EXHIBIT 4.2
ANNEX IV
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March , 2000 (this
"Agreement"), is made by and between NATURAL HEALTH TRENDS CORP., a Florida
corporation, with headquarters located at 000 Xxxxxxx Xxxxxx, Xxxxxxxx, XX 00000
(the "Company"), and each entity named on a signature page hereto (each, an
"Initial Investor") (each agreement with an Initial Investor being deemed a
separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of March , 2000, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; terms not otherwise defined
herein shall have the meanings ascribed to them in the Securities Purchase
Agreement), the Company has agreed to issue and sell to the Initial Investor
shares of Series J Convertible Preferred Stock of the Company having an
aggregate liquidation preference of $1,000,000 (the "Preferred Stock"); and
WHEREAS, the Company has agreed to issue the Warrants to the Initial
Investor in connection with the issuance of the Preferred Stock; and
WHEREAS, the Preferred Stock is convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
dividends on conversion as contemplated by the Preferred Stock) upon the terms
and subject to the conditions contained in the Certificate of Designations and
the Warrants may be exercised for the purchase of shares of Common Stock (the
"Warrant Shares") upon the terms and conditions of the Warrants; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
piggy-back registration rights under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, or any similar successor statute
(collectively, the "Securities Act"), with respect to the Conversion Shares and
the Warrant Shares;
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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 the Initial
Investor hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Preferred Stock, Warrants or
Registrable Securities.
(b) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(c) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(d) "Registrable Securities" means the Conversion Shares and the Warrant
Shares.
(e) "Registration Statement" means a registration statement of the Company
under the Securities Act.
(f) "Required Effective Date" means the relevant Anticipated Initial
Effective Date or Anticipated Subsequent Effective Date (as those terms are
defined below).
2. Registration.
(a) Piggy Back Registration.
(i) If at any time after the date hereof, except in connection with the
registration statement currently filed for the secondary offering with May Xxxxx
Group, Inc. (SEC File No. 33389419), the Company shall prepare and file with the
SEC, either a Registration Statement on Form S-1 or an amendment to an existing
Registration Statement for the sale of shares of Common
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Stock of the Company, the Company shall, as part of such Registration Statement,
register for resale by the Investor a sufficient number of shares of Common
Stock for the Initial Investors to sell the Registrable Securities (or such
lesser number as may be required by the SEC, but in no event less than the
number of shares equal to the sum of (A) two hundred percent (200%) of the
number of shares into which the Preferred Stock and all dividends thereon
through the fifth anniversary of the Closing Date would be convertible at the
time of filing of such Registration Statement (assuming for such purposes that
all shares of Preferred Stock, had been eligible to be converted, and had been
converted, into Conversion Shares in accordance with their terms, whether or not
such accrual of dividends, eligibility or conversion had in fact occurred as of
such date) and (B) the number of shares which would be issued upon exercise of
all of the Warrants at the time of filing of the Registration Statement
(assuming for such purposes that all Warrants, including all Warrants had been
eligible to be exercised and had been exercised in accordance with their terms,
whether or not such eligibility or exercise had in fact occurred as of such
date). The Registration Statement shall state that, in accordance with Rule 416
and 457 under the Securities Act, it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Preferred Stock and the exercise of the Warrants to prevent dilution resulting
from stock splits, or stock dividends.
(ii) If at any time (an "Increased Registered Shares Date"), the number of
shares of Common Stock represented by the Registrable Shares, issued or to be
issued as contemplated by the Transaction Agreements, exceeds the aggregate
number of shares of Common Stock then registered, then,
(A) if permitted by SEC regulations or practice, the Company shall, within
ten (10) business days after the Increased Registered Shares Date, amend
the Registration Statement filed by the Company pursuant to the preceding
provisions of this Section 2, if such Registration Statement has not been
declared effective by the SEC at that time, to register, in the aggregate,
at least the number of shares (the "Increased Shares Amount") equal to (x)
(I) the number of shares theretofore issued on conversion of the Preferred
Stock (including any dividends paid on conversion by the issuance of
Conversion Shares) plus (II) two hundred percent (200%) of the number of
shares into which the unconverted Preferred Stock and all dividends
thereon through the second anniversary of the Closing Date would be
convertible at the Increased Registered Shares Date (assuming for such
purposes that all such shares of Preferred Stock had been eligible to be
converted, and had been converted, into Conversion Shares in accordance
with their terms, whether or not such accrual of dividends, eligibility or
conversion had in fact occurred as of such date) and (y) the number of
shares which would be issued upon exercise of all of the Warrants
(assuming for such purposes that all Warrants had been eligible to be
exercised and had been exercised in accordance with their terms, whether
or not such eligibility or exercise had in fact occurred as of such date);
and
(B) If such Registration Statement has been declared effective by the SEC
at that time and such Registration Statement can not be so amended, the
Company will
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include such shares in any subsequent or additional Registration Statement
on Form S-1 or other appropriate registration statement form (an
"Additional Registration Statement") filed with the SEC so as to register
the number of shares equal to the excess of the Increased Shares Amount
over the aggregate number of shares of Common Stock already registered.
(b) Payments by the Company.
(i) Anything herein to the contrary notwithstanding, the
Company agrees that if (A) a Registration Statement covering the number of the
shares contemplated by the provisions of Section 2(a)(i) is not declared
effective within ninety (90) days after the Initial Closing Date, (the
"Anticipated Initial Effective Date"), (B) a Registration Statement covering the
number of shares contemplated by the provisions of Section 2(a)(ii)(A) is not
declared effective by the earlier of the Anticipated Initial Effective Date or
sixty (60) days after the Increased Registered Shares Date (an "Anticipated
Subsequent Effective Date"), or (C) a Registration Statement covering the number
of shares contemplated by the provisions of Section 2(a)(ii)(B) is not declared
effective by sixty (60) days after the Increased Registered Shares Date (an
"Anticipated Subsequent Effective Date"), the Company will make payment to the
Initial Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(b).
(ii) If the Investor is restricted from making sales of
Registrable Securities covered by a previously effective Registration Statement
at any time (the date such restriction commences, a "Restricted Sale Date")
after the Effective Date other than during a Permitted Suspension Period (as
defined below), then the Company will make payments to the Initial Investor in
such amounts and at such times as shall be determined pursuant to this Section
2(b).
(iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Preferred Stock for
the period from the date following the relevant Required Effective Date or
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and thereafter to each subsequent Computation Date. The "Periodic Amount
Percentage" means two percent (2.0%) of the Purchase Price of all Preferred
Stock (prorated on a daily basis if the period from the relevant Required
Effective Date, Restricted Sale Date or immediately preceding Computation Date,
as the case may be, until the next Computation Date is less than thirty (30)
days). Anything in the preceding provisions of this paragraph (iii) to the
contrary notwithstanding, after the Effective Date the Purchase Price for such
Preferred Stock shall be deemed to refer to the sum of (X) the principal amount
of all Preferred Stock not yet converted and (Y) the Held Shares Value (as
defined below). The "Held Shares Value" means, for shares acquired by the
Investor upon a conversion within the thirty (30) days preceding the Restricted
Sale Date, but not yet sold by the Investor, the principal amount of the
Preferred Stock converted into such Conversion Shares; provided, however, that
if the Investor effected more than one conversion during such thirty (30) day
period and sold less than all of such shares, the sold shares shall be deemed to
be derived first from the conversions in the
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sequence of such conversions (that is, for example, until the number of shares
from the first of such conversions have been sold, all shares shall be deemed to
be from the first conversion; thereafter, from the second conversion until all
such shares are sold). By way of illustration and not in limitation of the
foregoing, if the Registration Statement is not declared effective until one
hundred sixty-five (165) days after the Initial Closing Date, the Periodic
Amount will aggregate five percent (5%) of the Purchase Price of the Preferred
Stock theretofore issued (2% for days 91-120, plus 2% for days 121-150, plus 1%
for days 151-165).
(iv) Each Periodic Amount will be payable by the Company in cash or other
immediately available funds to the Investor monthly, without requiring demand
therefor by the Investor.
(v) The parties acknowledge that the damages which may be incurred by the
Investor if the Registration Statement has not been declared effective by a
Required Effective Date, including if the right to sell Registrable Securities
under a previously effective Registration Statement is suspended, may be
difficult to ascertain. The parties agree that the Periodic Amounts represent a
reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of such damages.
(vi) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable (i) to the extent any delay in
the effectiveness of the Registration Statement occurs because of an act of, or
a failure to act or to act timely by the Initial Investor or its counsel, (ii)
in the event all of the Registrable Securities may be sold pursuant to Rule 144
or another available exemption under the Act without volume or other
restrictions or limits or (iii) with respect to a Permitted Suspension Period.
(vii) "Computation Date" means (A) the date which is the earlier of (1)
thirty (30) days after any relevant Required Effective Date or a Restricted Sale
Date, as the case may be, or (2) the date after such Required Effective Date or
Restricted Sale Date on which the Registration Statement is declared effective
or has its restrictions removed, as the case may be, and (B) each date which is
the earlier of (1) thirty (30) days after the previous Computation Date or (2)
the date after the previous Computation Date on which the Registration Statement
is declared effective or has its restrictions removed, as the case may be.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) After filing with the SEC a Registration Statement with respect to not
less than the number of Registrable Securities provided in Section 2(a) above,
use its reasonable best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date and
keep the Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earliest of (i) the date that is two
(2) years after the last day of the calendar month following the month in which
the Effective Date occurs, (ii)
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the date when the Investors may sell all Registrable Securities under Rule 144
without volume or other restrictions or limits or (iii) the date the Investors
no longer own any of the Registrable Securities, which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Permit a single firm of counsel designated by the Initial Investors to
review the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects;
(d) Notify each Investor's legal counsel identified to the Company and
which has requested by written notice to the Company that it receive such
notification (which, until further notice, shall be deemed to be Xxxxxxx &
Xxxxxx LLP, Attn: Xxxxxx Xxxxxxx, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel"), and any managing underwriters
immediately (and, in the case of (i)(A) below, not less than three (3) business
days prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) business day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) whenever the SEC
notifies the Company whether there will be a "review" of such Registration
Statement; (C) whenever the Company receives (or a representative of the Company
receives on its behalf) any oral or written comments from the SEC in respect of
a Registration Statement (copies or, in the case of oral comments, summaries of
such comments shall be promptly furnished by the Company to the Investors); and
(D) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the SEC or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose; and (vi) of the occurrence of any event that to the
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best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;
(e) Furnish to the Investor's Counsel (i) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one (1) copy of the Registration Statement, each preliminary prospectus
and prospectus, and each amendment or supplement thereto, and (ii) such number
of copies of a prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(f) As promptly as practicable after becoming aware thereof, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(g) As promptly as practicable after becoming aware thereof, notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance by the SEC of
a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period. The term "Permitted Suspension
Period" means up to two suspension periods during any consecutive 12-
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month period, each of which suspension period shall not either (i) be for more
than twenty (20) days or (ii) begin less than ten (10) business days after the
last day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period); provided further that the Company shall,
if lawful to do so, provide the Investor with at least two (2) business days'
notice of the existence (but not the substance of) a Potential Material Event;
(i) Use its reasonable efforts to secure and maintain the designation of
all the Registrable Securities covered by the Registration Statement on the
"NASDAQ/SmallCap Market" of the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the quotation of the Registrable Securities on The NASDAQ/SmallCap Market;
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities;
(j) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(k) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request, and, within five (5) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel; and
(l) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
(a) The 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 registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least ten (10) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor (the "Requested
Information") if such Investor has any Registrable Securities included in the
Registration Statement.
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(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 the 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 the Registration Statement; and
(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(e) or 3(f),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel to review the Registration Statement on behalf of the Investors equal
to, in the aggregate for all Investors, $3,500, shall be borne by the Company.
6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein 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 the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation
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or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation under the Securities Act, the
Exchange Act or any state securities law (the matters in the foregoing clauses
(i) through (iii) being, collectively, "Violations"). Subject to clause (b) of
this Section 6, the Company shall reimburse the Investors, 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) shall not
(I) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, after such prospectus was made
available by the Company pursuant to Section 3(c) hereof; (II) be available to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company or the amendment or
supplement thereto made available by the Company; (III) be available to the
extent such Claim is based on the delivery of a prospectus by the Investor after
receiving notice from the Company under Section 3(e), (f) or (g) hereof (other
than a notice regarding the effectiveness of the Registration Statement or any
amendment or supplement thereto), or (IV) 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. Each
Investor will indemnify the Company and its officers, directors and agents
(each, an "Indemnified Person" or "Indemnified Party") against any claims
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 or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement or the amendment or supplement thereto, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company to this Section 6. 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) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), 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. In case any
such action is brought against any Indemnified Person or Indemnified Party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Person or Indemnified Party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such Indemnified Person or Indemnified Party under this Section 6 for
any legal or other reasonable out-of-pocket expenses subsequently
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incurred by such Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action of its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party provided such counsel is of the opinion that all
defenses available to the Indemnified Party can be maintained without
prejudicing the rights of the indemnifying party. In no event shall the
Indemnifying Party be responsible for the legal fees and expenses of more than
one separate counsel for the Indemnified Person or the Indemnified Party.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. 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 such expense, loss, damage or liability is
incurred and is due and payable.
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 (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities 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 Securities Act and the Exchange Act; and
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(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange 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 the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Preferred Stock or
unexercised Warrant) only if: (a) 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, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein,
and (e) such transfer of Registrable Securities is completed and disclosed to
the Company prior to the initial Effective Date or involves the transfer of
Registrable Securities resulting from the conversion of Preferred Stock having a
liquidation preference of at least $100,000. In the event of any delay in filing
or effectiveness of the Registration Statement as a result of such assignment,
the Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof arising from such delay.
10. Amendment of Registration Rights. Any provision 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 and Investors who hold a sixty-seven (67%)
percent interest of the Registrable Securities (as calculated by the liquidation
preference of the Preferred Stock without any reference to the Warrant Shares).
Any amendment or waiver effected in accordance with this Section 10 shall be
binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
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(b) Notices required or permitted to be given hereunder shall be given in
the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
coveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, either party hereto shall reimburse the other
party for any reasonable legal fees and disbursements incurred by such party in
enforcement of or protection of any of its rights under this Agreement.
(e) 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 or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more 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 telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such performance
could result in loss to the
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Investors, and the Company agrees that, in addition to any other liability the
Company may have by reason of such failure or delay, the Company shall be liable
for all direct damages caused by any such failure or delay, unless the same is
the result of force majeure. Neither party shall be liable for consequential
damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
COMPANY:
NATURAL HEALTH TRENDS CORP.
By:
-----------------------------
Name:
Title:
INITIAL INVESTOR:
--------------------------------
[Print Name of Initial Investor]
By:
-----------------------------
Name:
Title:
