CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") executed as of this 20th day of
March, 2002, is made by and between Xxxxx X. Xxxxx ("Consultant") and Vital
Living, Inc., a Nevada corporation ("Company").
R E C I T A L S
Company desires to utilize Consultant's experience, knowledge and
abilities in the various aspects of its business. Consultant desires to
render such consulting services subject to the terms and conditions of this
Agreement.
In consideration of the foregoing recitals and the mutual covenants and
agreements contained herein, Consultant and Company agree as follows:
1. CONSULTING SERVICES.
(a) The Company retains Consultant to provide the following consulting
services (the "Consulting Services") to the Company:
(i) Assist the Company in formulating, developing and executing a strategic
business plan.
(ii) Assist the Company effecting the clinical evaluation of its products.
(iii) Assist in developing a brand identity and marketing strategy for
Company products, including the identifying, developing and assessing of
distribution channels, including mainstream physicians, and formulating a
Company identity and message to be communicated to investors, physicians,
researchers, patients, and other constituencies.
(iv) Advise the Company with respect to high level legal and regulatory
issues, including strategies for the protection of Company intellectual
property.
(v) Facilitate introductions to leading physicians and other prominent
healthcare industry professionals, including the recruiting of highly
qualified individuals to serve as members of the Scientific Advisory Board.
(vi) Assist in the design, development and implementation of a lifestyle and
compliance program.
(vii) Assist the Company in identifying and assessing opportunities for
capital formation.
(viii) Appear at and participate in medical conferences, meetings,
conference calls, or other corporate promotional functions.
(ix) Perform such additional services as the Company and Consultant may agree
upon.
(b) In performing the duties required under this Agreement, Consultant, at
all times shall exercise his professional independent judgment, based on his
training, experience and expertise. Consultant shall at all times comply
with the ethical rules and opinions of the professional organizations of
which he is a member. If any conflict arises between Consultant's duties
hereunder and Consultant's ethical or other contractual obligations,
Consultant shall immediately bring the matter to the attention of the chief
executive officer, president or chairman of the board of directors of the
Company.
(c) Consultant shall devote such time as is reasonably required to perform
the Consulting Services.
(d) Consultant shall provide the Consulting Services at such locations as
may be necessary or desirable to perform such Consulting Services
effectively.
(e) Consultant and Company presently believe that effective performance will
require Consultant to visit the Company's offices at least every other month
during the Term.
2. TERM AND TERMINATION.
(a) This Agreement shall commence on the execution date hereof (the
"Effective Date") and shall automatically terminate (the period commencing
upon the Effective Date and ending upon termination of this Agreement, the
"Term") upon the termination of the two year period commencing on the
Effective Date, or earlier as follows:
(i) by the Company at any time, with or without Cause (as defined below),
provided that a termination of this Agreement for Cause shall be effective
only upon 30 days written notice from the Company to the Consultant.
(ii) upon the death or disability of the Consultant.
(iii) by mutual agreement of the Company and Consultant.
(iv) by Consultant for any reason, provided that a termination of this
Agreement by the Consultant shall be effective only upon 30 days written
notice from the Consultant to the Company.
(b) For purposes of this Agreement, Company shall have "Cause" to terminate
this Agreement upon Consultant's:
(i) Commission of a felony involving moral turpitude; or
(ii) death; provided that the Consultant's beneficiaries shall be entitled to
receive his compensation through the last day of the month in which his death
occurs; or
(iii) Commission of any act of fraud, theft, or embezzlement involving
assets of the Company; or
(iv) Becoming physically or mentally disabled so that he is unable to perform
his services for (I) a period of 60 consecutive days, or (II) for shorter
periods aggregating 60 days during any twelve-month period. The Consultant
shall become physically or mentally disabled so that he is unable
substantially to perform his services for (i) a period of 30 consecutive
days, or (ii) for shorter periods aggregating 30 days during any twelve-month
period. Notwithstanding such disability the Company shall continue to pay
the Consultant his compensation through the date of such termination.
(c) Upon the expiration or termination of this Agreement for any reason, (a)
each party will be released from all obligations to the other arising after
the date of expiration or termination, except that expiration or termination
of this Agreement will not relieve either party of its obligations under
Sections 3(b), 3(c), 6, 7, 8, or 9, nor will expiration or termination
relieve Consultant or Company from any liability arising from any breach of
this Agreement; and (b) Consultant will promptly notify Company of all
Confidential Information and Subject Inventions, in Consultant's possession
and promptly deliver to Company, or destroy at Company's request, all such
materials.
3. COMPENSATION AND EXPENSES.
(A) Commencing on the Effective Date and during the Term, Company shall
compensate Consultant at the rate of $2,000 per month payable pursuant to the
Company's payroll practices, as revised by the Company from time to time in
its sole discretion. Consultant agrees that without breaching this
Agreement, the Company may defer payment of Consultant's compensation if the
Company is unable to compensate Consultant, provided that such deferral shall
under no circumstances continue for a period of six months or more, and that
any deferral of payment of Consultant's compensation for a period of six
months or more shall constitute a breach of this agreement.. The
determination of the Company's ability to compensate Consultant shall be at
the sole discretion of the board of directors of the Company, provided,
however, that (i) the Company's right to defer payment of Consultant's
compensation shall terminate at such time as the Company shall have raised a
total of at least $2 million from any one or more related or unrelated debt
or equity financing transactions occurring after the date of this agreement;
(ii) the Company shall not defer payment of Consultant's compensation unless,
either prior to or concurrently with the deferment of Consultant's salary,
the Company ceases to pay any compensation to each of its then current Chief
Executive Officer, Chairman, and President; and the Company shall not pay any
compensation to its then current Chief Executive Officer, Chairman, or
President until it has made payment in full of all deferred Consultant
compensation; and (iii) if the Company defers payment of Consultant's
compensation for a period of six months, Consultant may, at his option,
terminate this Agreement by providing written notice of such termination to
the Company.
(b) Company shall promptly pay or reimburse Consultant for the reasonable
and necessary expenses incurred by Consultant in connection with the
performance of his duties hereunder, including travel expenses incurred by
Consultant at the request of Company, subject to Company's receipt of such
verification thereof as is reasonably required and subject to Company's
general expense reimbursement policies.
(c) If Consultant is terminated by the Company other than for cause, or if
Consultant terminates his engagement pursuant to Section 3(a)(iii) hereof,
then Consultant shall be entitled to continue to receive his then current
compensation for a period of six (6) months (such payments, the "Severance
Payments") pursuant to the payment schedule in effect for Consultant
immediately prior to such termination; provided, that without limiting any
other rights or remedies available to the Company, any violation of this
Agreement by Consultant during the 6 month period commencing upon
Consultant's termination shall terminate the Company's obligation to make
Severance Payments.
4. WARRANT.
Concurrently with the execution of this Agreement, the Company and
Consultant shall enter into the Warrant Agreement attached hereto as Exhibit
A.
5. INDEPENDENT CONTRACTOR RELATIONSHIP.
(a) The relationship of Consultant to Company is that of an independent
contractor and advisor only. Nothing contained in this Agreement shall be
construed to create the relationship of employer and employee or principal
and agent between Consultant and Company. Accordingly, Consultant shall not
be entitled to any employee benefits, such as medical or other health
insurance, available to employees of Company. In addition, Consultant is not
a member, partner or joint venturer with Company, and nothing contained in
this Agreement shall be construed so as to make such parties partners or
joint venturers or to impose any liability as such on either of them.
Consultant shall have no authority to bind Company to any agreement,
obligation or commitment.
(b) It is understood and agreed that Consultant's duties and obligations to
Company are fully expressed by the terms hereof. As long as Consultant's
other business activities or services do not cause substantial interference
with Consultant's performance of his duties under this Agreement or otherwise
violate any other agreement between the Consultant and the Company,
Consultant shall be entitled to engage in any other business activities he
deems fit, as an owner, officer, director, partner, investor, employee,
consultant or otherwise.
(c) Consultant shall be responsible for payment of any and all applicable
federal, state and local income and other taxes, business license fees and
workers' compensation and disability benefits which he may incur as a
consequence of rendering the Consulting Services provided for herein. In the
event that the Company is required to pay, or it is contended that the
Company is required to pay any such employee taxes, penalties, interest,
fines or assessments, Consultant agrees to hold harmless and indemnify the
Company in full from and against any such taxes, penalties, fines or
assessments, and attorneys' fees and other expenses which result from, or are
incident to, any proceeding to establish or collect such taxes.
6. CONFIDENTIALITY.
(a) "Confidential Information" shall mean all confidential or proprietary
information of the Company whether developed by the Company, by Consultant
within the scope of Consultant's engagement by the Company, or by third
parties for the Company, including without limitation knowledge about
business, marketing plans, pricing practices, products, formulation,
ingredients, formulations, dosages, sources, methods of manufacturing and
delivery, inventions, prototypes, formula, processes, programming techniques,
experimental work, as well as information relating to the customers, clients
and suppliers of Company. Confidential Information will not include, however,
any information which is or becomes part of the public domain through no
fault of Consultant or that Company regularly gives to third parties without
restriction on use or disclosure.
(b) Consultant agrees to hold all such Confidential Information in strict
confidence, not to disclose it to others or use it in any way, except in
performing the Services, and not to allow any unauthorized person access to
it, either before or after expiration or termination of this Agreement.
Consultant further agrees to take all action reasonably necessary and
satisfactory to protect the confidentiality of the Confidential Information.
7. ASSIGNMENT OF INVENTIONS.
(a) "Inventions" shall mean all designs, discoveries, inventions, computer
programs, procedures, improvements (whether or not patentable or whether or
not copyrightable), modifications, enhancements, products, developments,
drawings, notes, documents, information and materials, including any such
items relating to the ingredients, formulations, dosages, sources, methods of
manufacturing and delivery of Nutraceuticals, whether or not patentable and
whether or not reduced to practice, together with each literary work of such
owner, whether or not copyrightable.
(b) "Subject Inventions" shall mean all Inventions made by Consultant during
the Term that result from any work performed by Consultant for the Company or
were developed using the Company's equipment, supplies, facilities, or trade
secret information.
(c) Consultant hereby assigns to the Company, without additional
consideration to the Consultant, the entire right, title, and interest in and
to the Subject Inventions and all confidential information, writings,
apparatus, and other matter related to the Subject Inventions and in and to
all proprietary rights therein or based thereon. Consultant understands and
agrees that all materials included in any Subject Invention which is eligible
for protection under the Copyright Laws shall be deemed specially
commissioned by the Company and treated as "Works for Hire" under the
Copyright Laws of the United States to the extent such materials fall within
a category eligible for such treatment. In the event that such materials are
not eligible to be treated as a Work for Hire, Consultant nonetheless shall,
and hereby does, assign all of Consultant's interest in such work to the
Company as the same is created by Consultant.
(d) During and after the Term, Consultant shall execute and deliver all
written assignments, oaths, declarations, applications, and other documents
as may be prepared by the Company to evidence and/or effect the assignments
required by this Agreement.
(e) During and after the Term, Consultant shall provide the Company with all
information, documentation, and assistance the Company may request to
perfect, enforce, or defend any Subject Inventions or Proprietary Information
under this Agreement. The Company, in its sole discretion, shall determine
the extent of the proprietary rights, if any, to be protected in or based on
the Subject Inventions and Proprietary Information. All such information,
documentation, and assistance shall be provided at no additional expense to
the Company, except out-of-pocket expenses which the Consultant incurred at
the Company's request.
(f) Nothing in this Agreement shall affect in any way the ownership of, or
rights to, any Inventions other than the Subject Inventions.
8. CONFLICTS OF INTEREST
(a) During the Term and for two (2) years thereafter, Consultant shall not:
(i) perform any services for any person or entity competing directly with
the Company; or
(ii) directly or indirectly (other than for Company), sell or attempt to sell
any Nutraceuticals to any person or entity which has been a customer of the
Company during the Term, purchase or attempt to purchase (other than for
Consultant's personal use) any Nutraceuticals from any person or entity which
has been a vendor or supplier of Company during the Term, or use Consultant's
personal knowledge or influence in relation to any person or entity which has
at any time during such period been a customer, vendor, or supplier of
Company in order to compete with Company.
(b) During the Term and for two (2) years thereafter, Consultant shall not:
(i) directly or indirectly, induce or attempt to induce any employee,
consultant, independent contractor, advisor, or other service provider of the
Company to terminate such person's or entity's relationship with the Company;
(ii) directly or indirectly induce or attempt to induce any vendor, customer,
or supplier, or any other person having a business relationship with Company,
to terminate or adversely modify such person's or entity's relationship with
the Company.
9. MISCELLANEOUS
(a) Binding Effect. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and Company's successors or assigns and
the Consultant's heirs, executors and legal representatives, provided that
this Agreement is a personal services contract and may not be assigned by
Consultant without the prior written consent of Company.
(b) Publicity. Consultant shall not publicize or advertise in any manner
that Consultant is performing the Consulting Services hereunder, without the
prior written consent of Company. Consultant hereby grants to Company the
right to use Consultant's name, likeness, and relationship with Company in
and in connection with technical materials, various reports, brochures or
other documents produced by or on behalf of Company.
(c) Assignment. Consultant may not assign this Agreement or any of
Consultant's rights or delegate Consultant's duties under this Agreement
either in whole or in part, whether by operation of law or otherwise, without
the prior written consent of Company. Any attempted assignment or delegation
without such consent will be void and of no force and effect.
(d) Equitable Remedies. Because the Services are personal and unique and
because Consultant will have access to Confidential Information of Company,
Company will have the right to enforce this Agreement and any of its
provisions by injunction, specific performance or other equitable relief
without prejudice to any other rights and remedies that Company may have for
a breach of this Agreement.
(e) Attorneys' Fees. If any action is necessary to enforce the terms of
this Agreement, the substantially prevailing party will be entitled to
reasonable attorneys' fees, costs and expenses in addition to any other
relief to which such prevailing party may be entitled.
(f) Governing Law; Severability. This Agreement will be governed by and
construed in accordance with the laws of the State of Nevada excluding that
body of law pertaining to conflict of laws. If any provision of this
Agreement is for any reason found to be unenforceable, the remainder of this
Agreement will continue in full force and effect.
(g) Notices. All notices and demands between the parties hereto shall be in
writing and shall be served either by registered or certified mail, and such
notices or demands shall be deemed given and made forty-eight (48) hours
after the deposit thereof in the United States mail, postage prepaid,
addressed to the party to whom such notice or demand is to be given or made,
and the issuance of the registered receipt therefor. All notices and demands
to Consultant or the Company may be given to them at the following addresses:
If to Consultant: Xxxxx X. Xxxxx
000 Xxxxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
If to Company: Vital Living, Inc.
0000 X. Xxxxx Xx.
Xxxxx, XX 00000
(h) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(i) Captions. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
thereof.
(j) Modification. Any waiver, modification or amendment of any provision of
this Agreement will be effective only if in writing and signed by the parties
hereto.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written.
VITAL LIVING, INC., a Nevada corporation
/S/Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx, C.E.O.
Xxxxx X. Xxxxx
/S/Xxxxx X. Xxxxx
Exhibit A
WARRANT
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
LAW, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR ANY
APPLICABLE STATE SECURITIES LAWS. AS A CONDITION TO SALE OR OTHER TRANSFER
OF THE SECURITY, THE COMPANY MAY, AT ITS OPTION, REQUIRE THE PROPOSED
TRANSFEROR HEREOF TO DELIVER TO THE COMPANY AN OPINION OF COUNSEL, WHICH
OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRE FOR SUCH PROPOSED SALE
OR OTHER TRANSFER.
Warrant # W. - _____________
To Purchase 150,000 Shares of Common Stock ($0.001 par value)
March 20, 2002
VITAL LIVING, INC.
Incorporated Under the Laws of the State of Nevada
Warrant
1. Basic Terms. This certifies that the registered owner is entitled,
subject to the terms and conditions of this Warrant, at any time and from
time to time, in whole or in part, from the time set forth in Paragraph 3
below until the expiration date, to purchase 150,000 shares of the Common
Stock, par value $0.001 (the "Common Stock"), of Vital Living, Inc. (the
"Company") from the Company at the purchase price set forth in Paragraph 2
below, on delivery of this Warrant to the Company with the exercise form duly
executed and payment of the purchase price (in cash or by certified or bank
cashier's check payable to the order of the Company) for each share
purchased.
Registered Owner: XXXXX X. XXXXX
2. Purchase Price. The purchase price per share shall be $1.00.
3. Exercise of Warrants.
3.1 When Exercisable.
(a) At any time prior to the expiration of the five year period commencing
upon the date of this warrant (the "Expiration Date"), Holder shall have the
right to exercise this warrant to purchase in whole or in part the shares of
Common Stock which at the time of exercise are Vested Shares (as defined
below).
(b) Shares of Common Stock underlying this Warrant shall become "Vested
Shares" as follows: (a) upon execution of this Warrant, 8,334 shares of
Common Stock shall become Vested Shares, (b) so long as Holder is engaged by
the Corporation pursuant to the Consulting Agreement to which this Warrant is
an Exhibit (the "Consulting Agreement"), 8,334 shares of Common Stock shall
become Vested Shares on 15th day of each month commencing upon April 15, 2002
for 16 months, and (c) 8,322 shares shall become Vested Shares on August 15,
2003.
(c) Notwithstanding the provisions of Section 3.1(i), if Holder is
terminated by the Company other than for Cause (as defined in the Consulting
Agreement), or if Holder terminates its engagement pursuant to Section
3(a)(iii) of the Consulting Agreement, then the number of shares that are
Vested Shares at the time of such termination shall be that number of shares
that would have been Vested Shares had such termination occurred one year
after the actual date of termination.
3.2 Payment. Subject to compliance with the terms and conditions of
this Warrant and applicable securities laws, this Warrant may be exercised
according to the provisions set forth in Section 3.1 by the delivery
(including, without limitation, delivery by facsimile) of the form of Notice
of Exercise attached hereto as (the "Notice of Exercise"), duly executed by
the Holder, at the principal office of the Company, and as soon as
practicable after such date, surrendering
(i) this Warrant at the principal office of the Company, and
(ii) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder; or
(iii) by a combination of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the "Exercise
Amount").
3.3 "Easy Sale" Exercise. When, and if, the Company's Common Stock
is traded on the NASDAQ, AMEX, NYSE or like stock exchange with quantitative
and qualitative listing requirements, Holder may, in lieu of the payment
methods set forth in Section 3.2(ii) above, when permitted by law and
applicable regulations (including Nasdaq and NASD rules), pay the Purchase
Price through a "same day sale" commitment from the Holder (and if applicable
a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer")), whereby the Holder irrevocably elects to
exercise this Warrant and to sell a portion of the shares so purchased to pay
the Purchase Price and the Holder (or, if applicable, the NASD Dealer)
commits upon sale (or, in the case of the NASD Dealer, upon receipt) of such
shares to forward the Purchase Price directly to the Company.
3.4 Stock Certificates; Fractional Shares. As soon as practicable on
or after the date of any exercise of this Warrant, the Company shall issue
and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share equal to such fraction of the current Fair Market Value of one whole
share of Common Stock as of such date of exercise. No fractional shares or
scrip representing fractional shares shall be issued upon an exercise of this
Warrant.
3.5 Partial Exercise; Effective Date of Exercise. In case of any
partial exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor
and date for the balance of the shares of Common Stock purchasable hereunder.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided
above. The person entitled to receive the shares of Common Stock issuable
upon exercise of this Warrant shall be treated for all purposes as the holder
of record of such shares as of the close of business on the date the Holder
is deemed to have exercised this Warrant.
3.6 Termination of Purchase Right.
(i) For Cause. If the Holder is terminated by the Company for Cause (as
defined in the Consulting Agreement) the Holder shall have fifteen (15) days
to exercise and purchase all Vested Shares. Following the expiration of the
fifteen (15) day period this Warrant shall become null and void and the
Holder's right to acquire any shares of Common Stock pursuant to this Warrant
shall cease.
(ii) Termination other than for Cause. If the Holder's engagement with
the Company is terminated other than pursuant to a termination by the Company
for Cause (as defined in the Consulting Agreement) the Holder shall have the
right to purchase all of the Vested Shares at any time prior to and until the
Expiration Date.
4. Company's Covenants as to Common Stock. Shares deliverable on the
exercise of this Warrant shall, at delivery, be fully paid and non-
assessable, free from taxes, liens, and charges with respect to their
purchase. The Company shall take any necessary steps to assure that the par
value per share of the Common Stock issuable hereunder is at all times equal
to or less than the then current Warrant purchase price per share of the
Common Stock issuable pursuant to this Warrant. The Company shall at all
times reserve and hold available sufficient shares of Common Stock to satisfy
all conversion and purchase rights of all outstanding convertible securities,
options, and warrants, including, without limitation, this Warrant.
5. Method of Exercise. The purchase rights represented by this Warrant
are exercisable at the option of the registered owner in whole at any time,
or in part, from time to time, within the period above specified. In case of
the exercise of this Warrant for less than all shares purchasable, the
Company shall cancel the Warrant and execute and deliver a new Warrant of
like tenor and date for the balance of the shares purchasable.
6. Limited Rights of Owner. This Warrant does not entitle the owner to
any voting rights or other rights as a shareholder of the Company, or to any
other rights whatsoever except the rights herein expressed. No dividends are
payable or will accrue on this Warrant or the shares purchasable hereunder
until, and except to the extent that, this Warrant is exercised.
7. Exchange or Other Denominations. This Warrant is exchangeable, on
its surrender by the registered owner to the Company, for new Warrants of
like tenor and date representing in the aggregate the right to purchase the
number of shares purchasable hereunder in denominations designated by the
registered owner at the time of surrender.
8. Transfer. Except as otherwise above provided, this Warrant is
transferable only on the books of the Company by the registered owner in
person or by attorney, on surrender of this Warrant, properly endorsed.
9. Recognition of Registered Owner. Prior to due presentment for
registration of transfer of this Warrant, the Company may treat the
registered owner as the person exclusively entitled to receive notices and
otherwise to exercise rights hereunder.
10. Effect of Stock Split, etc. If the Company, by stock split, stock
dividend, reverse split, reclassification of shares, or otherwise, changes as
a whole the outstanding Common Stock into a different number or class of
shares, then: (1) the number and/or class of shares as so changed shall, for
the purposes of this Warrant, replace the shares outstanding immediately
prior to the change; and (2) the Warrant purchase price in effect, and the
number of shares purchasable under this Warrant, immediately prior to the
date upon which the change becomes effective, shall be proportionately
adjusted (the price to the nearest cent). Irrespective of any adjustment or
change in the Warrant purchase price or the number of shares purchasable
under this or any other Warrant of like tenor, the Warrants therefore and
thereafter issued may continue to express the Warrant purchase price per
share and the number of shares purchasable as the Warrant purchase price per
share and the number of share purchasable were expressed in the Warrant when
initially issued.
11. Effect of Merger, etc. If the Company consolidates with or merges
into another corporation, the registered owner shall thereafter be entitled,
upon exercise of this Warrant, to purchase, with respect to each share of
Common Stock purchasable hereunder immediately before the consolidation or
merger becomes effective, the securities or other consideration to which a
holder of one share of Common Stock is entitled in the consolidation or
merger without any change in or payment in addition to the Warrant purchase
price in effect immediately prior to the merger or consolidation. The
Company shall take any necessary steps in connection with a consolidation or
merger to assure that all the provisions of this Warrant shall thereafter be
applicable, as nearly as reasonably may be, to any securities or other
consideration so deliverable on exercise of this Warrant. The Company shall
not consolidate or merge unless, prior to consummation, the successor
corporation (if other than the Company) assumes the obligations of this
paragraph by written instrument executed and mailed to the registered owner
at the address of the owner on the books of the Company. A sale or lease of
all or substantially all the assets of the Company for a consideration (apart
from the assumption of obligations) consisting primarily of securities is a
consolidation or merger for the foregoing purposes.
12. Notice of Adjustment. On the happening of an event requiring an
adjustment of the Warrant purchase price or the shares purchasable hereunder,
the Company shall forthwith give written notice to the registered owner
stating the adjusted Warrant purchase price and the adjusted number and kind
of securities or other property purchasable hereunder resulting from the
event and setting forth reasonable detail of the method of calculation and
the facts upon which the calculation is based. The Board of Directors of the
Company, acting in good faith, shall determine the calculation.
13. Notice and Effect of Dissolution, etc. In case a voluntary or
involuntary dissolution, liquidation, or winding up of the Company (other
than a connection with a consolidation or merger covered by Paragraph 11
above) is at any time proposed, the Company shall give at least 30 days'
prior written notice to the registered owner. Such notice shall contain:
(1) the date on which the transaction is to take place; (2) the record date
(which shall be at least 30 days after the giving of the notice) as of which
holders of Common Stock will be entitled to receive distributions as a result
of the transaction: (3) a brief description of the transaction; (4) a brief
description of the distributions made to holders of Common Stock as a result
of the transaction and (5) an estimate of the fair value of the
distributions. On the date of the transaction, if it actually occurs, this
Warrant and all rights hereunder shall terminate.
14. Registration of Common Stock. Neither this Warrant nor the shares
of Common Stock issuable upon exercise hereof, have been registered under the
Securities Act of 1933, as amended. The initial Holder hereof has delivered
to Vital Living, Inc. a written statement to the effect that he is purchasing
this Warrant for his own account for investment and not with a view to or for
sale in connection with any distribution thereof except in conformity with
the provisions of the Securities Act of 1933, as amended, and the Rules and
Regulations promulgated thereunder, and applicable state securities laws, and
has further agreed that this Warrant may also state that it may not be sold
or transferred in the absence of an effective registration statement under
the Securities Act of 1933, and applicable state securities laws, or an
opinion of counsel which opinion shall be satisfactory to Vital Living, Inc.
to the effect that there is an exemption therefrom. In addition, the initial
Holder hereto agrees to deliver to Vital Living, Inc. a similar written
statement with respect to any shares of Common Stock purchased upon the
conversion of this Warrant unless such shares have at the time of issuance
been registered under the Securities Act of 1933, as amended, and applicable
state securities laws.
15. Method of Giving Notice; Extent Required. Notices shall be given
by first class mail, postage prepaid, addressed to the registered owner at
the address of the owner appearing in the records of the Company.
16. Registration Rights. All shares of Common Stock issued upon exercise
of this Warrant shall be "Registrable Securities" or such other definition of
securities entitled to registration rights pursuant to Exhibit A of this
Warrant, the terms of which are hereby incorporated by reference.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written..
VITAL LIVING, INC.
By: /S/Xxxx X. Xxxxx
Xxxx X. Xxxxx, CEO
XXXXX X. XXXXX
/S/Xxxxx X. Xxxxx
Exercise Form
(To be executed by the registered owner to purchase
Common Stock pursuant to the Warrant)
To: Vital Living, Inc.
0000 Xxxxx Xxxxx Xxxx
Xxxxx, XX 00000
The undersigned hereby: (1) irrevocably subscribed for ___________ shares of
your Common Stock pursuant to this Warrant, and encloses payment of
$_____________ therefor, (2) requests that a certificate for the shares be
issued in the name of the undersigned and delivered to the undersigned at the
address below; and (3) if such number of shares is not all of the shares
purchasable hereunder, that a new Warrant of like tenor for the balance of
the remaining shares purchasable hereunder be issued in the name of the
undersigned and delivered to the undersigned at the address below.
Date: _____________________
Signature: _________________________________________________________
(Please sign exactly as name appears on Warrant)
Printed Name: _________________________________________________________
Address: _________________________________________________________
_________________________________________________________
Taxpayer ID No.:_________________________________________________________
ASSIGNMENT FORM
(To be executed by the registered owner to transfer the Warrant)
For value received the undersigned hereby sells, assigns, and transfers
to:
Name ___________________________________________________________
Address ___________________________________________________________
___________________________________________________________
this Warrant irrevocably appoints ________________________ attorney (with
full power of substitution) to transfer this Warrant on the books of the
Company.
Date: ___________________________
__________________________________________________________
(Please sign exactly as name appears on Warrant)
Taxpayer ID No. ___________________
In the presence of _______________________
Signature guaranteed by:
______________________________________
EXHIBIT A TO WARRANT
1. DEFINITIONS.
CAPITALIZED TERMS NOT DEFINED IN THIS EXHIBIT A SHALL HAVE THE MEANING
SET FORTH IN THE WARRANT (THE "WARRANT") TO WHICH THIS EXHIBIT IS ATTACHED.
FOR PURPOSES OF THIS EXHIBIT A:
(a) Effective Date. The term "Effective Date" shall mean the date that the
Warrant first becomes exercisable.
(b) Holder. The term "Holder" shall mean Xxxxx Xxxxx.
(c) Registration. The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended, (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement.
(d) Registrable Securities. The term "Registrable Securities" means: (1)
any Common Stock of the Company issued or to be issued upon exercise of the
Warrant and (2) any shares of Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, any shares of Common Stock
described in clause (1) of this paragraph. Notwithstanding the foregoing,
"Registrable Securities" shall exclude any Registrable Securities sold by a
person in a transaction in which rights under this Exhibit A are not assigned
in accordance with this Agreement.
(e) Registrable Securities Then Outstanding. The number of shares of
"Registrable Securities then outstanding" shall mean the number of shares of
Common Stock of the Company that are Registrable Securities and (l) are then
issued and outstanding or (2) are then issuable pursuant to an exercise of
the Warrant or pursuant to conversion of securities issuable pursuant to an
exercise of the Warrant.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities and
Exchange Commission.
2. PIGGYBACK REGISTRATIONS.
(a) The Company shall notify all Holders of Registrable Securities in
writing at least ten (10) days prior to filing any registration statement
under the Securities Act for purposes of effecting a public offering of
securities of the Company that will include shares of Common Stock that is
then held by officers, directors or 10% or more beneficial owners of the
Company's Common Stock (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company,
including registration statements relating to any employee benefit plan filed
on Form S-8, but excluding any registration statements relating to any
corporate reorganization filed on Form S-4) and will afford each such Holder
an opportunity to include in such registration statement all or any part of
the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall within ten (10) days after receipt of
the above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such registration
statement. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company,
such Holder shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth
herein.
(b) Underwriting. If a registration statement under which the Company gives
notice under this Section 2 is for an underwritten offering, and
notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall
include in such offering at least that number of Holder's Registrable
Securities that is equal to the product of (a) the number of Holder's
Registrable Securities with respect to which Holder has requested
registration pursuant to the notice provisions described in Section 2.1; and
(b) a fraction (i) the numerator of which is equal to the number of shares
that the underwriter(s) determine(s) it can underwrite and (ii) the
denominator of which is the number of other shares of Common Stock of the
Company requested to be included by the Company and other investors having
written registration rights agreements with the Company respecting such
shares ("Other Registrable Securities"). If Holder disapproves of the terms
of any such underwriting, Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter(s), delivered at least ten (10)
business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.
(c) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 2 (excluding underwriters' and brokers' discounts
and commissions relating to shares sold by the Holders), including, without
limitation all federal and "blue sky" registration, filing and qualification
fees, printers' and accounting fees, and fees and disbursements of counsel
for the Company and Holder, shall be borne by the Company.
(d) No Limit on Registrations. Except as otherwise provided herein, there
shall be no limit on the number of times the Holders may request registration
of Registrable Securities under this Section 2.
3. DEMAND REGISTRATIONS.
(a) At any time after the earlier of (a) February 15, 2003, or (b) such time
as the Company's Common Stock is traded on the NASDAQ, AMEX, NYSE or like
stock exchange with quantitative and qualitative listing requirements, the
Holder may request that the Company register any Registrable Securities. The
Holder shall be entitled to one (1) such demand registration per twelve (12)
month period (i.e. all registrations must be at least 12 months plus one day
apart). The Holder shall have the right to demand that the Company satisfy
its obligations pursuant to this Section 3 by use of the SEC's Form S-8, or
any successor form thereto, subject to applicable law, or such other SEC
registration statement form as Holder may choose to request, including Form S-
3 or any successor form thereto, or if Form S-3 is not available, Form S-1 or
Form S-2, or any successor form thereto. Holder shall notify the Company in
writing that it intends to offer or cause to be offered for public sale all
or any portion of the Registrable Shares, and within ten (10) days of the
receipt after such notice.
(b) Upon written request of Holder the Company will use its best efforts to
cause all or any part of the Registrable Securities that may be requested by
Holder to be registered under the Securities Act as expeditiously as
possible.
(c) If Holder intends to distribute the Registrable Securities covered by
its request by means of an underwriting, it shall so advise the Company as
part of its request.
(d) Notwithstanding the foregoing, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 3: (i) if the Company shall furnish to Holder a certificate signed
by the President of the Company stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such registration statement to be
effected at such time, and that it is essential to the Company to defer the
filing, in which event the Company shall have the right to defer the filing
of the 3 registration statement for a period of not more than 120 days after
receipt of the request of the Holder under this Section 3; provided, however
that the Company shall not utilize this right more than once in any 12 month
period; or (ii) during the period starting with the date 60 days prior to the
Company's good faith estimate of filing of, and ending on a date 180 days
after the effective date of, a registration statement filed under the
Securities Act (other than a registration relating solely to the sale of
securities to participants in a Company stock plan).
4. OBLIGATIONS OF THE COMPANY. WHENEVER REQUIRED TO EFFECT THE REGISTRATION
OF ANY REGISTRABLE SECURITIES UNDER THIS AGREEMENT THE COMPANY SHALL, AS
EXPEDITIOUSLY AS POSSIBLE:
(a) Registration Statement. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective, provided,
however, that the Company shall not be required to keep any such registration
statement effective for more than one (1) year.
(b) Amendments and Supplements. Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) Underwriting. In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement in usual and
customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances then existing.
Opinion and Comfort Letter. Furnish, at the request of any Holder
requesting registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities, and (ii) a "comfort" letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities. If such securities are
not being sold through underwriters, then the Company shall furnish, at the
request and at the sole expense of any Holder requesting registration of
Registrable Securities, on the date that the registration statement with
respect to such securities becomes effective, an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
5. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to effect the Registration of their Registrable
Securities that the selling Holder shall furnish to the Company such
information regarding himself, the Registrable Securities held by him, and
the intended method of disposition of such securities as shall be required to
timely effect the Registration of their Registrable Securities.
6. INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Section 2:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors
of each Holder, any underwriter (as determined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of
1934, as amended, (the "1934 Act"), against any losses, claims, damages, or
Liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not misleading, or
(iii) any violation or alleged violation by the Company of the Securities
Act, the 1934 Act, any federal or state securities law or any rule or
regulation promulgated under the Securities Act, the 1934 Act or any federal
or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 6.1 shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by such Holder, partner, officer, director, underwriter or controlling person
of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or
any person who controls such Holder within the meaning of the Securities Act
or the 1934 Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, partner or director, officer or
controlling person of such other Holder may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, partner,
officer, director or controlling person of such other Holder in connection
with investigating or defending any such loss, claim, damage, liability or
action: provided, however, that the indemnity agreement contained in this
Section 6.2 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld; and
provided, further, that the total amounts payable in indemnity by a Holder
under this Section 6.2 in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential conflict of interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of liability to the indemnified
party under this Section 6 to the extent the indemnifying party is prejudiced
as a result thereof, but the omission so to deliver written notice to the
indemnified party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 6.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that,
insofar as they relate to any Violation made in a preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(e) Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i)
any Holder exercising rights under this Agreement, or any controlling person
of any such Holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this Section 6
provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any such selling Holder or any
such controlling person in circumstances for which indemnification is
provided under this Section 6; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion
represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold
under such registration statement, and the Company and other selling Holders
are responsible for the remaining portion; provided, however, that, in any
such case: (A) no such Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(f) Survival. The obligations of the Company and Holders under this
Section 6 shall survive until the fifth anniversary of the completion of any
offering of Registrable Securities in a registration statement, regardless of
the expiration of any statutes of limitation or extensions of such statutes.
7. TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
obligations pursuant to Section 2 with respect to any Registrable Securities
proposed to be sold by a Holder in a registration pursuant to Section 2 more
than five (5) years after the date of this Agreement.
8. Covenant. The Company hereby covenants to the Holder that at all times
subsequent to the date of the Warrant, it shall file in a timely manner
consistent with the requirements of the Securities Exchange Act of 1934, as
amended (the "34 Act") all reports and other materials required to be filed
pursuant to the 34 Act.
