**Exhibit 10.37**

** **

**CONSENT AND MUTUALRELEASE**

 

ThisCONSENT AND MUTUAL RELEASE, dated as of April 14, 2003 (this “*Agreement*”),is made among Westgate Equity Partners, L.P., a limited partnership organizedunder the laws of Delaware (“*Westgate*”), Health Holdings &Botanicals, LLC, a limited liability company formed under the laws ofCalifornia (“*HHB*”), and Naturade, Inc., a Delaware corporation (the “*Company*”).

 

RECITALS

 

A.  Westgate, HHB and the Company are parties toa Securities Purchase Agreement dated as of December 20, 2001 (the “*PurchaseAgreement*”), pursuant to which Westgate purchased 13,540,723 sharesof Series B Convertible Preferred Stock of the Company (the “*Series BPreferred*”) and warrants to purchase 33,641,548 shares of Series BPreferred (the *“Westgate Warrants”*).

 

B.  The Purchase Agreement provided, among otherthings, (i) that “[u]pon  exercise ofthe [Westgate] Warrants, and assuming that the Purchaser does not dispose ofany Shares and assuming that no additional voting securities are issued afterthe Closing Date, the Purchaser will own a majority of the issued andoutstanding voting securities of the Company,” and (ii) that the Company wouldnot, without the prior consent of Westgate, issue stock options, restrictedstock or other equity linked stock awards or compensation for any equitysecurities of the Company, other than Non-Voting Common Stock and the CommonStock to be issued upon the exercise of stock options and warrants outstandingas of the date of the Purchase Agreement and listed on Schedule 3.2 of thePurchase Agreement.

 

C.  A dispute has arisen between Westgate andthe Company concerning the failure of the Company to list in the PurchaseAgreement or the schedules thereto certain notes of the Company convertible atthe option of the holders into shares of the Company’s Common Stock.

 

D.  The parties wish to resolve their disputeand also permit the Company to grant to its employees options to purchase up to1,250,000 shares of Common Stock (the “*New**Options*”).

 

E.  In consideration of an Amendment to theCompany’s Certificate of Designation of Series B Preferred, which will adjustthe conversion ratio of the Series B Preferred to compensate for additionalshares of Common Stock issued on conversion of the Convertible Notes (as definedbelow), Westgate has agreed in accordance to the terms hereof to release HHBand the Company from any liability resulting from the lack of disclosureconcerning the Convertible Notes in the Purchase Agreement.

 

F.  In consideration of an irrevocable proxygiven by HHB, which will grant to Westgate voting rights over 1.041 shares ofCommon Stock held by HHB for every share of Common Stock issued upon exerciseof a New Option, Westgate has agreed to consent to the granting by the Companyof the New Options.

 

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NOW,THEREFORE, in consideration of the premises and the mutual agreements andcovenants hereinafter set forth, and intending to be legally bound hereby, theparties to this Agreement hereby agree as follows:

 

1.                                       *Amendments*.  HHB andWestgate each agree to vote all of their shares of voting stock of the Company,by execution and delivery concurrently with this Agreement of the Consent ofStockholders in the form attached hereto as *Exhibit A (*the*“Stockholder Consent”),*to(i) approve the Certificate of Amendment to Certificate of Designation ofSeries B Convertible Preferred Stock of the Company in the form attached to theStockholder Consent as Exhibit A thereto, and (ii) to approve the Certificateof Amendment to Certificate of Incorporation of the Company to increase thenumber of shares of Common Stock authorized for issuance by the Company to150,000,000 in the form of Exhibit B thereto (collectively with the Certificateof Amendment described in clause (i), the *“Amendments”*).  The Company agrees to file the Amendments with the Secretary ofState of the State of Delaware immediately after the execution and delivery ofthe Stockholder Consent, and to provide prompt notice to the stockholders of theaction taken by the Stockholder Consent.

 

2.                                       *Irrevocable Proxy*.  Concurrentlywith the execution of this Agreement, HHB is delivering to Westgate a proxy inthe form attached hereto as *Exhibit B* (the “*Proxy*”), which shall beirrevocable to the full extent permitted by law, with respect to the number ofshares of the Company’s Common Stock held by HHB specified therein (the “*Subject**Shares*”).

 

3.                                       *Opinion of Counsel. *Concurrently with the execution of thisAgreement, the Company is delivering to Westgate an opinion of counsel in theform attached hereto as *Exhibit C*.

 

4.                                       *Representations and Warranties of HHB. *HHB hereby represents and warrants to Westgate and theCompany that:

 

(a)                                  This Agreement, the Stockholder Consentand the Proxy have been duly authorized, executed and delivered by HHB, and arethe legal, valid and binding obligations of HHB, enforceable against HHB inaccordance with their respective terms.

 

(b)                                 No consent of any court, governmentalauthority, beneficiary, co-trustee or other person or entity is necessary forthe execution, delivery and performance of this Agreement, the StockholderConsent or the Proxy by HHB.

 

(c)                                  HHB has the present power and right tovote all of the Subject Shares.

 

(d)                                 HHB has not (i) granted any proxy,power-of-attorney or other authorization or interest with respect to any of theSubject Shares, except as has been revoked on or before the date hereof,(ii) deposited any of the Subject Shares into a voting trust or(iii) entered into any voting agreement or other arrangement with respectto the voting of any of the Subject Shares.

 

5.                                       *Representations and Warranties of the Company*. The Company hereby represents and warrants to Westgate and HHB that:

 

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(a)                                  The Company is a corporation dulyorganized, validly existing, and in good standing under the laws of the Stateof Delaware, and has full power and authority to own and operate its propertiesand assets and to carry on its business as presently conducted and to enterinto and consummate the transactions described herein.  The Company is duly qualified and authorizedto do business, and is in good standing as a foreign corporation, in eachjurisdiction where the nature of its activities and of its properties (both ownedand leased) makes such qualification necessary, except where the failure to soqualify would not have a material adverse effect upon the business andoperations of the Company.

 

(b)                                 This Agreement has been duly authorized,executed and delivered by the Company, and is the legal, valid and bindingobligation of the Company, enforceable in accordance with its terms.  Upon the execution and delivery to theCompany of the Stockholder Consent by the parties named thereon, the Amendmentswill be duly authorized and executed by the Company and, when accepted forfiling by the Secretary of State of the State of Delaware, will be duly filedand have every legal effect they purport to have.

 

(c)                                  No consent, approval, order orauthorization, or registration or filing with any court, governmentalauthority, including without limitation the Securities and Exchange Commission,beneficiary, co-trustee, stockholder or other person or entity is necessary forthe execution, delivery and performance of this Agreement by the Company andthe consummation of the transactions contemplated hereby, including theAmendments, other than has been obtained on or before the date hereof and otherthan the filing of the Amendments with the Secretary of State of the State ofDelaware.

 

(d)                                 As of the date hereof, the authorizedcapital stock of the Company consists of 100,000,000 shares of Common Stock,2,000,000 shares of Non-Voting Common Stock and 50,000,0000 shares of PreferredStock, of which 48,000,000 shares have been designated Series B ConvertiblePreferred Stock.  Upon the consummationof the transaction contemplated hereby, the authorized capital stock of theCompany shall consist of 150,000,000 shares of Common Stock, 2,000,000 sharesof Non-Voting Common Stock and 50,000,0000 shares of Preferred Stock, of which48,000,000 shares have been designated Series B Convertible PreferredStock.  As of the date hereof 44,533,866shares of Common Stock, 13,540,723 shares of Series B Convertible PreferredStock (which shall be convertible into 13,540,723 shares of Common Stock,subject to possible adjustment as provided in the Certificate of Designation),Westgate Warrants to purchase 33,641,548 shares of Series B ConvertiblePreferred Stock and warrants (the “HHB Warrants”) to purchase 600,000 shares ofNonvoting Common Stock are issued and outstanding.  Other than stock options representing in the aggregate the rightto purchase no more than 832,000 shares of Common Stock, the Westgate Warrantsand the HHB Warrants, the Convertible Notes in the aggregate principal amountof $200,000 described in clauses (i) and (ii) of Section 8(a) hereof, andexcept for this Agreement, there are no outstanding rights of first refusal,preemptive rights or other rights, options, warrants, conversion rights,convertible securities, convertible notes, calls, commitments, undertakings, orother agreements or arrangements of any kind (whether written or oral) eitherdirectly or indirectly for the issuance by, or purchase or 

 

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acquisitionfrom, the Company of any shares of its capital stock, or obligating the Companyto issue, grant, extend or enter into any such rights of first refusal or otherrights, options, warrants, conversion rights, convertible securities,convertible notes, calls, commitments, undertakings, or other agreements orarrangements of any kind (whether written or oral).  No bonds, debentures, notes or other indebtedness of the Companyhaving the right to vote on any matters on which stockholders may vote areissued or outstanding.  As of the dateof this Agreement, there are no outstanding obligations of the Company torepurchase, redeem or otherwise acquire any shares of capital stock of theCompany.

 

(e)                                  After the completion of the transactionscontemplated hereby, upon exercise of the Westgate Warrants and giving effectto Westgate’s right to vote the Subject Shares under the Proxy, and assuming(i) that Westgate does not dispose of any of its shares of Series B Preferredpurchased under the Purchase Agreement or issuable on exercise of the WestgateWarrants, and (ii) that no additional voting securities are issued after thedate hereof (other than upon conversion of the Convertible Notes), Westgatewill own and/or have the power to vote a majority of the issued and outstandingvoting securities of the Company .

 

(f)                                    All of the Subject Shares have been dulyauthorized and validly issued and are fully paid and nonassessable.

 

(g)                                 The Company has filed all requiredregistration statements, prospectuses, reports, schedules, forms, statementsand other documents required to be filed by it with the Securities and ExchangeCommission since January 1, 1999 (collectively, including all exhibits thereto,the “Company SEC Reports”).  The Companyhas provided to Westgate true and complete copies of all Company SECReports.  Each Company SEC Report, as ofits date, (i) conformed in all material respects to the requirements of theSecurities Act of 1933, as amended (the “Securities Act”) and the Securities ExchangeAct of 1934, as amended (the “Exchange Act”) and the applicable rules andregulations promulgated thereunder (the “Rules”), (ii) contained all materialinformation required to be included therein by the Securities Act and theExchange Act and the Rules and (iii) did not contain any untrue statement of amaterial fact or omit to state a material fact required to be stated therein ornecessary to make the statements therein, in light of the circumstances underwhich they were made, not misleading. Each of the financial statements (including the related notes) includedin the Company SEC Reports presents fairly, in all material respects, thefinancial position and results of operations and cash flows of the Company asof the respective dates or for the respective periods set forth therein, all inconformity with generally accepted accounting principles applied on aconsistent basis throughout the periods involved except as otherwise notedtherein, and subject, in the case of the unaudited interim financialstatements, to normal and recurring adjustments that were not or are notexpected to be material in amount and to the lack of footnote disclosure.

 

(h)                                 The David Weil Convertible Note describedin clause (iii) of Section 8(a) hereof has been converted in exchange for720,392 shares of Common Stock and no additional shares are issuable in respectthereto or amount payable by the 

 

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Companywith respect thereto (whether for principal, interest or otherwise).  True and correct copies of each of theConvertible Notes (and all amendments and modifications thereto) are attachedhereto as Exhibit D.

 

6.                                       *Covenants of HHB*.  HHB herebyagrees and covenants that:

 

(a)                                  HHB will not transfer, sell, exchange,pledge or otherwise dispose of or encumber any of the Subject Shares or makeany offer or agreement relating thereto at any time prior to the termination ofthe Proxy unless (i) Westgate has given its prior written consent to suchtransfer, sale, exchange or other disposition or encumbrance, such consent notto be unreasonably withheld, (ii) the subsequent holder agrees to be bound bythe terms of this Agreement and (iii) all of the Subject Shares remain subjectto proxies on the same terms of the Proxy (to be voted by Westgate on a prorata basis among all of such proxies).

 

(b)                                 HHB agrees that until termination of theProxy, all certificates evidencing the Subject Shares shall bear a legendsubstantially in the following form:

 

THE SECURITIESREPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONSENT AND RELEASE AND ANIRREVOCABLE PROXY DATED AS OF APRIL      , 2003AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND CERTAIN OF THECOMPANY’S STOCKHOLDERS.  A COPY OF THECONSENT AND RELEASE AND THE IRREVOCABLE PROXY WILL BE FURNISHED WITHOUT CHARGEBY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.

 

7.                                       *Covenants of the Company*.  The Companyhereby agrees and covenants that (i) the Company will not, and will cause itsstock transfer agent not to, register the transfer of any of the Subject Sharesbearing the legend set forth in Section 5(b) on the stock transfer ledger ofthe Company at any time prior to the termination of the Proxy, unless Westgateconsents to such transfer as provided in Section 5(a), the transferee agrees tobe subject to this Agreement, the transferee delivers a proxy in the form ofthe Proxy, and the certificates evidencing the transferred Subject Shares beara legend as set forth in Section 5(b); (ii) the Company will cause theSubject Shares to be voted only as provided in the Proxy. (iii) the Companywill not amend or extend any of the Convertible Notes without the prior writtenconsent of Westgate, and (iv) the Company will provide prompt notice toWestgate whenever Common Stock is issued on the exercise of New Options,including in such notice the number of shares issued.

 

8.                                       *Consent to Issuance of Options and Other VotingSecurities. *Westgate hereby consents and permanentlywaives any objection to (i) the granting by the Company of options to purchaseup to 1,250,000 shares of voting Common Stock in accordance with the Company’s1998 Incentive Stock Option Plan; and (ii) the issuance of voting Common Stockon the exercise of such options and the conversion of the Convertible Notes (asdefined below) in accordance with their terms.

 

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9.                                       Release.

 

(a)                                  Effective on the filing with the DelawareSecretary of State of the Amendments, Westgate, for itself and for itsofficers, directors, partners, employees, agents, and attorneys and for thesuccessors and assigns of the foregoing persons and entities hereby fully,forever and unconditionally releases, exonerates, waives, relinquishes,discharges, acquits, relieves and covenants not to sue or charge HHB or theCompany and their respective agents, employees, representatives, attorneys,stockholders, officers, directors, successors and assigns (collectively, “allrelated persons”), and all affiliated, parent and subsidiary corporations, andeach of them, and all related persons connected therewith, from any and allrights, claims, demands, debts, obligations, liabilities, promises, acts,agreements, costs, expenses (including, but not limited to, attorneys’ fees andcosts), damages, disputes, controversies, actions and causes of action, ofwhatever kind or nature, in law or equity, whether known or unknown, suspectedor unsuspected, potential or actual, based on, or arising out of, the existenceand conversion rights of the holders of (i) the Convertible Secured PromissoryNote dated October 31, 2000, payable (with accrued interest) to Howard Shao, inthe original principal amount of $100,000, (ii) the Convertible Secured Promissory Note dated November 30, 2000,payable (with accrued interest) to Howard Shao, in the original principalamount of $100,000, and (iii) the Convertible Secured Promissory Note datedSeptember 12, 2001, in the principal amount of $50,000, payable to DavidWeil (collectively, the “*Convertible Notes*”), which were eachoutstanding on the date of the Purchase Agreement but which were not listed ordisclosed in the Purchase Agreement or the schedules or exhibits thereto (the *“ReleasedClaims”*).

 

(b)                                 Effective on the filing with the DelawareSecretary of State of the Amendments, the Company and HHB, for themselves andfor their shareholders, officers, directors, members, partners, employees,agents, and attorneys and for the successors and assigns of the foregoingpersons and entities hereby fully, forever and unconditionally releases,exonerates, waives, relinquishes, discharges, acquits, relieves and covenantsnot to sue or charge Westgate and all related persons of Westgate,  and all affiliated, parent and subsidiarycorporations, and each of them, and all related persons connected therewith,from any and all Released Claims.

 

(c)                                  The immediately preceding two paragraphsspecifically include any and all claims, demands, obligations, and causes forcompensatory or exemplary damages and other relief based on the ReleasedClaims, whether or not specifically or particularly described herein.

 

(d)                                 Each party hereto understands and agreesthat this Section 8 extends to all claims of whatever nature and kind, knownand unknown, suspected or unsuspected based on the Released Claims, and theyeach expressly waive any and all rights under Section 1542 of the Civil Code ofthe State of California based on the Released Claims, which provides asfollows:

 

AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT

 

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TOEXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIMMUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

(e)                                  Westgate, the Company and HHB acknowledgethat Section 1542, and any equivalent provision in any other jurisdiction, ifthey exist, are designed to protect a party from waiving claims that he doesnot know exist or may exist. Nonetheless, each of Westgate, the Company and HHB agrees that thewaiver of Section 1542 and its equivalents is a material part of the releasesintended by this Section 8, and each party, therefore, intends to waiveany and all protection provided by Section 1542 or its equivalents with respectto the release set forth above.

 

(f)                                    Anything herein to the contrarynotwithstanding, the release herein is limited to the Released Claims.  Other than as results from the facts relatedto the Convertible Notes, Westgate does not release HHB or the Company, and HHBand the Company do not release Westgate, from liability for the inaccuracy ofany of the representations and warranties in the Purchase Agreement, and eachof Westgate, the Company and HHB reserves for itself and its successors ininterest all rights and remedies under (i) the Purchase Agreement except asspecifically set forth herein, (ii) this Agreement and (iii) the Proxy.

 

10.                                 *Notices*.  All noticesand other communications given or made pursuant hereto shall be in writing andshall be deemed to have been duly given or made as of the date delivered,mailed or transmitted, and shall be effective upon receipt, if deliveredpersonally or mailed by registered mail (postage prepaid, return receiptrequested) to the parties at the following addresses (or to such other addressfor a party as shall be specified by like change of address), or sent byelectronic transmission with confirmation received, to the telecopy numberspecified below, if any.

 

(a)                                  if to Westgate:  

 

Westgate Equity Partners,L.P.

One Magna Place, Suite650

1401 South Brentwood Blvd.

St. Louis, MO   63144

Facsimile:  (314) 918-7337

Attention:  Robert V. Vitale

 

with a copy (which shallnot constitute notice) to:

 

Lewis, Rice &Fingersh L.C.

500 North Broadway, Suite2000

St. Louis, MO   63102

Facsimile:  (314) 612-7671

Attention:  Thomas C. Erb, Esquire

 

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(b)                                 If to HHB:

 

Health Holdings & Botanicals, LLC

330 Primrose Road, Suite 500

Burlingame, CA 94010

Facsimile: (650) 685-8711

Attention: Lionel P. Boissiere

 

(c)                                  If to the Company:  

 

Naturade, Inc.

14370 Myford Road, Suite 100

Irvine, CA  92606

Facsimile: (714) 573-3494

Attention: Bill D. Stewart

 

with a copy (which shall not constitute notice) to:

 

Sheppard, Mullin, Richter & Hampton LLP

333 South Hope Street

Los Angeles, CA 90071

Facsimile: 213-620-1780

Attention: Charles Kaufman, Esquire

 

11.                                 *Headings*.  The headingscontained in this Agreement are for reference purposes only and shall notaffect in any way the meaning or interpretation of this Agreement.

 

12.                                 *Severability*.  If any termor other provision of this Agreement is invalid, illegal or incapable of beingenforced by any rule of law, or public policy, all other conditions andprovisions of this Agreement shall nevertheless remain in full force and effectso long as the economic or legal substance of the transactions contemplatedhereby is not affected in any manner adverse to any party.  Upon such determination that any term orother provision is invalid, illegal or incapable of being enforced, the partieshereto shall negotiate in good faith to modify this Agreement so as to effectthe original intent of the parties as closely as possible in an acceptablemanner to the end that transactions contemplated hereby are fulfilled to theextent possible.

 

13.                                 *Entire Agreement*.  ThisAgreement constitutes the entire agreement and supersedes all prior agreementsand undertakings, both written and oral, among the parties, or any of them,with respect to the subject matter hereof and, except as otherwise expresslyprovided herein, are not intended to confer upon any other person any rights orremedies hereunder.  This Agreement doesnot supersede the Purchase Agreement, except as expressly provided herein.

 

14.                                 *Assignment*.  ThisAgreement shall not be assigned by operation of law or otherwise.

 

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15.                                 *Amendment*.  ThisAgreement may not be modified, amended or waived in any manner except by aninstrument in writing signed by each of the parties hereto.  Except as is provided in Section 9,this Agreement may be terminated only by a writing signed by each of theparties hereto.

 

16.                                 *Governing Law*.  ThisAgreement shall be governed by, and construed accordance with, the laws of theState of California.

 

17.                                 *Specific Performance*.  The partieshereto agree that irreparable damage would occur in the event that any of theprovisions of this Agreement were not performed in accordance with theirspecific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to aninjunction or injunctions to prevent breaches of this Agreement and to enforcespecifically the terms and provisions hereof in any court of the United Statesor any state then having jurisdiction without posting bond, this being inaddition to any other remedy to which they are entitled at law or in equity.

 

18.                                 *Counterparts*.  ThisAgreement may be executed in one or more counterparts, and by the differentparties hereto in separate counterparts, each of which when executed shall bedeemed to be an original but all of which taken together shall constitute oneand the same agreement.

 

*The next page is the signature page.*

 

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INWITNESS WHEREOF, each of the parties has caused this Consent and Mutual Releaseto be executed by its duly authorized officer as of the date first abovewritten.

 
|   | **WESTGATE  EQUITY PARTNERS, L.P.**             |
|--------|-------------------------------------------------|
|   |                                            |   |
|   | By:                                             | WESTGATE GROUP, LLC, |
|   |                                            | its General Partner |
|   |                                            |   |
|   | By:                                             | /s/ Robert Vitale |   |
|   |                                            | Robert Vitale |
|   |                                            | Manager |
|   |                                            |   |
|   |                                            | One Magna Place, Suite 650 |
|   |                                            | 1401 South Brentwood Blvd. |
|   |                                            | St. Louis, MO   63144 |
|   |                                            |   |
|   | **HEALTH  HOLDINGS & BOTANICALS, LLC** |
|   |                                            |   |
|   | By                                              | /s/ Lionel P. Boissiere |   |
|   |                                            | Lionel P. Boissiere |
|   |                                            | President |
|   |                                            |   |
|   |                                            | 330 Primrose Road, Suite 500 |
|   |                                            | Burlingame, CA   94010 |
|   |                                            |   |
|   | **NATURADE,  INC.**                             |
|   |                                            |   |
|   | By                                              | /s/ Bill D. Stewart |   |
|   |                                            | Bill D. Stewart |
|   |                                            | President and |
|   |                                            | Chief Executive Officer |
|   |                                            |   |
|   |                                            | 14370 Myford Road |
|   |                                            | Irvine, California 92606 |

 

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Exhibit A

 

**FORM OF**

**CONSENT**

**OF THE STOCKHOLDERS**

**OF**

**NATURADE, INC.**

 

The undersigned, beingthe holders of a majority of the voting stock of Naturade, Inc., a Delawarecorporation (the “Corporation”), and the holder of all of the issued andoutstanding Series B Convertible Preferred Stock of the Corporation, do herebyadopt the following resolutions by written consent pursuant to Sections 228(a),242(a) and 242(b) of the Delaware General Corporation Law and the Corporation’sbylaws, which authorize the stockholders so to act:

 

**Amendment to**

**Certificate of Designation of SeriesB Convertible Preferred Stock**

 

WHEREAS, the undersignedstockholders own a majority of the shares entitled to vote on the subjectmatter of these resolutions; and

 

WHEREAS, the undersignedstockholders have agreed that the Certificate of Designation of Series BConvertible Preferred Stock shall be amended as provided herein;

 

NOW, THEREFORE, BE ITRESOLVED, that the Certificate of Amendment to the Certificate of Designationof Series B Convertible Preferred Stock of the Corporation attached hereto asExhibit A is hereby approved.

 

RESOLVED FURTHER, thatthe officers of the Corporation, and each of them, are hereby authorized totake, make or cause to be taken, any further actions which they deem to benecessary and appropriate to consummate and carry out the intent of theseresolutions and the intent of the documents referenced herein and all relateddocuments and agreements to which the Corporation shall be a party.

 

**Amendment to**

**Certificate of Incorpotation**

 

WHEREAS, the undersignedstockholders own a majority of the shares entitled to vote on the subjectmatter of these resolutions; and

 

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WHEREAS, the undersignedstockholders have agreed that the number of authorized shares of Common Stockof the Corporation shall be increased to permit the full conversion of theSeries B Convertible Preferred Stock, to increase the pool of shares availablefor incentives, and for other corporate purposes;

 

NOW, THEREFORE, BE ITRESOLVED, that the Certificate of Amendment to the Certificate of Incorporationattached hereto as Exhibit B is hereby approved.

 

RESOLVED FURTHER, thatthe officers of the Corporation, and each of them, are hereby authorized totake, make or cause to be taken, any further actions which they deem to benecessary and appropriate to consummate and carry out the intent of theseresolutions and the intent of the documents referenced herein and all relateddocuments and agreements to which the Corporation shall be a party.

 

*The next page is the signature page*.

 

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IN WITNESS WHEREOF, eachof the undersigned has consented to this action by written consent as evidencedby the signature of its officer as of April     ,2003. 

 
|   | WESTGATE EQUITY PARTNERS, L.P.        |
|--------|---------------------------------------|
|   |                                  |   |
|   | By:                                   | WESTGATE GROUP, LLC, |
|   |                                  | its General Partner |
|   |                                  |   |
|   | By:                                   |   |   |
|   |                                  | Robert Vitale |
|   |                                  | Manager |
|   |                                  |   |
|   |                                  | One Magna Place, Suite 650 |
|   |                                  | 1401 South Brentwood Blvd. |
|   |                                  | St. Louis, MO   63144 |
|   |                                  |   |
|   | HEALTH HOLDINGS & BOTANICALS, LLC |
|   |                                  |
|   | By                                    |   |   |
|   |                                  | Lionel P. Boissiere |
|   |                                  | President |
|   |                                  |   |
|   |                                  | 330 Primrose Road, Suite 500 |
|   |                                  | Burlingame, CA   94010 |

 

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EXHIBIT A

 

FORM OF

CERTIFICATE OF AMENDMENT

OF 

CERTIFICATE OF DESIGNATION OF SERIES B CONVERTIBLEPREFERRED STOCK 

OF

NATURADE, INC.

 

Naturade, Inc., a corporation duly organized andexisting under the Delaware General Corporation Law (the “Corporation”), doeshereby certify that:

 

Theamendment to the Certificate of Designation of Series B ConvertiblePreferred Stock (the “Certificate of Designation”) set forth below was dulyadopted in accordance with the provisions of Section 242 of the DelawareGeneral Corporation Law (the “DGCL”) and has been consented to by thestockholders in accordance with Section 228 of the DGCL.

 

SectionF(1) of the Certificate of Designation is amended to read in its entirety asfollows:

 

“1.  Each holder of any shares of Series BPreferred Stock shall have the right, at such holder’s option, at any time orfrom time to time, to convert any of such shares into Common Stock, on thebasis hereinafter provided.  Each shareof Series B Preferred Stock may be converted into such number (which may be afraction) of fully paid and non-assessable shares of Common Stock as is equalto the sum of (i) the quotient obtained by dividing (A) the Original IssuancePrice (as defined in Section I below) by (B) the Series B Conversion Price (asdefined in Section I below) (the “Series B Conversion Ratio”) PLUS (ii) anyAntidilution Shares (as defined in Section I below) .”

 

SectionF(3) of the Certificate of Designation is amended to read in its entirety asfollows:

 

“3.  No fractional shares of Common Stock orscrip shall be issued upon conversion of shares of Series B PreferredStock.  Instead of any fractional sharesof Common Stock which would otherwise be issuable upon conversion ofSeries B Preferred Stock, the Corporation shall pay a cash adjustment inrespect of such fractional interest in an amount equal to the then currentmarket price (as determined in accordance with Section F(4)(f) below) of ashare of Common Stock multiplied by such fractional interest.  Fractional interests shall not be entitledto dividends, and the holders of fractional interests shall not be entitled toany rights as stockholders of the Corporation in respect of such fractionalinterest.  For purposes of calculatingthe number of shares of Common Stock to be issued on conversion ofSeries B Preferred Stock, or for purposes of calculating voting ordividend rights based on the number of shares issuable on conversion ofSeries B Preferred Stock, all fractional shares of Common Stock of aholder resulting from, or that would result from, the conversion ofSeries B Preferred Stock, shall be 

 

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aggregated and combinedinto the largest resulting whole number, so that the total number of shares ofCommon Stock for which any holder receives settlement in cash as fractionalshares, or which the holder is not entitled to vote or receive dividends uponas fractional shares, will be less than one.”

 

Thedefinition of “Additional Shares of Common Stock” in Section I of theCertificate of Designation shall be amended to read in its entirety as follows:

 

“AdditionalShares of Common Stock” means all shares of Common Stock issued (or, pursuantto clauses (A) or (B) of Subparagraph (iv) of Section F(4)(a) above,deemed to be issued) by the Corporation after the Original Issue Date, otherthan Excluded Securities.

 

A newclause shall be added to Section I of the Certificate of Designation,immediately after the definition of Affiliate, reading in its entirety asfollows:

 

“AntidilutionShares” shall mean, on any date on which such calculation is required (a“Calculation Date”), the number of shares resulting from (A) the excess over537,242 in the number of shares of Common Stock issued and issuable onconversion of the Convertible Notes (based, as to issuable shares, on theconversion price of the Convertible Notes on such Calculation Date), multipliedby (B) 1.041, then divided by 47,182,301.”

 

A newclause shall be added to Section I of the Certificate of Designation,immediately after the definition of Common Stock, reading in its entirety asfollows:

 

“ConvertibleNotes” means (i) the Convertible Secured Promissory Note dated October 31,2000, payable (with accrued interest) to Howard Shao, in the original principalamount of $100,000, (ii) the Convertible Secured Promissory Note dated November30, 2000, payable (with accrued interest) to Howard Shao, in the originalprincipal amount of $100,000, and (iii) the Convertible Secured Promissory Notedated September 12, 2001, in the principal amount of $50,000, payable to DavidWeil.

 

Thereference in clause (B) of Section F(5) of the Certification of Designation to“Section F(4)” shall be deleted and replaced with a reference to“Section F(3).”

 

*The next page is the signature page.*

 

15

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INWITNESS WHEREOF, Naturade, Inc. has caused this Certificate of Amendment toCertificate of Designation to be executed by Bill D. Stewart, its authorizedofficer, on this      day of April, 2003.

 
|   | By                                     |   |   |
|--------|----------------------------------------|--------|--------|
|   | Bill D. Stewart,                       |
|   | President and Chief  Executive Officer |

 

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EXHIBIT B

 

FORM OF

CERTIFICATE OF AMENDMENT

OF 

CERTIFICATE OF INCORPORATION

OF

NATURADE, INC.

 

Naturade,Inc., acorporation duly organized and existing under the Delaware General CorporationLaw (the “Corporation”), does hereby certify that:

 

1.  The amendment to the Certificate ofIncorporation set forth below was duly adopted in accordance with theprovisions of Section 242 of the Delaware General Corporation Law (the“DGCL”) and has been consented to by the stockholders in accordance withSection 228 of the DGCL.

 

2.  Subsection (a) of Article 5 of theCorporation’s Certificate of Incorporation is amended to read in its entiretyas follows:

 

“a.  Authorized Stock.  The corporation is authorized to issue two classes of stock to bedesignated, respectively, “Common Stock” and “Preferred Stock.”  The total number of shares of stock whichthe corporation is authorized to issue is     ,000,000 shares,     ,000,000 of which shall be Common Stock with apar value of $.0001 per share, 2,000,000 of which shall be Non-Voting CommonStock with a par value of $.0001 per share, and 50,000,000 of which shall bePreferred Stock with a par value of $.0001 per share.”

 

*The next page is the signature page.*

 

17

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INWITNESS WHEREOF, Naturade, Inc. has caused this Certificate of Amendment toCertificate of Incorporation  to beexecuted by Bill D. Stewart, its authorized officer, on this       day of April, 2003.

 
|   | By                                     |   |   |
|--------|----------------------------------------|--------|--------|
|   | Bill D. Stewart,                       |
|   | President and Chief  Executive Officer |

 

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**EXHIBIT B**

 

**FORM OFIRREVOCABLE PROXY**

 

1.                                       Health Holdings & Botanicals, LLC, alimited liability company organized under the laws of the State of California(“HHB”), and a stockholder of Naturade, Inc., a Delaware corporation (the“Company”), hereby irrevocably appoints and constitutes Westgate Group, LLC(“Westgate Group”), as general partner of Westgate Equity Partners (the“Proxyholder”), the attorney and proxy of HHB, to the full extent of HHB’srights with respect to the number of shares of the common stock, par value$0.0001 per share, of the Company (the “Common Stock”) beneficially owned byHHB set forth in Paragraph 2 below, together with any and all other sharesissued or issuable after the date of this Proxy with respect thereof, from thetime of a Triggering Event as defined in Paragraph 7 below until a TerminationEvent as defined in Paragraph 8 below. On the execution of this Proxy, all prior proxies given by HHB withrespect to the Proxy Shares (as defined below) are hereby revoked, and nosubsequent proxies with respect to the Proxy Shares will be given until aTermination Event occurs.

 

2.                                       This Proxy entitles the Proxyholder tovote the number of shares of Common Stock (the “Proxy Shares”) equal to 1.041times the number of New Option Shares (as defined below) that are issued andoutstanding on the date of any voting event set forth in Paragraph 5.

 

3.                                       “New Option Shares” shall mean, up to amaximum of 1,250,000 shares (as adjusted for splits, reverse splits, stockdividends and similar changes in capitalization), the shares of Common Stockissued on the exercise of options to purchase Common Stock granted by theCompany on or after January 2, 2002 (except for options to purchase sharessubject to cancelled or terminated options that were originally issued beforeJanuary 2, 2002, in accordance with the proviso to Section 7.14 of theSecurities Purchase Agreement dated as of December 20, 2001 amongWestgate, the Company and HHB (the “Purchase Agreement”)).  The number of New Option Shares outstandingshall be deemed to be 1,250,000 unless the Proxyholder receives evidence to thecontrary, which evidence may be a certificate of the secretary of the Companyor of the Company’s transfer agent, a statement made in a report or proxystatement filed with the Securities and Exchange Commission, or other evidencereasonably acceptable to Westgate.

 

4.                                       This Proxy is irrevocable to the fullextent permitted by law and is coupled with an interest.

 

5.                                       The Proxyholder will be empowered, at anytime after a Triggering Event and prior to a Termination Event, to exercise allvoting rights (including, without limitation, the power to execute and deliverwritten consents with respect to the Shares) over the Proxy Shares at everyannual or special meeting of the stockholders of the Company and at everycontinuation or adjournment thereof, and on every action or approval by writtenconsent of the stockholders of the Company in lieu of any such meeting, and tovote the Proxy Shares in a manner determined by the Proxyholder in itsexclusive discretion.

 

6.                                       HHB will not exercise, vote or attempt toexercise or vote the Proxy Shares after a Triggering Event.

 

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7.                                       A “Triggering Event” is the delivery byWestgate to the Company, with a copy to HHB, of its notice to exercise in full(or, if a portion thereof has theretofore been exercised, its notice toexercise the remaining portion thereof) the Westgate Warrants together with itsdelivery to the Company of the exercise price therefor as provided in theWestgate Warrants.  As used herein,“Westgate Warrants” means the warrants to purchase 33,641,548 shares of SeriesB Convertible Preferred Stock purchased by Westgate pursuant to the SecuritiesPurchase Agreement (the “Westgate Warrants”).

 

8.                                       Any of the following events shallconstitute a “Termination Event”:

 

(a)                                  January 1, 2005, unless prior to thatdate Westgate has exercised all of the Westgate Warrants in full.

 

(b)                                 The sale or transfer by Westgate of anyof (i) the Westgate Warrants, (ii) the shares of Series B ConvertiblePreferred Stock purchased pursuant to the Purchase Agreement or the exercise ofthe Westgate Warrants, or (iii) the Common Stock issued on conversion of SeriesB Convertible Preferred Stock, except a transfer to an affiliate of Westgate,as the term “affiliate” is defined in Rule 405 under the Securities ExchangeAct of 1933.

 

(c)                                  The consummation of a merger or otherbusiness combination transaction involving the Company, except (i) atransaction exclusively to change the Company’s state of organization or formof organization in which the stockholders of the surviving entity are identicalto the stockholders of the Company, or (ii) a transaction in which the Companysurvives, Westgate continues as a stockholder, and the Company does not issueadditional shares of voting securities.

 

(d)                                 The issuance by the Company (subject tothe consent of Westgate required under Section 7.1.4 of the Purchase Agreementand the consent of a majority of the Series B Preferred Stock required underArticle B(2) of the Certificate of Designation of the Series B ConvertiblePreferred Stock) of additional voting securities or securities convertible intovoting securities (excluding for purposes of this paragraph the New OptionShares and any shares of Common Stock issued upon conversion in whole or inpart of (i) the  Convertible SecuredPromissory Note dated October 31, 2000, payable (with accrued interest) toHoward Shao, in the original principal amount of $100,000,  (ii) the Convertible Secured Promissory Notedated November 30, 2000, payable (with accrued interest) to Howard Shao, in theoriginal principal amount of $100,000, and (iii) the Convertible SecuredPromissory Note dated September 12, 2001, in the principal amount of$50,000, payable to David Weil), in an amount that would reduce Westgate’stotal voting power, after giving effect to the shares of Series B ConvertiblePreferred Stock originally sold in the Purchase Agreement and issuable underthe Westgate Warrants, and including the voting power over the Proxy Shares,below a majority of the Common Stock issued and outstanding after theconversion of all other convertible securities, options, warrants and rightsoutstanding after the issuance of such additional voting securities.

 

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9.                                       Any obligations of the undersignedhereunder shall be binding upon the successors and assigns of the undersigned.

 
| Dated:  April    ,  2003 |
|--------------------------------------------------------|
|                                                   |
|                                                   | HEALTH HOLDINGS &  BOTANICALS, LLC |
|                                                   |   |
|                                                   |   |
|                                                   | By: |   |   |
|                                                   |   | Lionel P. Boissiere |
|                                                   |   | President |
|                                                        |  |  |  |  |

 

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EXHIBITC 

FORMOF OPINION OF COUNSEL

 

Withsuch qualifications, exceptions and additional provisions as required bycounsel.

 

1.                                       The Company is a corporation dulyincorporated and legally existing under, and by virtue of, the laws of theState of Delaware and is in good standing under such laws.  The Company has the requisite corporatepower and authority to own and operate its properties and assets, and to carryon its business as presently conducted. The Company is qualified to do business as a foreign corporation inCalifornia.

 

2.                                       The Company has all requisite corporatepower and authority to execute and deliver the Agreement and to carry out andperform its obligations under the terms of the Agreement.

 

3.                                       As of the date hereof, the authorizedcapital stock of the Company consists of 100,000,000 shares of Common Stock,2,000,000 shares of Non-Voting Common Stock and 50,000,0000 shares of PreferredStock, of which 48,000,000 shares have been designated Series B ConvertiblePreferred Stock.  Upon the acceptance bythe Delaware Secretary of State of the Certificate of Amendment referred to inparagraph (c), the authorized capital stock of the Company shall consist of150,000,000 shares of Common Stock, 2,000,000 shares of Non-Voting Common Stockand 50,000,0000 shares of Preferred Stock, of which 48,000,000 shares have beendesignated Series B Convertible Preferred Stock.  As of the date hereof 44,533,866 shares of Common Stock,13,540,723 shares of Series B Convertible Preferred Stock (the “Series BShares”), the Westgate Warrants and warrants (the “HHB Warrants”) to purchase600,000 shares of Nonvoting Common Stock are issued and outstanding.  To our knowledge, other than stock optionsrepresenting in the aggregate the right to purchase no more than 832,000 sharesof Common Stock, the Westgate Warrants and the HHB Warrants, and ConvertibleNotes in the aggregate principal amount of $200,000, and except for theAgreement, there are no outstanding rights of first refusal, preemptive rightsor other rights, options, warrants, conversion rights, convertible securities,convertible notes, calls, commitments, undertakings, or other agreements orarrangements of any kind (whether written or oral) either directly orindirectly for the issuance by, or purchase or acquisition from, the Company ofany shares of its capital stock, or obligating the Company to issue, grant, extendor enter into any such rights of first refusal, preemptive rights or otherrights, options, warrants, conversion rights, convertible securities,convertible notes, calls, commitments, undertakings, or other agreements orarrangements of any kind (whether written or oral).  No bonds, debentures, notes or other indebtedness of the Companyhaving the right to vote on any matters on which stockholders may vote areissued or outstanding.  As of the dateof this Agreement, there are no outstanding obligations of the Company torepurchase, redeem or otherwise acquire any shares of capital stock of theCompany.

 

4.                                       The Company has all requisite corporatepower and authority to issue the Common Stock issuable upon conversion of theSeries B Shares, to issue the Westgate Warrant Shares on due exercise of theWestgate Warrants, and to issue the shares of Common Stock issuable uponconversion of the Westgate Warrant Shares.

 

22

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5.                                       All corporate action on the part of theCompany, its directors and stockholders necessary for (i) theauthorization, execution and delivery and performance of the Agreement and(ii) the authorization, execution and filing with the Secretary of Stateof the State of Delaware of the Certificates of Amendment, has been taken priorto the date hereof.  The Agreement hasbeen duly and validly executed and delivered by the Company and constitutes avalid and binding obligation of the Company, enforceable against the Company inaccordance with its terms.

 

6.                                       The execution, delivery and performanceof the terms of the Agreement, and the execution and filing with the Secretaryof State of the State of Delaware of the Certificates of Amendment, do notviolate any provision of the Certificate of Incorporation or Bylaws of theCompany, or any provision of any applicable federal or state law, rule orregulation known to us to be applicable to the Company.  The execution, delivery and performance ofthe terms of the Agreement, and the execution and filing with the Secretary ofState of the State of Delaware of the Certificates of Amendment, do notviolate, or constitute a default under, any contract or agreement listed inSchedule A attached to this opinion, which contracts or agreements the Companyhas represented to us are the only contracts or agreements material to theconduct of its business, financial condition or results of operation.

 

7.                                       No consent, approval or authorization ofor designation, declaration or filing with any governmental authority on the partof the Company is required in connection with the valid execution and deliveryof the Agreement, or the authorization, approval, execution and filing with theSecretary of State of the State of Delaware of the Certificates of Amendment,except such filing of the Certificates of Amendment in the office of theSecretary of State of the State of Delaware.

 

8.                                       The Certificate of Amendment referred toin paragraph (c) and the Series B Rights (as defined below) do not conflictwith the applicable laws of California.

 

9.                                       In connection with the action by writtenconsent of the stockholders of the Company approving the Certificates ofAmendment, the Company is not subject to the requirements of Section 14(c) ofthe Securities Exchange Act of 1934, as amended, and the regulations of theSecurities and Exchange Commission promulgated thereunder.

 

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EXHIBITD

CONVERTIBLENOTES

 

 

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CONVERTIBLE SECURED PROMISSORY NOTE

 
| $100,000 |   |                  | Irvine,  California |
|----------|--------|-----------------------|---------------------|
|     |   | October 31, 2000 |

 

FORVALUE RECEIVED, NATURADE, INC., a Delaware corporation (“Obligor”), herebypromises to pay to the order of Howard Shao (“Payee”), in lawful money of theUnited States at the address of Payee set forth below, the amount of OneHundred Thousand Dollars ($100,000), together with interest on the unpaidprincipal amount hereof.

 

Interestshall be paid quarterly in arrears, from the date hereof until paid in full, atthe rate of eight percent (8.00%) per annum, with the first payment of interestdue on December 31, 2000.  Unpaidprincipal together with all accrued interest shall be due and payable on August31, 2003. Capitalized terms not otherwise defined in this Note shall have themeanings assigned to them in the Loan Agreement (as defined below).

 

ThisNote may be prepaid, in whole or in part, upon at least thirty calendar days’notice to Payee, as further provided in the Loan Agreement.  Payments by Obligor shall be applied firstto any and all accrued interest through the payment date and second to theprincipal remaining due hereunder.  Uponpayment in full of all principal and interest payable hereunder, this Noteshall be surrendered to Obligor for cancellation.

 

Ifany payment of principal or interest on this Note shall become due on aSaturday, Sunday, or a public holiday under the laws of the State ofCalifornia, such payment shall be made on the next succeeding business day andsuch extension of time shall be included in computing interest in connectionwith such payment.

 

ThisNote is issued pursuant to and entitled to the benefits of the Loan Agreementand related agreements by and between Obligor and Payee dated August 31, 2000(“Loan Agreement”), and reference thereto is hereby made for a more completestatement of the terms under which the loan evidenced hereby is to be repaid,including the fact that the loan is subject to acceleration and the loan issubject to Payee’s right to convert, all as set forth in the Loan Agreement.  This Note is secured by certain collateral,more specifically described in the Loan Agreement.

 

Obligorwaives presentment, demand for performance, notice of nonperformance, protest,notice of protest, and notice of dishonor. No delay on the part of Payee in exercising any right hereunder shalloperate as a waiver of such right under this Note.  This Note is being delivered in the State of California.  This Note shall be governed in all respectsby the laws of the State of California as it applies to contracts between Californiaresidents, which are made and to be performed in California.

 

Ifthe indebtedness represented by this Note or any part thereof is collected atlaw or in equity or in bankruptcy, receivership or other judicial proceedingsor if this Note is placed in the hands of attorneys for collection afterdefault, Obligor agrees to pay, in addition to the principal and interestpayable herein, reasonable attorneys’ fees and costs incurred by Payee.

 

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TheObligor and the Payee intend to comply at all times with applicable usurylaws.  If at any time such laws wouldrender usurious any amounts due under this Note, then it is the Obligor’s andthe Payee’s express intention that the Obligor not be required to pay intereston this Note at a rate in excess of the maximum lawful rate, that theprovisions of this paragraph shall control over all other provisions of thisNote which may be in apparent conflict hereunder, that such excess amount shallbe immediately credited to the principal balance of this Note (or, if this Notehas been fully paid, refunded by the Payee to the Obligor), and the provisionshereof shall be immediately reformed and the amounts thereafter collectibleunder this Note reduced, without the necessity of the execution of any furtherdocuments, so as to comply with the then applicable usury law, but so as topermit the recovery of the fullest amount otherwise due under this Note.  Any such crediting or refund shall not cureor waive any default by the Obligor under this Note.  The term “applicable law” as used in this Note shall mean thelaws of the State of California or the laws of the United States, whicheverlaws allow the greater rate of interest, as such laws now exist or may bechanged or amended or come into effect in the future.

 

Nomodification, amendment or waiver of any provision of this Note shall beeffective unless approved in a writing specifically referring to this Note andsigned by the party against whom enforcement of the amendment is sought.  In the event that Obligor fails to makepayment on the date for payment hereinabove specified of all principal andinterest due hereunder on such date, then this Note shall accrue interest atthe highest rate permitted by law, until paid in full.

 

Eachnotice or other communication required or permitted hereunder (except payment)shall be in writing and shall be deemed given or made (a) on the daydelivered if delivered in person to the party to whom it is directed, or byovernight courier, (b) on the day delivery is confirmed by the recipient’ssignature if deposited in the United States Mail, registered or certified,return receipt requested, (c) on the day confirmed by the receivingfacsimile machine if sent by facsimile during regular business hours, in eachcase addressed to the party to whom it is directed at the address set forth inthe Loan Agreement.  Either party may,by notice given at any time or from time to time, require that subsequent noticesbe given at a different address.  Any paymentshall be deemed made upon receipt by Payee.

 

INWITNESS WHEREOF, Obligor has caused this Note to be executed and delivered byits duly authorized officer as of the date and at the place first writtenabove.

 
|   | OBLIGOR: | NATURADE,  INC.,         |
|--------|----------|--------------------------|
|   |     | a  Delaware corporation  |
|   |     |                     |
|   | By:      | /s/  Lawrence J. Batina  |   |
|   | Its:     | Chief  Financial Officer |
|        |          |                          |  |  |

 

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CONVERTIBLE SECURED PROMISSORY NOTE

 
| $100,000 |   |              | Irvine,  California |
|----------|--------|-------------------|---------------------|
|     |   | November 30, 2000 |

 

FORVALUE RECEIVED, NATURADE, INC., a Delaware corporation (“Obligor”), herebypromises to pay to the order of Howard Shao (“Payee”), in lawful money of theUnited States at the address of Payee set forth below, the amount of OneHundred Thousand Dollars ($100,000), together with interest on the unpaidprincipal amount hereof.

 

Interestshall be paid quarterly in arrears, from the date hereof until paid in full, atthe rate of eight percent (8.00%) per annum, with the first payment of interestdue on December 31, 2000.  Unpaidprincipal together with all accrued interest shall be due and payable onAugust 31, 2003. Capitalized terms not otherwise defined in this Noteshall have the meanings assigned to them in the Loan Agreement (as definedbelow).

 

ThisNote may be prepaid, in whole or in part, upon at least thirty calendar days’notice to Payee, as further provided in the Loan Agreement.  Payments by Obligor shall be applied firstto any and all accrued interest through the payment date and second to theprincipal remaining due hereunder.  Uponpayment in full of all principal and interest payable hereunder, this Noteshall be surrendered to Obligor for cancellation.

 

Ifany payment of principal or interest on this Note shall become due on aSaturday, Sunday, or a public holiday under the laws of the State ofCalifornia, such payment shall be made on the next succeeding business day andsuch extension of time shall be included in computing interest in connectionwith such payment.

 

ThisNote is issued pursuant to and entitled to the benefits of the Loan Agreementand related agreements by and between Obligor and Payee dated August 31, 2000(“Loan Agreement”), and reference thereto is hereby made for a more completestatement of the terms under which the loan evidenced hereby is to be repaid, includingthe fact that the loan is subject to acceleration and the loan is subject toPayee’s right to convert, all as set forth in the Loan Agreement.  This Note is secured by certain collateral,more specifically described in the Loan Agreement.

 

Obligorwaives presentment, demand for performance, notice of nonperformance, protest,notice of protest, and notice of dishonor. No delay on the part of Payee in exercising any right hereunder shalloperate as a waiver of such right under this Note.  This Note is being delivered in the State of California.  This Note shall be governed in all respectsby the laws of the State of California as it applies to contracts betweenCalifornia residents, which are made and to be performed in California.

 

Ifthe indebtedness represented by this Note or any part thereof is collected atlaw or in equity or in bankruptcy, receivership or other judicial proceedingsor if this Note is placed in the hands of attorneys for collection afterdefault, Obligor agrees to pay, in addition to the principal and interestpayable herein, reasonable attorneys’ fees and costs incurred by Payee.

 

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TheObligor and the Payee intend to comply at all times with applicable usurylaws.  If at any time such laws wouldrender usurious any amounts due under this Note, then it is the Obligor’s andthe Payee’s express intention that the Obligor not be required to pay intereston this Note at a rate in excess of the maximum lawful rate, that the provisionsof this paragraph shall control over all other provisions of this Note whichmay be in apparent conflict hereunder, that such excess amount shall beimmediately credited to the principal balance of this Note (or, if this Notehas been fully paid, refunded by the Payee to the Obligor), and the provisionshereof shall be immediately reformed and the amounts thereafter collectibleunder this Note reduced, without the necessity of the execution of any furtherdocuments, so as to comply with the then applicable usury law, but so as topermit the recovery of the fullest amount otherwise due under this Note.  Any such crediting or refund shall not cureor waive any default by the Obligor under this Note.  The term “applicable law” as used in this Note shall mean thelaws of the State of California or the laws of the United States, whicheverlaws allow the greater rate of interest, as such laws now exist or may bechanged or amended or come into effect in the future.

 

Nomodification, amendment or waiver of any provision of this Note shall beeffective unless approved in a writing specifically referring to this Note andsigned by the party against whom enforcement of the amendment is sought.  In the event that Obligor fails to makepayment on the date for payment hereinabove specified of all principal andinterest due hereunder on such date, then this Note shall accrue interest atthe highest rate permitted by law, until paid in full.

 

Eachnotice or other communication required or permitted hereunder (except payment)shall be in writing and shall be deemed given or made (a) on the daydelivered if delivered in person to the party to whom it is directed, or byovernight courier, (b) on the day delivery is confirmed by the recipient’ssignature if deposited in the United States Mail, registered or certified,return receipt requested, (c) on the day confirmed by the receivingfacsimile machine if sent by facsimile during regular business hours, in eachcase addressed to the party to whom it is directed at the address set forth inthe Loan Agreement.  Either party may,by notice given at any time or from time to time, require that subsequentnotices be given at a different address. Any payment shall be deemed made upon receipt by Payee.

 

INWITNESS WHEREOF, Obligor has caused this Note to be executed and delivered byits duly authorized officer as of the date and at the place first writtenabove.

 
|   | OBLIGOR: | NATURADE,  INC.,         |
|--------|----------|--------------------------|
|   |     | a  Delaware corporation  |
|   |     |                     |
|   | By:      | /s/  Lawrence J. Batina  |   |
|   | Its:     | Chief  Financial Officer |
|        |          |                          |  |  |

 

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THISCONVERTIBLE SECURED PROMISSORY NOTE IS SUBORDINATED IN RIGHT OF PAYMENT, AS SETFORTH IN THAT CERTAIN SUBORDINATION AGREEMENT DATED AUGUST 31, 2000 BETWEENPAYEE AND WELLS FARGO BUSINESS CREDIT INC. (“BANK”) AND ACKNOWLEDGED BYOBLIGOR, TO THE OBLIGATIONS OF OBLIGOR TO BANK UNDER (AND AS DEFINED IN) THATCERTAIN CREDIT AGREEMENT, DATED AS OF JANUARY 27, 2000, BETWEEN OBLIGOR, ASBORROWER, AND BANK, AS LENDER, AS AT ANY TIME AMENDED, SUPPLEMENTED OR OTHERWISEMODIFIED OR RESTATED.

 

CONVERTIBLE SECURED PROMISSORY NOTE

 
| $50,000 |   |                    | Irvine,  California |
|---------|--------|-------------------------|---------------------|
|    |   | September 12, 2001 |

 

FORVALUE RECEIVED, NATURADE, INC., a Delaware corporation (“Obligor”), herebypromises to pay to the order of WALD HOLDINGS, LLC, a Missouri limitedliability company (“Payee”), in lawful money of the United States at theaddress of Payee set forth below, the amount of FIFTY THOUSAND DOLLARS($50,000), together with interest on the unpaid principal amount hereof.

 

Interestshall be paid at maturity at the rate of eight percent (8.00%) per annum.  Notwithstanding anything to the contrary inthe Loan Agreement (as defined bleow), unpaid principal together with allaccrued interest shall be due and payable on the earlier of (a) September 12,2002 or (b) the date that Mr. David Weil is removed as a Director of theObligor.  CaCapitalized terms nototherwise defined in this Note shall have the meanings assigned to them in theLoan Agreement (as defined below).

 

ThisNote may be prepaid, in whole or in part, upon at least thirty calendar days’notice to Payee, as further provided in the Loan Agreement.  Payments by Obligor shall be applied firstto any and all accrued interest through the payment date and second to theprincipal remaining due hereunder.  Uponpayment in full of all principal and interest payable hereunder, this Noteshall be surrendered to Obligor for cancellation.

 

Ifany payment of principal or interest on this Note shall become due on aSaturday, Sunday, or a public holiday under the laws of the State ofCalifornia, such payment shall be made on the next succeeding business day andsuch extension of time shall be included in computing interest in connectionwith such payment.

 

ThisNote is issued pursuant to and entitled to the benefits of the Loan Agreementand related agreements by and between Obligor and Payee dated August 31, 2000(“Loan Agreement”), and reference thereto is hereby made for a more completestatement of the terms under which the loan evidenced hereby is to be repaid,including the fact that the loan is subject to acceleration and the loan issubject to Payee’s right to convert, all as set forth in the LoanAgreement.  This Note is secured bycertain collateral, more specifically described in the Loan Agreement.

 

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Obligorwaives presentment, demand for performance, notice of nonperformance, protest,notice of protest, and notice of dishonor. No delay on the part of Payee in exercising any right hereunder shalloperate as a waiver of such right under this Note.  This Note is being delivered in the State of California.  This Note shall be governed in all respectsby the laws of the State of California as it applies to contracts betweenCalifornia residents, which are made and to be performed in California.

 

Ifthe indebtedness represented by this Note or any part thereof is collected atlaw or in equity or in bankruptcy, receivership or other judicial proceedingsor if this Note is placed in the hands of attorneys for collection afterdefault, Obligor agrees to pay, in addition to the principal and interestpayable herein, reasonable attorneys’ fees and costs incurred by Payee.

 

TheObligor and the Payee intend to comply at all times with applicable usurylaws.  If at any time such laws wouldrender usurious any amounts due under this Note, then it is the Obligor’s andthe Payee’s express intention that the Obligor not be required to pay intereston this Note at a rate in excess of the maximum lawful rate, that the provisionsof this paragraph shall control over all other provisions of this Note whichmay be in apparent conflict hereunder, that such excess amount shall beimmediately credited to the principal balance of this Note (or, if this Notehas been fully paid, refunded by the Payee to the Obligor), and the provisionshereof shall be immediately reformed and the amounts thereafter collectibleunder this Note reduced, without the necessity of the execution of any furtherdocuments, so as to comply with the then applicable usury law, but so as topermit the recovery of the fullest amount otherwise due under this Note.  Any such crediting or refund shall not cureor waive any default by the Obligor under this Note.  The term “applicable law” as used in this Note shall mean thelaws of the State of California or the laws of the United States, whicheverlaws allow the greater rate of interest, as such laws now exist or may bechanged or amended or come into effect in the future.

 

Nomodification, amendment or waiver of any provision of this Note shall beeffective unless approved in a writing specifically referring to this Note andsigned by the party against whom enforcement of the amendment is sought.  In the event that Obligor fails to makepayment on the date for payment hereinabove specified of all principal andinterest due hereunder on such date, then this Note shall accrue interest atthe highest rate permitted by law, until paid in full.

 

Eachnotice or other communication required or permitted hereunder (except payment)shall be in writing and shall be deemed given or made (a) on the daydelivered if delivered in person to the party to whom it is directed, or byovernight courier, (b) on the day delivery is confirmed by the recipient’ssignature if deposited in the United States Mail, registered or certified,return receipt requested, (c) on the day confirmed by the receivingfacsimile machine if sent by facsimile during regular business hours, in eachcase addressed to the party to whom it is directed at the address set forth inthe Loan Agreement.  Either party may,by notice given at any time or from time to time, require that subsequentnotices be given at a different address. Any payment shall be deemed made upon receipt by Payee.

 

INWITNESS WHEREOF, Obligor has caused this Note to be executed and delivered byits duly authorized officer as of the date and at the place first writtenabove.

 

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|   | OBLIGOR: | NATURADE,  INC.,         |
|--------|----------|--------------------------|
|   |     | a  Delaware corporation  |
|   |     |                     |
|   | By:      | /s/  Lawrence J. Batina  |   |
|   | Its:     | Chief  Financial Officer |
|        |          |                          |  |  |

 

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