Contract
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES
ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION.
Date:
March
16,
2005
VITAL
LIVING, INC.
Warrant
for the Purchase of Shares of Common Stock
No.
W-___
For
value
received, this Warrant is hereby issued by Vital Living, Inc., a Nevada
corporation (the "Company"),
to
Xxxxxx Xxxxxxx (the "Holder").
Subject to the provisions of this Warrant, the Company hereby grants to Holder
the right to purchase from the Company 300,000 fully paid and non-assessable
shares of Common Stock, at a price of $0.12 per share (the "Exercise
Price").
The
term
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company. The number of shares of Common Stock to be received upon the exercise
of this Warrant may be adjusted from time to time as hereinafter set forth.
The
shares of Common Stock deliverable upon such exercise, and as adjusted from
time
to time, are hereinafter referred to as "Warrant
Stock."
The
term "Other
Securities"
means
any other equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock.
The
Holder agrees with the Company that this Warrant is issued, and all the rights
hereunder shall be held, subject to all of the conditions, limitations, and
provisions set forth herein.
1. Exercise
of Warrant.
Subject
to the terms and conditions set forth herein, this Warrant may be exercised
in
whole or in part, fifty percent (50%) on the date hereof and fifty percent
(50%)
on the first anniversary of the date hereof, pursuant to the procedures provided
below, at any time on or before the earlier of (i) 5:00 p.m., Mountain Standard
Time, on March 16, 2009, or (ii) the closing of the sale and issuance of shares
of equity securities of the Company in a firm commitment underwritten public
offering, pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities
Act"),
the
gross proceeds of which are at least $15,000,000 at a per share price of not
less than $10.00 (following appropriate adjustment in the event of any stock
dividends, stock splits, combination, or other similar recapitalization
affecting such shares) (the "Expiration
Date")
or, if
such day is a day on which banking institutions in New York are authorized
by
law to close, then on the next succeeding day that shall not be such a day.
To
exercise this Warrant the Holder shall present and surrender this Warrant to
the
Company at its principal office, with the Warrant Exercise Form attached hereto
duly executed by the Holder and accompanied by payment (either (a) in cash
or by
check, payable to the order of the Company, (b) by cancellation by the Holder
of
indebtedness or other obligations of the Company to the Holder, or (c) by a
combination of (a) or (b)), of the aggregate Exercise Price for the total
aggregate number of shares for which this Warrant is exercised. Upon receipt
by
the Company of this Warrant, together with the executed Warrant Exercise Form
and payment of the Exercise Price for the shares to be acquired, in proper
form
for exercise, and subject to the Holder's compliance with all requirements
of
this Warrant for the exercise hereof, the Holder shall be deemed to be the
holder of record of the shares of Common Stock (or Other Securities) issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder; provided,
however,
that no
exercise of this Warrant shall be effective, and the Company shall have no
obligation to issue any Common Stock or Other Securities to the Holder upon
any
attempted exercise of this Warrant, unless the Holder shall have first delivered
to the Company, in form and substance reasonably satisfactory to the Company,
appropriate representations so as to provide the Company reasonable assurances
that the securities issuable upon exercise may be issued without violation
of
the registration requirements of the Securities Act and applicable state
securities laws, including without limitation representations that the
exercising Holder is an "accredited investor" as defined in Regulation D under
the Securities Act and that the Holder is familiar with the Company and its
business and financial condition and has had an opportunity to ask questions
and
receive documents relating thereto to his reasonable satisfaction.
2. Net
Issue Exercise.
Notwithstanding any provisions herein to the contrary, if the fair market value
of one share of Common Stock is greater than the Exercise Price (at the date
of
calculation as set forth below), in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Notice of Exercise and notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X
=
Y
(A-B)
A
|
Where
|
X
=
|
the
number of shares of Common Stock to be issued to the Holder
|
|
Y
=
|
the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being canceled (at the date of such calculation)
|
|
|
A
=
|
the
fair market value of one share of the Company's Common Stock (at
the date
of such calculation)
|
|
|
B
=
|
Exercise
Price (as adjusted to the date of such calculation)
|
-2-
3. Reservation
of Shares.
The
Company will at all times reserve for issuance and delivery upon exercise of
this Warrant all shares of Common Stock or other shares of capital stock of
the
Company (and Other Securities) from time to time receivable upon exercise of
this Warrant. All such shares (and Other Securities) shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid, and
non-assessable and free of all preemptive rights.
4. Fractional
Shares.
No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant, but the Company shall pay the Holder an amount
equal to the Fair Market Value (as defined below) of such fractional share
of
Common Stock in lieu of each fraction of a share otherwise called for upon
any
exercise of this Warrant.
5. Fair
Market Value.
For
purposes of this Warrant, the Fair Market Value of a share of Common Stock
(or
Other Security) shall be determined as of any date (the "Value
Date")
by the
Company's Board of Directors in good faith; provided,
however,
that
where there exists a public market for the Company's Common Stock on the Value
Date, the fair market value per share shall be either:
a) If
the
Common Stock is listed on a national securities exchange or admitted to unlisted
trading privileges on such exchange or listed for trading on the NASDAQ system,
the Fair Market Value shall be the last reported sale price of the security
on
such exchange or system on the last business day prior to the Value Date or
if
no such sale is made on such day, the average of the closing bid and asked
prices for such day on such exchange or system; or
b) If
the
Common Stock is not so listed or so admitted to unlisted trading privileges,
the
Fair Market Value shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last business day prior
to the Value Date.
Notwithstanding
the foregoing, in the event the Warrant is exercised in connection with the
Company's initial public offering of Common Stock, the fair market value per
share shall be the product of (i) the per share offering price to the public
of
the Company's initial public offering, and (ii) the number of shares of Common
Stock or Other Securities issuable upon exercise.
6. Assignment
or Loss of Warrant.
Subject
to the transfer restrictions herein (including Section
9),
upon
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be canceled. Upon receipt by
the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and of reasonably satisfactory
indemnification by the Holder, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute and deliver a replacement
Warrant of like tenor and date.
-3-
7. Rights
of the Holder.
The
Holder shall not, by virtue hereof, be entitled to any rights of a stockholder
in the Company, either at law or in equity, and the rights of the Holder are
limited to those expressed in this Warrant.
8. Adjustments.
8.1 Conversion
or Redemption of Common Stock.
Should
all of the Company's Common Stock be, or if outstanding would be, at any time
prior to the expiration of this Warrant or any portion thereof, redeemed or
converted into shares of the Company's capital stock, then this Warrant shall
become immediately exercisable for that number of shares of the Company's
capital stock that would have been received if this Warrant had been exercised
in full and the capital stock received thereupon had been simultaneously
converted immediately prior to such event, and the Exercise Price shall
immediately be adjusted to equal the quotient obtained by dividing (x) the
aggregate Exercise Price of the maximum number of shares of Common Stock for
which this Warrant was exercisable immediately prior to such conversion or
redemption, by (y) the number of shares of capital stock for which this Warrant
is exercisable immediately after such conversion or redemption.
8.2 Adjustment
for Recapitalization.
If the
Company shall at any time after the date of this Warrant subdivide its
outstanding shares of Common Stock (or Other Securities at the time receivable
upon the exercise of the Warrant) by recapitalization, reclassification, or
split-up thereof, or if the Company shall declare a stock dividend or distribute
shares of Common Stock to its stockholders, the number of shares of Common
Stock
(or Other Securities) subject to this Warrant immediately prior to such
subdivision shall be proportionately increased, and if the Company shall at
any
time after the date of this Warrant combine the outstanding shares of Common
Stock by recapitalization, reclassification, or combination thereof, the number
of shares of Common Stock subject to this Warrant immediately prior to such
combination shall be proportionately decreased. Any such adjustment and
adjustment to the Exercise Price pursuant to this Section
8.2
shall be
effective at the close of business on the effective date of such subdivision
or
combination or if any adjustment is the result of a stock dividend or
distribution then the effective date for such adjustment based thereon shall
be
the record date therefor.
Whenever
the number of shares of Common Stock purchasable upon the exercise of this
Warrant is adjusted, as provided in this Section
8.2,
the
Exercise Price shall be adjusted to the nearest cent by multiplying such
Exercise Price immediately prior to such adjustment by a fraction (x) the
numerator of which shall be the number of shares of Common Stock purchasable
upon the exercise immediately prior to such adjustment, and (y) the denominator
of which shall be the number of shares of Common Stock so purchasable
immediately thereafter.
8.3 Adjustment
for Reorganization, Consolidation, Merger, Etc.
In case
of any reorganization of the Company (or any other corporation, the securities
of which are at the time receivable on the exercise of this Warrant) after
the
date of this Warrant or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in
each
such case, the Holder of this Warrant upon the exercise thereof as provided
in
Section
1
at any
time after the consummation of such reorganization, consolidation, merger,
or
conveyance, shall be entitled to receive, in lieu of the securities and property
receivable upon the exercise of this Warrant prior to such consummation, the
securities or property to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto; in each such case, the terms of this Warrant shall be applicable to
the
securities or property receivable upon the exercise of this Warrant after such
consummation.
-4-
8.4 Certificate
as to Adjustments.
The
adjustments provided in this Section
8
shall be
interpreted and applied by the Company in such a fashion so as to reasonably
preserve the applicability and benefits of this Warrant (but not to increase
or
diminish the benefits hereunder). In each case of an adjustment in the number
of
shares of Common Stock receivable on the exercise of the Warrant, the Company
at
its expense will promptly compute such adjustment in accordance with the terms
of the Warrant and prepare a certificate executed by two executive officers
of
the Company setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company will forthwith mail a copy of each
such certificate to each Holder.
8.5 Notices
of Record Date, Etc.
In the
event that:
(a) the
Company shall declare any dividend or other distribution to the holders of
Common Stock, or authorizes the granting to Common Stock holders of any right
to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or
any other securities; or
(b) the
Company authorizes any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of
all
or substantially all of the assets of the Company to another corporation or
entity; or
(c) the
Company authorizes any voluntary or involuntary dissolution, liquidation, or
winding up of the Company;
then,
and
in each such case, the Company shall mail or cause to be mailed to the holder
of
this Warrant at the time outstanding a notice specifying, as the case may be,
(i) the date on which a record is to be taken for the purpose of such dividend,
distribution, or right, and stating the amount and character of such dividend,
distribution, or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
or winding up is to take place, and the time, if any is to be fixed, as to
which
the holders of record of Common Stock (or such other securities at the time
receivable upon the exercise of the Warrant) shall be entitled to exchange
their
shares of Common Stock (or such Other Securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation, or winding up. Such notice shall
be mailed at least 20 days prior to the date therein specified.
8.6 No
Impairment.
The
Company will not, by any voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by
the
Company, but will at all times in good faith assist in the carrying out of
all
the provisions of this Section
8
and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against
impairment.
-5-
9. Transfer
to Comply with the Securities Act.
This
Warrant and any Warrant Stock or Other Securities may not be sold, transferred,
pledged, hypothecated, or otherwise disposed of except as follows: (a) to a
person who, in the opinion of counsel to the Company, is a person to whom this
Warrant or the Warrant Stock or Other Securities may legally be transferred
without registration and without the delivery of a current prospectus under
the
Securities Act with respect thereto and then only against receipt of an
agreement of such person to comply with the provisions of this Section
9
with
respect to any resale or other disposition of such securities; or (b) to any
person upon delivery of a prospectus then meeting the requirements of the
Securities Act relating to such securities and the offering thereof for such
sale or disposition, and thereafter to all successive assignees.
10. Legend.
Unless
the shares of Warrant Stock or Other Securities have been registered under
the
Securities Act, upon exercise of any of the Warrants and the issuance of any
of
the shares of Warrant Stock, all certificates representing shares shall bear
on
the face thereof substantially the following legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE,
ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT
TO
THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION
IS
OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION.
11. Notices.
All
notices required hereunder shall be in writing and shall be deemed given when
telegraphed, delivered personally or within two days after mailing when mailed
by certified or registered mail, return receipt requested, to the Company or
the
Holder, as the case may be, for whom such notice is intended, if to the Holder,
at the address of such party shown on the books of the Company, or if to the
Company, to Vital Living, Inc., at the address set forth on the signature page
hereof, Attn: President, or at such other address of which the Company or the
Holder has been advised by notice hereunder.
12. Governing
Law.
The
Warrant is issued under and shall for all purposes be governed by and construed
in accordance with the laws of the State of Arizona, without regard to the
conflict of laws provisions of such state.
-6-
13. Jurisdiction;
Venue.
The
parties hereby agree that any dispute which may arise between them arising
out
of or in connection with this Warrant shall be adjudicated before a court
located in Phoenix, Arizona and they hereby submit to the exclusive jurisdiction
of the courts of the state of Arizona and of the federal courts in the District
of Arizona with venue in Phoenix, Arizona with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they
now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Warrant or any acts
or
omissions relating to the sale of the securities hereunder, and consent to
the
service of process in any such action or legal proceeding by means of registered
or certified mail, return receipt requested.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-7-
IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf,
in its corporate name, by its duly authorized officer, all as of the day and
year first above written.
VITAL
LIVING, INC.
By:
/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx
X.
Xxxxxx
Title:
Chief
Executive Officer
Address:
0000
Xxxxx 00xx Xxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxx 00000
-8-
