EXHIBIT 10.24
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") executed as of this 4th day of
April, 2002, is made by and between Xxxxxx 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 in developing a brand identity and marketing strategy
for Company products, including the identifying, developing and assessing of
distribution channels and formulating a Company identity and message to be
communicated to investors, physicians, researchers, patients, and other
constituencies.
(iii) Assist in the design, development and implementation of a
lifestyle and compliance program.
(iv) Assist the Company in identifying and assessing
opportunities for capital formation.
(v) Agree to serve as a member of the Company's Board of
Directors, which shall be subject to shareholder election each year at the
Company's annual shareholder meeting.
(vi) Appear at and participate in medical conferences, meetings,
conference calls, or other corporate promotional functions.
(vii) Perform such additional services as the Company and
Consultant may agree upon.
1
(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 once a 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 three (3) 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
2
(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.
3
(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
4
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
5
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.
6
(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: Xxxxxx Xxxxx
---------------------
---------------------
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.
7
[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
------------------------------------
Xxxxxxx X. Xxxxx, C.E.O.
XXXXXX XXXXX
------------------------------------
8
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 500,000 Shares of Common Stock ($0.001 par value)
April 4, 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 500,000 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: XXXXXX XXXXX
2. Purchase Price. The purchase price per share shall be $1.50.
9
3. Exercise of Warrants.
3.1 When Exercisable. 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.
3.2 Payment. Subject to compliance with the terms and conditions of
this Warrant and applicable securities laws, this Warrant may be exercised 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
10
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 shares of Common Stock. 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 shares of Common Stock 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.
11
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
12
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]
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written..
VITAL LIVING, INC.
By:
--------------------------------
Xxxx X. Xxxxx, CEO
XXXXXX XXXXX
--------------------------------
14
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.:
---------------------------------------------------------
15
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:
--------------------------------------
16
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 Xxxxxx 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
17
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) April 1, 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
18
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
19
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:
20
(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
21
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
22
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.
23
