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EXHIBIT 6.5
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement"), made and entered into as of
the 5th day of November, 1999 by and between VITAL LIVING PRODUCTS, INC., a
Delaware corporation (the "Company"), and C. XXXXXX XXXXXX ("Xxxxxx")
WITNESSETH:
WHEREAS, Xxxxxx has from time to time extended credit to the Company in
the form of loans, advances, and forbearances, and has also leased equipment to
the Company; and
WHEREAS, as of June 30, 1999, the total indebtedness of the Company to
Xxxxxx for money borrowed and for the accrued and unpaid amounts due under
equipment leases to the Company was $5,077,779.00, and as of such date Xxxxxx
agreed to forgive an aggregate amount of $2,042,244.00 of such total
indebtedness in consideration of the Company's acknowledging its obligation to
pay the remaining $3,035,535.00 and issuing its promissory note in such
remaining principal amount dated June 30, 1999 (the "Note"); and
WHEREAS, Xxxxxx has agreed to exchange the Note, including all interest
accrued thereon, together with the items of equipment listed Schedule 1 to the
Xxxx of Sale in the form attached hereto as Exhibit A (the "Equipment"), which
Equipment the parties have agreed has a value of $93,467.00, for an aggregate of
31,290 shares of a new series of the Company's Class B Preferred Stock,
designated as Series B, Class B Preferred Stock (the "Series B Shares"), which
Series B Shares shall have the terms set forth in a Certificate of Designation
in substantially the form of Exhibit B hereto, with only such changes to which
Xxxxxx and the Company may mutually agree (the "Certificate of Designation");
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. EXCHANGE OF INDEBTEDNESS AND EQUIPMENT FOR SERIES B SHARES. At the Closing
(hereinafter defined), (a) the Company shall issue to Xxxxxx 31,290 of the
Series B Shares in exchange for the Note and the Equipment, and (b) Xxxxxx
shall surrender the Note to the Company for cancellation and convey the
Equipment to the Company in exchange for the issuance to Xxxxxx of such
31,290 Series B Shares. To effect such exchange, the Company shall deliver
to Xxxxxx a certificate or certificates for the 31,290 Series B Shares and
Xxxxxx shall execute and deliver the Xxxx of Sale in the form of Exhibit A
hereto (the "Xxxx of Sale") and possession and control of the Equipment to
the Company and shall surrender the Note to the Company for cancellation.
2. CLOSING. The consummation of the exchange described in Section 1 above (the
"Closing") shall occur at the Company's principal offices at 10:00 a.m.,
local time, on November 5, 1999, or at such other time and place as the
parties may mutually agree. The obligations of
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the respective parties to complete such exchange are conditioned upon (a)
the accuracy, as of the time of the Closing, of the other party's
representations and warranties, (b) the performance in all material
respects by the other party of such other party's obligations hereunder to
be performed at or prior to the Closing, (c) the approval of this Agreement
and the Certificate of Designation by the Company's Board of Directors, (d)
the filing of the Certificate of Designation with the Delaware Secretary of
State, (e) there not having occurred any loss of or damage to the Equipment
that materially effects its value (other than loss or damage for which the
Company is responsible), and (f) the absence of any litigation or other
judicial, administrative, regulatory or other proceedings seeking to enjoin
such exchange or seeking damages from either party or, in the case of the
Company, its directors or officers, in connection therewith. If the Closing
does not occur on or before December 1, 1999 because the necessary
conditions have not been met, then either party may terminate this
Agreement unless the reason such conditions have not been met is a breach
by such party of such party's representations, warranties or obligations
under this Agreement.
3. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to
Xxxxxx that the Series B Shares, when issued at the Closing, will be duly
and validly authorized and issued, fully paid and nonassessable, will have
the terms set forth in the Certificate of Designation, and will be issued
free and clear of any and all liens, encumbrances and adverse claims, other
than restrictions on transfer imposed by applicable securities laws.
4. REPRESENTATIONS OF XXXXXX. Xxxxxx represents and warrants to the Company
that: (a) good and valid title to the Equipment will be conveyed to the
Company at the Closing, free and clear of any and all liens, encumbrances
and adverse claims; (b) he is the current holder of the Note, and the
surrender of the Note to the Company for cancellation at the Closing shall
extinguish the Company's obligations under the Note; and (c) he is familiar
with the business and affairs and condition, financial and otherwise of the
Company, is acquiring the Series B Shares (and any shares of the Company's
Common Stock into which such Series B Shares are convertible) for purposes
of investment, and understands that such shares have not been registered
under the federal Securities Act of 1933 or any state securities laws, that
the transferability thereof is restricted and such shares may be required
to be held by him indefinitely, and hereby agrees that the certificates for
such shares may bear an appropriate legend to such effect, restricting the
transfer thereof in the absence of registration under such laws or the
availability of an applicable exemption therefrom, as proven to the
reasonable satisfaction of the Company.
5. REASONABLE EFFORTS AND FURTHER ASSURANCES. Each of the parties shall use
commercially reasonable efforts to cause all of the conditions to the
Closing to be met as soon as practicable, to the extent within such party's
control, and shall provide to the other party, at such other party's
reasonable request, such further instruments, proofs, evidence and other
assurances as such other party may reasonably request in order to effect or
evidence the exchange described herein.
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IN WITNESS WHEREOF, the Company and Xxxxxx have duly executed this
Agreement, effective as of the day and year first above written.
VITAL LIVING PRODUCTS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
Title: President
/s/ C. Xxxxxx Xxxxxx
C. Xxxxxx Xxxxxx
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EXHIBIT A
XXXX OF SALE
FOR VALUE RECEIVED, C. XXXXXX XXXXXX ("Seller") hereby bargains, sells,
conveys, transfers, sets over and assigns unto VITAL LIVING PRODUCTS, INC.
("Purchaser") all of the items of machinery and equipment described on Schedule
1 hereto (the "Equipment").
Seller represents and warrants to Purchaser that Seller has good and
valid title to the Equipment and full power and authority to sell the Equipment
to Purchaser hereby, and that Seller is hereby transferring to Purchaser good
and valid title to the Equipment free and clear of any and all liens and
encumbrances. Except as stated in the preceding sentence, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES AS TO THE EQUIPMENT, EXPRESS OR IMPLIED, AND
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR
ANY PARTICULAR PURPOSE OR OTHERWISE. The Equipment is sold "AS IS, WHERE IS."
Made and delivered in the State of North Carolina, this 5th day of
November, 1999.
/s/ C. Xxxxxx Xxxxxx [SEAL]
C. Xxxxxx Xxxxxx
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SCHEDULE 1
Description of Equipment
1. All Water Vending and All Mount Units
2. All Puritron Water Treatment Units
3. All Water Cooler Units
4. Four (4) 1995 Chevrolet Vans Model CG 113
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EXHIBIT B
VITAL LIVING PRODUCTS, INC.
CERTIFICATE OF DESIGNATION
OF SERIES B, CLASS B PREFERRED STOCK
SETTING FORTH THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF SUCH SERIES OF CLASS B PREFERRED STOCK
VITAL LIVING PRODUCTS, INC., a Delaware corporation (this
"Corporation"), hereby certifies that pursuant to the authority contained in
Article 4 of its Certificate of Incorporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, (a) this Corporation has the authority to issue 1,000,000 shares of
Class B Preferred Stock, (b) the Board of Directors of this Corporation has the
authority to issue any or all of said shares in one or more series and by
resolution provide for the designation of each series to be issued pursuant to
the foregoing authority and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and other qualifications, limitations and restrictions thereof, and (c) the
Board of Directors has adopted the following resolution creating a series of its
Class B Preferred Stock to be designated Series B, Class B Preferred Stock:
RESOLVED, that a series of the authorized Class B Preferred Stock of
this Corporation be and hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and other qualifications,
limitations and restrictions thereof are as follows:
SECTION 1. DESIGNATION AND AMOUNT; PAR VALUE
The shares of such series shall be designated as Series B, Class B
Preferred Stock (the "Series B Shares") and the number of shares constituting
such series shall be 31,290. The par value of each share of such series shall be
$.01.
SECTION 2. DIVIDENDS
This Corporation shall be authorized to pay dividends to the holders of
the Series B Shares, from any lawful source therefor, when, as and if declared
by the Board of Directors, in preference (as herein provided) to the payment of
dividends on the common stock of this Corporation (the "Common Stock") and the
Class A preferred stock of this Corporation (the "Class A Preferred Stock")
(which has no dividend rights except as to liquidating distributions) and any
other shares of any other class or series of preferred stock of this Corporation
hereafter created which is by its terms expressly made junior and subordinate to
the Series B Shares as to the payment of dividends (referred to in this Section
2 as "Other Junior Preferred Stock"), but junior and subordinate to the payment
of preferential dividends to the holders of Series A, Class B Preferred Stock
(the "Series A Shares"), or any other shares of any other class or series of
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preferred stock of this Corporation hereafter created which is not by its terms
expressly made junior and subordinate to the Series B Shares as to the payment
of dividends (referred to in this Section 2 as "Other Senior Preferred Stock").
The amount of such dividends paid on the Series B Shares in any one calendar
year shall not be greater than $12.00 per share, and such dividends shall not be
cumulative so that accrued and unpaid dividends on the Series B Shares for any
calendar year shall not be payable in a subsequent calendar year. No dividends
may be paid an the Series B Shares unless and until all accrued and unpaid
dividends on the Series A Shares and any Other Senior Preferred Stock to which
the holders thereof shall be entitled shall have been paid in full. No dividends
may be paid on the Common Stock or any Other Junior Preferred Stock in any
calendar year unless and until dividends on the Series B Shares in the amount of
$12.00 per share shall have first been paid during such calendar year.
SECTION 3. LIQUIDATION RIGHTS
As to liquidation rights, the Series B Shares shall rank senior, as
herein provided, to the Common Stock and the Class A Preferred Stock and to any
other shares of any other class or series of preferred stock of this Corporation
hereafter created which is by its terms expressly made junior and subordinate to
the Series B Shares as to liquidation rights (referred to in this Section 3 as
"Other Junior Preferred Stock"), and shall rank junior and subordinate, as
herein provided, to the Series A Shares and to any other shares of any other
class or series of preferred stock of this Corporation hereafter created which
is not by its terms expressly made junior and subordinate to the Series B Shares
as to the liquidation rights (referred to in this Section 3 as "Other Senior
Preferred Stock"). In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of this Corporation, before any payment
or distribution shall be made to the holders of any shares of the Common Stock,
the Class A Preferred Stock or any Other Junior Preferred Stock, but after all
payments and distributions required to be made to the holders of the Series A
Shares and any Other Senior Preferred Stock in accordance with their respective
liquidation rights, the holders of the Series B Shares shall be entitled to
receive an amount equal to $10.00 per share. After the payment or the setting
apart for payment of amounts so payable to the holders of the Series B Shares,
the remaining assets of this corporation shall be available for distribution to
the holders of shares of the Common Stock, the Class A Preferred Stock and any
Other Junior Preferred Stock in accordance with their respective liquidation
preferences. If the assets or surplus funds to be distributed to the holders of
the Series B Shares are insufficient to permit the payment to such holders of
the full amounts to which they are entitled, the assets and surplus funds
available for such distribution shall be distributed pro-rata to the holders of
the Series B Shares.
SECTION 4. VOTING RIGHTS
The holders of Series B Shares shall not be entitled to vote, except to
the extent otherwise required by the Delaware General Corporation Law.
SECTION 5. REDEMPTION
(a) This Corporation may at any time and from time to time redeem all
or a portion of the outstanding Series B Shares at the redemption price of
$100.00 per share (the "Redemption
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Price"), provided that this Corporation has paid all of the declared dividends
corresponding to the Shares being redeemed (the "Redemption Shares"). This
Corporation shall provide notice of any redemption pursuant to Section 5 hereof
specifying the date (the "Redemption Date") and the place of redemption, by
first class or registered mail, postage prepaid, to each holder of Series B
Shares at the address for such holder last shown on the records of this
Corporation, not more than 60 nor less than 5 days before the applicable
Redemption Date. The notice shall specify the number of shares that are to be
redeemed. Upon mailing of any such notice of redemption, this Corporation shall
become obligated an the applicable Redemption Date to carry out the redemption
specified in such notice. If less than all of the Series B Shares are to be
redeemed, such redemption shall be made from the respective holders thereof on a
pro rata basis, and the Board of Directors may fix a record date for purposes of
determining such proration and the particular shares to be redeemed. If less
than all of the Series B Shares represented by any certificate are redeemed in
any redemption, this corporation shall, at its own expense and upon the
surrender of such certificate, issue to the holder thereof a new certificate
representing such holder's unredeemed shares.
(b) No Series B Shares designated for redemption pursuant to any notice
of redemption shall be entitled to any dividends declared after the applicable
Redemption Date. All rights of the holders of Redemption Shares as stockholders
of this Corporation by reason of the ownership of Redemption Shares shall cease
as of the date on which written notice of redemption has been sent to holders
thereof and a sum sufficient to redeem the Redemption Shares has been
irrevocably deposited or set aside to pay the Redemption Price to the holders of
the Redemption Shares upon surrender of the certificate therefor, except the
night to receive the Redemption Price of such shares upon presentation and
surrender of the certificate representing such shares. No Redemption Shares
shall be deemed to be outstanding after the Redemption Date.
SECTION 6. CONVERSION
(a) Holders of Series B Shares are entitled to convert such shares
commencing one year from the issuance thereof into shares of Common Stock at the
rate of 50 shares of Common Stock for each Series B Share so converted (the
"Conversion Rate"), such Conversion Rate to be subject to adjustment as follows:
(1) Stock Dividends, Subdivisions, Combinations. If this
Corporation shall at any time (i) take a record of the holders
of its Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of,
Common Stock; (ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or (iii)
combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, the Conversion Rate shall be
adjusted so that each Series B Share issued and outstanding on
the date thereof shall thereafter be convertible into the
number of shares of Common Stock which the holder of such
Series B Shares would have been entitled to receive after the
happening of such event had
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such Series B Shares been so converted immediately prior to
the happening of such event. An adjustment made pursuant to
this Subparagraph 6(a)(1) shall become effective retroactively
to the record date in the case of a dividend and shall become
effective on the effective date in the case of a subdivision
or combination.
(2) Reorganization or Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of
this Corporation, each Series B Share issued and outstanding
on the date thereof shall thereafter be convertible into the
number of shares of stock or other securities or property that
would have been receivable with respect to the shares of
Common Stock into which the Series B Shares were convertible
immediately prior to such capital reorganization or
reclassification of capital stock; and, in any case,
appropriate adjustment (as reasonably determined in good faith
by the Board of Directors) shall be made in application of the
provisions herein set forth with respect to the rights and
interests there after of the holders of the Series B Shares to
the end that the provisions set forth herein (including any
adjustments of the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or other property
thereafter deliverable upon the conversion of the Series B
Shares.
(b) If any holder of outstanding Series B Shares shall elect to convert
any Series B Shares as described in Section 6(a), such holder shall notify this
Corporation in writing, which writing (the "Conversion Notice") shall be duly
signed by or on behalf of such holder, shall specify the number of Series B
Shares being so converted, shall be accompanied by the certificate or
certificates for the Series B Shares being so converted, and such conversion
shall be effective upon receipt by this Corporation of such Conversion Notice
and certificate or certificates. As soon as practicable after such conversion,
this Corporation shall issue or cause to be issued, at its own expense, a
certificate or certificates representing the shares of Common Stock issuable
upon the conversion, and, if less than all the shares represented by any
tendered certificates are converted, shall issue a new certificate representing
the unconverted Series B Shares.
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IN WITNESS WHEREOF, VITAL LIVING PRODUCTS, INC., has caused this
Certificate of Designation to be executed by its President and attested to by
its Secretary this 5th day of November, 1999.
VITAL LIVING PRODUCTS, INC.
/s/ Xxxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxxxxxxx, President
ATTEST:
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx, Secretary
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