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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 21, 1997
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CTC Cosmetics Holdings Company, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
033-23884-LA 87-0415594
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(Commission File Number) (IRS Employer Identification No.)
No. 80 Liu Tuang Road Pudong, Shanghai, China
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (852) 2882-5699
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Exhibit Index is on page 2 of the manually executed copy.
Page 1 of 3 pages
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Item 9. Sales of Equity Securities Pursuant to Regulation S.
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On March 21, 1997, CTC Cosmetics Holdings Company, Inc., (the
"Registrant") closed an offshore private placement of $500,000 of 8%
Convertible Debentures Due March 31, 1998 ( the "Closing Date"). The
Debentures were sold to a certain offshore accredited investor. The
offshore placement was made pursuant to Regulation S and Section 4(2) of
the securities Act of 1933, as amended.
The principal amount of the Debentures may be converted, at the option
of the holder thereof, at any time after 45 days commencing from the Closing
Date, at a conversion price equal to the lower of 50% of the average closing
bid price of common stock for 5 business days immediately preceding the
conversion date or $2.50 per share.
In addition to the Debentures, the offshore investors received
warrants to purchase 100,000 shares of common stock of the Registrant at an
exercise price equal to 50% of the closing bid price of common stock at the
date of exercise. The warrant can be exercised at any time, subject to the
restrictive period imposed by Regulation S.
Item 7. Financial Statements, Pro Forma Financial Information and
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(c) Exhibits
10. Material Contracts
10.1 Form of Offshore Securities S Subscription
Agreement.
10.2 Form of Convertible Debenture
10.3 Form of Warrant
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 5, 1997 CTC Cosmetics Holdings Company, Inc.
By: /s/ Mark K.W. Lee
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Mark K.W. Lee
President
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OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT"), AND MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S OF THE 1933
ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN
REGULATION S OF THE 1933 ACT) EXCEPT PURSUANT TO REGISTRATION UNDER OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN MAKING AN
INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE
COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE ACCURACY OR
ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT dated as of March___,
1997 (the "Agreement"), is executed in reliance upon the exemption from
registration afforded by Regulation S ("Regulation S") as promulgated by the
Securities and Exchange Commission ("SEC"), under the Securities Act of
1933, as amended. Capitalized terms used herein and not defined shall have
the meanings given to them in Regulation S.
CTC Cosmetics Holding (BVI) Co., Ltd. ("CTC"), a British Virgin
Islands corporation and The Westwind Group, Inc., a Delaware corporation
("WGI"), have executed a Agreement and Plan of Reorganization as of March__,
1997, pursuant to which all of the common stock of CTC shall be acquired by
WGI in exchange for common stock of WGI (the "Acquisition") subject to
fulfillment of certain conditions. All references to the Seller or the
Company in this Agreement refer to the combined entity of CTC and WGI as if
the Acquisition had taken place. Simultaneous with the closing of the
Acquisition, WGI shall undertake a reverse split of the WGI issued and
outstanding common stock, whereby 1 share of common stock will be issued in
exchange for every ___ shares of common stock then issued and outstanding.
CTC is engaged in the business of developing, manufacturing,
distributing and marketing of skin and hair care products, cosmetics and
cosmetic related chemical ingredients in the People's Republic of China.
This Agreement has been executed by the undersigned "Buyer" in
connection with the private placement of 8% Convertible Debentures due March
31, 1998. Buyer hereby represents and warrants to, and agrees with Seller:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) Subscription. The undersigned Buyer hereby subscribes
for and agrees to purchase the Seller's 8% Convertible Debentures due March
31, 1998 substantially in the form of the Debentures attached as Exhibit A
hereto and incorporated herein by reference, and having an aggregate
original principal amount of up to U.S. $1,000,000 (singularly, a
"Debenture," and plurally, the "Debentures"), at an aggregate purchase price
as set forth in subsection (b) herein.
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(b) Payment. The Purchase Price for the Buyer's portion of
the Debentures shall be Five Hundred Thousand United States Dollars (U.S.
$500,000) (the "Purchase Price"), which shall be payable at the Closing, as
defined below, pursuant to paragraph (C) herein by delivering immediately
available funds in United States Dollars by wire transfer to Iwona J. Alami,
Esq., attorney trust account as Escrow Agent ("Escrow Agent") for closing
by delivery of securities versus payment.
(c) Closing. (i) The closing of the purchase and sale of
the Debentures pursuant to paragraph (a) hereof shall take place subject to
the satisfaction of the conditions set forth in Sections 7 and 8 hereof, on
or before March __, 1996 (the "Closing Date") after the Company has
delivered to the offices of the Escrow Agent, $_______ of Debentures in
denominations of not less than $50,000 and registered in the names provided
by the Buyer.
(ii) The Company and the Buyer agree that they shall
instruct the Escrow Agent as follows:
A. On the Closing Date, for each Debenture subscribed
for and delivered to the Escrow Agent pursuant to the paragraph (b) above,
the Escrow Agent shall has wired payment of the Purchase Price for the
Debentures (less any fees Company has authorized Escrow Agent to deduct) in
immediately available funds to the Company's account as provided in the
escrow instructions to the Escrow Agent and release the Debentures described
in paragraph (a) above to the Buyer.
B. The Escrow Agent will make delivery of the number of
Debentures set forth in clause (a) above in accordance with the instructions
of the Buyer subject to customary settlement procedures upon confirmation of
the wiring of funds to the Company as described in clause (b) above, except
that all such Debentures shall be delivered to a location outside the United
States and none of the Debentures shall be delivered to a U.S. Person (as
defined in Regulation S).
2. BUYER REPRESENTATIONS AND COVENANTS; ACCESS TO INFORMATION.
Offshore Transaction. In connection with the purchase and sale of
the Debentures, Buyer represents and warrants to, and covenants and agrees
with Seller as follows:
(i) Buyer is not a natural person and is not organized
under the laws of any jurisdiction within the United States, was not formed
by a U.S. Person (as defined in Section 902(o) of Regulation S) for the
purpose of investing in Regulation S securities and is not otherwise a U.S.
Person. Buyer is not, and on the Closing Date will not be, an affiliate of
Seller. To enable the Company to avoid withholding interest paid, the Buyer
certifies under penalty of perjury that it is neither a citizen nor a
resident of the United States and that its address set forth in the Escrow
Agreement is correct;
(ii) At the time the buy order was originated, Buyer was
outside the United States and is outside of the United States as of the date
of the execution and delivery of this Agreement and will be outside the
United States on the Closing Date;
(iii) No offer to purchase the Debentures or the common
stock of Seller issuable upon conversion of the Debentures (collectively,
the "Securities"), was made while Buyer was present in the United States;
(iv) Buyer is purchasing the Securities for its own
account and not (i) with a view to or for sale in connection with, any
distribution thereof or (ii) for the account or on behalf of any U.S.
Person, and Buyer is qualified to purchase the Securities under the laws of
its jurisdiction of residence, and the offer and sale of the Securities will
not violate the securities or other laws of such jurisdiction;
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(v) All offers and sales of any of the Securities by
Buyer prior to the end of the Restricted Period (as hereinafter defined)
shall be made in compliance with any applicable securities laws of any
applicable jurisdiction and in accordance with Rule 903 and 904, as
applicable, of Regulation S or pursuant to registration of securities under
the 1933 Act or pursuant to an exemption from registration. In any case,
none of the Securities have been and will be offered or sold by Buyer to,
or for the account or benefit of, a U.S. Person or within the United States
until after the end of the forty (40) day period commencing on the date of
closing of the offering of the Securities (the "Restricted Period"), as
certified by Buyer to Seller, and thereafter only pursuant to a Registration
Statement or an applicable exemption therefrom;
(vi) The transactions contemplated by this Agreement (a)
have not been and will not be pre-arranged by Buyer with a purchaser located
in the United States or a purchaser which is a U.S. Person, and (b) are not
and will not be part of a plan or scheme by Buyer, to evade the registration
provisions of the 1933 Act;
(vii) Buyer understands that the Securities are not
registered under the 1933 Act and are being offered and sold to it in
reliance on specific exclusions from the registration requirements of
Federal and State securities laws, and that Seller is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
applicability of such exclusions and the suitability of Buyer and any
purchaser from Buyer to acquire the Securities;
(viii) The Buyer has agreed, and to the best knowledge of
the Buyer, each distributor, if any, participating in the offering of the
Securities, has agreed that all offers and sales of the Securities prior to
the expiration of a period commencing on the closing of the offering of the
Debentures and ending forty days thereafter shall not be made to U.S.
persons or for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S. Buyer is not a
distributor or dealer. Buyer and its controlling persons agree to indemnify
the Company for any misrepresentation of Buyer contained herein;
(ix) Buyer has not conducted and shall not conduct any
"directed selling efforts" as that term is defined in Rule 902(b) of
Regulation S; nor has Buyer conducted any general solicitation relating to
the offer and sale of any of the Securities in the United States or
elsewhere;
(x) This Agreement has been duly authorized, validly
executed and delivered on behalf of Buyer and is a valid and binding
agreement in accordance with its terms, subject to general principals of
equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally;
(xi) The execution and delivery of this Agreement and the
consummation of the purchase of the Securities, and the transactions
contemplated by this Agreement do not and will not conflict with or result
in a breach by Buyer of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws (or similar
constitutive documents) of Buyer or any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Buyer is a party or by
which it or any of its properties or assets are bound, or any existing
applicable law, rule or regulation of the United States or any State thereof
or any applicable decree, judgment or order of any Federal or State court,
Federal or State regulatory body, administrative agency or other United
States governmental body having jurisdiction over Buyer or any of its
properties or assets;
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(xii) All invitations, offers and sales of or in respect
of, any of the Securities, by Buyer and any distribution by Buyer of any
documents relating to any offer by it of any of the Securities will be in
compliance with applicable laws and regulations and will be made in such a
manner that no prospectus need be filed and no other filing need be made by
Seller with any regulatory authority or stock exchange in any country or any
political sub-division of any country;
(xiii) Buyer will not make any offer or sale of the
Securities by any means which would not comply with the laws and regulations
of the territory in which such offer or sale takes place or to which such
offer or sale is subject or which would in connection with any such offer or
sale impose upon Seller any obligation to satisfy any public filing or
registration requirement or provide or publish any information of any kind
whatsoever or otherwise undertake or become obligated to do any act; and
(xiv) Neither the Buyer nor any of its affiliates has
entered, has the intention of entering, or will during the Restricted Period
enter into any put option, short position or other similar instrument or
position with respect to any of the Securities or securities of the same
class as the Securities.
(xv) the Buyer (or others for whom it is contracting
hereunder) has been advised to consult its own legal and tax advisors with
respect to applicable resale restrictions and applicable tax considerations
and it (or others for whom it is contracting hereunder) is solely
responsible (and the Seller is not in any way responsible) for compliance
with applicable resale restrictions and applicable tax legislation.
(xvi) No Government Recommendation or Approval. Buyer
understands that no Federal or State or foreign government agency has passed
on or made any recommendation or endorsement of the Securities.
(xvii) Current Public Information. Buyer has received
and carefully reviewed the accompanying Disclosure Documents, as defined
herein. Buyer, in electing to subscribe for the Securities hereunder, has
relied upon an independent investigation made by it and its representatives
and advisors, if any, and has, prior to the date hereof, been given access
to and the opportunity to examine all books and records of the Company, and
all material contracts and documents of the Company. Buyer has been given
no oral or written representations or assurances from the Company or any
representation of the Company other than as set forth in this Agreement or
in a document executed by a duly authorized representative of the Company
making reference to this Agreement. The Buyer has such experience in
business and financial matters that it is capable of evaluating the risk of
its investment and determining the suitability of its investment. Buyer
understands that all financial information set forth in the Disclosure
Documents is subject to the qualifications set forth therein.
(xviii) No Legal Advice from Company. Buyer acknowledges
that Buyer has had the opportunity to review this Agreement and the
transactions contemplated herein with Buyer's own legal counsel. Buyer is
relying solely on such counsel and not on any statements or representations
of the Company for legal advice with respect to this investment, except for
the representations, warranties and covenants set forth herein.
(xix) No Public Solicitation. Buyer knows of no public
solicitation or advertisement of an offer in connection with the proposed
issuance and sale of the Securities.
(xx) Buyer's Sophistication. Buyer acknowledges that the
purchase of the Securities involves a high degree of risk, including the
total loss of Buyer's investment. Buyer has such knowledge and experience
in financial and business matters that it is capable of evaluating the
merits and risks of purchasing the Securities.
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(xxi) Tax Status. Buyer is not a "10-percent
Shareholder" (as defined in Section 871(h)(3)(B) of the U.S. Internal
Revenue Code) of Seller.
3. SELLER REPRESENTATIONS AND COVENANTS.
(a) Reporting Company Status. Seller is a "Reporting Issuer"
as defined by Rule 902 of Regulation S. Seller is required to file reports
pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and its Common Stock, $0.004 par value per share (the
"Common Stock") is listed and trades on Bulletin Board. Seller has filed
all material required to be filed pursuant to all reporting obligations
under either Section 13(a) or 15(d) of the Exchange Act for a period of at
least twelve (12) months immediately preceding the offer or sale of the
Securities (or for such shorter period that Seller has been required to file
such material).
(b) Current Public Information. The Company has provided the
Buyer with true and correct copies of the Business Plan of CTC, audited
financial statements of CTC for the fiscal years ending September 30, 1994,
September 30, 1995 and September 30, 1996, report on Form 10-KSB for fiscal
year ending August 31, 1996 of WGI, the most recent report on Form 10-QSB
of WGI for the period ending November 30, 1996, and such other publicly
available documents as requested by Buyer (collectively, the "Disclosure
Documents").
(c) Offshore Transaction. Seller has not offered any of the
Securities to any person in the United States, any identifiable groups of
U.S. citizens abroad, or to any U.S. Person, as such terms are used in
Regulation S.
(i) Based upon the truth and accuracy of representations
and warranties of Buyer, at the time the buy order was originated, Seller
and/or its agents reasonably believe the Buyer was outside of the United
States and was not a U.S. person.
(ii) Based upon the truth and accuracy of representations
and warranties of Buyer, Seller and/or its agents reasonably believe that
the transaction has not been pre-arranged with a buyer in the United States.
(iii) No offer to buy or sell the Securities was or will
be made by Seller to any person in the United States.
(iv) The sale of the Securities by Seller pursuant to
this Agreement will (based in part upon the representations and warranties
of the Buyer contained herein) be made in accordance with the provisions and
requirements of Regulation S provided that the representations and
warranties of Buyer in Section 2(a) hereof are true and correct.
(v) The transactions contemplated by this Agreement (a)
have not been and will not be pre-arranged by Seller with a purchaser
located in the United States or a purchaser which is a U.S. Person, and (b)
are not and will not be part of a plan or scheme by Seller to evade the
registration provisions of the 1933 Act.
(d) No Directed Selling Efforts. In regard to this
transaction, to the best knowledge of the Seller, Seller has not conducted
any "directed selling efforts" as that term is defined in Rule 902 of
Regulation S nor has Seller conducted any general solicitation relating to
the offer and sale of any of the Securities in the United States or
elsewhere.
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(e) Concerning the Securities. The issuance, sale and
delivery of the Debentures have been duly authorized by all required
corporate action on the part of Seller, and when issued, sold and delivered
in accordance with the terms hereof and thereof for the consideration
expressed herein and therein, will be duly and validly issued, fully paid
and non-assessable. The Common Stock issuable upon conversion of the
Debenture has been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of the Debentures, shall be duly and validly
issued, fully paid, and non-assessable and will not subject the holders
thereof, if such persons are non-U.S. persons, to personal liability by
reason of being such holders. There are no pre-emptive rights of any
shareholder of Seller.
(f) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a
valid and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally.
(g) Non-contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and the
transactions contemplated by this Agreement do not and will not conflict
with or result in a breach by Seller of any of the terms or provisions of,
or constitute a default under, the articles of incorporation or by-laws of
Seller, or any indenture, mortgage, deed of trust, or other material
agreement or instrument to which Seller is a party or by which it or any of
its properties or assets are bound, or any existing applicable law, rule or
regulation of the United States or any State thereof or any applicable
decree, judgment or order of any Federal or State court, Federal or State
regulatory body, administrative agency or other United States governmental
body having jurisdiction over Seller or any of its properties or assets.
(h) Approvals. Seller is not aware of any authorization,
approval or consent of any governmental body which is legally required for
the issuance and sale of the Debentures and the Common Stock issuable upon
conversion thereof to persons who are non-U.S. Persons, as contemplated
by this Agreement.
4. EXEMPTION; RELIANCE ON REPRESENTATIONS. Buyer understands that
the offer and sale of the Securities are not being registered under the 1933
Act. Seller and Buyer are relying on the rules governing offers and sales
made outside the United States pursuant to Regulation S.
5. TRANSFER AGENT INSTRUCTIONS.
(a) Debentures. The certificates representing the Securities
and the Shares issued during the Restricted Period, shall bear the following
legend (the "Legend"):
"The securities represented hereby have been issued pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended (the
"1933 Act"), and have not been registered under the 1933 Act. Such
securities may not be transferred, offered or sold prior to the end of the
forty (40) day period (the "Restricted Period") commencing on March __, 1997
unless such transfer, offer or sale is made in an "offshore transaction" and
not to or for the account of or benefit of a "U.S. Person" (as such terms
are defined in Regulation S) and is otherwise in accordance with the
requirements of Regulation S. Following expiration of the Restricted
Period, the securities represented hereby may not be offered, sold or
otherwise transferred in the United States or to a U.S. Person unless the
securities are registered under the 1933 Act and applicable state securities
laws, or such offers, sales and transfers are made pursuant to an available
exemption from the registration requirements of those laws."
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Upon the conversion of the Debentures, the holder thereof shall submit such
Debenture with a notice of conversion to the Seller and the Seller shall
instruct Seller's transfer agent to issue one or more Certificates
representing that number of shares of Common Stock into which the Debenture
or Debentures are convertible in accordance with the provisions regarding
conversion set forth in the Form of Debenture attached hereto as Exhibit A.
The Seller or its designees shall act as Debenture Registrar and shall
maintain an appropriate ledger containing the necessary information with
respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend.
Upon the conversion of any Debenture by a person who is a non-U.S. Person,
Seller shall instruct Seller's transfer agent to issue Stock Certificates
without restrictive legend in the name of Buyer (or its nominee (being a
non-U.S. Person) or such non-U.S. Persons as may be designated by Buyer
prior to the closing) and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon
such conversion, as applicable, if the Buyer holding such Securities or any
other person in whose name such certificates have been or are to be issued
shall have delivered a certificate (a "Removed Certificate") to the Company
to the following effect.
"The undersigned acknowledges that the securities to which this
certificate relates have not been registered under Securities Act of 1933,
as amended (the "1933 Act") and that offers, sales or other transfer of such
securities must be made in compliance with Regulation S promulgated under
the 1933 Act, pursuant to an effective registration statement under the 1933
Act or pursuant to an available exemption from registration, and the
undersigned certifies that the undersigned has not made, nor will the
undersigned make or cause to be made, any offer, sale or other transfer of
such securities, in violation of the 1933 Act, other applicable securities
laws or the rules and regulations of the Securities and Exchange
Commission."
Seller warrants that no instructions other than these instructions and
instructions to impose a "stop transfer" instruction with respect to the
certificates until the end of the Restricted Period have been given or will
be given to the transfer agent and that the Common Stock shall otherwise be
freely transferable on the books and records of Seller. Nothing in this
Section 5, however, shall affect in any way Buyer's or such nominee's
obligations and agreements to comply with all applicable securities laws
upon resale of the Securities. Notwithstanding the provisions of this
section 5(c), if with respect to the Company's receipt of a Removal
Certificate from any person, prior to any removal of the Legend, there shall
have been after the date hereof any amendment to the 1933 Act or Regulation
S or any no action letter, interpretative release or other advice from the
Securities and Exchange Commission after the date hereof which disallows the
removal of the Legend under the circumstances in which the request that it
be removed is being made, then the Company shall have no obligation to
remove or to instruct its transfer agent to remove the Legend, unless the
Company shall have received from the person requesting such removal a
written letter of counsel to such person reasonably acceptable to the
Company and its counsel confirming that the Legend may be so removed or
share certificates may be so issued without the Legend without violation of
the 1933 Act. If the person requesting a removal of the Legend is unable to
supply the legal opinion referred to above then the Company shall, upon
demand of such person, be obligated to register the Common Stock for resale
pursuant to section 6 herein.
6. REGISTRATION.
(a) Conditions to Registration Requirement. The Company's
obligation hereunder to register the shares of common stock issuable upon
conversion of the Debentures ("Underlying Shares") shall arise in the event
that Company receives a written opinion of counsel for the Buyer (which
counsel shall be of a law firm experienced in United States securities
matters) indicating that there has been an amendment or change to the
Securities Act or Regulation S after the date hereof, or the promulgation by
the Commission of an interpretative release or other statement after the
date hereof, which prohibits or restricts Buyer from reselling Underlying
Shares without registration under the Securities Act (a "Registration
Trigger Event"). Notwithstanding the foregoing, it will not be deemed a
"Registration Trigger Event" to the extent that Buyer desires to engage in a
distribution of the Underlying Shares which otherwise requires registration
under the Securities Act or in activity which otherwise deems Buyer to be a
statutory underwriter under Section 5 of the Securities Act. In the event
that a Registration Trigger Event has occurred, then Buyer shall be entitled
to require the Company to register all of Buyer's Underlying Shares in
accordance with this Section 6.
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(b) Request for Registration. Upon the occurrence of a
Registration Trigger Event, if the Company shall receive from a Buyer a
written request that the Company effect any registration with respect to any
Underlying Shares, the Company shall use its commercially reasonable efforts
to effect, at its expense, such registration (including, without
limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act) as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Underlying Shares as are specified in such request in the states specified
in such request. Notwithstanding the foregoing, the Company shall not be
obligated hereunder to effect such registration unless the proposed public
offering price of the securities to be included in such registration (i)
shall be at least $500,000 (before deducting underwriting discounts and
commissions) and (ii) such notice requesting that the Company effect a
registration pursuant to this Section 6 shall have been received by the
Company after the Company has filed its Annual Report on Form 10-K for the
fiscal year ending August 31, 1996 containing three-year audited financial
statements. The Company and the Buyer shall cooperate in good faith in
connection with the furnishing of information required for such registration
and the taking of such other actions as may be legally or commercially
necessary in order to effect such registration. The Company shall file a
registration statement within 45 days of Buyer's demand therefor and shall
use its commercially reasonable efforts to cause such registration statement
to become effective as soon as practicable thereafter. Such best efforts
shall include, but not be limited to, promptly responding to all comments
received from the staff of the Securities and Exchange Commission, providing
Buyer's counsel with a contemporaneous copy of all written communications
from and to the staff of the Securities and Exchange Commission with respect
to such registration statement and promptly preparing and filing amendments
to such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission, the Company shall cause
such registration statement to remain effective until the earlier of (i) the
sale by the Buyer of all Underlying Shares registered or (ii) 120 days after
the effective date of such registration statement. The foregoing shall not
in any way limit Buyer's rights in connection with the Common Stock pursuant
to Regulation S.
7. DELIVERY INSTRUCTIONS. The Debentures being purchased
hereunder shall be delivered to the Buyer at such time and place as shall be
mutually agreed by Seller and Buyer.
8. CONDITIONS TO SELLER'S OBLIGATION TO SELL. Seller's obligation
to sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Buyer of this Agreement as
evidenced by execution of this Agreement by Buyer.
(b) Delivery into the closing depository of good funds by
Buyer as payment in full of the purchase price of the Debentures.
9. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE. Buyer's
obligation to purchase the Debentures is conditioned upon:
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(a) The receipt and acceptance by Seller of this Agreement as
evidenced by execution of this Agreement by the duly authorized officer of
Seller.
(b) Delivery of the Debentures as described herein.
10. OFFERING MATERIALS. All offering materials and documents used
in connection with offers and sales of the Securities prior to the
expiration of the Restricted Period referred to in Section 2(v) hereof shall
include statements to the effect that the Securities have not been
registered under the 1933 Act or applicable state securities laws, and that
neither Buyer, nor any direct or indirect purchaser of the Securities from
Buyer, may directly or indirectly offer or sell the Securities in the United
States or to U.S. Persons (other than distributors) unless that Securities
are registered under the 1933 Act any applicable state securities laws, or
any exemption from the registration requirements of the 1933 Act or such
state securities laws is available. Such statements shall appear (1) on the
cover of any prospectus or offering circular used in connection with the
offer or sale of the Securities, (2) in the underwriting section of any
prospectus or offering circular used in connection with the offer or sale of
the Securities, and (3) in any advertisement made or issued by Seller,
Buyer, any other distributor, any of their respective affiliates, or any
person acting on behalf of any of the foregoing.
11. NO SHAREHOLDER APPROVAL. Seller hereby agrees that from the
Closing Date until the issuance of Common Stock upon the conversion of the
Debentures, Seller will not take any action which would require Seller to
seek shareholder approval of such issuance unless such shareholder approval
is required by law or regulatory body (including but not limited to the
NASDAQ Stock Market, Inc.) as a result of the issuance of the Securities
hereunder.
9
<PAGE>
12. MISCELLANEOUS.
(a) Except as specifically referenced herein, this Agreement
constitutes the entire contract between the parties, and neither party shall
be liable or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth herein. Any
previous agreement among the parties related to the transactions described
herein is superseded hereby. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors, and no
other person shall have any right or obligation hereunder. This Agreement
shall not be assignable by either party without the prior written consent of
the other, and any assignment in violation hereof shall be void.
Notwithstanding the foregoing, the Buyer may assign its rights in this
Agreement to, and the provisions of this Agreement shall inure to the
benefit of, and be enforceable by, any transferee of any of the Securities
or Shares. This Agreement together with the Form of Debenture constitutes
the entire agreement of the parties with respect to the subject matter
hereof. Nothing in this Agreement, express or impled, is intended to confer
upon any party, other than the parties hereto, and their respective
successors and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
(b) Buyer is an independent contractor, and is not the agent
of Seller. Buyer is not authorized to bind Seller, or to make any
representations or warranties on behalf of Seller.
(c) Seller makes no additional representations or warranty
with respect to Seller, its finances, assets, business prospects or
otherwise, except as disclosed in the Disclosure Documents incorporated
herein by reference. Buyer will advise each purchaser, if any, and
potential purchaser of the Securities, of the foregoing sentence, and that
such purchaser is relying on its own investigation with respect to all such
matters, and that such purchaser will be given access to any and all
documents, including without limitations the Disclosure Documents which have
been provided to the Buyer and his advisors, and Seller personnel as it may
reasonably request for such investigation.
(d) All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(e) This Agreement shall be construed in accordance with the
laws of California and shall be binding upon the successors and assigns of
each party hereto. This Agreement may be executed in counterparts, and the
facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
(f) Buyer agrees to indemnify and hold Seller harmless from
any and all claims, damages and liabilities arising from Buyer's breach of
its representations and/or covenants set forth herein.
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The undersigned hereby subscribes for ___________________ in
principal amount of Debentures and pays herewith funds in the amount of
____________________ Dollars ($_______ U.S.) (Sales of Debentures are made
only in $50,000 increments).
The undersigned acknowledges that this subscription shall not be
effective unless accepted by the Company as indicated below.
Dated this ___ day of March, 1997.
_______________________________________
(Name) (Please Print)
_______________________________________
(Signature)
_______________________________________
(Mailing Address)
_______________________________________
(Country of Execution)
_______________________________________
(Registration instructions)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE _____ DAY OF
________ 1997.
THE WESTWIND GROUP, INC./
CTC COSMETICS HOLDING (BVI) CO., LTD.
By: _____________________________________
Its: ___________________________
11
<PAGE>
PURCHASER REPRESENTATIONS LETTER
The undersigned,_________________, a ___________ corporation has acquired
on March___, 1997, $500,000 Convertible Debentures Due March 31, 1998 (the
"Debentures") of THE WESTWIND GROUP, INC./ CTC COSMETICS HOLDING (BVI) CO.,
LTD. (the "Company") pursuant to that certain Offshore Securities
Subscription Agreement ("Agreement") dated March___, 1997. As the forty
(40) day transaction restriction period has expired, the undersigned hereby
requests to convert certain portion of the Debentures into shares of common
stock (the "Shares") without the restrictive legend on the certificates
representing the Shares.
The undersigned represents and warrants as follows:
1.The offer to purchase the Securities was made to it outside of the United
States, and the undersigned was, at the time the Agreement was executed and
delivered, and is now outside the United States;
2. It is not a U.S. Person (as such term is defined in Section 902(a) of
Regulation S ("Regulation S") promulgated under the United States Securities
Act of 1933 (the "Securities Act"), and it has acquired the Securities for
its own account and not for the account or benefit of any U.S. person, and
it has not made any pre-arrangements to transfer the Securities to a U.S.
person or to return the Securities to the U.S. securities markets;
3. All offers and sales by the undersigned of the Securities acquired
pursuant to the Agreement shall be made pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of
the Securities Act;
4. It is familiar with and understands the terms and conditions, and
requirements contained in Regulation S and definitions of U.S. persons
contained in Regulation S;
5. The undersigned has not engaged in any "directed selling efforts" (as
such term is defined Regulation S) with respect to the Securities;
6. The undersigned acquired the Securities with investment intent and not
with an intent of "distributing" the Securities on behalf of the Company or
a "distributor", or any of their affiliates, in the U.S. or to any U.S.
persons, and presently has no interest to sell, dispose of or otherwise
transfer the Securities.
7. The undersigned is not a director, officer or other affiliate of the
Company; and
8. The undersigned does not have any short positions in any securities of
the Company.
Dated this _____ day of _______________, 1997.
By:_______________________________________
Official Signatory of Purchaser
Title:______________________________
Country of Execution:_______________
12
<PAGE>
FORM OF DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S
UNDER THE ACT) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS
DEFINED IN REGULATION S UNDER THE ACT) EXCEPT PURSUANT TO REGISTRATION
UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS.
No. 1-1997 US $50,000
THE WESTWIND GROUP, INC./CTC COSMETICS HOLDING (BVI) CO., LTD.
8% CONVERTIBLE DEBENTURE DUE MARCH 31, 1998
THIS DEBENTURE is one of a duly authorized issue of Debentures of The
Westwind Group, Inc. / CTC Cosmetics Holding (BVI) Co., Ltd., a corporation
duly organized and existing under the laws of Delaware (the "Company")
designated as its 8% Convertible Debenture Due March 31, 1998, in an
aggregate principal amount not exceeding One Million Dollars (U.S.
$1,000,000).
FOR VALUE RECEIVED, the Company promises to pay to ___________________,
a __________________ corporation, the registered holder hereof and its
successors and assigns (the "Holder"), the principal sum of
____________________ Dollars (US $__________) on March 31, 1998 (the
"Maturity Date"), and to pay interest on the principal sum outstanding, at
the rate of 8% per annum commencing from the date of issuance due and
payable semi-annually in arrears on the first day of each March and
September (the "Interest Payment Dates"). Accrual of interest shall
commence on the date hereof and shall continue until payment in full of the
outstanding principal sum has been made or duly provided for. The interest
so payable will be paid at the option of the Company, either in cash or in
shares of common stock at the then applicable conversion price (computed as
described in paragraph 4 below) will be paid to the person in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register"); provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer,
sale or other disposition is made in accordance with the terms and
conditions of the Offshore Securities Subscription Agreement dated as of
March__, 1997 between the Company and the Holder (the "Subscription
Agreement"). The principal of, and interest on, this Debenture are payable
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts, at the
address last appearing on the Debenture Register of the Company as
designated in writing by the Holder hereof from time to time. The Company
will pay the outstanding principal of and all accrued and unpaid interest
due upon this Debenture on the Maturity Date, less any amounts required by
law to be deducted or withheld, to the record Holder of this Debenture as of
the tenth (10th) day prior to the Maturity Date and addressed to such record
Holder at the last address appearing on the Debenture Register. The
forwarding of such check shall constitute a payment of outstanding principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this Debenture to the extent of the sum
represented by such check plus any amounts so deducted.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Fifty Thousand
Dollars (US$50,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders surrendering
the same but not less than U.S. $50,000. No service charge will be made for
such registration or transfer or exchange.
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<PAGE>
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments. Holder agrees to
provide Company a Form W-8, a Certification under penalty of perjury, or a
certificate from a financial institution described in Section 871(h)(4)(B)
of the Internal Revenue Code of 1986 demonstrating that the Holder is not a
United States person.
3. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the U.S. only in compliance with the Securities Act of 1933, as
amended (the "Act") and applicable state securities laws. Prior to due
presentment for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered
on the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or
not this Debenture be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary. Any holder of this
Debenture, electing to exercise the right of conversion set forth in Section
4(a) hereof, in addition to the requirements set forth in Section 4(a), is
also required to give the Company (i) written confirmation that it is not a
U.S. Person and the Debenture is not being converted on behalf of a U.S.
Person ("Notice of Conversion") or (ii) an opinion of U.S. counsel to the
effect that the Debenture and shares of common stock issuable upon
conversion thereof have been registered under the 1933 Act or are exempt
from such registration. In the event a Notice of Conversion or opinion of
counsel is not provided the Holder hereof will not be entitled to exercise
the right to convert the Debentures pursuant to Section 4(a) herein.
4. The Holder of this Debenture is entitled, at its option, at any
time commencing 45 days after issue hereof to convert any or all of the
original principal amount of this Debenture into shares of common stock,
$0.004 par value per share, of the Company (the "Common Stock"), at a
conversion price for each share or Common Stock equal to the lower of (a)
50% of the average closing bid price of the Common Stock for the five (5)
business days immediately preceding the conversion date or (b) $2.50 per
share of Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") (the "Conversion Price"). For
purposes of this Section, the closing bid price of the common stock shall be
the closing bid price as reported by NASDAQ Small Cap Market, or the closing
bid price in the over-the-counter market or, in the event the common stock
is listed on a stock exchange, the closing bid price on such exchange as
reported in the Wall Street Journal. Such conversion shall be effectuated
by surrendering the Debentures to be converted to the Company, with the form
of conversion notice attached to the Debenture as Exhibit A, executed by the
Holder of the Debenture evidencing such Holder's intention to convert this
Debenture, and accompanied, if required by the Company, by proper assignment
in blank. Interest accrued or accruing from the date of issuance to the
date of conversion on the amount so converted shall be paid in cash or at
Company's option, in shares of common stock of the Company, calculated at
the same conversion price (as determined above), as would apply on the
conversion date of the principal amount being converted but using the
discount percentage applicable as of such date and shall constitute payment
in full of any such interest on the same terms as would otherwise apply to
the conversion of the principal amount hereof, except that the Holder hereof
waives its right to any interest accrued, if the Holder converts this
Debenture within six months from the date of its issuance. No fractional
shares no scrip representing fractions of Shares will be issued on
conversion, but the number of Shares issuable shall be rounded up to the
nearest whole share. The date on which notice of conversion is given
("Conversion Date") shall be deemed to be the date on which the Holder has
delivered this Debenture, with the Conversion Notice, as defined below, duly
executed, to the Company or, if earlier, the date set forth in such
Conversion Notice if the Debenture is received by the Company within five(5)
business days thereafter. Any unconverted principal amount and accrued
interest thereon shall at maturity date be paid, at the option of the
Holder, in either (a) cash or (b) shares of common stock valued at a price
equal to the average closing bid price for the five trading days immediately
preceding the maturity date.
2
<PAGE>
5. No provision of this Debenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Debenture at the time, place, and rate,
and in the coin currency, herein prescribed.
6. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, bringing of suit
and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence, act
or omission as or with respect to the collection of any amount called for
hereunder.
7. If one or more of the "Events of Default" as described in
paragraph 8 shall occur, the Company agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by Holder in
collecting any amount due under the Debenture.
8. If one or more of the following described "Events of Default"
shall occur:
(a) The Company shall default in the payment of principal or
interest on this Debenture; or
(b) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter furnished by
or on behalf of the Company in connection with the execution and delivery of
this Debenture or the Subscription Agreement shall be false or misleading in
any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision, condition, agreement
or obligation of the Company under this Debenture and such failure shall
continue uncured for a period of thirty (30) days after notice from the
Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its liability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or
assets of the Company and shall not be dismissed within sixty (60) days
thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of Three Hundred Thousand ($300,000) Dollars in
the aggregate shall be entered or filed against the Company or any of its
properties or other assets and shall remain unpaid, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five
(5) days prior to the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed within sixty
(60) days after such instruction of the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or admit
the material allegations of, or default in answering a petition filed in any
such proceeding; or
(i) The Company shall have its Common Stock delisted from an
exchange or over-the-counter market.
3
<PAGE>
Then, or at any time thereafter, and in each and every such case, as long as
such Event of Default is continuing unless such Event of Default shall have
been waived in writing by the Holder (which waiver shall not be deemed to be
a waiver of any subsequent default) at the option of the Holder and in the
Holder's sole discretion, the Holder may consider this Debenture immediately
due and payable, without presentment, demand, protest or notice of any
kinds, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or
any other rights or remedies afforded by law.
9. This Debenture represents a general unsecured obligation of the
Company. No recourse shall be had for the payment of the principal of, or
the interest on, this Debenture, or for any claim based hereon, or otherwise
in respect hereof, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law,
or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
10. The Holder of this Debenture, by acceptance hereof, agrees that
this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Shares of
Common Stock issuable upon exercise thereof except under circumstances which
will not result in a violation of the Act or any applicable state Blue Sky
law or similar laws relating to the sale of securities.
11. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture
will not in any way be affected or impaired thereby.
12. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
13. This Debenture shall be governed by and construed in accordance
with the laws of California.
14. As set forth herein, the Company shall use all reasonable
efforts to issue and deliver, within five business days after the Holder has
fulfilled all conditions and submitted all necessary documents duly executed
and in proper form required for conversion, to the Holder or any party
receiving a Debenture by transfer from the Holder (together, a "Holder"), at
the address of the Holder on the books of the Company, a certificate or
certificates for the number of Shares of Common Stock to which the Holder
shall be entitled.
The Holder may, subject to compliance with the Offshore Securities
Subscription Agreement and the provisions of Regulation S, without notice,
transfer or assign this Debenture or any interest herein in integral
multiples of $50,000 or the entire outstanding balance (other than to a U.S.
Person or on behalf of a U.S. Person) and may mortgage, encumber or transfer
any of its rights or interest in and to this Debenture or any part hereof
and, without limitation, each assignee, transferee and mortgagee (which may
include any affiliate of the Holder) shall have the right to transfer or
assign its interest. Each such assignee, transferee and mortgagee shall
have all of the rights of the Holder under this Debenture. The Company may
condition registrations of transfers on the receipt of an IRS Form W-8 or an
equivalent certification under penalty of perjury in compliance with Section
871(h)(4)(B) of the Internal Revenue Code of 1986.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated:
THE WESTWIND GROUP, INC./
CTC COSMETICS HOLDING (BVI) CO., LTD.
By:
Title:
Buyer certifies under the penalty of perjury that Buyer is neither a
citizen nor a resident of the United States and that Buyer's full name and
address are set out below.
______________________________________
______________________________________
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<PAGE>
EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $______________ of
the above Debenture No. ___ into Shares of Common Stock of The Westwind
Group, Inc./ CTC Cosmetics Holding (BVI) Co., Ltd. (the "Company") according
to the conditions set forth in such Debenture, as of the date written below.
The undersigned represents and warrants that (i) it is not a U.S.
Person as defined in Regulation S promulgated under the Securities Act of
1933, as amended, and is not converting the Debenture on behalf of any U.S.
Person and the representations contained in the Subscription Agreement are
true, (ii) all of the requirements of Regulation S promulgated under the
Securities Act of 1933, as amended (the "Act") applicable to the undersigned
have been complied with by the undersigned, and (iii) the undersigned has
not engaged in any transaction or series of transactions that is a part of
or a plan or scheme to evade the registration requirements of the Act.
Date of Conversion*
Applicable Conversion Price
[Specify discount if more than one discount percentage is available].
Signature
[Name]
Address:
* This original Debenture and Notice of Conversion must be received by the
Company by the fifth business date following the Date of Conversion.
6
<PAGE>
THE WESTWIND GROUP, INC./
CTC COSMETICS HOLDING (BVI) CO., LTD.
COMMON STOCK PURCHASE WARRANT
To Purchase Fifty Thousand (50,000) Shares
Warrant No. 1997-1
FOR CONSIDERATION, the sufficiency and receipt of which is hereby
acknowledged by The Westwind Group, Inc./CTC Cosmetics (BVI) Co., Ltd., a
Delaware corporation (the "Company"), _________________________., a
___________ corporation (the "Holder"), is hereby granted a warrant (the
"Warrant") to purchase, at any time from the date hereof until 5:00 p.m.,
Los Angeles time, on March 31, 1999 (the "Expiration Date"), the number of
shares of fully paid and non-assessable shares (the "Shares") of common
stock of the Company set forth above.
The Shares shall be available for purchase at a price per Share equal
to 50% of the closing bid price on the date of exercise (the "Purchase
Price"). The Purchase Price shall be payable in cash, by certified or
official bank check or postal or express money order, in U.S. Dollars,
subject to adjustment as provided for herein. Upon surrender of this
Warrant with the Subscription Form attached to this Warrant duly executed,
together with payment of the Purchase Price times the number of Shares
purchased, at the Company's offices, the Holder shall be entitled to receive
certificates for the number of the Shares purchased.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole at any time, or in part from time to time
(but not as to a fractional Share), from the date hereof but not later than
5:00 p.m., Los Angeles time on the Expiration Date. This Warrant shall
automatically terminate, without any further action by the Company, after
such time on the Expiration Date. In the case of the purchase of less than
all of the Shares purchasable hereunder upon surrender of this Warrant for
cancellation, together with the duly executed subscription form and funds
sufficient to pay any transfer tax, the Company shall cause to be delivered
to the Holder without charge a new Warrant of like tenor to this Warrant
evidencing the right of the Holder to purchase the number of Shares
purchasable hereunder as to which this Warrant has not been exercised. The
issuance of certificates for the Shares upon the exercise of this Warrant
shall be made without charge to the Holder for such certificates or for any
tax in respect of the issuance of such certificates, and such certificates
shall (subject to the provisions of the following paragraph of this Warrant)
be issued in the name of, or in such names as may be directed by, the
Holder; provided, however that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance
of any such certificate in a name other than that of the registered Holder,
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
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The Holder, by acceptance hereof, represents, warrants, covenants and
agrees that: (i) the Holder has knowledge of the business and affairs of the
Company; (ii) the Holder has received information regarding the Company that
he or she considers necessary or appropriate for his or her investment
decision; and (iii) this Warrant and the Shares issuable upon the exercise
of this Warrant are being acquired pursuant to an exemption from
registration provided by Regulation S promulgated under the Securities Act
of 1933. THIS WARRANT AND THE SHARES RECEIVABLE UPON EXERCISE THEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (AACT@) AND
THIS WARRANT CANNOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS
THE SHARES HAVE BEEN REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. EACH PERSON EXERCISING THIS WARRANT IS EITHER
REQUIRED TO GIVE A WRITTEN CERTIFICATION, AS SET FORTH ON THE SUBSCRIPTION
FORM, THAT HE IS NOT A U.S. PERSON AND THAT THE WARRANT IS NOT BEING
EXERCISED ON BEHALF OF A U.S. PERSON, OR TO TAKE THE SHARES AS "RESTRICTED
SECURITIES" AS SUCH TERM IS DEFINED UNDER RULE 144 PROMULGATED UNDER THE
ACT. Subject to the terms hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on the books of the Company maintained
for such purpose at its principal office referred to above by the Holder in
person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer,
the Company will issue and deliver to the Holder a new warrant or warrants
of like tenor with respect to the Shares not so transferred. Each Holder,
by taking or holding this Warrant, consents and agrees that the Holder may
be treated by the Company and all other persons dealing with this Warrant,
as the absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby, or to the transfer hereof on the
books of the Company, any notice to the contrary notwithstanding; but until
such transfer on such books, Company may treat the Holder as the owner for
all purposes.
In case the Company shall at any time subdivide or combine the
outstanding shares of common stock, the Purchase Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the
case of combination. Upon each adjustment of the Purchase Price pursuant to
the provisions of this paragraph, the number of Shares issuable upon the
exercise of each Warrant shall be adjusted to the nearest full Share by
multiplying the Purchase Price in effect immediately prior to such
adjustment by the number of Shares issuable upon exercise of the Warrant
immediately prior to such adjustment and dividing the product so obtained by
the adjusted Purchase Price. In cash of any reclassification of common
stock (other than a change in par value or as a result of a subdivision or
combination), or in the case of any consolidation of the Company with, or
merger of the Company into, another corporation (other than a consolidation
or merger in which the Company is the surviving corporation and which does
not result in any reclassification or change of the outstanding shares of
common stock, except a change as a result of a subdivision or combination of
such shares or a change in par value, as aforesaid), or in the case of a
sale or conveyance to another corporation of the property of the Company as
an entirety, the Holder of this Warrant shall thereafter have the right to
purchase the kind and number of Shares and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale
or conveyance by a Holder of the number of Shares which the Holder of such
Warrant would have had the right to purchase immediately prior to the record
date for such reclassification, change, consolidation, merger, sale or
conveyance, at a price equal to the product of (Y) the number of Shares
issuable upon exercise of this Warrant, and (Z) the Purchase Price in effect
immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance. No adjustment of the Purchase
Price or number of Shares shall be made upon the issuance or sale of shares
of common stock, options, rights or warrants, conversion or exchange of con-
vertible or exchangeable securities or the occurrence of any event other
than as set forth in this paragraph.
2
<PAGE>
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in case
of such loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor, in lieu of this Warrant. The Company shall not be required to
issue certificates representing fractions of Shares, nor shall it be
required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated. The Company shall at all times reserve and keep available out
of its authorized common stock, solely for the purpose of issuance upon the
exercise of the Warrant, such number of shares of common stock as shall be
issuable upon the exercise hereof. The Company covenants and agrees that,
upon exercise of this Warrant and payment of the Purchase Price therefor,
all shares of common stock issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable.
Nothing contained in this Warrant shall be construed as conferring upon
the Holder the right to vote or consent to or receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the
expiration of the Warrant or its exercise, any of the following events shall
occur: (a) the Company shall take a record of the holders of its common
stock for the purpose of entitling the Holders to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribu-
tion payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or (b) the Company shall offer to all the holders
of its common stock any additional shares of stock of the Company or
securities convertible into or exchangeable for shares of common stock of
the Company, or any option, right or warrant to subscribe therefore; or (c)
a dissolution, liquidation or winding-up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written
notice of such events at least ten (10) days prior to the date fixed as a
record date or the date of closing the transfer books for the determination
of the shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding-up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration
of payment of any such dividend, or the issuance of any convertible or
exchangeable securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding-up or sale.
3
<PAGE>
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when
delivered, or three (3) days after posting if mailed by registered or
certified mail, return receipt requested if to the registered Holder, to the
address of such Holder as shown on the books of the Company; or if to the
Company, to its executive office, or to such other address as may be
specified by the Holder or the Company in accordance with the foregoing
provisions. All the covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of California.
THE WESTWIND GROUP, INC./
CTC COSMETICS HOLDING (BVI) CO., LTD.
Dated: March __, 1997 By:
Its: ________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,
hereby sells, assigns, and transfers unto:
Name _____________________________________
(Please type or print in block letters)
Address: _________________________________
_________________________________
the right to purchase the Shares represented by this Warrant to the extent
of ____________ Shares as to which such right is exercisable and does
hereby irrevocably constitute and appoint ________________________________
__________________________________________________________________________
attorney, to transfer the same on the books of the Company with full power
of substitution in the premises.
Dated: ____________________
Signature: ________________________
4
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase _________________ Shares covered by this Warrant No. _____________
___________________ according to the conditions hereof and herewith makes
payment of the Purchase Price of such Shares in full.
The undersigned represents that he is not a U.S. Person as defined
below and is not exercising this Warrant on behalf of any U. S. Person.
______________________________
Signature
______________________________
Name
Address:
______________________________
______________________________
Date: __________________
A U.S. Person is any of the following:
(a) Any natural person resident in the United States;
(b) Any partnership or corporation organized or incorporated under the
laws of the United States;
(c) Any estate of which any executor or administrator is a U.S. person;
(d) Any trust of which any trustee is a U.S. person;
(e) Any agency or branch of a foreign entity located in the United
States;
(f) Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or
account of a U.S. person;
(g) Any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized, incorporated, or
(if an individual) resident in the United States; and
(h) Any partnership or corporation if (A) organized or incorporated
under the laws of any foreign jurisdiction; and (B) formed by a U.S. person
principally for the purpose of investing in securities not registered under
the Securities Act of 1933, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule 501(a) of Regulation D)
who are not natural persons, estates or trusts.
Notwithstanding the above, the following are not "U.S. Persons:
(i) Any discretionary account or similar account (other than an estate or
trust) held for the benefit or account of a non-U.S. person by a dealer or
other professional fiduciary organized, incorporated, or (if an individual)
resident in the United States;
(j) Any estate of which any professional fiduciary acting as executor or
administrator is a U.S. person if an executor or administrator of the estate
who is not a U.S. person has sole or shared investment discretion with
respect to the assets of the estate, and the estate is governed by foreign
law;
(k) Any trust of which any professional fiduciary acting as trustee is a
U.S. person, if another of the trustees is a non-U.S. person with sole or
shared investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable) is a
U.S. person;
(l) An employee benefit plan established and administered in accordance
with the law of a country other than the United States and customary
practices and documentation of such country;
(m) Any agency or branch of a U.S. person located outside the United
States if the agency or branch operates for valid business reasons; and the
agency or branch is engaged in the business of insurance or banking and is
subject to substantive insurance or banking regulation, respectively, in the
jurisdiction where located.
(n) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the United Nations,
and their agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension plans;
"United States" means the United States of America, its territories and
possessions, any State of the United States, and the District of Columbia.
5