida. To the extent that any
Transaction Document provides that it is to be governed by the laws of any
jurisdiction other than the State of Florida, our opinions regarding that
Transaction Document are being rendered, with your concurrence, as if only the
internal laws of the State of Florida were applicable thereto, notwithstanding
the governing law provisions of the Transaction Document to the contrary. In
addition, we express no opinion with respect to any matters relating to the
Company occurring prior to July 30, 2002 and the opinions set forth below are
qualified and limited to the extent affected by events of which occurred prior
to July 30, 2002.
The opinion hereafter expressed in numbered opinion 2 with respect to
the enforceability of any provisions of the Transaction Documents, or any rights
or remedies granted to you under the Transaction Documents, are subject to the
general qualifications that such rights and remedies may be subject to and
affected by:
(i) applicable bankruptcy, insolvency, reorganization,
receivership, moratorium, or assignment for the benefit of creditors laws and
other laws affecting the rights and remedies of creditors generally, including
without limitation laws regarding fraudulent transfers, fraudulent conveyances,
preferences, avoidance, automatic stay and turn-over;
(ii) general principles of equity, including without limitation
those governing the availability of equitable remedies, affording equitable
defenses, requiring good faith, fair dealing and reasonableness in the
performance and enforcement of a contract, and affording defenses based upon
unconscionability, lack of notice, impracticability or impossibility of
performance; and
(iii) general rules of contract law with respect to matters such as
the election of remedies, the limits of severability, mutuality of obligations,
and opportunity to cure, limitations on the enforceability of indemnification,
contribution or exculpation provisions under applicable securities laws or
otherwise and limitations on the enforceability of provisions which are in
violation of public policy.
We express no legal opinion upon any matter other than those explicitly
addressed in numbered paragraphs 1 through 4 below, and our express opinions
therein contained shall not be interpreted to be implied opinions upon any other
matter. In particular, we express no opinion as to the registration and
qualification of the Units under the securities or blue sky laws of any state or
other jurisdiction in the United States of America or any country other than the
United States of America, or as to any requirements of the National Association
of Securities Dealers, Inc.
Without limiting any of the qualifications and limitations set forth in
this Opinion Letter, (i) we express no opinion concerning the enforceability of
any provisions of the Transaction Documents providing for indemnification,
liquidated damages, arbitration, mediation or specific performance; and (ii)
with respect to our legal opinion set forth in numbered paragraph 1 below, we
have relied exclusively upon a certificate of the Secretary of State of the
State of Florida with respect to the incorporation, existence and good standing
of the Company.
Based upon and subject to the foregoing, we are of the opinion that:
2
1) The Company has been duly incorporated and is validly existing and in
good standing in the State of Florida;
2) Each of the Transaction Documents has been duly authorized, executed
and delivered by the Company, and the Warrants and the Registration
Rights Agreement are the valid and binding obligation of the Company,
and enforceable against the Company;
3) The authorized capital stock of the Company as of the date hereof
(before giving effect to the transactions contemplated by the
Agreements) is as follows: 501,500,000 shares consisting of 500,000,000
shares of Common Stock and 1,500,000 shares of "blank check" Preferred
Stock. The (i) shares of Common Stock included in the Units, and (ii)
shares of Common Stock issuable upon exercise of the Warrants contained
in the Units, have been duly reserved, and when issued and paid for in
accordance with the terms of the Agreements and/or Warrants, as the
case may be, will be validly issued, fully paid and nonassessable; and
4) Assuming: (i) that the information provided by the investors in the
Agreements is accurate, correct and complete, and (ii) that the
placement agents engaged by the Company have complied in all respects
with the requirements of the Securities Act of 1933, as amended (the
"Act") (and the provisions of Regulation D promulgated under the Act),
the issuance and sale of the Units is exempt from the registration
requirements of Section 5 under the Act and Regulation D promulgated
thereunder;
This opinion is rendered to you for your benefit in connection with the
transactions contemplated by the Agreement and may not be delivered to, or
relied upon by, any other party without our prior written consent.
Very truly yours,
Xxxxx Xxxxxxx Xxxxxxx Israels LLP
ANF, SPW
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Exhibit A
---------
List of Investors
-----------------
4
SCHEDULE A
LIST OF DOCUMENTS
-----------------
In connection with the Opinion Letter to which this Schedule A is
attached, we have reviewed the following Documents. However, except as otherwise
expressly indicated, we have not reviewed any other documents, instruments or
agreements referred to in or listed upon any of the following Documents:
(i) the Securities Purchase Agreement;
(ii) the Subscription Agreement;
(iii) the Warrants executed by the Company and issued to each of the
Investors;
(iv) the Registration Rights Agreement dated as of October 6, 2004
by and among the Company and the investors signatory thereto;
(v) the Articles of Incorporation of the Company, as amended, as
certified by the Secretary of State of the State of Florida and a certificate of
the Secretary of the Company that there have been no further amendments thereto;
(vi) a copy of the By-laws of the Company, as amended, certified by
the Secretary of the Company as presently being in effect;
(vii) The unanimous written consents of the Board of Directors as to
approvals given with respect to the Offering, together with a certificate of the
Secretary of the Company, certifying (a) as to the resolutions adopted pursuant
to the written consents taken, (b) that such resolutions are in full force and
effect as of the date hereof, (c) that the same have not been altered, amended
or rescinded in any way, and (d) that such resolutions are the only resolutions
adopted relating to such matters; as to which we have relied exclusively with
respect to the subject matter of such certificate;
(viii) An electronic confirmation from the Company's Transfer Agent
as of a recent date as to the issued and outstanding shares of common stock of
the Company, as to which we have relied exclusively with respect to the subject
matter thereof;
(ix) a certificate dated as of October 6, 2004, of the Secretary of
State of the State of Florida as to the corporate good standing of the Company
and tax status, as to which we have relied exclusively with respect to the
subject matter of such certificate;
(x) the certificates evidencing the shares of Common Stock;
(xi) the confidential purchaser questionnaires;
(xii) a certificate of the Chief Executive Officer of the Company,
as to certain matters related to Regulation D promulgated under the Act, as to
which we have relied exclusively with respect to the subject matter of such
certificate; and
1
(xiii) a certificate of the Secretary of the Company as to the
incumbency and signatures of the officers of the Company, as to which we have
relied exclusively with respect to the subject matter of such certificate.
2
SCHEDULE B
XXXXX XXXXXXX BERLACK ISRAELS LLP
STANDARD ASSUMPTIONS
--------------------
In rendering legal opinions in third party transactions, Xxxxx Xxxxxxx
Xxxxxxx Israels LLP makes certain customary assumptions described below:
1. Each natural person executing any of the Documents
has sufficient legal capacity to enter into such Documents and
perform the transactions contemplated thereby.
2. The Company holds requisite title and rights to any
property involved in the transactions contemplated by the
Transaction Documents and purported to be owned by it.
3. Each person other than the Company has all requisite
power and authority and has taken all necessary corporate or
other action to enter into those Transaction Documents to
which it is a party or by which it is bound, to the extent
necessary to make the Transaction Documents enforceable
against it.
4. Each person other than the Company has complied with
all legal requirements pertaining to its status as such status
relates to its rights to enforce the Transaction Documents
against the Company.
5. Each Document is accurate, complete and authentic,
each original is authentic, each copy conforms to an authentic
original and all signatures are genuine.
6. All official public records are accurate, complete
and properly indexed and filed.
7. There has not been any mutual mistake of fact or
misunderstanding, fraud, duress, or undue influence by or
among any of the parties to the Transaction Documents.
8. The conduct of the parties involved in the Offering
has complied in the past and will comply in the future with
any requirement of good faith, fair dealing and
conscionability.
9. Each person other than the Company has acted in good
faith and without notice of any defense against the
enforcement of any rights created by, or adverse claim to any
property or security interest transferred or created as part
of, the Transaction Documents.
10. There are no agreements or understandings among the
parties involved in the Offering, and there is no usage of
trade or course of prior dealing among such parties, that
1
would define, modify, waive, or qualify the terms of any of
the Transaction Documents.
11. The Company will not in the future take any
discretionary action (including a decision not to act)
permitted under any Transaction Document that would result in
a violation of law or constitute a breach or default under
that or any other Transaction Document or court or
administrative orders, writs, judgments and decrees that name
any Company and are specifically directed to it or its
property.
12. The Company will obtain all permits and governmental
approvals and make all filings not required at the time of the
Closing of the Offering but which are subsequently required,
and will take all actions similarly required, relevant to
subsequent consummation of the transactions contemplated by
the Offering or performance of the Transaction Documents.
13. All parties to or bound by the Transaction Documents
will act in accordance with, and will refrain from taking any
action that is forbidden by, the terms and conditions of the
Transaction Documents.
14. That there is no legal restriction, no requirement of
registration, consent, approval, license or authorization by
any governmental authority, no pending judicial proceeding,
and no order, writ, injunction or decree of any court or
governmental agency, any of which would limit, prescribe or
require consent for the undertaking by the investor or any
third party or agency in connection with the transactions
contemplated by the Transaction Documents, except for
consents, approvals, licenses and authorizations that have
been obtained;
15. An officer of the Company has executed each of the
Transaction Documents and the Company has delivered the
Transaction Documents with the intent of creating an
immediately binding obligation.
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