EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of July
22, 2005, between Naturade, Inc., a Delaware corporation (the "Company"), on the
one hand, and Health Holdings and Botanicals, LLC ("HHB"), Westgate Equity
Partners, L.P. ("Westgate") and Quincy Investments Corp. ("Quincy" and together
with HHB and Westgate, the "Investors") on the other.
RECITALS
A. As of the date of this Agreement, the Company and the Investors are
also entering into a Master Investment Agreement (the "Investment Agreement"),
pursuant to which, among other things, (i) HHB will convert certain shares of
Common Stock of the Company held by it into Series C Convertible Preferred Stock
of the Company, (ii) Westgate will convert certain shares of Series B Preferred
Stock of the Company held by it into Series C Convertible Preferred Stock of the
Company, (iii) the Company will issue to Quincy shares of Common Stock and
Series C Convertible Preferred Stock of the Company, and (iv) the Company will
issue to HHB and Quincy warrants (the "Warrants") to purchase additional shares
of Common Stock (the "Warrant Shares"). The shares of Series C Convertible
Preferred Stock to be issued to HHB, Westgate and Quincy pursuant to the
Investment Agreement are referred to herein as the Preferred Shares.
B. To induce the Investors to enter into the Investment Agreement, the
Company has agreed, under the terms and conditions of this Agreement, among
other things, to provide under certain circumstances for the registration for
resale under the Securities Act of the Common Stock issuable on conversion of
the Preferred Shares and the Warrant Shares.
D. Capitalized terms not defined in this Agreement have the meanings
ascribed to them in the Investment Agreement.
NOW, THEREFORE, in consideration of the foregoing facts and the mutual
covenants, representations and warranties made herein and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Definition of Terms.
For all purposes of this Agreement, the following terms shall have the
meanings ascribed to them in this Section 1.1.
"Agreement" means this Registration Rights Agreement (including the
Exhibits and the Schedules as provided herein), as the same from time to time
may be amended, supplemented, modified or waived.
"Board" means the Company's Board of Directors.
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"Certificate of Designation" means the Certificate of Designation of the
Series C Convertible Preferred Stock.
"Common Stock" means the common stock, par value $0.0001 of the Company,
and also shall include any securities issued or issuable with respect to the
Common Stock, by way of a stock dividend, stock split, combination of shares,
recapitalization, restructuring, merger, consolidation or other reorganization
of the Company.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Registration" means a registration under the Securities Act
undertaken by the Company for the sale of its shares of Common Stock or
securities convertible into Common Stock, or for the resale of such securities
by holders other than the Holders, in connection with the public offering of
such securities, other than any of the following:
(i) a registration relating the sale of securities to
employees, directors or consultants of the Company pursuant to a stock
option, stock purchase or similar plan;
(ii) a registration relating to a corporate reorganization or
other transaction under Rule 145 under the Securities Act;
(iii) a registration on any form that does not include
substantially the same information as would be required to be included in
a registration statement covering the sale of the Registrable Securities;
or
(iv) a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities
that are also being registered.
"Control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise.
"Debt" means, as to any Person, all obligations for payment of principal,
interest, penalties and collection costs thereof, with respect to money
borrowed, incurred or assumed (including guarantees), and other similar
obligations in the nature of a borrowing by which such Person will be obligated
to pay.
"Dollars" or "$" means lawful money of the United States of America.
"Eligible Investor" has the meaning set forth in Section 3.3.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means Form S-3 promulgated by the SEC for the registration of
securities under the Securities Act as in effect on the date hereof, or any
registration form under the Securities Act subsequently adopted by the SEC in
place of Form S-3 that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
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"Holder" means any person owning Registrable Securities or securities
convertible into Registrable Securities.
"Initiating Holders" has the meaning set forth in Section 2.1(a).
"Investor" has the meaning set forth in the first paragraph of this
Agreement.
"Material Adverse Effect" means any material adverse change in the
financial condition, business prospects, revenues or properties of the Company
and its subsidiaries, taken as a whole.
"New Shares" has the meaning set forth in Section 3.1.
"Notice" has the meaning set forth in Section 6.3.
"Offer Notice" has the meaning set forth in Section 3.1(a).
"Permitted Transferee" means a Person to whom registration rights, along
with Registrable Securities, have been transferred in accordance with Section
2.10.
"Person" means any natural person, firm, partnership, association,
corporation, company, limited liability company, trust, business trust,
governmental authority or other entity.
"Preferred Shares" has the meaning set forth in the first paragraph of
this Agreement.
"Qualified Public Offering" means the Company's first underwritten public
offering after the date hereof that results in gross proceeds of at least $35
million and a price per share that is equal to at least $6.00 (subject to
adjustment for recapitalizations, splits, reverse splits and the like affecting
the Common Stock).
"Refused Shares" has the meaning set forth in Section 3.1(c).
The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
"Registrable Securities" means (i) the shares of Common Stock issuable or
issued upon conversion of the Preferred Shares issued to any Investor by the
Company pursuant to the Investment Agreement, (ii) shares of Common Stock
issuable or issued upon exercise of the Warrants, and (iii) shares of Common
Stock issued to Quincy pursuant to the Investment Agreement, excluding in all
cases, however, any shares that have been sold or transferred by a Person in any
of the following transactions (and shares of Common Stock issuable on conversion
of Preferred Shares, or exercise of Warrants, that have been so sold or
transferred): a transaction in which his, her or its rights under this Agreement
are not assigned; a sale pursuant to an effective registration statement under
the Securities Act; or a sale pursuant to Rule 144 under the Securities Act. For
purposes of determining the number of outstanding Registrable Securities from
time to time, and the number of Registrable Securities held by a Holder from
time to time, both Registrable Securities that have been issued and those that
are issuable on conversion of other securities shall be deemed outstanding.
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"SEC" means the United States Securities and Exchange Commission.
"Second Offer Notice" has the meaning set forth in Section 3.1(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Series C Director" has the meaning as provided in the Certificate of
Designations.
"Violation" has the meaning set forth in Section 2.8(a).
"Warrants" has the meaning set forth in Recital A.
1.2 Construction.
(a) All references in this Agreement to a Section, Exhibit or
Schedule are to a Section, Exhibit or Schedule of or to this Agreement, unless
otherwise indicated.
(b) Whenever the context requires, the masculine pronoun shall
include the feminine and the neuter, and the singular shall include the plural.
(c) The terms "include," "includes" and "including" shall be
construed as if followed by the phrase "without limitation."
(d) The term "or" includes the meaning "and/or."
ARTICLE II
Registration Rights
2.1 Request for Registration.
(a) Subject to the conditions of this Section 2.1 and Section
2.4(b), if the Company shall receive at any time after the third anniversary of
the date hereof, a written request from the Holders of forty percent (40%) or
more of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities having an anticipated aggregate gross
offering price of at least $10,000,000, then the Company shall use all
commercially reasonable efforts to cause the resale of all of the Registrable
Securities covered by the request to be registered under the Securities Act.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.1,
and the Company shall include that information in the written notice referred to
in Section 2.1(a).
(c) Notwithstanding any other provision of this Section 2.1, if the
underwriter advises the Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the number of shares
of Registrable Securities that may be included in the underwriting shall be so
limited on a pro rata basis, provided that no reduction shall be made in the
Registrable Securities included in the underwriting until the number of any
securities to be sold by the Company or by holders other than the Holders has
been reduced to zero.
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(d) The Company shall not be required to effect a registration
pursuant to this Section 2.1 under any of the following circumstances:
(i) after the Company has effected two registrations pursuant
to this Section 2.1, and the registrations have been declared or ordered
effective;
(ii) during the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of the filing of a
Company Registration, and ending on a date one hundred eighty (180) days
following the effective date of such Company Registration, provided that
the Company is actively employing in good faith all commercially
reasonable efforts to cause the registration statement for the Company
Registration to become effective;
(iii) if the Initiating Holders propose to dispose of
Registrable Securities that may be registered on Form S-3 pursuant to
Section 2.3;
(iv) if the Company shall furnish to Holders requesting a
registration pursuant to this Section 2.1 a certificate signed by the
Company's Chief Executive Officer or Chairman of the Board stating that,
in the good faith judgment of the Board, it would be seriously detrimental
to the Company and its stockholders for such registration to be effected
at such time, in which event the Company shall have the right to defer
such filing for a period of not more than ninety (90) days after receipt
of the request of the Initiating Holders, provided that such right to
delay a request shall be exercised by the Company not more than once in
any twelve-month period; or
(v) in any jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting such
registration, unless the Company is already subject to service in such
jurisdiction and except as may be required under the Securities Act.
2.2 Registration Incidental to Company Registration.
(a) If the Company proposes a Company Registration, the Company
shall, at a reasonable time prior to the filing of the registration statement,
give each Holder written notice of such Company Registration. Upon the written
request of each Holder given within twenty (20) days after mailing of such
notice by the Company, the Company shall, subject to the conditions set forth in
this Section 2.2 and Section 2.4(b), use all commercially reasonable efforts to
cause to be registered under the Securities Act all of the Registrable
Securities that each such Holder has requested to be registered.
(b) Notwithstanding any other provision of this Section 2.2, if the
Company Registration is an underwritten offering and the underwriter advises the
Company that in its reasonable judgment the inclusion of Registrable Securities
requested by the Holders in such registration may adversely affect the offering
of the securities contemplated thereby, the Registrable Securities shall be
reduced on a pro rata basis among the participating Holders, as determined by
the Company or its managing underwriters.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 2.2 prior to its effectiveness,
whether or not any
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Holder has elected to include Registrable Securities in such registration. The
expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5.
2.3 S-3 Registration.
(a) If the Company receives from the Holders of at least ten percent
(10%) of the outstanding Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, the Company shall:
(i) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(ii) subject to the conditions of this Section 2.3 and Section
2.4(b), use commercially reasonable efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders' Registrable
Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any other Holders joining in such
request as are specified in a written request given within 20 days after
receipt of such written notice from the Company, provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.3 under any of the
following circumstances:
(1) if Form S-3 is not available for such offering by
the Holders;
(2) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000;
(3) if the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer or Chairman of the
Board of the Company stating that in the good faith judgment of the
Board, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such
time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not
more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.3, provided, however, that
the Company shall not utilize this right more than once in any
12-month period and provided further, that the Company shall not
register any of its other equity securities during such ninety (90)
day period;
(4) during the period beginning sixty (60) days prior to
the filing of a registration statement under the Securities Act
pursuant to Section 2.1 or Section 2.2, and ending one hundred
eighty (180) days following the effective date of any such
Registration Statement; and
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(5) in any jurisdiction in which the Company would be
required to qualify to do business, where not otherwise required, or
to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act.
2.4 Conduct of Registration.
(a) Obligations of Company. Whenever required under this Agreement
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all commercially
reasonable efforts to cause such registration statement to become
effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration
statement effective for a period of up to one hundred eighty (180) days
or, if earlier, until the distribution contemplated in the Registration
Statement has been completed; provided, however, that (A) such one hundred
eighty (180) day period shall be extended for a period of time equal to
the period the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or
other securities) of the Company; and (B) in the case of any registration
of Registrable Securities on Form S-3 that are intended to be offered on a
continuous or delayed basis, such 180-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the
Securities Act governing the obligation to file a post-effective amendment
to a registration statement permit the registrant to incorporate
information into the registration statement by reference to periodic
reports filed pursuant to Section 13 or 15(d) of the Exchange Act after
the effective date to provide information required by Section 10(a)(3) of
the Securities Act or to disclose facts or events representing a material
or fundamental change in the information originally provided in the
registration statement;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(iii) furnish to each Holder (A) a draft copy of the
registration statement prior to effectiveness, and (B) such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as
it may reasonably request in order to facilitate the disposition of
Registrable Securities owned by it;
(iv) use all commercially reasonable efforts to register and
qualify the securities covered by such registration statement under such
other securities or "blue sky" laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company shall not
be required in connection therewith or as a condition thereto to
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qualify to do business, where not otherwise required, or to file a general
consent to service of process in any such states or jurisdictions, unless
the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(v) in any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
(vi) notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of (A) the
issuance of any stop order by the SEC in respect of such registration
statement, or (B) the happening of any event as a result of which the
prospectus included in such 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 not misleading in the light of the circumstances then
existing;
(vii) cause all such Registrable Securities registered under
this Agreement to be listed on each securities exchange on which similar
securities issued by the Company are then listed; and
(viii) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number
for all such Registrable Securities, in each case not later than the
effective date of such registration.
(b) Required Actions by Holders. The obligations of the Company to
take any action pursuant to this Agreement with respect to registering the
Registrable Securities of any Holder shall be subject to the fulfillment of the
following conditions:
(i) the Holder shall furnish to the Company such information
regarding the Holder, the Registrable Securities held by the Holder, and
the intended method of disposition of such securities as shall be required
to effect the registration of such Holder's Registrable Securities;
(ii) in any underwritten offering of Registrable Securities,
the Holder shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the managing
underwriter of such offering;
(iii) in any underwritten offering of Company securities, the
Company shall not be required to include Registrable Securities of any
Holder unless the Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the Company and
enters into an underwriting agreement in customary form with an
underwriter or underwriters selected by the Company (and, in the case of a
registration under Section 2.1, reasonably acceptable to the Initiating
Holders holding at least sixty percent (60%) of the Registrable Securities
held by the Initiating Holders), and agree to customary conditions to an
underwritten offering on behalf of selling security holders, including the
surrender of securities into custody prior to the
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closing of the offering and the appointment of an officer of the Company
as attorney-in-fact to execute such underwriting agreement on behalf of
the Holder(s).
2.5 Expenses of Registration.
(a) All expenses other than underwriting discounts and commissions
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2.1 and 2.2, including all registration, filing and qualification fees
(including "blue sky" fees), printers' and accounting fees, fees and
disbursements of counsel for the Company shall be borne by the Company,
including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2.1 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all participating
Holders shall bear such expenses pro rata based upon the number of Registrable
Securities that were to be registered in the withdrawn registration), unless the
Holders of a majority of the Registrable Securities agree to forfeit one right
to demand registration pursuant to Section 2.1; provided, however, that if at
the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company, taken as a whole,
from that known to the Holders at the time of their request and have withdrawn
the request with reasonable promptness following disclosure by the Company of
such material adverse change, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 2.1.
(b) All expenses incurred in connection with a registration
requested pursuant to Section 2.3, including all registration, filing and
qualification fees (including "blue sky" fees), printers' and accounting fees,
fees and disbursements of counsel for the Company and the fees and disbursements
of counsel for the selling Holder or Holders, shall be borne pro rata by the
Holder or Holders participating in the registration.
2.6 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
2.7 Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Article II after the time when all
Registrable Securities held by such Holder (together with Registrable Securities
held by any affiliate of the Holder with whom such Holder must aggregate its
sales under Rule 144) can be sold without registration pursuant to Rule 144.
2.8 Indemnification.
(a) Indemnification by Company. If any Registrable Securities are
included in a registration statement of the Company under this Agreement, then,
to the extent permitted by law, the Company will indemnify and hold harmless
each Holder, the partners or officers, directors and stockholders of each
Holder, legal counsel and accountants for each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter, within the meaning of the Securities Act or
the Exchange
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Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or any
state securities laws, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) 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, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities laws or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
laws; and the Company will reimburse each such Holder, partner, officer,
director, stockholder, counsel, accountant, or controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the indemnity agreement contained in this
Section 2.8(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, partner, officer, director, stockholder, counsel, accountant or
controlling person; provided further, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Holder, partner, officer, director, stockholder, counsel or
accountant, or any person controlling such Holder, from whom the person
asserting any such losses, claims, damages or liabilities purchased shares in
the offering, if a copy of the prospectus (as then amended or supplemented if
the Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Holder or underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(b) Indemnification by Holders. To the extent permitted by law, each
selling Holder, on a several and not joint basis, will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of the Securities Act, legal counsel and accountants for the
Company, any underwriter, any other stockholder selling securities in such
registration statement and any controlling person of any such underwriter or
other stockholder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation (but excluding clause (iii) of the definition
thereof), in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any person intended to be indemnified
pursuant to this Section 2.8(b) for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this
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Section 2.8(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder (which consent shall not be unreasonably withheld),
provided that in no event shall any indemnity under this Section 2.8(b) exceed
the net proceeds from the offering received by such Holder.
(c) Procedures for Indemnification. Promptly after receipt by an
indemnified party under this Section 2.8 of actual knowledge of the commencement
of any action (including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 2.8, 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 the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties that may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.8 to the extent of such prejudice, but the omission to so deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.8.
(d) Contribution. If the indemnification provided for in this
Section 2.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
and the relative benefits received by the indemnifying party on the one hand and
of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or expense, as
well as any other relevant equitable considerations, provided that no person
guilty of fraud shall be entitled to contribution. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The relative benefits received by the
indemnifying party and the indemnified party shall be determined by reference to
the net proceeds and underwriting discounts and commissions from the offering
received by each such party. In no event shall any Holder's contribution under
this Section 2.8 exceed the net proceeds from the offering received by such
Holder, less any amounts paid under Section 2.8(b).
(e) Underwriting Agreements. Notwithstanding the foregoing, to the
extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with an underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
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(f) Survival. The obligations of the Company and Holders under this
Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement.
2.9 Reports Under Securities Exchange Act of 1934.
(a) With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act and any other rule or regulation
of the SEC that may at any time permit a Holder to sell securities of the
Company to the public without registration or pursuant to a registration on Form
S-3, the Company agrees to:
(b) make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(c) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities;
(d) 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
(e) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (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 in availing any Holder of
any rule or regulation of the SEC that permits the selling of any such
securities without registration or pursuant to such form.
2.10 Assignment of Registration Rights.
(a) Permitted Assignees. Subject to Section 2.10(b), the right to
cause the Company to register Registrable Securities pursuant to this Article II
may be assigned (but only with all related obligations) by a Holder only to one
of the following Persons ("Permitted Transferees"):
(i) a partner, retired partner, or affiliated partner of any
Holder that is a partnership;
(ii) a member of any Holder that is a limited liability
company;
(iii) a subsidiary or affiliate of any Holder;
(iv) an immediate family member of an individual Holder, or a
trust for the benefit of such Holder or immediate family member; or
(v) a Person who, after such assignment or transfer, holds at
least 50% of the outstanding Registrable Securities, subject to
appropriate adjustment for stock splits, reverse stock splits and similar
transactions.
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(b) The transfer to a Permitted Transferee of any right to cause the
Company to register Registrable Securities pursuant to this Agreement is subject
to the satisfaction of all of the following conditions:
(i) the Company receives, within a reasonable time after such
transfer, Notice of the name and address of the Permitted Transferee and
the securities with respect to which such the registration rights are
being transferred;
(ii) the Permitted Transferee agrees in writing (a copy of
which writing is provided to the Company at the time of transfer) to be
bound by and subject to the terms and conditions of this Agreement,
including the provisions of Section 4.1; and
(iii) immediately following their transfer, the further
disposition of the Registrable Securities by the transferee or assignee is
restricted under the Securities Act.
ARTICLE III
Miscellaneous
3.1 Aggregation of Stock. When determining the availability of any rights
under this Agreement, the Company shall aggregate all shares of securities held
or acquired by affiliated entities, and shall deem all such securities to be
held by a single Person.
3.2 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.3 Notices. All notices, requests, demands, approvals, consents, waivers
and other communications required or permitted to be given under this Agreement
(each, a "Notice") shall be in writing and shall be (a) delivered personally,
(b) mailed by certified mail, return receipt requested, postage prepaid, (c)
sent by next-day or overnight mail or delivery, or (d) sent by facsimile
transmission, provided that a confirmation statement is retained by sender, as
follows;
(a) if to an Investor, to the address or facsimile number for that
investor provided on the signature page hereto.
(b) if to the Company, to:
Naturade, Inc.
00000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Chief Executive Officer
With a copy (which shall not constitute Notice to):
Sheppard, Mullin, Xxxxxxx & Hampton LLP
000 X. Xxxx Xxxxxx, 00xx Xxxxx Xxx Xxxxxxx, XX 00000
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Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx, Esq.
or, in each case, at such other address as may be specified in a Notice to the
other party hereto. All Notices shall be deemed effective and given upon
receipt.
3.4 Headings. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement or any of its terms.
3.5 Entire Agreement. This Agreement (including any Schedules and Exhibits
hereto) constitutes the entire agreement between the parties with respect to the
subject matter hereof, and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect thereto.
3.6 Counterparts. This Agreement may be signed (including by facsimile) in
one or more counterpart signature pages, each of which shall be deemed an
original and all of which shall together constitute one and the same instrument.
3.7 Governing Law, Jurisdiction and Venue. This Agreement shall be
governed in all respects, including as to validity, interpretation and effect,
by the internal laws of the State of California, without giving effect to the
conflict of laws rules thereof. Each Investor and the Company hereby irrevocably
submits to the jurisdiction of the courts of the State of California, and the
federal courts of the United States of America located in the Central District
of California, in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any of such document may not be
enforced in or by those courts, and the parties hereto irrevocably agree that
all claims with respect to such action or proceeding shall be heard and
determined in such a California State Court or federal court. Each Investor and
the Company hereby consent to and grant any such court jurisdiction over the
person of such parties and over the subject matter of any such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 3.3, or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
3.8 WAIVER OF JURY TRIAL. IF ANY DISPUTE BETWEEN THE COMPANY AND THE
INVESTORS ARISES OUT OF THIS AGREEMENT OR ANY RELATED TRANSACTION, WITH RESPECT
TO ANY LITIGATION THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY MAY HAVE TO A JURY
TRIAL AND AGREE THAT ANY SUCH LITIGATION SHALL BE TRIED BY A JUDGE WITHOUT A
JURY.
3.9 Successors and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the successors and Permitted Transferees of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and Permitted Transferees any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
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3.10 No Third Party Beneficiaries. Except as provided in Section 2.10,
nothing in this Agreement shall confer any rights upon any Person other than the
parties to this Agreement and their heirs, legal representatives, successors and
Permitted Transferees.
3.11 Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of at least two-thirds of the
then-outstanding Preferred Shares (including Common Stock not previously sold to
the public that is issued or issuable upon conversion of the then-outstanding
Preferred Shares). Any amendment or waiver effected in accordance with this
section shall be binding upon each Investor, Holder and Permitted Transferee,
each future holder of all securities otherwise subject to this Agreement and the
Company. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights
of the party granting the waiver in any other respect or at any other time.
Neither the waiver by any of the parties hereto of a breach of or a default
under any of the provisions of this Agreement, nor the failure by any of the
parties, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right or privilege hereunder, shall be construed as
a waiver of any other breach or default of a similar nature, or as a waiver of
any of such provisions, rights or privileges hereunder.
The next page is the signature page.
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IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first above written.
Company:
NATURADE, INC.
By:
/s/ Xxxx X. Xxxxxxx
----------------------------
Xxxx X. Xxxxxxx,
Chief Executive Officer
Investors:
HEALTH HOLDINGS AND BOTANICALS, LLC
By:
Name:/s/ Xxxxxxx X. Xxxxx
----------------------------
Title: Secretary
000 Xxxxxxxx Xxxx
0xx Xxxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
WESTGATE EQUITY PARTNERS, L.P.
By:
Name: /s/ Xxxxxx X. Xxxxxx
------------------------------
Title: Partner
One Magna Place
Suite 650
0000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
FAX: (000) 000-0000
QUINCY INVESTMENTS CORP.
By:
Name: /s/ Xxxxx X. Xxxxxxxxxxx
-----------------------------
Title: Chairman
00-000 Xxxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
FAX: (000) 000-0000
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