INVESTOR RIGHTS
AGREEMENT
This Investor
Rights Agreement (this “ Agreement ”), dated as
of April 30, 2009, is made by and among ComVest NationsHealth
Holdings, LLC, a Delaware limited liability company (“
Parent ”), NationsHealth, Inc., a Delaware corporation
(the “ Company ”), MHR Capital Partners Master
Account, LP, MHR Capital Partners (100) LP, OTQ, LLC, and Mark
H. Rachesky M.D., as a holder of record and as authorized signatory
for certain other entities, (collectively, with their respective
Affiliates and any successor to any of the foregoing, “
MHR, ” provided, that any representations and
covenants made by any of the foregoing signatories hereto shall be
made severally and not jointly), Glenn Parker, Lewis Stone, Timothy
Fairbanks, Mark Lama, and RGGPLS, LLC, a Delaware limited liability
company, (each, individually, a “ Key Holder ”
and, collectively, the “ Key Holders ” and
together with MHR, individually, a “ Stockholder
” and, collectively, the “ Stockholders
”). Certain defined terms used in this Agreement are defined
in Article 4 and capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Merger
Agreement (as defined below).
WHEREAS ,
concurrently with the execution of this Agreement, Parent,
NationsHealth Acquisition Corp., a Delaware corporation and a
wholly owned Subsidiary of Parent (“ Merger Sub
”), and the Company have entered into that certain Agreement
and Plan of Merger (the “ Merger Agreement
”);
WHEREAS ,
pursuant to the Merger Agreement, Merger Sub will merge with and
into the Company (the “ Merger ”) and the
separate corporate existence of Merger Sub shall thereupon cease,
and the Company shall be the surviving corporation in the Merger
(the “ Surviving Corporation ”);
WHEREAS ,
in connection with the Merger and immediately prior to the
Effective Time, each of the Stockholders shall contribute all
issued and outstanding shares of Company Common Stock and Company
Restricted Stock owned, beneficially and of record, by each of them
(or their respective Affiliates) (the “ Rollover
Shares ”) in exchange for the same number of shares of
the Merger Sub Non-Voting Common Stock at a price per share equal
to $0.12 (the “ Exchange ”) in accordance with
the terms and conditions of the Exchange and Rollover
Agreement;
WHEREAS ,
in connection with the Merger and at the Effective Time,
(a) each share of issued and outstanding Company Common Stock,
including shares of Company Restricted Stock (other than shares to
be canceled in accordance with Section 2.1(c) of the Merger
Agreement, the Dissenting Shares, and the shares of Preferred Stock
issued at or immediately prior to the Effective Time in connection
with the Preferred Stock Investment and the Preferred Stock
Investment Option (if exercised)) shall be converted into the right
to receive from the Surviving Corporation a cash amount equal to
$0.12 per share, (b) each share of Merger Sub Non-Voting
Common Stock owned, beneficially or of record, by each of the
Stockholders (or its Affiliates) shall be converted into and become
one share of Surviving Corporation Common Stock in accordance with
Section 2.1(a) of the Merger Agreement, and (c) each
share of Merger Sub Voting Common Stock owned, beneficially or of
record, by Parent shall be converted into and become one share of
Surviving Corporation Common Stock in accordance with the terms and
conditions of Section 2.1(a) of the Merger
Agreement;
WHEREAS ,
concurrently with the execution of this Agreement, the Company and
Parent have entered into the Bridge Loan Documents pursuant to
which Parent has agreed to provide the Bridge Loan which Bridge
Loan shall be converted into shares of Preferred Stock at the
Effective Time;
WHEREAS ,
all of the outstanding obligations under the Bridge Loan may be
converted into shares of Preferred Stock in accordance with the
Bridge Loan Documents and/or the Merger Agreement;
WHEREAS ,
concurrently with the execution of this Agreement, the Company,
Parent, the Key Holders and MHR have entered into the other
Preferred Stock Investment Documents to which each is a party,
including Series A Preferred Stock Purchase Agreement, dated
as of the date hereof (the “ Series A Stock Purchase
Agreement ”), by and between Parent and the Company,
pursuant to which Parent shall purchase, and the Company shall
sell, shares of Preferred Stock and the Company shall grant to
Parent the Preferred Stock Investment Option;
WHEREAS ,
the execution and delivery of this Agreement is a condition to
Parent’s purchase of the Preferred Stock pursuant to the
Series A Stock Purchase Agreement and Parent’s execution
and delivery of the Series A Stock Purchase
Agreement;
WHEREAS ,
at the Effective Time, each of the Stockholders shall own,
beneficially or of record, in such Stockholder’s name (or in
the name of its Affiliates, permitted assigns or transferees) the
number of shares of Surviving Corporation Common Stock and/or
Preferred Stock set forth opposite such Stockholder’s or
Parent’s name on Schedule A attached hereto;
and
WHEREAS ,
the Company, Parent and each of the Stockholders desire to enter
into this Agreement for the purposes, among others, of providing
certain rights and restrictions with respect to the Common Stock
and the Preferred Stock owned by the Key Holders, MHR and Parent,
as the case may be.
NOW,
THEREFORE , in consideration of the mutual covenants and
agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby mutually covenant and
agree as follows:
ARTICLE 1
REGISTRATION RIGHTS
(a) Subject
to the conditions of this Section 1.1 , after the
Effective Time, if at any time after the first (1st) anniversary of
the date a registration statement for an IPO is declared effective
by the SEC, the Company receives a written request from MHR that
the Company file a registration statement on Form S-1 with the SEC
with respect to all of the Registrable Securities owned by MHR,
then the Company shall, subject to the limitations of
Section 1.1(b) , Section 1.1(c) , and
Section 1.4 , (i) as soon as practicable, and in
any event within sixty (60) days after the date such request
is given, file a registration statement on Form S-1 under the
Securities Act covering all Registrable Securities that MHR
requested to be registered, and (ii) use its commercially
reasonable efforts to cause such registration statement to be
declared effective by the SEC as soon as practicable.
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(b) Notwithstanding
the foregoing obligations, if the Company furnishes to MHR a
certificate signed by the Company’s Chief Executive Officer
stating that in the good faith judgment of the Company’s
Board of Directors it would be detrimental to the Company and its
stockholders for such registration statement to be filed, become
effective, remain filed or remain effective for as long as such
registration statement otherwise would be required to remain filed
or effective, because such action would (i) interfere with a
significant acquisition, corporate reorganization, or other similar
transaction involving or then being actively pursued by the
Company; (ii) require premature disclosure of material
information that the Company has a bona fide business purpose for
preserving as confidential; or (iii) render the Company unable
to comply with requirements under the Securities Act or Exchange
Act, then the Company shall have the right to defer taking action
with respect to such filing or effectiveness of such registration
statement, for one period of not more than one hundred eighty
(180) consecutive days after the request of MHR is provided to
Company; provided , however , that the Company shall
not be prohibited or restricted by the terms and conditions of this
Section 1.1 from registering any securities in
connection with an Excluded Registration.
(c) The
Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to this Section 1.1
:
(i) after
the Company has effected (which for purposes of this Agreement
shall mean a registration statement that has been declared
effective by the SEC and has satisfied the requirements of
Section 1.14 ) two (2) registrations pursuant to
this Section 1.1 ; provided , however ,
that the Company shall grant to MHR an additional demand
registration pursuant to Section 1.1 for each year the
Company is not in compliance with the rules and regulations of the
Securities Act or Exchange Act and, as a result, is not eligible to
use a Form S-3, which additional demand registrations shall not
exceed two (2) in the aggregate;
(ii) if
MHR proposes to dispose of its shares of Registrable Securities
that may be immediately registered on a Form S-3 pursuant to a
request made pursuant to Section 1.3 ; or
(iii) if
MHR has the right to dispose of its shares of Registrable
Securities pursuant to Rule 144 in a single transaction without
being subject to any volume or holding period
limitations.
1.2 Company
Registration. After the Effective Time, if at any time after
the date a registration statement for an IPO is declared effective
by the SEC or at such earlier time to the extent other stockholders
are granted the right to registration before such time, the Company
proposes to register (including, for this purpose, a registration
effected by the Company for stockholders) any of the
Company’s equity or debt securities under the Securities Act
in connection with the public offering of such securities solely
for cash (other than an Excluded Registration), the Company shall,
at such time, promptly give Parent, MHR and each of the Key Holders
notice of such registration (a “ Piggyback Notice
”). Upon the request of Parent, MHR and/or any of the Key
Holders given within twenty (20) days after such Piggyback
Notice is given by the Company, the Company shall, subject to the
provisions of Section 1.4 , cause to be registered all
of the Registrable Securities that Parent, MHR and/or any of the
Key Holders has requested to be included in such registration. The
Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 1.2
before the effective date of such registration, whether or not
Parent, MHR and/or any of the Key Holders has elected to include
any shares in such registration.
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1.3
Form S-3 Registration.
(a) Subject
to the conditions of this Section 1.3 , if at any time
when it is eligible to use a Form S-3, the Company receives a
written request from MHR that the Company file a Form S-3 with
respect to all or a part of MHR’s Registrable Securities,
then the Company shall (i) as soon as practicable, and in any
event within forty-five (45) days after the date such request
is given, file a registration statement on Form S-3 under the
Securities Act covering all Registrable Securities that MHR
requested to be registered, and (ii) use its commercially
reasonable efforts to cause such registration statement to be
declared effective by the SEC as soon as practicable, subject to
the limitations of Section 1.3(b) ,
Section 1.3(c) , and Section 1.4 .
(b) Notwithstanding
the foregoing obligation, if the Company furnishes to MHR a
certificate signed by the Company’s Chief Executive Officer
stating that in the good faith judgment of the Company’s
Board of Directors it would be detrimental to the Company and its
stockholders for such Form S-3 to be filed, become effective,
remain filed or remain effective for as long as such registration
statement otherwise would be required to remain filed or effective,
because such action would (i) interfere with a significant
acquisition, corporate reorganization, or other similar transaction
then being actively pursued by the Company; (ii) require
premature disclosure of material information that the Company has a
bona fide business purpose for preserving as confidential; or
(iii) render the Company unable to comply with requirements
under the Securities Act or Exchange Act, then the Company shall
have the right to defer taking action with respect to such filing
or effectiveness of such registration statement, for a period of
not more than one hundred eighty (180) days after the request
of MHR is provided to the Company; provided , however
, that the Company shall not be prohibited or restricted by the
terms and conditions of this Section 1.1 from
registering any securities in connection with an Excluded
Registration.
(c) The
Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to this Section 1.3
:
(i) if
a Form S-3 is not then available with respect to such offering;
or
(ii) if
the Company has, within the twelve (12) month period preceding
the date of such request, already effected three
(3) registrations on Form S-3 for MHR pursuant to this
Section 1.3 .
(d) Registrations
initiated or effected pursuant to this Section 1.3
shall not be counted as a demand for registration effected pursuant
to Section 1.1 .
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1.4
Underwriting Requirements . If MHR intends to distribute the
Registrable Securities covered by its request pursuant to
Section 1.1 or Section 1.3 by means of an
underwriting, MHR shall so advise the Company as a part of its
request made pursuant to Section 1.1 or
Section 1.3 , and if the Company intends to distribute
shares of its capital stock pursuant to Section 1.2 by
means of an underwriting, the Company shall include such
information in the Piggyback Notice. The underwriter will be an
investment banking firm of national standing selected by the
Company, subject to the consent of MHR in connection with a
registration pursuant to Section 1.1 or
Section 1.3 (which consent shall not be unreasonably
withheld, conditioned or delayed). In such event, the right of MHR
to include Registrable Securities in such registration shall be
conditioned upon MHR’s participation in such underwriting and
the inclusion of MHR’s Registrable Securities in the
underwriting to the extent provided herein. MHR and the Company (as
provided in Section 1.5(e) ) shall enter into an
underwriting agreement in customary form with the underwriter(s)
selected for such underwriting. Notwithstanding any other provision
of this Section 1.4 , if the underwriter(s)
determine(s) that marketing factors require a limitation on the
number of shares to be underwritten, then the underwriter(s) may
exclude shares (including Registrable Securities) from the
registration and underwriting, and the number of shares that may be
included in the registration and the underwriting shall be
allocated, (a) in the case of (x) a primary registration
by the Company under Section 1.2 , (i) first, to
the Company, (ii) second, to MHR, Parent and each of the Key
Holders, with such registrable securities and shares of capital
stock requested by any of them pursuant to piggy back registration
rights held by any of them to be allocated pro rata based upon the
number of shares of the Company’s Common Stock (determined on
a fully diluted and as converted to Common Stock basis assuming
full conversion or exercise of all of the Company’s
convertible securities and Options) owned by such holder, and
(iii) third, to each of the other holders of shares of capital
stock of the Company requesting inclusion of their securities in
such registration statement pursuant to piggyback registration
rights granted to such holders to be allocated among such holders
thereof pro rata based on the number of shares of Company Common
Stock (determined on a fully diluted and as converted to Common
Stock basis assuming full conversion or exercise of all of the
Company’s convertible securities and Options) owned by each
such holder, and (y) a secondary registration by the Company
under Section 1.2 , (i) first, to the stockholder
having the right to require such secondary registration,
(ii) second, to MHR, Parent and each of the Key Holders, with
such registrable securities and shares of capital stock requested
by any of them pursuant to piggy back registration rights held by
any of them to be allocated pro rata based upon the number of
shares of the Company’s Common Stock (determined on a fully
diluted and as converted to Common Stock basis assuming full
conversion or exercise of all of the Company’s convertible
securities and Options) owned by such holder, and (iii) third,
to each of the other holders of shares of capital stock of the
Company requesting inclusion of their securities in such
registration statement pursuant to piggyback registration rights
granted to such holders to be allocated among such holders thereof
pro rata based on the number of shares of Company Common Stock
(determined on a fully diluted and as converted to Common Stock
basis assuming full conversion or exercise of all of the
Company’s convertible securities and Options) owned by each
such holder, and (b) in the case of a registration pursuant to
MHR’s rights under Section 1.1 or Section
1.3 , (i) first, to MHR, and (ii) second, to each of
the other holders of shares of capital stock of the Company
requesting inclusion of their securities in such registration
statement pursuant to piggyback registration rights granted to such
holders to be allocated among such holders thereof pro rata based
on the number of shares of Company Common Stock (determined on a
fully diluted and as converted to Common Stock basis assuming full
conversion or exercise of all of the Company’s convertible
securities and Options) owned by each such holder.
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1.5 Obligations
of the Company . Whenever required under this
Article 1 to effect the registration of any Registrable
Securities, the Company shall (in addition to, and not in
limitation of, any other requirements set forth in this
Article 1 ), as expeditiously as reasonably
possible:
(a) prepare
and file with the SEC a registration statement with respect to such
Registrable Securities and use its commercially reasonable efforts
to cause such registration statement to become effective and, upon
the request of MHR, keep such registration statement effective for
a period of up to one hundred twenty (120) days or, if
earlier, until the distribution contemplated in the registration
statement has been completed; provided , however ,
that (i) such one hundred twenty (120) day period shall
be extended for a period of time equal to the period MHR refrains,
at the request of an underwriter of securities of the Company, from
selling any securities included in such registration, and
(ii) in the case of any registration of Registrable Securities
on Form S-3 that are intended to be offered on a continuous or
delayed basis, subject to compliance with applicable SEC rules,
such 120 day period shall be extended to a period of two
years, or if earlier, until all such Registrable Securities are
sold; provided , further , that at any time, upon
written notice to MHR and for a period not to exceed sixty
(60) days thereafter (the “ Suspension Period
”), the Company may delay the filing or effectiveness of any
registration statement or suspend the use or effectiveness of any
registration statement (and MHR hereby agrees not to offer or sell
any Registrable Securities pursuant to such registration statement
during the Suspension Period) if the Company reasonably believes
that there is or may be in existence material nonpublic information
or events involving the Company, the failure of which to be
disclosed in the prospectus included in the registration statement
could result in a Violation;
(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
Securities Act in order to enable the disposition of all securities
covered by such registration statement;
(c) furnish
to MHR such numbers of copies of a prospectus, including a
preliminary prospectus, as required by (and in conformity with) the
Securities Act, and such other documents as MHR may reasonably
request in order to facilitate their disposition of their
Registrable Securities;
(d) use
its commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue-sky laws of such jurisdictions as shall be
reasonably requested by MHR; provided that the Company shall not be
required in connection therewith 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 Securities
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 underwriter(s) of such offering;
provided, that MHR shall also enter into and perform its
obligations under such agreement;
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(f) use
its commercially reasonable efforts to cause all such Registrable
Securities covered by such registration statement to be listed on a
national securities exchange or trading system and each securities
exchange and trading system (if any) on which similar securities
issued by the Company are then listed;
(g) provide
a transfer agent and registrar for all Registrable Securities
registered pursuant to this Agreement and provide a CUSIP number
for all such Registrable Securities, in each case not later than
the effective date of such registration;
(h) use
its commercially reasonable efforts to furnish, at the request of
MHR, on the date on which such Registrable Securities are sold to
the underwriter, (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, addressed to the
underwriters, if any, and (ii) a “comfort” 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, addressed to the underwriters, if
any;
(i) notify
MHR, promptly after the Company receives notice thereof, of the
time when such registration statement has been declared effective
or a supplement to any prospectus forming a part of such
registration statement has been filed; and
(j) after
such registration statement becomes effective, notify MHR of any
request by the SEC that the Company amend or supplement such
registration statement or prospectus, or discontinue or cease and
desist from selling securities pursuant thereto.
1.6 Furnish
Information . It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Article 1 that MHR 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 is
reasonably required to effect timely the registration of such
Registrable Securities.
1.7 Expenses of
Registration . All expenses (other than Selling Expenses)
incurred in connection with registrations, filings, or
qualifications pursuant to this Article 1 , including
all registration, filing, and qualification fees; printers’
and accounting fees; and fees and disbursements of counsel for the
Company shall be borne and paid by the Company; provided ,
however , that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to
Section 1.1 or Section 1.3 if the
registration request is subsequently withdrawn at the request of
MHR (in which case MHR shall bear all such expenses) other than a
request in accordance with Section 1.15 hereof. All Selling
Expenses relating to Registrable Securities registered pursuant to
this Article 1 shall be borne and paid by MHR, Parent,
or the Key Holders, as the case may be.
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1.8 Delay of
Registration . MHR shall have no right to obtain or seek an
injunction restraining or otherwise delaying any registration
pursuant to this Agreement as the result of any controversy that
might arise with respect to the interpretation or implementation of
this Article 1 .
1.9
Indemnification. If any Registrable Securities are included
in a registration statement under this Article 1
:
(a) To
the full extent permitted by law, the Company will indemnify and
hold harmless MHR and its Affiliates, and each of their partners,
members, officers, directors, managers, partners, employees,
advisors, agents and stockholders, and each of their respective
successors and assigns, and each person who “controls”
any of the foregoing within the meaning of the Securities Act and
the Exchange Act and any underwriter (as defined in the Securities
Act) for MHR, against any Damages, and the Company will pay to each
such Person any legal or other expenses reasonably incurred thereby
in connection with investigating any matter or defending any claim,
investigation or proceeding or appeal taken from the foregoing by
or before any court or governmental, administrative, or regulatory
agency, body or the SEC, whether pending or threatened, whether or
not such Person is or may be a party thereto, from which Damages
may result; provided , however , that the indemnity
agreement contained in this Section 1.9(a) shall not
apply to amounts paid in settlement of any such claim,
investigation or proceeding if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable for any Damages to the
extent that they arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
such registration statement, or preliminary, final or free writing
prospectus, or amendment or supplement thereto, in reliance upon
and in full conformity with written information furnished to the
Company by MHR expressly for use therein. Such indemnity obligation
shall remain in full force and effect regardless of any
investigation made by or on behalf of MHR and shall survive the
transfer or disposal of the Registrable Securities by
MHR.
(b) To
the full extent permitted by law, MHR will indemnify and hold
harmless the Company, and each of its Affiliates, directors,
officers, stockholders, any underwriter (as defined in the
Securities Act), and any of such Persons’ respective
Affiliates, against any Damages, in each case to the extent that
such Damages arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such
registration statement, or any preliminary, final or free writing
prospectus contained therein or furnished by the Company to MHR, or
any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but
only to the extent, that (i) such untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon and in full conformity with written information
furnished to the Company by MHR expressly for use therein and
(ii) MHR had a reasonable opportunity to review the relevant
registration statement or preliminary, final or free writing
prospectus contained therein or amendment or supplement thereto
prior to its filing and failed to correct such statement or
omission; and MHR will pay to the Company and each such Person any
legal or other expenses reasonably incurred thereby in connection
with investigating any matter or defending any claim, investigation
or proceeding from which Damages may result, as such expenses are
incurred; provided , however , that the indemnity
agreement contained in this Section 1.9(b) shall not apply
to amounts paid in settlement of any such claim, investigation or
proceeding if such settlement is effected without the consent of
MHR, which consent shall not be unreasonably withheld;
provided , further , that MHR’s liability under
this Section 1.9(b) shall not exceed the dollar amount
of the net proceeds actually received by MHR from the sale of such
Registrable Securities pursuant to such registration.
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(c) Promptly
after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action
(including any governmental action) for which a party may be
entitled to indemnification hereunder, such indemnified party will,
if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.9 , give the
indemnifying party notice of the commencement thereof. The
indemnifying party shall have the right to participate in such
action and, to the extent the indemnifying party so desires,
participate jointly with any other indemnifying party to which
notice has been given, and 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 (and one local
counsel), with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified
party and
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