EXHIBIT 10.31
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VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement") is made and entered into as of
this 26th day of December, 2001, by and between WESTGATE EQUITY PARTNERS, L.P.,
a limited partnership organized under the laws of Delaware ("Westgate"), and
HEALTH HOLDINGS & BOTANICALS, LLC, a limited liability company formed under the
laws of California ("HHB").
R E C I T A L S
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A. Naturade, Inc., a Delaware corporation (the "Company"), Westgate and
HHB are parties to a certain Securities Purchase Agreement, dated as of December
20, 2001 (the "Purchase Agreement").
B. Immediately prior to the consummation of the transactions
contemplated by the Purchase Agreement, HHB and its affiliates and associates
beneficially owned 5,064,412 shares of Common Stock of the Company, 1,250,024
shares of Series A Convertible Preferred Stock of the Company, warrants to
purchase an aggregate of 600,000 shares of Common Stock of the Company and
Common Stock of the Company purchasable upon conversion of indebtedness of the
Company to HHB in the amount of $5,315,702 (as of December 7, 2001) (the
"Company Loan").
C. Pursuant to the Purchase Agreement, in consideration for the
issuance to HHB by the Company of 35,989,855 shares of Common Stock of the
Company, HHB shall cancel the Company Loan, including all accrued interest
thereon, and tender all of its shares of Series A Convertible Preferred Stock to
the Company for cancellation without conversion or exchange therefor.
D. Pursuant to the Purchase Agreement, Westgate shall purchase
13,540,723 shares of Series B Convertible Preferred Stock from the Company and
warrants to purchase 33,641,548 shares of Series B Convertible Preferred Stock
from the Company (the "Warrants").
E. Each share of Series B Convertible Preferred Stock of the Company is
convertible into one share of Common Stock of the Company (subject to adjustment
as provided in the Certificate of Designation therefor) and votes on an
as-converted basis with the Common Stock of the Company on all matters submitted
to the holders of the Common Stock of the Company for a vote, including the
election of directors.
F. Upon exercise of the Warrants, and assuming that Westgate does not
dispose of any shares of Series B Convertible Preferred Stock of the Company
acquired pursuant to the Purchase Agreement and assuming that no additional
voting securities of the Company are issued after the consummation of the
transactions described in the Purchase Agreement, Westgate would own a majority
of the issued and outstanding voting securities of the Company.
G. The Company was incorporated under the laws of the State of Delaware
and, as a result, is governed by the Delaware General Corporation Law (the
"DGCL") and its Certificate of Incorporation and By-laws, as amended (the
"Company Charter Documents"). Under the DGCL and the Company Charter Documents
as in effect on the date hereof, the holder(s) of a majority of the Company's
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voting securities would have the right to elect all (100%) of the Company's
board of directors (other than directors to be elected solely by the holders of
the Series B Convertible Preferred Stock of the Company as provided in the
Certificate of Designation therefor).
H. As of the date hereof, the principal operations of the Company are
headquartered in the State of California and more than one-half of its
outstanding voting securities are held of record by persons having addresses in
the State of California. The Company has advised HHB and Westgate that the
Company is subject to certain enumerated provisions of the California General
Corporation Law (the "CGCL") by virtue of the requirements of Section 2115 of
the CGCL.
I. The application of the provisions of Section 2115 of the CGCL to the
Company could adversely impact the ability of a majority stockholder of the
Company to elect all (100%) of the directors of the Company (other than
directors to be elected solely by the holders of the Series B Convertible
Preferred Stock of the Company as provided in the Certificate of Designation
therefor).
J. The purpose of this Agreement is to xxxxx Xxxxxxxx certain voting
rights with respect to the shares of Common Stock owned by HHB so that, in the
event Westgate acquires (by virtue of its exercise of the Warrants or otherwise)
a majority of the issued and outstanding voting securities of the Company during
a period of time in which the provisions of Section 2115 of the CGCL are
applicable to the Company, Westgate shall be entitled to elect and remove
directors to the same extent as if the provisions of Section 2115 of the CGCL
were not applicable to the Company (provided that Westgate has agreed, pursuant
to the terms and conditions of this Agreement, to vote its shares of stock of
the Company as necessary to ensure that two persons identified by HHB also shall
serve on the Board of Directors of the Company).
K. The obligations of Westgate under the Purchase Agreement are
conditioned upon the execution of this Agreement by HHB. HHB shall derive direct
and indirect benefits from the consummation of the transactions contemplated by
the Purchase Agreement and it has agreed to enter into this Agreement in order
to induce Westgate to consummate the transactions contemplated by the Purchase
Agreement.
Now, therefore, in consideration of the foregoing promises and certain
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
A G R E E M E N T
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1. Agreement of Westgate.
(a) Westgate agrees that, during such period of time, if any, as
Westgate, together with its affiliates and associates (as such terms are defined
in Rule 405 promulgated under the Securities Act of 1933, as amended) and
assigns, shall Control (as defined below in this Section 1(a)) the Company, it
shall vote its shares of capital stock of the Company, and cause its affiliates,
associates and assigns to vote their shares of capital stock of the Company
(collectively with the shares held by Westgate, the "Westgate Shares"), in
whatever manner shall be necessary to ensure that at each annual or special
meeting of stockholders of the Company called for such purpose or pursuant to
any written consent of the stockholders of the Company, two persons identified
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in writing by HHB to Westgate shall be elected to the Board of Directors of the
Company. For purposes of this Agreement, Westgate shall be deemed to "Control"
the Company at such time as Westgate and its affiliates, associates and assigns
own, in the aggregate, a majority of the issued and outstanding capital stock of
the Company entitled to vote in the election of directors of the Company and, as
a result of such ownership, have the power and right to elect all (100%) of the
directors of the Company under the terms of the Company Charter Documents and
the DGCL (without giving effect to the application of any provisions of the
CGCL).
(b) If, during such period of time, if any, that Westgate shall Control
the Company and the Company shall be subject to Section 2115 of the CGCL, any
directors of the Company are removed by the stockholders of the Company prior to
the expiration of their terms and, after the vacancies created thereby are
filled, the two persons theretofore identified in writing by HHB to Westgate
pursuant to Section 1(a) have not been retained on or elected to the Board of
Directors of the Company, Westgate shall within five days thereafter vote its
shares by written consent in favor of the removal of directors to allow the
election of the two persons so identified by HHB, and shall deliver notice to
the Company pursuant to the Company Charter Documents that a special meeting of
the stockholders should be called for the purpose of electing two directors and
that such meeting should take place as soon as possible in light of notice
requirements under the Company Charter Documents and applicable law.
(c) Westgate agrees that, during such period of time, if any, as it
shall Control the Company, it shall be present, and shall cause its affiliates,
associates and assigns to be present, in person or by proxy, at all meetings of
stockholders of the Company so that all Westgate Shares beneficially owned (as
such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended) by Westgate may be counted for the purpose of determining
the presence of a quorum at such meetings and voted as required herein.
(d) Westgate agrees that it shall not transfer any of the Westgate
Shares to another person without obtaining as a condition to transfer such
transferee's agreement to be bound by this agreement on the same terms as
Westgate.
2. Agreement of HHB.
(a) HHB agrees that, during such period of time, if any, that Westgate
shall Control the Company, HHB shall vote its shares of capital stock of the
Company, and cause its affiliates and associates (as such terms are defined in
Rule 405 promulgated under the Securities Act of 1933, as amended) and assigns
to vote their shares of capital stock of the Company (collectively with the
shares held by HHB, the "HHB Shares"), in whatever manner shall be necessary to
ensure that Westgate shall have the voting power and capacity to immediately
remove any or all of the members of the Board of Directors of the Company
(except those members, if any, elected by a class of preferred stock of the
Company) by written consent or at any annual or special meeting of stockholders
of the Company called for such purpose and to fill the vacancies so created with
persons designated by Westgate.
(b) HHB agrees that, during such period of time, if any, that Westgate
shall Control the Company and the Company shall be subject to Section 2115 of
the CGCL, whenever a transaction that constitutes or is otherwise deemed to be a
"reorganization" (as defined in Section 181 of the CGCL) is submitted for a vote
of the stockholders of the Company, HHB shall vote the HHB Shares, and cause its
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affiliates, associates and assigns to vote their HHB Shares, to approve or
disapprove such transaction in the same manner as Westgate shall inform HHB in
writing that Westgate shall vote.
(c) HHB agrees that, during such period of time, if any, that Westgate
shall Control the Company, HHB shall be present, and shall cause its affiliates,
associates and assigns to be present, in person or by proxy, at all meetings of
stockholders of the Company so that all HHB Shares beneficially owned (as such
term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) by HHB may be counted for the purpose of determining the
presence of a quorum at such meetings and voted as required herein.
(d) HHB agrees that it shall not transfer any of the HHB Shares to
another person without obtaining as a condition to transfer such transferee's
agreement to be bound by this agreement on the same terms as HHB.
3. Termination. This Agreement shall terminate and be of no further force
or effect upon the earlier to occur of (a) the termination of the Warrants by
their terms prior to the exercise thereof by Westgate, (b) the closing of (i)
the acquisition of all or substantially of the assets of the Company or (ii) an
acquisition of the Company by another corporation or entity 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 50% of
the voting power of the corporation or entity surviving such transaction, (c) as
to the obligations of Westgate under Section 1, the beneficial ownership by HHB
of less than 20,827,134 shares of Common Stock of the Company (as adjusted for
any stock splits, stock dividends or the like after the date hereof); or (d) the
tenth anniversary of the date first above written.
4. Specific Enforcement. Each party acknowledges and agrees that each
party hereto will be irreparably damaged in the event any of the provisions of
this Agreement are not performed by the parties in accordance with their
specific terms or are otherwise breached. Accordingly, it is agreed that the
parties hereto shall be entitled to an injunction to prevent breaches of this
Agreement and to specifically enforce this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction, in addition to any other
remedy to which the parties may be entitled at law or in equity.
5. Representations and Warranties of HHB.
(a) HHB represents and warrants to Westgate that HHB (i) on the date
hereof is the record and beneficial owner of and, subject to the terms of this
Agreement and the irrevocable proxy, has the sole right to vote or direct the
voting of 41,654,267 shares of Common Stock of the Company (which comprise all
of the HHB Shares as of the date hereof), which HHB Shares at the date hereof
are free and clear of any liens, claims, options, charges or other encumbrance,
(ii) on the date hereof does not own, either beneficially or of record, any
shares of capital stock of the Company other than the HHB Shares, and (iii)
shall not take any action inconsistent with the purposes and provisions of this
Agreement.
(b) HHB represents and warrants to Westgate that the execution and
delivery of this Agreement by HHB does not, and the performance of this
Agreement by HHB shall not: (i) conflict with or violate any legal requirement,
order, decree or judgment applicable to HHB or by which HHB or any of HHB's
properties is bound or affected; or (ii) result in any breach of or constitute a
default (with notice or lapse of time, or both) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
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the creation of an encumbrance on or otherwise affecting any of the HHB Shares
pursuant to, any contract to which HHB is a party or by which HHB or any of
HHB's properties is bound or affected. The execution and delivery of this
Agreement by HHB does not, and the performance of its obligations under this
Agreement by HHB shall not, require any consent of any person or entity.
(c) HHB represents and warrants to Westgate that HHB has all requisite
power and capacity to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
HHB and constitutes the legal, valid and binding obligations of HHB, enforceable
against HHB in accordance with its terms.
(d) HHB represents and warrants that the representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement and shall be accurate in all material respects at all times through
the termination of this Agreement.
6. Representations and Warranties of Westgate.
(a) Westgate represents and warrants to HHB that Westgate (i) on the
date hereof is the record and beneficial owner of and, subject to the terms of
this Agreement, has the sole right to vote or direct the voting of 13,540,723
shares of Series B Convertible Preferred Stock of the Company (which comprise
all of the Westgate Shares as of the date hereof), which Westgate Shares at the
date hereof are free and clear of any liens, claims, options, charges or other
encumbrances, (ii) on the date hereof does not own, either beneficially or of
record, any shares of capital stock of the Company other than the Westgate
Shares, and (iii) shall not take any action inconsistent with the purposes and
provisions of this Agreement.
(b) Westgate represents and warrants to HHB that the execution and
delivery of this Agreement by Westgate does not, and the performance of this
Agreement by Westgate shall not: (i) conflict with or violate any legal
requirement, order, decree or judgment applicable to Westgate or by which
Westgate or any of Westgate's properties is bound or affected; or (ii) result in
any breach of or constitute a default (with notice or lapse of time, or both)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an encumbrance on or otherwise
affecting any of the Westgate Shares pursuant to, any contract to which Westgate
is a party or by which Westgate or any of Westgate's properties is bound or
affected. The execution and delivery of this Agreement by Westgate does not, and
the performance of its obligations under this Agreement by Westgate shall not,
require any consent of any person or entity.
(c) Westgate represents and warrants to HHB that Westgate has all
requisite power and capacity to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly executed and
delivered by Westgate and constitutes the legal, valid and binding obligations
of Westgate, enforceable against Westgate in accordance with its terms.
(d) Westgate represents and warrants that the representations and
warranties contained in this Agreement are accurate in all respects as of the
date of this Agreement and shall be accurate in all material respects at all
times through the termination of this Agreement.
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7. Miscellaneous.
(a) All costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such expenses.
(b) Subject to applicable law, this Agreement may not be amended,
modified, or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (which is
confirmed) or sent by an internationally recognized overnight courier service,
such as Federal Express, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice): If to Westgate:
Westgate Equity Partners L.P., One Magna Place, Suite 650, 0000 Xxxxx Xxxxxxxxx
Xxxx., Xx. Xxxxx, XX 00000, and, if to HHB: Health Holdings & Botanicals, LLC,
000 Xxxxxxxx Xxxx Xxxxx 000 Xxxxxxxxxx, XX 00000.
(d) This Agreement may be executed in one or more counterparts (whether
delivered by facsimile or otherwise), each of which shall be considered one and
the same agreement.
(e) This Agreement and the documents and the instruments referred to
herein constitute the entire agreement and supersede all prior agreements,
negotiations, arrangements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(f) Any term or provision of this Agreement that is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the invalid, void or unenforceable term or provision in any
other situation or in any other jurisdiction. If the final judgment of a court
of competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to and shall, subject to the
discretion of such court, reduce the scope, duration, area or applicability of
the term or provision, to delete specific words or phrases, or to replace any
invalid, void or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(h) At any time prior to the termination of this Agreement, the parties
to this Agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other parties to this Agreement, or (b) waive
compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.
(i) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party to this Agreement (whether
by operation of law or otherwise) without the prior written consent of the other
party to this Agreement.
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(j) The Section headings herein are for convenience only and shall not
affect the construction or interpretation of this Agreement.
The next page is the signature page.
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IN WITNESS WHEREOF, the parties have caused this Voting
Agreement to be duly executed on the date and year first above written.
WESTGATE EQUITY PARTNERS, L.P.
By: WESTGATE GROUP, LLC, its General Partner
By: ________________________________
Xxxxxx X. Xxxxxx
Manager
HEALTH HOLDINGS & BOTANICALS, LLC
By: ____________________________
Xxxxxx X. Xxxxxxxxx
President
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