DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into and effective this 21st day of August,
2001 by and between Vital Living, Inc., a Nevada corporation ("VL") and
Advanced Medical China Ltd., a Hong Kong Limited Company ("AMC").
Recitals
A. VL is in the business of, among other things, developing and
distributing nutritional products (the "Products"). VL wishes to distribute
such Products through AMC distribution channels in China, Taiwan and Hong
Kong (the "Territory").
B. AMC sells products to medical facilities in the Territory.
Principles of AMC are also developing a medical facility in Beijing (the
"Beijing International Heart Hospital"). AMC wishes to distribute the
Products on behalf of VL in the Territory to AMC customers and through the
Beijing International Heart Hospital. The parties therefore agree to the
following terms and conditions:
Terms and Conditions
1. Product Distribution. AMC will offer the Products as part of its
general line of products to all AMC existing cardiovascular physician
customers, hospitals and any other customers to which it currently offers
product and to any new customer within the Territory, including the Beijing
International Heart Hospital. AMC will not offer or sell any other
nutritional products during the term of this Agreement. AMC will be Vital
Livings exclusive distributor in the territory during the term. AMC will
purchase all Products directly from VL in accordance with paragraph 3. AMC
will assist in obtaining the necessary government approvals for importing the
Products to the Territory and will ensure that the Products and distribution
thereof complies with all applicable laws and regulations of the country or
territory.
2. Product Marketing. AMC will market the Products within the Territory.
All marketing materials must be approved by VL. AMC will assist in the
translation of any materials required for registration in the Territory. All
translated materials will be owned by VL. VL grants AMC a limited license to
use VL's name, marketing materials and any VL logos or trademarks solely in
connection with marketing the Products and performing this Agreement. AMC
will enable VL products to be prominently displayed at the Beijing
International Heart Hospital. AMC will display and distribute Product
information literature, provide education and information to assist
physicians and medical personnel in promoting the Products to patients, and
assist in promotion of the Products through local media. AMC will maintain a
specified inventory of Products to meet patient demand.
3. Payment Terms. AMC will pay for all Products in U.S. dollars according
to ordering and payment procedures to be established by the parties. All
Products will be shipped to an American location and AMC will be responsible
for delivery to AMC's Beijing distribution center.
4. Consideration. As consideration for AMC's services, VL will grant AMC
the option to purchase 1,000,000 shares of common stock of VL at $.35 per
share, of which 300,000 shares will vest upon execution of this Agreement;
provided, however, that such shares are subject to recall by VL if gross
aggregate sales of the Products by does not equal or exceed $2,000,000 within
the first 30 months of the effective date of this Agreement. The balance of
the options will vest subject to the following sales performance schedule
being achieved within 30 months of execution of this Agreement: 100,000
shares will vest when gross aggregate sales of the Products by AMC equal or
exceed $5,000,000; 200,000 shares when gross aggregate sales of the Products
by AMC equal or exceed $8,000,000; 200,000 shares when gross aggregate sales
of the Products by AMC reach $12,000,000; and the remaining 200,000 shares
when gross aggregate sales of the Products equal or exceed $15,0000,000. This
Agreement is based on a guaranteed purchase by AMC of the Product based on a
30% xxxx-up over VL's cost. For purposes of this Agreement, VL's cost is
defined as a fully loaded xxxx of materials. All vested shares will be
exercisable but subject to a lock-up for trading for twelve months from the
date on which such shares vest in accordance with the stock option agreement
attached hereto as Exhibit A.
5. Term. This Agreement will continue for five years from the effective
date of this Agreement and will automatically renew for additional one-year
terms unless either party gives notice of its intent not to renew the
Agreement not less than sixty (60) days prior to the end of the then current
term. Either party may terminate the Agreement upon thirty (30) days written
notice of material breach and the breaching party's failure to cure the
breach within such thirty-day period. Upon termination of this Agreement,
AMC will return all Products and marketing materials to VL and cease
distribution of the Products.
6. Confidentiality. In connection with this Agreement, the parties may
develop, acquire, or be granted access to trade secrets and other information
that is confidential and proprietary to the other party or to third parties.
Such information includes but is not limited to patient lists and
information, costs of manufacturing, technical data, methods, processes, know-
how, business and marketing strategies, operations, research and development,
business opportunities, and financial data. The parties will not at any time
during or after termination of this Agreement, directly or indirectly,
divulge, use or permit the use of any confidential or proprietary information
of the other, except as required in the course of this Agreement. Upon
termination of this Agreement, the parties will immediately turn over to the
other all confidential information materials belong to such part, including
all copies thereof or notes relating thereto, in such party's possession or
otherwise subject to its control. Notwithstanding the above, the following
materials will not be deemed confidential:
(i) Information which was in the public domain at the time of
disclosure (provided, however, that collection or compilation of publicly
available information will be considered proprietary if the disclosing
party's collection or organization of the material would be difficult or time-
consuming to replicate);
(ii) Information which was published or otherwise became part of
the public domain after disclosure to the receiving party through no fault of
the receiving party (but only after, and only to the extent that, it is
published or otherwise becomes a part of the public domain); and
(iii) Information which was received from a third party who did not
acquire it, directly or indirectly, from the disclosing party under an
obligation of confidence except where required by law.
The receiving party will have the burden of establishing the existence of
these conditions by objective or verifiable evidence.
7. Warranty. The Products are provided "AS IS." VL specifically
disclaims all warranties express or implied regarding the Products including
any warranty of merchantability or fitness for a particular purposed. AMC
will not make any representation or warranty regarding the Products except as
provided herein.
8. Limitation of Liability. AMC's sole right and exclusive remedy for
breach of this Agreement by VL is to terminate this Agreement as provided
herein and to recover any amounts paid to VL for the Products during the
preceding three (3) months. IN NO EVENT IS VL LIABLE TO AMC FOR ANY DIRECT
OR CONSEQUENTIAL DAMAGES INCURRED IN CONNECTION WITH OR ARISING OUT OF USE OR
DISTRIBUTION OF THE PRODUCTS OR ANY BREACH OF THIS AGREEMENT BY VL,
REGARDLESS OF THE FORM OF ACTION AND EVEN IF VL HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE OR LOSS. VL's sole right and exclusive remedy for
breach of this Agreement by AMC is to terminate this Agreement. IN NO EVENT
IS AMC LIABLE TO VL FOR ANY DIRECT OR CONSEQUENTIAL DAMAGES INCURRED IN
CONECTION WITH OR ARISING OUT OF USE OR DISTRIBUTION OF THE PRODUCTS OR ANY
BREACH OF THIS AGREEMENT BY AMC, REGARDLESS OF THE FORM OF ACTION AND EVEN IF
AMC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS.
9. Indemnity. AMC will defend, indemnify and hold VL, its authorized
sublicensees, successors and assigns, and its directors, officers, employees
and agents, harmless for, from and against all claims, liabilities, damages,
costs and expenses, including without limitation reasonable attorneys' fees,
arising from or in connection with any breach or alleged breach by AMC of any
agreement made by AMC hereunder, or arising from or in connection with AMC's
distribution of the Products pursuant hereto. VL will have the right of
approval, not to be unreasonably withheld, of any attorneys or other counsel
retained by AMC for the performance of AMC's obligations pursuant to this
Paragraph 9. The terms and provisions of this Paragraph 9 will survive
termination or expiration of this Agreement. VL will indemnify and hold AMC,
its authorized sublicenses, successors and assigns, and its directors,
officers, employees and agents, harmless for, from and against all claims,
liabilities, damages, costs and expenses, including without limitation
reasonable attorneys' fees, arising from or in connection with any breach or
alleged breach by VL of any agreement made by VL hereunder. The terms and
provisions of this Paragraph 9 will survive termination or expiration of this
Agreement.
10. Notice. Any notice or other communications required or that may be
given pursuant to this Agreement will be in writing and will be delivered
personally, or sent by facsimile or electronic mail with confirmation by
recognized overnight carrier, to the address of the party as set forth below
or to any other address requested by the respective parties after giving
written notice to the other party.
11. Governing Law. This Agreement will be governed by and construed in
accord with the laws of the State of Arizona. All disputes will be resolved
by binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association in Phoenix, Arizona, except that either party may
apply to a court of competent jurisdiction solely for interlocutory
injunctive relief to maintain the status quo pending the results of the
arbitration. The prevailing party in any dispute will be entitled to recover
its reasonable attorneys' fees and related costs and expenses incurred in
connection therewith.
12. Severability. If any court of competent jurisdiction rules any
provision of this Agreement invalid, illegal, or unenforceable, the validity,
legality, and enforceability of the remaining provisions will not be affected
or impaired in any way.
13. Entire Agreement. This Agreement constitutes the entire,
integrated agreement among the parties regarding the subject matter hereof
and supersedes any and all prior and contemporaneous agreements,
representations, and understandings of the parties.
14. Assignment. Neither party will assign this Agreement or any of its
rights or obligations hereunder without the prior consent of the other party;
provided, however, that either party may assign this Agreement and its rights
and obligations hereunder, with prior notice to the other party, to any
person or entity that purchases all or substantially all of its assets, or
that merges with or into such assigning party, or that is under common
ownership or control of the assigning party, and that agrees in writing to be
bound by the terms hereof.
15. Force Majeure. Neither party will be liable to the other for
failure to carry out this Agreement in whole or in part when such failure is
due to strikes, lockouts or other labor problems, inability to obtain
materials, or acts of God, freight embargoes, transportation delays, any
existing or future laws or acts of the Federal, State or Local government or
any other occurrences beyond its control. A party so affected shall
immediately advise the other in writing, describing the cause of the failure,
and estimating, if possible, the duration of the interruption. The parties
shall cooperate within reason to mitigate the effects of the interruption.
If the interruption continues for a period of ninety (90) days, either party
may terminate this Agreement.
Vital Living, Inc., Advanced Medical China Ltd.,
a Nevada corporation a Hong Kong Limited Company
By: Xxxxxxx X. Xxxxx By: Xxxxx X. XxxXxxxxx
(Print Name) (Print Name)
By:/S/ Xxxxxxx X. Xxxxx By: /S/ Xxxxx X. XxxXxxxxx
(Signature) (Signature)
Its: C.E.O Its: Managing Director
EXHIBIT A
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is entered into as of August
____, 2001, between Vital Living, Inc., a Delaware corporation ("VL"), and
Advanced Medical China Ltd., a Hong Kong Limited Company ("AMC").
RECITALS
WHEREAS, VL and AMC have entered into an Agreement of even date herewith
(the "Distributor Agreement") and unless otherwise defined herein, the terms
defined in the Distributor Agreement shall have the same defined meanings in
this Stock Option Agreement (the "Option Agreement"); and
WHEREAS, as consideration for AMC's performance under the terms of the
Distributor Agreement, VL has agreed to grant the AMC an option to purchase
certain shares of its common stock.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, VL hereby grants an Option to
acquire certain shares of its common stock on the terms and conditions
hereinafter set forth:
TERMS AND CONDITIONS
1. Grant of Option. VL irrevocably grants to AMC the right and option
(the "Option Right") to purchase all or any part of an aggregate of up to One
Million (1,000,000) shares of common stock (the "Shares") on the terms and
conditions set forth herein.
2. Purchase Price. The purchase price of the Shares acquired pursuant
to the exercise of an Option Right shall be thirty-five cents ($0.35) per
Share. The purchase price shall be paid in the manner set forth in Section 8
hereof.
3. Vesting. Subject to the terms of this Agreement, AMC's right to
acquire Shares pursuant to the exercise of an Option Rights as provided
herein shall initially vest in the amount of 300,000 shares upon execution of
this Agreement; provided, however, that such shares are subject to recall by
VL if gross aggregate sales of the Products by does not equal or exceed
$2,000,000 within the first 30 months of the effective date of this Agreement
as provided in paragraph 4 of the Distributor Agreement. The balance of the
options will vest subject to the following sales performance schedule being
achieved within 30 months of execution of this Agreement: 100,000 shares will
vest when gross aggregate sales of the Products by AMC equal or exceed
$5,000,000; 200,000 shares when gross aggregate sales of the Products by AMC
equal or exceed $8,000,000; 200,000 shares when gross aggregate sales of the
Products by AMC reach $12,000,000; and the remaining 200,000 shares when
gross aggregate sales of the Products equal or exceed $15,0000,000. This
Agreement is based on a guaranteed purchase by AMC of the Product based on a
30% xxxx-up over VL's cost. For purposes of this Agreement, VL's cost is
defined as a fully loaded xxxx of materials.
4. Term of Option. The Option Right for vested shares shall expire
two years from the date AMC becomes vested in the right to acquire the Shares
to the extent any of the Shares are not acquired pursuant to the Option Right
as of that date.
5. Transferability. The Option Right may be transferred by AMC upon
prior written notice to VL provided that the transferee becomes a party to
this Option Agreement and the Development Agreement and agrees to be bound by
the terms thereof and VL consents to such transfer, which consent will not be
unreasonably withheld. Otherwise, the Option Right may not be sold,
assigned, transferred, pledged, hypothecated, or disposed of in any manner,
such not be assignable by operation of law, and shall not be subject to
execution, attachment, or similar process. Any attempted prohibited sale,
assignment, transfer, pledge, hypothecation, or other disposition contrary to
the provisions hereof, and the levy of execution, attachment, or similar
process upon the Option Right, shall be null and void and without effect.
6. Additional Agreements. AMC understands that the Common Shares
subject to the Option Right have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and are subject to substantial
restrictions on transfer set forth in the Securities Act and the rules and
regulations of the Securities and Exchange Commission adopted thereunder.
AMC acknowledges and agrees that VL is under no obligation to register the
Shares. AMC represents and warrants, and shall be deemed to have affirmed
such representations and warranties upon each exercise of an Option Right
hereunder, that AMC is acquiring the Shares for his account for investment
purposes and not with a view to the distribution of such shares within the
meaning of the Securities Act. All certificates for Shares issued pursuant
to the exercise of Option Rights granted hereunder shall bear a legend
evidencing and restricted nature of the Shares. Without limiting the
foregoing, upon each exercise of all or any portion of the Option Right, AMC
agrees to execute and deliver to VL a subscription offer in form and
substance reasonably accepted to VL.
7. Lock-Up Period. AMC hereby agrees that, if so requested by VL or
any representative of the underwriters (the "Managing Underwriter") in
connection with any registration of the offering of any securities of VL
under the Securities Act, AMC shall not sell or otherwise transfer any Shares
or other securities of VL during the 180-day period (or such other period as
may be requested in writing by the Managing Underwriter and agreed to in
writing by VL) (the "Market Standoff Period") following the effective date of
a registration statement of VL filed under the Securities Act. Such
restriction shall apply only to the first registration statement of VL to
become effective under the Securities Act that includes securities to be sold
on behalf of VL to the public in an underwritten public offering under the
Securities Act. VL may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market
Standoff Period.
8. Method of Exercising.
(a) Notice of Exercise/Payment of Purchase Price. The Option
Right may be exercised by written notice to the Board of Directors of VL, at
VL's main office, or at such other address as VL, by notice to AMC, may
designate from time to time. The notice from AMC shall state the election to
exercise the Option Right and the number of Shares with respect to which the
Option Right is being exercised, and shall be signed by the person or persons
exercising the Option Right. Such notice shall be accompanied by payment or
the full purchase price of such Shares, in cash or by cashier's or certified
check, or other cash equivalent acceptable to VL, in an amount equal to the
full Option Price of the Shares for which the Option Right is being
exercised. The Option Right must be exercised in minimum blocks of 10,000
or more Shares. AMC shall be permitted to exercise his Option Right once per
calendar year without incurring any expenses associated with the exercise of
the option, except those expenses provided in Sections 2 of his Agreement.
For any additional exercises of AMC's Option Rights during the same calendar
year, AMC shall pay all reasonable costs incurred by VL in connection with
fulfilling its obligations in accordance with this Agreement.
(b) Stock Certificates. As soon as practicable after the exercise
of an Option Right, and following VL's receipt of notice and payment of the
exercise price and AMC's payment of all expenses to be borne by AMC, VL shall
deliver a certificate or certificates representing any Shares acquired
hereunder. All Shares that shall be purchased upon the exercise of an Option
Right as provided herein shall be fully paid and nonassessable.
9. Reservation of Shares. VL shall at all times during the term of
the Option Right reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirement of this Agreement,
shall pay all fees, expenses, and taxes necessarily incurred by VL in
connection therewith, and shall use its good faith efforts to comply with all
laws, rules, and regulations which, in the opinion of counsel for VL, shall
be applicable thereto.
10. Adjustment for Recapitalization. In the event of any stock
dividend or stock split made by the Board of Directors of VL, to the number
and kind of Shares and the price per Share subject to this Agreement, then
any new or additional shares of Common Stock or different shares to which AMC
may become entitled shall be subject to the terms, conditions and
restrictions herein contained relating to the Shares, and such shares shall
contain a legend indicating that they are subject to the restrictions set
forth herein.
11. Action Taken in Good Faith. No member of the Board of Directors,
nor any officer or employee of VL acting on behalf of the Board, shall be
personally liable for any action, determination or interpretation taken or
made in good faith with respect to this Agreement.
12. Rights as Shareholder. AMC shall not by reason of the Option Right
have any rights of a shareholder of VL until AMC shall, from time to time,
have duly exercised the Option Right, and upon each such exercise, AMC shall
have, with respect to the number of Common Shares as to which the Option
Right is then exercised, all rights of a shareholder of record from the date
of such exercise, irrespective of whether certificates to evidence the Common
Shares with respect to which the Option Right was exercised shall have been
issued on such date.
13. Miscellaneous.
(a) Waiver. The waiver of any provision of this Agreement will
not be effective unless in writing and executed b the party against whom
enforcement of the waiver is sought.
(b) Entire Agreement. This Agreement and the Distributor
Agreement constitute the entire integrated agreement among the parties
pertaining to the subject matter hereof, and supercede all prior and
contemporaneous agreements, representations, and understandings of the
parties. This Agreement may not be amended except by written instrument
executed by the parties.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, without regard
to its conflict of laws principles.
(d) Severability. If any provision of this Agreement is held to
be unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall be severable and no affected thereby.
(e) Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
(f) Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing to any party hereunder or any breach or
default under this Agreement shall impair any such right, power, or remedy,
nor shall it be construed as a waiver of or acquiescence to any such breach
or default or of or in any similar breach or default occurring later; nor
shall any waiver or any single breach or default be deemed a waiver of any
other breach or default occurring before or after the waiver. Any waiver,
permit, consent, or approval of any kind of any breach or default under this
Agreement or of any provision or condition of this Agreement must be in
writing and shall be effective only to the extent specifically stated in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any part shall be cumulative.
(g) Headings. The headings in this Agreement have been inserted
for convenience only and shall not affect the meaning or interpretation of
any provision in this Agreement.
(h) Assignment. The rights and obligations of VL and AMC
hereunder shall inure to the benefit of and shall be binding on their
successors and assigns. This provision in no way modifies the
transferability of this Agreement as set forth in Section 5.
IN WITNESS WHEREOF, the undersigned have duly executed this Option
Agreement effective as of the day and year first above written.
Vital Living, Inc., Advanced Medical China Ltd.,
a Delaware corporation a Hong Kong Company
By:/S/ Xxxxxxx X. Xxxxx By: /S/ Xxxxx X. XxxXxxxxx
Printed Name: Xxxxxxx X. Xxxxx Printed Name: Xxxxx X. XxxXxxxxx
Its: C.E.O. Its: Managing Director
