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EXHIBIT 10.9
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT is made as of November 11, 1999, by and
among FitnessAge, Inc., a Nevada corporation (the "Company") and Natural
Alternatives International, Inc., a Delaware corporation (the "Investor").
RECITALS
WHEREAS, the Company proposes to borrow a total of $750,000 in two
tranches from the Investor pursuant to Convertible Promissory Notes ("Notes")
and Loan Agreement (collectively "Notes and Loan Agreement") of even date
herewith;
WHEREAS, the Company proposes to issue a Warrant to purchase 150,000
shares of common stock of the Company ("Warrant") to Investor in connection with
the Notes and Loan Agreement;
WHEREAS, as a condition of entering into the Notes and Loan Agreement,
the Investor has requested that the Company extend to it registration rights,
information rights and certain other rights as set forth below, and the Company
is willing to grant such rights to the Investor;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth herein and in
the Notes and Loan Agreement, the parties mutually agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-3" means such form under the Act as in effect on the date
hereof or any registration form under the Act subsequently adopted by the SEC
that permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.
"Holder" means any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with Section 2.12
hereof.
"Initial Offering" means the Company's initial public offering of
its Common Stock registered under the Act.
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
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"Registrable Securities" means (i) the shares of Common Stock
issuable or issued upon conversion of the Notes (ii) the shares of Common Stock
issuable or issued upon exercise of the Warrant and (iii) any shares of Common
Stock of the Company issued (or issuable upon the conversion or exercise of any
warrant, right, the Notes, or other security which is issued) as a dividend or
other distribution with respect to, or in exchange for or in replacement of, the
shares referenced in (i) and/or (ii) above, excluding in all cases, however, any
Registrable Securities sold by a person in a private transaction in which the
transferor's rights under Section 2 are not assigned or assignable and any
Registrable Securities sold to the public pursuant to a registration statement
or Rule 144 promulgated under the Act. In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made in the
definition of Registrable Securities as is appropriate in order to prevent any
dilution of the rights granted herein.
"Registrable Securities then outstanding" means (i) the aggregate
number of shares of Common Stock outstanding and (ii) the number of shares of
Common Stock issuable pursuant to then exercisable or convertible securities,
that are Registrable Securities.
"SEC" means the Securities and Exchange Commission.
"Shares" means any shares of, or securities convertible into or
exercisable for any shares of, any class of the Company's capital stock.
2. REGISTRATION RIGHTS
2.1 Demand Registration.
(a) Subject to the conditions of this Section 2.1, if the Company
shall receive a written request from the Holders of a majority 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 then outstanding, then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.1, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered, provided, however, the rights in this Section 2.1(a) shall not be
exercisable until 60 days after the Initial Offering of the Company.
(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 or any request pursuant to Section 2.2 and the Company shall
include such information in the written notice referred to in Section 2.1(a) or
Section 2.2(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders, which underwriter or underwriters shall be reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
2.1 or
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Section 2.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities to be underwritten (including
Registrable Securities) then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.1:
(i) after the fifth anniversary of the date of the Loan
Agreement; or
(ii) after the Company has effected one (1) registration
pursuant to this Section 2.1, and such registration has been declared or ordered
effective; or
(iii) prior to sixty (60) days following the effective
date of a registration statement pertaining to the Initial Offering.
2.2 Piggyback Registrations.
(a) The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to the filing of any
registration statement under the Act for purposes of a public offering of
securities of the Company (including, but not limited to, registration
statements relating to the Initial Offering or secondary offerings of securities
of the Company, but excluding registration statements relating to employee
benefit plans or with respect to corporate reorganizations or other transactions
under Rule 145 of the Act) and will afford each such Holder an opportunity to
include in such registration statement all or part of the Registrable Securities
held by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by it shall, within
twenty (20) days after the above-described notice from the Company, so notify
the Company in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by such Holder. If a Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(b) Underwriting. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated,
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first, to the Common Stock the Company proposes to sell; second, the Common
Stock the founders and Company executives propose to sell; and third, to any
stockholder of the Company and the Holders on a pro rata basis based on the
total number of Registrable Securities held by the Holders. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partner and
stockholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "Holder," and any pro rate
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
2.3 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and keep such registration
statement effective for a period of up to one hundred eighty (180) days
provided, however, that (i) such 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 (ii) in the case of any registration
of Registrable Securities on Form S-3 which 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 Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment that (I) includes any prospectus required by Section 10(a)(3) of the
Act or (II) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) 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 Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions, including
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California, as shall be reasonably requested by the Holders and do any and all
other acts and things which may be necessary or advisable to enable the Holders
to consummate the public sale or other disposition in California and in such
jurisdiction where the securities are owned by such Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business 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 Act.
(e) In the event of 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. Each Holder
participating in such underwriting also shall enter into and perform its
obligations under such an agreement.
(f) 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 Act of 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.
(g) Cause all such Registrable Securities registered
pursuant hereto to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereto and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities, and (ii) a letter,
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.4 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such
securities, as shall be required to effect the registration of such Holder's
Registrable Securities.
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2.5 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.1 and Section 2.2 for each Holder, including (without
limitation) all registration, filing, qualification, printers' and accounting
fees, fees and disbursements of counsel for 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, not to
exceed fifteen thousand dollars ($15,000), of one counsel for the selling
Holders), but excluding underwriting discounts and commissions relating to
Registrable Securities.
2.6 Underwriting Requirements.
(a) In connection with any offering involving an
underwriting of Shares, the Company shall not be required under Section 2.1 or
2.2 to include any of the Registrable Securities in such underwriting unless the
Holders of a majority of the Registrable Securities that indicated interest in
including their Registrable Securities in the underwriting accept the terms of
the underwriting as agreed upon between the Company and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine, in their sole
discretion, will not jeopardize the success of the offering by the Company.
(b) If the total number of Shares, including Registrable
Securities, requested by shareholders to be included in such offering exceeds
the number of Shares to be sold (other than by the Company) that the
underwriters determine, in their sole discretion, will be compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of Shares, including Registrable Securities, that the
underwriters determine in their sole discretion will not jeopardize the success
of the offering.
With respect to a demand registration under Section 2.1, the
Shares held by selling shareholders to be included in such offering shall be
apportioned pro rata among the selling shareholders according to the total
number of Shares entitled to be included therein owned by each selling
shareholder or in such other proportions as they shall mutually agree, but in no
event shall (i) the number of Registrable Securities included in the offering be
reduced below fifty percent (50%) of the total number of Shares (including
Shares sold by the Company) included in such offering, unless such offering is
the Initial Offering in which case the selling shareholders may be excluded if
the underwriters make the determination described above and no other
shareholder's securities are included; or (ii) any shares being sold by a
shareholder exercising a demand registration right be excluded from such
offering, notwithstanding (i) above.
(c) In apportioning the Shares in accordance with
subsection 2.6(b), if a "selling shareholder" is a Holder of Registrable
Securities and a partnership or corporation, then the partners, retired partners
and shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons, shall be deemed to be a single "selling shareholder," and any
pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate number of shares having registration rights owned by all
entities and individuals deemed to be such "selling shareholder."
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2.7 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 Section 2.
2.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Exchange Act, against any losses, claims,
damages or liabilities (joint or several) to which they may become subject under
the Act, the Exchange Act or other federal or state law, 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 any 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 made therein not misleading; or (iii) any violation or
alleged violation by the Company of the Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided; however, that the indemnity agreement contained in this
subsection 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, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
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 Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person or any such underwriter or Holder, against any losses, claims, damages or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 2.8(b), in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
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,
however, that in no event shall any indemnity under this subsection 2.8(b)
exceed the net proceeds from the offering received by such Holder.
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(c) Promptly after receipt by an indemnified party under
this Section 2.8 of notice 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 notified, 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 conflicts
of interest 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, but the omission so to 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) 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 therein, 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
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. 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.
(e) 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 of the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
2.9 Exchange Act Reports. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the 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:
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(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the registration statement pertaining to the
Initial Offering;
(b) 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 use Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act, and the Exchange Act (at
any time after it has become subject to such reporting requirements), 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 which permits the
selling of any such securities without registration or pursuant to such form.
2.10 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration specified by the Company and the managing
underwriter of the Initial Offering, it shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except common stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only with respect
to the Initial Offering;
(b) all officers and directors of the Company, all other
persons with registration rights (whether or not pursuant to this Agreement) and
all shareholders who are required by the underwriter to execute lock-ups enter
into similar agreements;
(c) such market stand-off time period shall not exceed one
hundred eighty (180) days after the effective date of the registration statement
pertaining to the Initial Offering; and
(d) such agreement shall not apply to any Registrable
Securities included in the registration statement pertaining to the Initial
Offering.
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In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of the period.
Notwithstanding the foregoing, the obligations described in this
Section 2.10 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
2.11 Limitation on Subsequent Registration Rights. From and after
the date this Agreement is signed, the Company shall not enter into any
agreement granting any holder, or prospective holder of any securities of the
Company, registration rights with respect to such securities without the written
consent of the Holders of a majority of the Registrable Securities then
outstanding, unless: (i) such other registration rights are equal to or
subordinate to the registration rights granted to the Holders hereunder; and
(ii) the holders of such rights are subject to market standoff obligations no
more favorable to such persons than those contained herein.
2.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(i) is a subsidiary, parent, affiliate, general partner, limited partner or
retired partner of a Holder, or (ii) is a Holder's family member or trust for
the benefit of an individual Holder. No assignment of Registrable Securities
pursuant to this Section 2.12 shall be effective unless (A) the transferor
shall, within ten (10) days after such transfer, furnish to the Company written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
2.13 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 2 after five (5) years following the closing of the
Initial Offering.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 2 shall
terminate on such date, after the closing of the Initial Offering, that all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any 90-day period;
provided, however, that the provisions of this Section 2.13(b) shall not apply
to any Holder who owns at least one percent (1%) of the Company's outstanding
stock.
3. COVENANTS OF THE COMPANY
3.1 Delivery of Financial Statements.
(a) The Company shall deliver to each Holder or instead,
to the Investor:
(i) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance
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sheet of the Company and statement of shareholder's equity as of the end of such
year, and a statement of cash flows for such year, such year-end financial
reports to be prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
selected by the Company's Board of Directors; and
(ii) as soon as practicable, but in any event
within forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year of the Company, an unaudited profit or loss
statement, statement of cash flows for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter, together with an instrument
executed by the Chief Financial Officer or President of the Company certifying
that such financial reports were prepared in accordance with GAAP consistently
applied with prior practices for earlier periods (with the exception of
footnotes that may be required by GAAP) and fairly present the financial
condition of the Company and its results of operation for the period specified,
subject to year-end audit adjustments.
(b) The Company shall deliver to each Holder who holds
Registrable Securities (or Common Stock issued or issuable upon exercise or
conversion thereof, as adjusted for stock splits, stock dividends and the like):
(i) as soon as practicable, but in any event thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on at least a quarterly basis, including balance
sheets and statements of cash flows for such quarters or other such periods (the
"Annual Financial Plan"), and, as soon as prepared, any other budgets or revised
budgets prepared by the Company;
(ii) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
any of such Holders or any assignee of any of such Holders may from time to time
reasonably request; provided, however, that the Company shall not be obligated
under this subsection 3.1(b)(ii) or any other subsection of Section 3.1 to
provide information that it deems in good faith to be a trade secret or similar
confidential information unless the Holder or Holders provide assurances in
writing to the Company that it will maintain the confidentiality of the
information.
3.2 Inspection. The Company shall permit each Holder, at such
Holder's expense, to visit and inspect the Company's properties, to examine its
books of account and records, and to discuss the Company's affairs, finances and
accounts with its officers, all at such reasonable times as may be requested by
such Holder; provided, however, that the Company shall not be obligated pursuant
to this Section 3.2 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information unless such
Holder provides assurances in writing to the Company that it will maintain the
confidentiality of the information.
3.3 Meeting of Directors, Committees and Appointment of Director
Rights. The Company shall:
(a) Hold meetings of the Board of Directors on not less
than a quarterly basis;
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(b) Permit the Investor to have one representative
nominated to the Board of Directors of the Company ("Board"). The Company shall
have the right to approve any individual requested by the Investor to be
nominated to be a member of the Board, which approval shall not be unreasonably
withheld. The Company shall take such actions as may be necessary to ensure that
such individual is duly appointed or elected as director of the Company and
remains a director until the earlier of (i) the Initial Offering; or (ii) there
is no amount remaining outstanding pursuant to this Loan or the Notes. In the
event Investor declines to nominate a representative as a member of the Board,
Investor shall have the right to have a representative attend all meetings in a
non-voting capacity;
(c) Send to such Investor representative the notice of the
time and place of each such meeting in the same manner and at the same time as
it shall send such notice to its directors or committee members; and
(d) Provide to such Investor representative copies of all
notices, reports, minutes and consents at the same time and in the same manner
as they are provided to the Board or any committee members; provided that
Company may require as a condition precedent to these rights that each person
proposing to attend any Board meeting and each person who will have access to
any of the information provided by Company to the Board, who is not a member of
the Board, shall agree to hold in confidence and trust, and to act in a
fiduciary manner with respect to, all such information received during such
meetings or otherwise; and provided further that Company reserves the right not
to provide information and to exclude such representative from any meeting or
portion of any meeting if delivery of the information or attendance at the
meeting or portion of such meeting by such representative would result in trade
secrets disclosure to such representative or would adversely affect the
attorney-client privilege between Company and its counsel or if such
representative is affiliated with a direct competitor of Company.
3.4 Expenses of Directors. Company shall promptly reimburse in
full the Investor representative for all reasonable out-of-pocket expenses
incurred in attending each meeting of the Board or any committee of the Board.
3.5 Indemnification. At all times, Company shall maintain
provisions in its articles of incorporation and bylaws exculpating and
indemnifying all directors from and against liability, to the maximum extent
permitted under the laws of the State of Nevada.
3.6 Records and Books of Account. Company shall keep adequate
records and books of account in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of Company, and in
which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
3.7 Certain Operating Covenants. Without the consent of the
Holders of a majority of the Registrable Securities, the Company shall not:
(d) declare or pay dividends on the Company's capital
stock;
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(e) make any loan or guarantee (excluding accounts
receivable) senior to the Notes and Loan Agreement;
3.8 Confidentiality and Employee Inventions Agreements. The
Company shall cause each of its officers, employees, consultants and independent
contractors to enter into a confidentiality and inventions agreement with the
Company that restricts the disclosure of the Company's proprietary information
to third parties and provides for assignment to the Company of all inventions
and intellectual property created and developed by such employees, consultants
and contractors in the course of their employment or engagement, as the case may
be, by the Company.
3.9 Termination of Covenants. The covenants set forth in this
Section 3 shall, except as otherwise specifically provided, terminate and be of
no further force or effect upon the earlier of:
(a) the effective date of the Registration Statement
pertaining to the Initial Offering;
(b) the closing date of (i) a sale, lease or other
disposition of all or substantially all of the Company's assets, or (ii) an
acquisition of the Company by another entity by stock purchase, consolidation,
merger or other reorganization in which the holders of the Company's outstanding
voting stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the entity surviving such transaction;
(c) when the Company first becomes subject to the periodic
reporting requirements of Section 15(d) of the Securities Exchange Act of 1934,
as amended; or
(d) repayment of the loan pursuant to the Notes and Loan
Agreement.
4. RIGHT OF CO-SALE
4.1 Right of Co-Sale. Each of Xxxx Xxxxxx-Xxxxx and Xxxxx
Xxxxxxxx (individually, a Founder," and collectively, the "Founders") grants the
Holders the right to participate in any sale, assignment, pledge or other
transfer ("Transfer") of any Shares owned by the Founders on the same terms and
conditions on which they, or any one of them, proposes to Transfer their Shares.
To the extent that the Holders exercise their right of co-sale as set forth
below, the number of Shares that the Founders, or any one of them, may Transfer
in a proposed the transaction shall be correspondingly reduced.
4.2 Exercise of Right. Each time a Founder proposes to Transfer
any Shares, he shall first notify the Investor as follows:
(a) The selling Founder shall deliver a notice
("Participation Notice") to the Holders stating (i) the Founder's bona fide
intention to Transfer his Shares, (ii) the number of such Shares to be
Transferred, and (iii) the price and other terms upon which he proposes to
Transfer his Shares.
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(b) By written notification to the selling Founder within
five (5) days after receiving the Participation Notice, the Holders may elect to
Transfer, at the price and on the terms specified in the Participation Notice,
up to that portion of such Shares that equals the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion of the Notes
and upon exercise of the Warrant then held by such Holder bears to the total
number of shares of Common Stock outstanding or issuable upon conversion of the
Notes and exercise of the Warrant.
(c) Each Holder shall effect its participation in the
Transfer by promptly delivering to the selling Founder, for transfer to the
prospective purchaser, one or more certificates, properly endorsed for transfer,
which represent (i) the type and number of Shares that the Holder elects to
Transfer; or (ii) that number of Shares that is at such time convertible into or
exercisable for the number of shares of Common Stock that such Holder elects to
sell; provided, however, that if the prospective purchaser objects to the
delivery of the Warrant in lieu of Common Stock, such Holder shall exercise such
Warrant for Common Stock and deliver Common Stock to the prospective purchaser.
The Company agrees to make any such conversion concurrent with the actual
transfer of such shares to the purchaser.
4.3 Obligation to Effect Transfer. The stock certificate or
certificates that the Holders deliver to the selling Founder pursuant to
paragraph 4.2(c) shall be transferred to the prospective purchaser upon
consummation of the Transfer of the Shares pursuant to the terms and conditions
specified in the Participation Notice, and the Founder shall concurrently
therewith remit to each participating Holder that portion of the Transfer
proceeds to which such Holder is entitled by reason of its participation in such
Transfer.
4.4 Termination of Rights. The rights of co-sale set forth in
this Section 4 shall terminate upon the earlier of (a) the effective date of the
registration statement pertaining to a public offering of shares of Common Stock
resulting in gross proceeds to the Company of no less than ten million dollars
($10,000,000); (b) a sale, lease or other disposition of all or substantially
all of the Company's assets; or (c) an acquisition of the Company by another
entity by stock purchase, consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the entity surviving such
transaction.
5. MISCELLANEOUS
5.1 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 respective successors and assigns of the parties, including
permitted transferees of any Registrable Securities. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
5.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
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5.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid or upon delivery to a recognized courier service and addressed
to the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten (10) days' advance written notice to the other parties.
5.6 Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement 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 the acquiescence thereof, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind of character on
any Holder's part of any breach default or noncompliance under the Agreement or
any waiver on such Holder'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. All remedies, either under this
Agreement, by law or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
5.8 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
more than fifty percent (50%) of the Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of any Registrable Securities, or shares of Series A Stock, then
outstanding and the Company.
5.9 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.
5.10 Aggregation of Stock. All shares of Registrable Securities
or Series A Preferred Stock held or acquired by an Investor and All Related
Parties of such Investor shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
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5.11 Entire Agreement. This Agreement and the Purchase Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.
5.12 Additional Parties. In the event of a subsequent closing
with one or more additional investor as provided for in Section 1.3 of the
Purchase Agreement between the Company and the Investors, such investor shall
become a party to this Agreement as an "Investor" upon receipt from such
investor of a fully executed signature page hereto.
5.13 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties only in the courts of the
State of California, County of San Diego, or, if it has or can acquire
jurisdiction, in the United States District Court for the Southern District of
California, and each of the parties consents to the jurisdiction of such courts
(and of the appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any action or proceeding
referred to in the proceeding sentence may be served on any party anywhere in
the world.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
The Company: Investor:
FitnessAge, Inc. Natural Alternatives International, Inc.
a Nevada corporation a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxx X. XxXxxx
-------------------------------- -------------------------------------
Xxxxx X. Xxxxxxx, Chief Xxxx X. XxXxxx, Chief Executive
Financial Officer Officer
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