EXHIBIT 10.28
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is made as of
this 20th day of December, 2001, by and between Naturade, Inc., a Delaware
corporation (the "Company"), Westgate Equity Partners, L.P., a limited
partnership organized under the laws of Delaware (the "Purchaser"), and, as to
Recital C and Sections 2, 5, 6.2, 7.2 and 8 by Health Holdings & Botanicals,
LLC, a limited liability company formed under the laws of California ("HHB"),
with respect to the following facts:
A. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, 13,540,723 shares of the Series B Convertible
Preferred Stock of the Company on the terms and conditions of the Certificate of
Designation of Series B Convertible Preferred Stock attached hereto as Exhibit A
(the "Shares") for U.S. $2,000,000, which shares would, on a converted basis,
constitute not less than 23% of the outstanding common stock of the Company (the
"Common Stock"), on a fully converted, fully diluted basis determined after
giving effect to (i) the issuance of 35,989,855 shares of Common Stock to HHB as
provided herein; (ii) the tendering to the Company by HHB of its existing shares
of Series A Preferred Stock for cancellation without conversion or exchange
therefor; and (iii) the exercise of outstanding options to purchase 981,250
shares of Common Stock; but determined before giving effect to exercise of the
warrants held by HHB for the purchase of 600,000 shares of Common Stock or the
exercise of the warrants to purchase Series B Preferred Stock to be purchased by
the Purchaser hereunder.
B. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, for U.S. $500,000, warrants to purchase
33,641,548 shares of Series B Convertible Preferred Stock, at an aggregate
exercise price of $3,500,000, having the terms and conditions set forth in the
Series B Convertible Preferred Stock Warrant Certificate attached hereto as
Exhibit B (the "Warrants"), which shares would constitute not less than 28% of
the outstanding Common Stock on a fully converted, fully diluted basis,
determined in the same manner as set forth in paragraph A, but also giving
effect to the exercise of the Warrants and conversion of the shares of Series B
Preferred Stock issued on such exercise.
C. HHB, as a principal stockholder of the Company, desires the
Purchaser to purchase the Shares and the Warrants. Accordingly, in consideration
for the issuance to HHB by the Company of 35,989,855 shares of Common Stock, HHB
will cancel all of its indebtedness of the Company to HHB, including accrued
interest, comprising $5,315,702 as of December 7, 2001, and tender all of its
shares of Series A Preferred to the Company for cancellation without conversion
or exchange therefor.
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Now, therefore, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SECURITIES
1.1 Sale and Issuance of Securities. Subject to the terms and
conditions of this Agreement, the Purchaser shall purchase the Shares and the
Warrants (collectively, the "Securities") from the Company, and the Company
shall sell and issue the Securities to the Purchaser, for an aggregate purchase
price of U.S. $2,500,000 (the "Purchase Price") ($2,000,000 of the Purchase
Price shall be allocated by the parties hereto to the purchase of the Shares and
$500,000 of the Purchase Price shall be allocated by the parties hereto to the
purchase of the Warrants).
1.2 Closing. The purchase and sale of the Securities shall take place
at 10:00 a.m. (California time) on the earlier of December 31, 2001 and the date
on which all of the conditions to closing set forth in Section 6 have been
satisfied or waived (the "Closing Date"), or at such other time as the parties
shall mutually agree, at the principal executive offices of the Company, 00000
Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000. On the Closing Date, the
Company will deliver to the Purchaser certificates evidencing the Securities,
against receipt of the Purchase Price payable in cash or by wire transfer of
immediately available funds to an account designated by the Company.
2. CONVERSION OF DEBT
2.1 Conversion of Debt. On the Closing Date, HHB will cancel all of
the indebtedness of the Company to HHB then outstanding, including all accrued
interest thereon through the Closing Date, in consideration for the issuance by
the Company to HHB of 35,989,855 shares of Common Stock.
2.2 Cancellation of Preferred Stock. Prior to the Closing Date, HHB
shall, in consideration for the issuance of the same 35,889,855 shares of Common
Stock, tender the certificate(s) for its Series A Convertible Preferred Stock to
the Company. Immediately prior to the Closing on the Closing Date, the Company
shall file a Certificate of Cancellation, or other appropriate document, with
the Secretary of State of the State of Delaware as required to cancel and
extinguish all of the shares of preferred stock theretofore designated as the
Company's Series A Convertible Preferred Stock and return such shares to the
status of authorized but unissued shares of preferred stock.
2.3 Amendment to Finance Agreement. HHB and the Company shall at
closing deliver an amendment to that certain Finance Agreement between the
Company and HHB dated March 17, 1999 and amended June 1, 1999 (the "Finance
Agreement"), to provide that the Warrants issued thereunder are exercisable for
Nonvoting Common Stock.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser and HHB as
follows:
3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and has full power and authority to own and operate its properties and
assets and to carry on its business as presently conducted. The Company is duly
qualified and authorized to do business, and is in good standing as a foreign
corporation, in each jurisdiction where the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
where the failure to so qualify would not have a material adverse effect upon
the business and operations of the Company. True, correct and complete copies of
the Company's Certificate of Incorporation and Bylaws in effect as of the date
hereof (including all amendments through the date hereof) are attached hereto as
Schedule 3.1. The Company does not have any subsidiaries, nor does it directly
or indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity.
3.2 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock and 2,000,000
shares of Preferred Stock. Immediately prior to the Closing Date, the authorized
capital stock of the Company shall consist only of 100,000,000 shares of Common
Stock, 2,000,000 shares of Non-Voting Common Stock and 50,000,0000 shares of
Preferred Stock, 48,000,000 of which shall be designated Series B Convertible
Preferred Stock. Immediately following the purchase and sale of the Shares
contemplated hereby and the issuance of the shares of Common Stock to HHB as
provided in Section 2 hereof, all issued and outstanding shares of the Company's
capital stock will be duly authorized, validly issued, fully paid and
nonassessable and, except for the Shares as provided in the Certificate of
Designation, no capital stock will be entitled to preemptive rights. Immediately
prior to the purchase and sale of the Shares contemplated hereby and the
issuance of shares of Common Stock to HHB as provided in Section 2 hereof, there
were issued and outstanding 7,823,639 shares of Common Stock and 1,250,024
shares of Series A Convertible Preferred Stock. Immediately after the purchase
and sale of the Shares contemplated hereby and the issuance of shares of Common
Stock to HHB as provided in Section 2 hereof, the filing of a Certificate of
Amendment to Certificate of Incorporation in the form attached hereto as Exhibit
D (the "Certificate of Amendment"), the amendment to the Finance Agreement and
the cancellation of the Series A Convertible Preferred Stock as provided herein,
there will be issued and outstanding 43,813,494 shares of Common Stock, no
shares of Series A Convertible Preferred Stock, and 13,540,723 shares of Series
B Convertible Preferred Stock (which shall be convertible into 13,540,723 shares
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of Common Stock, subject to possible adjustment as provided in the Certificate
of Designation) and Warrants to purchase 33,641,548 shares of Series B
Convertible Preferred Stock and 600,000 shares of Nonvoting Common Stock. Other
than stock options representing in the aggregate the right to purchase no more
than 981,250 shares of Common Stock and warrants to purchase 600,000 shares of
Common Stock, as set forth in Schedule 3.2, and except for this Agreement, there
are no outstanding rights of first refusal, preemptive rights or other rights,
options, warrants, conversion rights, calls, commitments, undertakings, or other
agreements or arrangements of any kind (whether written or oral) either directly
or indirectly for the issuance by, or purchase or acquisition from, the Company
of any shares of its capital stock, or obligating the Company to issue, grant,
extend or enter into any such rights of first refusal or other rights, options,
warrants, conversion rights, calls, commitments, undertakings, or other
agreements or arrangements of any kind (whether written or oral). No bonds,
debentures, notes or other indebtedness of the Company having the right to vote
on any matters on which stockholders may vote are issued or outstanding. As of
the date of this Agreement, there are no outstanding obligations of the Company
(except for this Agreement) to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company. Upon exercise of the Warrants, and
assuming that the Purchaser does not dispose of any Shares and assuming that no
additional voting securities are issued after the Closing Date, the Purchaser
will own a majority of the issued and outstanding voting securities of the
Company.
3.3 Authorization; Consents. The Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate and other action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the other agreements
and documents contemplated herein, and the performance of all the Company's
obligations hereunder and thereunder, has been taken, except for delivery of
notice to Stockholders of the consent of a majority of Stockholders to the
Certificate of Amendment, which shall be promptly made after the date hereof.
This Agreement has been duly executed and delivered, and the other agreements
and documents contemplated herein shall at Closing have been duly executed and
delivered, by the Company and, when executed and delivered by the Purchaser and
HHB, shall constitute valid and legally binding obligations of the Company
enforceable in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and subject to the availability of equitable remedies. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
national, state, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other authority
thereof, or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority (a
"Governmental Entity") or other third party is required by or with respect to
the Company in connection with the execution and delivery of this Agreement by
the Company or the consummation of the transactions contemplated hereby, except
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those that have been received and except for notices required or permitted to be
filed with certain state and federal securities commissions after the purchase
of the Securities and the filing of the Certificate of Designation and
Certificate of Amendment with the state of Delaware. The Board of Directors of
the Company, by resolutions duly adopted by vote of those voting at a meeting
duly called and held and not subsequently rescinded or modified in any way has
duly approved this Agreement and the transactions contemplated hereby, including
the issuance of the Shares and the Warrants to the Purchaser, for the purposes
of Section 203 of the DGCL. No state takeover statute or other similar statute
is or will be applicable to the transactions contemplated hereby, including the
issuance of the Shares and the Warrants to the Purchaser. No vote, consent or
other action of the stockholders of the Company is required by law, the
Company's certificate of incorporation or by-laws or otherwise in order for the
Company to consummate the transactions contemplated hereby, including the
issuance of the Shares and the Warrants to the Purchaser.
3.4 Reservation of Shares. The Company has reserved out of its
authorized Common Stock sufficient shares for the conversion of the Shares and
exercise of the Warrants.
3.5 Validity of Securities. The purchase and sale of the Shares
contemplated hereby is not subject to any preemptive rights or rights of first
refusal and, when issued, sold and delivered in compliance with the provisions
of this Agreement, the Shares, and the shares of Common Stock issuable on
conversion thereof, will be duly and validly issued, fully paid and
nonassessable, and will be free of any liens, encumbrances or restrictions on
transfer; provided, however, that the Shares may be subject to restrictions on
transfer under state or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed. The shares
of Series B Convertible Preferred Stock issuable on exercise of the Warrants
(the "Warrant Shares"), and the shares of Common Stock issuable on conversion of
the Warrant Shares, will, when the Warrants are duly exercised in accordance
with their terms and the exercise price is fully paid and the shares of Common
Stock issuable on conversion of the Warrant Shares are issued, as the case may
be, be duly and validly issued, fully paid and nonassessable, and will be free
of any liens, encumbrances or restrictions on transfer; provided, however, that
the Warrant Shares and the shares of Common Stock issuable on conversion of the
Warrant Shares may be subject to restrictions on transfer under state or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
3.6 Compliance with Other Instruments. Except as provided in Schedule
3.6, the execution, delivery, and performance of and compliance with this
Agreement by the Company will not result in any violation of any term of the
Certificate of Incorporation or Bylaws of the Company, as each is then in
effect, or any material mortgage, indenture, contract, agreement, franchise,
license, note, mortgage, lease, benefit plan, or other instrument or any
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judgment, decree, order, statute, law, ordinance, rule or regulation to which
the Company is a party or subject, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance, or charge upon any of the properties or assets of the
Company.
3.7 Accuracy of SEC Reports. The Company has filed all required
registration statements, prospectuses, reports, schedules, forms, statements and
other documents required to be filed by it with the Securities and Exchange
Commission since January 1, 1999 (collectively, including all exhibits thereto,
the "Company SEC Reports"). The Company has provided to the Purchaser true and
complete copies of all Company SEC Reports. Each Company SEC Report, as of its
date, (i) conformed in all material respects to the requirements of the
Securities Act of 1933, as amended (the "Securities Act") and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the applicable rules
and regulations promulgated thereunder (the "Rules"), (ii) contained all
material information required to be included therein by the Securities Act and
the Exchange Act and the Rules and (iii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements
(including the related notes) included in the Company SEC Reports presents
fairly, in all material respects, the financial position and results of
operations and cash flows of the Company as of the respective dates or for the
respective periods set forth therein, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved except as otherwise noted therein, and subject, in the case of the
unaudited interim financial statements, to normal and recurring adjustments that
were not or are not expected to be material in amount and to the lack of
footnote disclosure.
3.8 Title to Assets. With the exception of those of its properties
that are under lease, and except as set forth on Schedule 3.8 attached hereto,
the Company has good and marketable title to, and is the owner, free and clear,
of all of its material properties and assets and there are no liens or other
security interests outstanding against any of these properties and assets. The
term "properties" as used herein shall include all tangible property used by the
Company in the conduct of its business. All leases pursuant to which the Company
leases real or personal property are in good standing and are valid and
effective in accordance with their respective terms and there exists no default
or other occurrence or condition which could result in a default or termination
hereof.
3.9 Intellectual Property.
3.9.1 Schedule 3.9 contains a complete and accurate list of all
trademarks, trademark applications, service marks, service xxxx applications,
trade dress, trade names, patents, patent applications, copyrights and World
Wide Web sites necessary to the conduct of its business as conducted and as
proposed to be conducted. Each of the foregoing, together with all manufacturing
processes, formulae, trade secrets, customer lists and know-how necessary to the
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conduct of the Company's business as conducted and as proposed to be conducted
is referred to herein collectively as the "Intellectual Property."
3.9.2 The Company owns all right, title and interest in and to all
of the Intellectual Property, free and clear of all liens or other security
interests or encumbrances.
3.9.3 There have been no claims made against the Company asserting
the invalidity or misuse of, or unenforceability of rights to, any of its
Intellectual Property, and the Company knows of no valid grounds for any such
claims.
3.9.4 The Company has not received any notices of, and is not
aware of any facts which indicate a likelihood of, any infringement of or
misappropriation by, or conflict with, any third party with respect to its
Intellectual Property (including, without limitation, any demand or request that
the Company or any affiliate of the Company license any rights from a third
party).
3.9.5 To the knowledge of the Company, the conduct of the Company
has not infringed, misappropriated or conflicted with, and does not infringe,
misappropriate or conflict with, any Intellectual Property of other Persons, nor
would any future conduct as presently contemplated infringe, misappropriate or
conflict with any Intellectual Property of other Persons. The term "Person," as
used herein, means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
3.9.6 The transactions contemplated by this Agreement shall have
no material adverse effect on the Company's right, title and interest in and to
the Intellectual Property.
3.10 Litigation; Compliance With Laws.
3.10.1 Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement, there is no suit, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against or
affecting the Company, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against the Company.
3.10.2 The Company holds all permits, licenses, variances,
exemptions, orders and approvals of the United States Food and Drug
Administration (the "FDA"), the United States Consumer Product Safety Commission
(the "CPSC"), the United States Department of Agriculture (the "USDA"), the
United States Environmental Protection Agency (the "EPA") and the United States
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Federal Trade Commission (the "FTC") and, to the extent they are material, of
all other Governmental Entities, necessary for the operation of the businesses
of the Company (the "Company Permits"). The Company is in compliance with the
terms of the Company Permits. The Company's business is not being conducted in
violation of, and the Company has not received any notices of violations with
respect to, any law or ordinance, or any regulation of the FDA, CPSC, USDA, EPA
or FTC, or, to the extent material, of any regulation of any other Governmental
Entity. The Company is not aware of any facts that would indicate that the FDA
has or shall prohibit the marketing, sale, license or use in the United States
of any product developed, produced or marketed by the Company (a "Product") or
proposed to be developed, produced or marketed by the Company, and the Company
knows of no product or process which the FDA has prohibited from being marketed
or used in the United States which in function and composition is substantially
similar to any Product.
3.11 Assets Necessary to Conduct Business. The Company has good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises or shown on the Company financial statements
included in the Company SEC Reports or acquired thereafter, free and clear of
all liens, security interests or other encumbrances (except as set forth in
Schedule 3.8), except for properties and assets disposed of in the ordinary
course of business since the date of the latest balance sheet included in the
Company SEC Reports, and for minor matters that, in the aggregate, do not impair
any material asset or materially impair business operations. The assets of the
Company constitute all of the assets used or employed by the Company, directly
or indirectly, in its business as currently conducted and as proposed to be
conducted and there are no other material assets, whether real or personal,
tangible or intangible, which are necessary in order to permit or otherwise
enable the Company to engage in such business.
3.12 Affiliated Transactions. Except as set forth in the Company SEC
Reports, no officer, director, employee, stockholder or affiliate of the Company
or any individual related by blood, marriage or adoption to any such individual
or any entity in which any such Person owns any beneficial interest, is a party
to any agreement, contract, commitment or transaction with the Company or has
any material interest in any material property used by the Company.
3.13 Tax Matters. The Company has timely filed with the appropriate
governmental agencies all federal, state and local Tax (as defined below in this
Section 3.13) returns, reports, declarations, estimates, information returns,
statements and reports (collectively, "Tax Returns") required to be filed by it.
All such Tax Returns were, when filed, proper and accurate in all material
respects. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been paid. The Company is not (i) delinquent in the payment of any Taxes,
(ii) subject to any agreement extending the period for assessment or collection
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of any Tax, or (iii) a party to any action or proceeding with, nor has any claim
been asserted or threatened against it by, any governmental authority for
assessment or collection of Taxes. Except as set forth in Schedule 3.13, the
income tax returns of the Company have not been audited by the Internal Revenue
Service The term "Taxes," as used in this Agreement, means any federal, state,
local, or foreign income, gross receipts, payroll, employment, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
alternative or add-on minimum or estimated tax and, to the extent material, any
license, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, value added or other tax of any
kind whatsoever, including any interest, penalty or addition thereto, whether
disputed or undisputed.
3.14 Absence of Changes. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, since December 31, 2000,
there has not been any adverse change in the business, prospects (as disclosed
by the Company to the Purchaser or as described in the Company's business plan
or publicly disclosed in filings or press releases), financial condition or
results of operations of the Company that is material to the Company taken as a
whole.
3.15 Properties and Material Contracts and Agreements. The Company is
not a party to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) with respect to the employment of
any directors, officers or employees other than in the ordinary course of
business, (ii) that is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the Company
SEC Reports, (iii) that materially restricts the conduct of any line of business
of the Company or that upon the consummation of the transactions described in
this Agreement will materially restrict the conduct of any line of business of
the Company, or (iv) with any labor union or guild (including any collective
bargaining agreement). The only contracts or agreements material to the conduct
of the Company's business, financial condition or results of operation are (i)
the Credit and Security Agreement between the Company and Xxxxx Fargo Business
Credit, Inc. dated as of January 27, 2000, as amended as of November 16, 2000,
January 3, 2001, May 14, 2001 and December 20, 2001; (ii) the Industrial Lease
(Multi-Tenant; Net) between the Irvine Company and the Company dated as of
December 23, 1998; and (iii) the Amended and Restated Employment Agreement
between the Company and Xxxx X. Xxxxxxx dated as of December 26, 2001 (the
"Lease").
3.16 Insurance. The Company has provided or made available to the
Purchaser true, correct and complete copies of all policies of insurance to
which the Company is a party or is a beneficiary or named insured. The Company
maintains insurance coverage with reputable insurers in such amounts and
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covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to that of the Company (taking into
account the cost and availability of such insurance).
3.17 Customers and Vendors. Schedule 3.17 includes correct and
complete lists of the ten (10) largest (by dollar volume) customers and vendors
of the Company during each of the eight most recently completed calendar
quarters. There are no outstanding disputes with any customer or vendor listed
thereon and no customer or vendor listed thereon has refused to continue to do
business with the Company or has stated its intention not to continue to do
business with the Company. Since December 31, 2000, there has not been any
material shortage or unavailability of the raw materials necessary to
manufacture the products sold by the Company, and there is no current shortage
or unavailability which leads it to believe that any such shortages will occur.
While the volume of orders by individual customers generally fluctuates from
quarter to quarter, and year to year, to the knowledge of the Company none of
the customers or vendors listed in Schedule 3.17 plan to or shall significantly
decrease the volume of their respective transactions with the Company from that
conducted during the most recently completed four calendar quarters.
3.18 Environmental Compliance; Hazardous Materials. The Company has
complied in all material respects with, and has not been cited for any violation
of, federal, state and/or local environmental protection laws and regulations,
and no material capital expenditures will be required for compliance with any
federal, state or local laws or regulations now in force relating to the
protection of the environment. As used in this paragraph, "hazardous material"
means any hazardous or toxic substance, material or waste that is regulated by
any federal authority or by any state or local authority where the substance,
material or waste is located. There are no underground storage tanks located on
any of the real property ever occupied or owned by the Company in which the
Company stores or stored any hazardous material, and the Company has not
spilled, disposed, discharged or released any hazardous material into, upon, or
over any real property or into ground or surface water on any real property.
3.19 Product Liabilities and Warranties. All products manufactured by
the Company, and, to the best of its knowledge after reasonable inquiry, all
products sold or delivered by the Company, have been in conformity in all
material respects with all applicable contractual commitments and all express
and implied warranties, and the Company does not have any liability (and, to the
Company's knowledge, there is no reasonable basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against it giving rise to any such liability) for damages in connection
therewith in excess of any warranty reserve specifically established with
respect thereto and included on the face of the latest balance sheet (rather
than the notes thereto) included in the Company SEC Reports that are not covered
by insurance. No products manufactured, sold or delivered by the Company are
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subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of such sale (including as a result of any course
of conduct between the Company and any Person or as a result of any statements
in any of the Company's product or promotional literature). Schedule 3.19
includes copies of such standard terms and conditions of sale for the Company
(containing applicable guaranty, warranty and indemnity provisions). The Company
has not been notified of any claims for (and the Company has no knowledge of any
threatened claims for) any extraordinary product returns, warranty obligations,
product liability or product services relating to any of its products or
services. Since January 1, 2000 there have been no product recalls, withdrawals
or seizures with respect to any products manufactured, sold or delivered by the
Company.
3.20 Business Plan. The Business Plan provided by the Company to the
Purchaser is the current business and operating plan of the Company.
3.21 No Undisclosed Liabilities. The Company does not have any
material liability, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or demand against
the Company giving rise to any such liability), except as may be disclosed in
the Company SEC Reports filed prior to the date of this Agreement.
3.22 No Additional Antidilution Rights. Neither the execution and
delivery of this Agreement, the Warrants or any other document or agreement
contemplated hereby or thereby, the sale and issuance of the Shares or the
Warrants, the issuance of the shares of Series B Convertible Preferred Stock
issuable upon exercise of the Warrants, the issuance of the Common Stock
issuable upon conversion of the Shares, the issuance of the Common Stock
issuable upon conversion of the shares of Series B Convertible Preferred Stock
issuable upon exercise of the Warrants, nor the performance by the Company of
its obligations under the terms of this Agreement, the Warrants or any other
document or agreement contemplated hereby or thereby, will trigger or otherwise
activate any "anti-dilution" protections (however described and whether oral or
written) in any stock options, warrants or other rights, undertakings or
arrangements involving the Company or otherwise increase, directly or
indirectly, the number or amount or type of securities of the Company that may
be purchased or acquired by a Person or reduce the purchase price of any such
securities, except such protections as shall be terminated on or before the
Closing of this Agreement.
3.23 Brokers and Finders. Other than the fee payable by the Company to
Health Business Partners, as specified in a letter agreement dated December 17,
2001, no agent, broker, investment banker, financial advisor or other firm or
Person is or will be entitled to any broker's or finder's fee or any other
similar commission or fee in connection with any of the transactions
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contemplated by this Agreement, based upon arrangements made by or on behalf of
the Company. A copy of the Engagement Letter of Health Business Partners has
been provided to the Purchaser.
3.24 Filing Status. The Company does not have and has never had a
class of equity security required to be registered under Section 12 of the
Exchange Act. Holders of the Common Stock and other equity securities of the
Company do not have an obligation under either Section 13(d) or Section 16(a) of
the Exchange Act to report holdings of or transactions in the Common Stock and
other equity securities of the Company, nor does the Company have a right under
Section 16(b) of the Exchange Act to recover "short swing profits" from
stockholders.
3.25 No Default Under Credit Agreement. No Default or Event of Default
(as those terms are defined therein) exists under that certain Credit and
Security Agreement dated January 27, 2000 by and between the Company and Xxxxx
Fargo Business Credit, Inc., as amended from time to time (the "Credit
Agreement"), and no event has occurred which with the giving of notice or lapse
of time or both would be a Default of Event of Default under the Credit
Agreement, except as may have been specifically and irrevocably waived in
writing by Xxxxx Fargo Business Credit, Inc. prior to the date hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company and HHB as
follows:
4.1 Legal Power. The Purchaser has all requisite corporate power and
authority to enter into this Agreement, to purchase the Securities hereunder and
to carry out and perform its obligations under the terms of this Agreement.
4.2 Due Execution. All actions on the part of the Purchaser and its
officers, managers and partners necessary for the authorization, execution and
delivery of this Agreement and the other agreements and documents contemplated
herein, and the performance of all the Purchaser's obligations hereunder and
thereunder, have been taken. This Agreement and the other agreements and
documents contemplated have been duly executed and delivered by the Purchaser,
and when executed and delivered by the Company and HHB, shall constitute valid
and legally binding obligations of the Purchaser, enforceable in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and subject to the availability
of equitable remedies.
4.3 No Conflicts or Consents Required. The execution, delivery and
performance of and compliance with this Agreement by the Purchaser will not
result in any violation of any term of any material mortgage, indenture,
contract, agreement or other instrument or any judgment, decree or order to
12
which the Purchaser is a party or subject, or be in conflict with or constitute
a default under any such term. All consents, approvals, orders, or
authorizations of or registrations, qualifications, designations, declarations,
or filings with, any Governmental Entity or other third party, required on the
part of the Purchaser in connection with the valid execution and delivery of
this Agreement, the purchase of the Securities, or the consummation of any other
transaction contemplated hereby have been obtained, except for notices that may
be required to be filed with certain state or federal securities commissions
after the purchase of the Securities.
4.4 Investment Representations.
(a) The Purchaser is acquiring the Securities for its own account,
not as nominee or agent, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act.
(b) The Purchaser understands that (i) the Securities and
securities that may be issued on conversion or exercise of the Securities
have not been registered under the Securities Act by reason of a specific
exemption therefrom, that they must be held by it indefinitely, and that it
must, therefore, bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration; (ii) each certificate representing
the Securities, or securities that may be issued on the conversion or
exercise of the Securities, will be endorsed with the following or a
similar legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES
ACT") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
COVERING SUCH SECURITIES OR IF THE COMPANY RECEIVES AN OPINION OF COUNSEL
FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT."
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Securities (or securities issuable on conversion
or exercise of the Securities) unless the conditions specified in the
foregoing legend are satisfied.
13
(c) The Purchaser is an investor in securities of companies in
various stages of development and acknowledges that it can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits
and risks of the investment in the Securities.
(d) The Purchaser has reviewed this Agreement, the Company SEC
Reports (including all exhibits thereto), the Certificate of Incorporation
and Bylaws of the Company, the Certificate of Designation, the Certificate
of Amendment, the Registration Rights Agreement and the Warrant carefully,
has conducted such investigation of the Company as it has deemed
appropriate, and has had the questions it has asked of the Company answered
to its satisfaction.
(e) The Purchaser has not been offered the Securities by any form
of advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or any seminar or meeting whose attendees have been invited by such media.
(f) The Purchaser is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission, as presently in effect, by virtue of being a partnership, not
formed for the specific purpose of acquiring the Securities offered
hereunder, with total assets in excess of $5,000,000.
(g) The Purchaser's principal address is as set forth on the
signature page hereof, and it does not reside in any state of the United
States other than the state specified in such address, if at all.
4.5 Brokers and Finders. Other than Xxxxxxx Xxxxx Partners, whose fee
is payable by the Purchaser and has been disclosed to the Company, no agent,
broker, investment banker, financial advisor or other firm or Person is or will
be entitled to any brokers' or finders' fee or any similar commission or fee in
connection with the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of the Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF HHB
HHB hereby represents and warrants to the Company and the Purchaser as
follows:
5.1 Legal Power. HHB has the requisite legal power to enter into this
Agreement and to carry out and perform its obligations under the terms of this
Agreement.
14
5.2 Due Execution. All corporate action on the part of HHB and its
officers and members necessary for the authorization, execution and delivery of
this Agreement and the other agreements and documents contemplated herein, and
the performance of all HHB's obligations hereunder and thereunder, has been
taken. This Agreement has been duly executed and delivered, and the other
agreements and documents contemplated herein to which HHB is a party shall at
Closing have been duly executed and delivered, by HHB, and when executed and
delivered by the Company and the Purchaser, shall constitute valid and legally
binding obligations of HHB, enforceable in accordance with their respective
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and subject to the availability of equitable remedies.
5.3 No Conflicts or Consents Required. The execution, delivery and
performance of and compliance with this Agreement by HHB will not result in any
violation of any term of any material mortgage, indenture, contract, agreement
or other instrument or any judgment, decree or order to which HHB is a party or
subject, or be in conflict with or constitute a default under any such term. All
consents, approvals, orders, or authorizations of or registrations,
qualifications, designations, declarations, or filings with, any Governmental
Entity or other third party, required on the part of HHB in connection with the
valid execution and delivery of this Agreement, or the consummation of any other
transaction contemplated hereby have been obtained, except for notices required
or permitted to be filed with certain state and federal securities commissions
upon issuance of the shares of Common Stock to HHB in consideration of HHB's
release of indebtedness.
5.4 Indebtedness of the Company. As of December 7, 2001, the amount of
the Company's debt to HHB, including all accrued interest thereon, was U.S.
$5,315,702.
5.5 Rights to Acquire Additional Capital Stock. As of the date hereof,
HHB and its Affiliates and Associates (as defined in this paragraph)
beneficially own 5,064,412 shares of Common Stock, 1,250,024 shares of Series A
Convertible Preferred Stock, 600,000 shares of Common Stock purchasable on
exercise of common stock warrants related to the Finance Agreement, and Common
Stock purchasable on conversion of the indebtedness of the Company to HHB in the
amount of $5,315,702 (as of December 7, 2001), and other than such shares and
rights neither HHB nor its Affiliates or Associates has any outstanding rights
of first refusal, preemptive rights or other rights, options, warrants,
conversion rights, calls, commitments, undertakings, or other agreements or
arrangements of any kind (whether written or oral) either directly or indirectly
for the issuance by, or purchase or acquisition from, the Company of any shares
of its capital stock or debt securities convertible into shares of its capital
stock, or obligating the Company to issue, grant, extend or enter into any such
rights of first refusal, preemptive rights or other rights, options, warrants,
15
conversion rights, calls, commitments, undertakings, or other agreements or
arrangements of any kind (whether written or oral). After giving effect to the
transactions contemplated by this Agreement, HHB and its Affiliates and
Associates will beneficially own 41,654,267 shares of Common Stock (on an
as-converted, as-exercised basis after taking into account securities
convertible into or exchangeable for Common Stock). For purposes of this
Agreement, the terms "Affiliate" and "Associate" shall have the meanings
ascribed to them is under the Rule 405 promulgated under the Securities Act.
5.6 Additional Consideration. The only payment, fee or other
consideration received or to be received by HHB or its affiliates or associates
as an inducement to or otherwise in connection with its execution and
performance of this Agreement and the transactions contemplated hereby is its
receipt of 35,989,855 shares of Common Stock as described herein.
6. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchaser. The obligation of the
Purchaser to purchase the Securities is subject to the satisfaction of the
following conditions unless waived by the Purchaser:
6.1.1 The Certificate of Designation of Series B Convertible
Preferred Stock, in the form attached hereto as Exhibit A, shall have been duly
adopted, executed and filed with the Secretary of State of the State of
Delaware, and evidence of such filing shall have been delivered to the
Purchaser. The Certificate of Designation shall be in full force and effect as
of the Closing Date and shall not have been amended or modified.
6.1.2 Certificates evidencing the Securities shall have been made
available for inspection by the Purchaser and for delivery by the Company to the
Purchaser against payment therefor.
6.1.3 A Warrant Certificate in the form of Exhibit B shall have
been executed by the Company and made available for inspection by the Purchaser
and for delivery by the Company to the Purchaser against payment therefor.
6.1.4 The Registration Rights Agreement in the form of Exhibit C
shall have been executed by the Company and HHB, and delivered to the Purchaser
and shall be in full force and effect as of the Closing Date.
6.1.5 The Certificate of Amendment to Certificate of Incorporation
in the form attached hereto as Exhibit D, creating a class of non-voting common
stock (the "Non-Voting Common Stock"), and providing specific provisions for
removal of directors of the Company, shall have been duly adopted, executed and
filed with the Secretary of State of the State of Delaware, and evidence of such
16
filing shall have been delivered to the Purchaser. The Certificate of Amendment
shall be in full force and effect as of the Closing Date and shall not have been
amended or modified.
6.1.6 HHB shall have delivered to the Company, for cancellation in
accordance with this Agreement, its certificates for Series A Preferred Stock
and its original notes evidencing the indebtedness of the Company to HHB.
6.1.7 The representations and warranties of the Company contained
in this Agreement that are limited by materiality shall be true and correct, and
the representations and warranties made without such limitation shall be true
and correct in all material respects, in each case with the same force and
effect as though made on the Closing Date; from the date hereof to the Closing
Date there shall have been no adverse change in the business, prospects (as
disclosed by the Company to the Purchaser or as described in the Company's
business plan or publicly disclosed in filings or press releases), financial
condition or results of operations of the Company that is material to the
Company taken as a whole; the Company shall have performed in all material
respects all of the covenants and agreements set forth herein required to be
performed by it prior to the Closing; and a certificate to such effect executed
by an executive officer of the Company shall have been delivered to the
Purchaser on the Closing Date.
6.1.8 No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the consummation of
the transactions contemplated hereby shall be in effect, nor shall any
proceeding by any regulatory authority or other Person seeking an Injunction be
pending nor shall any necessary regulatory approval or consent required by law
for consummation of the transactions contemplated hereby not have been obtained.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the transactions contemplated
hereby which makes the consummation of such transactions illegal.
6.1.9 Two persons to be identified in writing by the Purchaser
shall have been elected as directors of the Company, effective immediately upon
consummation of the Closing.
6.1.10 The Company shall have made all filings under all
applicable federal and state securities and corporations laws necessary to be
made prior to the consummation and issuance of the Shares and the Warrants
pursuant to this Agreement in compliance with such laws.
6.1.11 The Company shall have entered into an amended and restated
employment agreement with Xxxx X. Xxxxxxx in the form of Exhibit I.
17
6.1.12 The Management Services Agreement in the form of Exhibit E
shall have been executed by the Company and delivered to the Purchaser and shall
be in full force and effect as of the Closing Date.
6.1.13 The Company shall have delivered to the Purchaser (1)
certified copies of (a) the resolutions duly adopted by the Company's board of
directors authorizing the execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Warrants, the Management Services
Agreement and each of the other agreements contemplated hereby, the filing of
the Certificate of Designation, the issuance and sale of the Shares, the filing
of the Certificate of Amendment, the issuance of the Warrants, the reservation
for issuance upon conversion of the Shares and the exercise of the Warrants an
aggregate of 47,182,271 shares of Common Stock and the consummation of all other
transactions contemplated by this Agreement, (2) certified copies of the
Certificate of Incorporation, the Certificate of Designation, the Certificate of
Amendment to the Certificate of Incorporation, and the Company's bylaws, each as
in effect at the Closing, and (3) copies of any third party and governmental
consents, approvals and filings required in connection with the consummation of
the transactions hereunder.
6.1.14 The Company's lenders shall have waived in writing all
events of default under all existing loan documents between the Company and such
lenders and the Company, provided that effectiveness of such waivers may be
contingent on the closing of the transactions contemplated by this Agreement.
The Company's lenders shall have entered into a modified lending agreement in
the form attached hereto as Exhibit F.
6.1.15 The Company shall have delivered to the Purchaser a legal
opinion of counsel for the Company substantially in the form of Exhibit E
attached hereto.
6.1.16 The transfer agent for the Company shall have provided a
certificate stating the issued and outstanding shares of Common Stock as of
December 14, 2001.
6.1.17 HHB and the Company shall have executed and delivered an
Amendment to the Financing Agreement between the Company and HHB dated March 17,
1999, as amended June 1, 1999, in the form of Exhibit J hereto, providing that
the warrants exercisable in connection therewith shall be exercisable for an
aggregate of 600,000 shares of Nonvoting Common Stock.
6.1.18 The Voting Agreement in the form of Exhibit H hereto shall
have been executed and delivered to Westgate by HHB.
18
6.2 Conditions to Obligations of HHB. The obligations of HHB to cancel
the indebtedness of the Company in consideration for shares of the Common Stock
pursuant to Section 2.1, and to tender its shares of Series A Convertible
Preferred Stock of the Company under Section 2.2, is subject to the satisfaction
or waiver of the following conditions.
6.2.1 The Purchaser shall have delivered to the Company the
Purchase Price.
6.2.2 A Certificate of Amendment to the Company's Certificate of
Incorporation in the form of Exhibit D shall have been filed with Secretary of
State of the State of Delaware.
6.2.3 The Voting Agreement in the form of Exhibit H hereto shall
have been executed and delivered to HHB by Westgate.
6.3 Conditions to Obligations of Company. The obligations of the
Company to issue and sell the Securities to the Purchaser and to issue Common
Stock to HHB in consideration of HHB's cancellation of indebtedness pursuant to
Section 2.1 are subject to the satisfaction or waiver of the following
conditions:
6.3.1 The delivery by the Purchaser to the Company of the Purchase
Price.
6.3.2 The Certificate of Designation and Certificate of Amendment
shall have been accepted for filing by the Secretary of State of the State of
Delaware.
6.3.3 HHB shall have delivered to the Company its certificate for
the Series A Preferred Stock (or a lost certificate agreement and indemnity in a
form acceptable to the Company) and its original notes evidencing the
indebtedness of the Company to HHB.
6.3.4 The representations and warranties of the Purchase and HHB
contained in this Agreement shall be true and correct in all material respects
with the same force and effect as though made on the Closing Date.
6.3.5 No Injunction preventing the consummation of the
transactions contemplated hereby shall be in effect, nor shall any proceeding by
any regulatory authority or other Person seeking an Injunction be pending nor
shall any necessary regulatory approval or consent required by law for
consummation of the transactions contemplated hereby not have been obtained.
There shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the transactions contemplated
hereby which makes the consummation of such transactions illegal.
19
7. COVENANTS
7.1 Covenants of the Company.
7.1.1 The Company agrees to take any action necessary prior to the
Closing Date to amend its bylaws to increase the size of its Board of Directors
to provide no more than seven directors.
7.1.2 On the Closing Date, upon consummation of the other
transactions contemplated by this Agreement, the Company shall reimburse the
Purchaser for its out-of-pocket expenses (including legal fees and expenses)
incurred in connection with the transactions contemplated by this Agreement,
including, without limitation, any due diligence review and preparation of
documentation of the transactions contemplated hereby; provided that the Company
shall not be obligated to reimburse more than $50,000 of such expenses. In the
event any action is necessary to enforce the rights of any of the parties
hereto, the prevailing party in any such action shall be entitled to reasonable
attorneys fees in addition to costs.
7.1.3 From and after the Closing Date, the Company shall not,
without the prior written consent of the Purchaser (so long as the Purchaser and
its Affiliates and Associates hold, in the aggregate, 50% or more of the Shares
and/or Common Stock issued upon conversion of the Shares), issue any stock
options, restricted stock or other equity linked stock awards or compensation
for any equity securities of the Company, other than the Non-Voting Common Stock
and the Common Stock to be issued upon the exercise of stock options and
warrants outstanding as of the date hereof and listed on Schedule 3.2.
7.1.4 From and after the Closing Date, the Company shall not,
without the prior written consent of the Purchaser (so long as the Purchaser and
its Affiliates and Associates hold, in the aggregate, 50% or more of the Shares
and/or Common Stock issued upon conversion of the Shares), issue any shares of
Common Stock or debt or equity securities convertible directly or indirectly
into shares of Common Stock or any other security which entitles its holder to
any voting right, other than the Non-Voting Common Stock and the Common Stock to
be issued upon the exercise of stock options and warrants outstanding as of the
date hereof and listed on Schedule 3.2; provided that all outstanding options
may be exercised for common stock notwithstanding any change in the exercise
price therefor, and if any outstanding options are cancelled or terminated for
any reason the Company may issue options to purchase an equal number of shares
of Common Stock (at a price to be determined by the Company) without the consent
of the Purchaser.
7.2 Covenant of HHB. HHB agrees through the Closing to vote all of its
shares of the Company in favor of the transactions contemplated by this
Agreement.
20
7.3 Mutual Covenant of the Company, HHB and the Purchaser. The
Company, HHB and the Purchaser shall each indemnify the other party from any
claim by any broker or finder based upon arrangements made by or on behalf of
the indemnifying party or any of his or its Affiliates in connection with this
Agreement or the transactions contemplated hereby.
8. MISCELLANEOUS
8.1 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed under the laws of the State of California as applied to
agreements among California residents, made and to be performed entirely within
the State of California. If any California law or laws shall require or permit
the application of the laws of any other jurisdiction to this Agreement, such
California law or laws shall be disregarded with the effect that the remaining
laws of the State of California shall nonetheless be applied.
8.2 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any party hereto
and the closing of the transactions contemplated hereby for the applicable
statute of limitations period and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of any party
hereto. Any party signing this Agreement shall be entitled to specifically
enforce its rights under the Agreement (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement, and to exercise all other rights granted by law or equity.
8.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.
8.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, and the other documents delivered pursuant hereto, constitute the full
and entire understanding and agreement among the parties with regard to the
subject hereof, and no party shall be liable or bound to any other party in any
manner by any covenants or agreements except as specifically set forth herein or
therein. Nothing in this Agreement, express or implied, 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.
8.5 Severability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties; and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
21
8.6 Amendment and Waiver. Any term of this Agreement may be amended
with the written consent of the Company and the Purchaser and, if made to
Sections 2, 5, 6.2, 7.2 or 8, also of HHB. The observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely) in writing by the party entitled to the benefit of such term.
8.7 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party hereto or any subsequent holder of any
Securities or any securities that may be issued on conversion or exercise of the
Securities upon any breach, default or noncompliance of any other party under
this Agreement or under the Certificate of Incorporation or Bylaws of the
Company shall impair any such right, power, or remedy, nor shall it be construed
to be a waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. Any waiver, permit, consent, or approval of any kind or character on
any party's part of or to any breach, default or noncompliance under this
Agreement or under the Certificate of Incorporation or Bylaws of the Company or
any waiver on any party's part of any provisions or conditions of this Agreement
must be in writing and shall be effective only to the extent specifically set
forth in such writing; and all remedies, either under this Agreement, the
Certificate of Incorporation or Bylaws, any law, or otherwise afforded to any
party, shall be cumulative and not alternative.
8.8 Notices, etc. All notices and other communications required or
permitted hereunder shall be effective if in writing and delivered personally or
sent by telecopier, Federal Express or registered or certified mail, return
receipt requested, postage prepaid, addressed to the party to which it is
directed at the address set forth below. Unless otherwise specified herein, such
notices or other communications shall be deemed effective (a) on the date
delivered, if delivered personally, (b) two business days after being sent, if
sent by Federal Express, (c) one business day after being sent, if sent by
telecopier with confirmation of good transmission and receipt, and (d) three
business days after being sent, if sent by registered or certified mail, postage
prepaid, return receipt requested. Each of the parties herewith shall be
entitled to specify another address by giving notice as aforesaid to each of the
other parties hereto.
8.9 Titles and Subtitles, Number and Gender. The titles of the
paragraphs and subparagraphs of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement. Whenever the
context requires, the plural shall include the singular and the reverse and each
gender shall include the others.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
22
8.11 Arbitration. Any controversy arising out of or relating to this
Agreement or the transactions contemplated hereby shall be referred to
arbitration before the American Arbitration Association strictly in accordance
with the terms of this Agreement and the substantive law of the State of
California. The board of arbitrators shall convene at a place mutually
acceptable to the parties and, if the place of arbitration cannot be agreed
upon, arbitration shall be conducted in Chicago, Illinois. The parties hereto
agree to accept the decision of the board of arbitrators, and judgment upon any
award rendered hereunder may be entered in any court having jurisdiction
thereof. Neither party shall institute a proceeding hereunder until that party
has furnished to the other party, by registered mail, at least thirty (30) days
prior written notice of its intent to do so.
8.12 Termination. If the transactions contemplated by this Agreement
have not been completed by December 31, 2001, it may be terminated by any of the
parties without notice.
The next page is the signature page.
23
In witness whereof, this Securities Purchase Agreement is
executed by the Company and Purchaser, and, as to Recital C and Sections 2, 5,
6.2, 7.2 and 8, by HHB, as of this 20th day of December, 2001.
Company: NATURADE, INC.
By /s/ Xxxx X. Xxxxxxx
______________________________
Xxxx X. Xxxxxxx
President and
Chief Executive Officer
00000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Purchaser: WESTGATE EQUITY PARTNERS, L.P.
By WESTGATE GROUP, LLC,
its General Partner
By: /s/ Xxxxxx X. Xxxxxx
_____________________
Xxxxxx X. Xxxxxx
Manager
One Magna Place, Suite 650
0000 Xxxxx Xxxxxxxxx Xxxx.
Xx. Xxxxx, XX 00000
Telecopy Number: 000-000-0000
HHB: HEALTH HOLDINGS &
BOTANICALS, LLC
By /s/ Xxxxxx X. Xxxxxxxxx
______________________________
Xxxxxx X. Xxxxxxxxx
President
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
24
List of Exhibits and Schedules
------------------------------
Naturade agrees to supplementally furnish a copy of any of the following
exhibits upon the request of the Commission.
Exhibits
--------
Exhibit A Certificate of Designation of Series B Convertible Preferred Stock
Exhibit B Warrant Certificate
Exhibit C Registration Rights Agreement
Exhibit D Form of Certificate of Amendment to Certificate of Incorporation
Exhibit E Management Services Agreement
Exhibit F Modified Lending Agreement
Exhibit G Form of Opinion of Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP
Exhibit H Voting Agreement Between Westgate and HHB
Exhibit I Form of Employment Agreement Between the Company and Xxxx X. Xxxxxxx
Exhibit J Form of amendment No. 2 to Finance Agreement
SCHEDULES
Schedule 3.1 Certificate of Incorporation and Bylaws
Schedule 3.2 Options and Warrants
Schedule 3.6 Exceptions to Compliance With Other Instruments
Schedule 3.8 Exceptions to Title to Assets
Schedule 3.9 Intellectual Property
Schedule 3.13 Tax Matters
Schedule 3.17 Customers and Vendors
Schedule 3.19 Standard Terms and Conditions of Sale
