EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of November 20, 2002 (this
"AGREEMENT"), between Vital Living, Inc., located at ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (the "COMPANY"), and those persons listed on
Exhibit A (each individually, an "INVESTOR", and collectively, the "INVESTORS").
WHEREAS, upon the terms and subject to the conditions of the
Subscription Agreements with each Investor (individually, a "SUBSCRIPTION
AGREEMENT", and collectively, the "SUBSCRIPTION AGREEMENTS"), the Company has
agreed to issue and sell to the Investors and the Investors have agreed to
purchase the shares of the Company's Common Stock (the "SHARES") and the Series
B Common Stock Purchase Warrants and the Series C Common Stock Purchase Warrants
(collectively, the "WARRANTS") set forth opposite their names on Exhibit A, all
as more fully described in that certain Confidential Private Placement
Memorandum, dated October 23, 2002 and as supplemented by that certain
Supplemented, dated as of November 8, 2002 (collectively, the "Memorandum"); and
WHEREAS, to induce the Investors to execute and deliver the
Subscription Agreements, the Company has agreed to provide, with respect to the
Shares and the shares of the Company's Common Stock to be issued upon exercise
of the Warrants (the "WARRANT SHARES" and together with the Shares, the
"REGISTRABLE SECURITIES"), certain registration rights under the Securities Act;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND THE MUTUAL
COVENANTS CONTAINED HEREIN, THE PARTIES HERETO, INTENDING TO BE LEGALLY BOUND,
HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
(a) As used in this Agreement, the following terms shall have
the meanings:
(i) "AFFILIATE," of any specified Person means any other
Person who directly, or indirectly through one or more intermediaries,
is in control of, is controlled by, or is under common control with,
such specified Person. For purposes of this definition, control of a
Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether by
contract, securities, ownership or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have the respective meanings correlative
to the foregoing.
(ii) "INITIAL CLOSING DATE" shall have the meaning set
forth in the Memorandum.
(iii) "COMMISSION" means the Securities and Exchange
Commission.
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(iv) "EFFECTIVE DATE" means the date the Registration
Statement is first declared effective by the Commission.
(v) "EFFECTIVENESS PERIOD" shall be the period five years
after the Registration Statement is declared effective under the
Securities Act or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold
without any restriction pursuant to Rule 144 as determined by the
counsel to the Company pursuant to a written opinion letter, addressed
to the Company's transfer agent to such effect.
(vi) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(vii) "PERSON" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(viii) "PROSPECTUS" means the prospectus (including,
without limitation, any preliminary prospectus and any final prospectus
filed pursuant to Rule 424(b) under the Securities Act, including any
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in
reliance on Rule 430A under the Securities Act) included in the
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement and by
all other amendments and supplements to such prospectus, including all
material incorporated by reference in such prospectus and all documents
filed after the date of such prospectus by the Company under the
Exchange Act and incorporated by reference therein.
(ix) "REGISTRATION STATEMENT" means a registration
statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including the
Prospectus contained therein and forming a part thereof, any amendments
to such registration statement and supplements to such Prospectus, and
all exhibits and other material incorporated by reference in such
registration statement and Prospectus.
(x) "RESTRICTED SECURITY" means any share of Common Stock
issued pursuant to the terms of the Subscription Agreement or exercise
of the Warrants except any such share of Common Stock that (i) has been
registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the prospectus
included in such registration statement, (ii) has been transferred in
compliance with the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto) or is transferable pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto), or (iii) otherwise has been transferred
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and a new share of Common Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the
Company.
(xi) "SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or
any similar successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Subscription Agreement.
2. REGISTRATION
(a) FILING AND EFFECTIVENESS OF REGISTRATION STATEMENT. The Company
shall prepare and file with the Commission not later than 30 days after the
Initial Closing Date, and in no event later than December 20, 2002 (the "FILING
DATE"), a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 120 days after the Initial Closing
Date (the "PENALTY DATE"). The Company shall not include any other securities in
the Registration Statement relating to the offer and sale of the Registrable
Securities. The Company shall notify the Investors by written notice that such
Registration Statement has been declared effective by the Commission within 48
hours of such declaration by the Commission.
(b) REGISTRATION DEFAULT. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective by the Commission by the Penalty Date,
then the Company shall make the payments to the Investors as provided in the
next sentence as liquidated damages and not as a penalty. Any such liquidated
damages shall not be exclusive of any other remedies at law or in equity. The
amount to be paid by the Company to the Investors shall be determined as of each
Computation Date (as defined below), and such amount shall be equal to 2.0% (the
"LIQUIDATED DAMAGE RATE") of the purchase price, calculated on a pro rata basis
to the date on which the Registration Statement is declared effective by the
Commission (the "PERIODIC AMOUNT"), payable in cash. The Periodic Amount shall
be paid by the Company to the Investors by wire transfer of immediately
available funds within three days after each Computation Date.
As used in this Section 2(b), "COMPUTATION DATE" means the date
which is 30 days after the Penalty Date and, if the Registration Statement
required to be filed by the Company pursuant to Section 2(a) has not theretofore
been declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
(c) FAILURE TO FILE REGISTRATION STATEMENT; RIGHTS OF RESCISSION. The
Company agrees that the Investors will suffer damages if the Registration
Statement is not maintained in the manner contemplated herein during the
Effectiveness Period or if certain other events occur. The Company further
agrees that it would not be feasible to ascertain the extent of such damages
with precision. Accordingly, if the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with and declared effective by the Commission, the
Company shall pay a penalty of 2% of the purchase price, in cash of the
securities for each 30 day period (or pro-rata portion if less that 30 days)
such failure has occurred. Notwithstanding the foregoing, such penalty shall not
apply for a ninety day period (whether
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or not consecutive) in any 12 month period) in the event that the Registration
Statement is not effective because there shall have occurred a "Material
Transaction." For purposes of this section, a Material Transaction shall be any
event which shall require the filing of a Form 8-k pursuant to the provisions of
Item 2 thereof.
(d) ELIGIBILITY FOR USE OF FORM S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(e) PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each Registration Statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of the Registrable
Securities registered under such Registration Statement, their underwriters, if
any, and their respective counsel and accountants the opportunity to participate
in the preparation of such Registration Statement, each prospectus included
therein or filed with the Commission, and, to the extent practicable, each
amendment thereof or supplement thereto, and give each of them such access to
its books and records, such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have certified its
financial statements as shall be necessary to conduct a reasonable investigation
within the meaning of the Securities Act.
3. OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of five years from the Initial Closing (as such term is
defined in the Memorandum) or such shorter period that will terminate when all
the Registrable Securities covered by the Registration Statement have been sold
pursuant thereto in accordance with the plan of distribution provided in the
Prospectus, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in the delivery of new securities
not subject to transfer restrictions under the Securities Act (the "REGISTRATION
PERIOD") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (B) the Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this Section 3(a), the
Company may, during the Registration Period, suspend the use of the Prospectus
for a period not to exceed 60 days (whether or not consecutive) in any 12-
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month period if the Board of Directors of the Company determines in good faith
that because of valid business reasons, including a Material Transaction,
pending material corporate developments and similar events, it is in the best
interests of the Company to suspend such use, and prior to or contemporaneously
with suspending such use the Company provides the Investors with written notice
of such suspension, which notice need not specify the nature of the event giving
rise to such suspension. Notwithstanding the foregoing, the Company may only
suspend the use of the Prospectus only one time during any 12 month period
unless such suspension arises from any act not caused by the Company (i.e., a
tender offer is launched by a third party for the Company's outstanding stock.)
At the end of any such suspension period, the Company shall provide the
Investors with written notice of the termination of such suspension. In the
event that the suspension is not terminated within such period, the Company
shall pay a penalty of 2.0%, as provided in Section 2(b) above;
(b) During the Registration Period, comply with the provisions of
the Securities Act with respect to the Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide (A)
draft copies thereof to the Investors and reflect in such documents all such
comments as the Investors (and their counsel) reasonably may propose and (B) to
the Investors a copy of the accountant's consent letter to be included in the
filing and (ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company, (A) promptly after the same is prepared and publicly distributed, filed
with the Commission, or received by the Company, one copy of the Registration
Statement, each Prospectus, and each amendment or supplement thereto, and (B)
such number of copies of the Prospectus and all amendments and supplements
thereto and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Investor;
(d) (i) Register or qualify the Registrable Securities covered by
the Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;
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(e) As promptly as practicable after becoming aware of such
event, notify each Investor of the occurrence of any event, as a result of which
the Prospectus included in the 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,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national securities
exchange, and included in an inter-dealer quotation system of a registered
national securities association, on or in which securities of the same class or
series issued by the Company are then listed or included;
(h) The Company shall appoint and/or maintain a transfer agent
and registrar for all of the class that includes the Registrable Securities
covered by a Registration Statement not later than the Effective Date ;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts, as the case may be, as the Investors reasonably
may request and registered in such names as each Investor may request; and,
within three business days after the Registration Statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in the Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of
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the Company and its subsidiaries complying with Section 11(a) of the Securities
Act and the rules and regulations of the Commission thereunder (including, at
the option of the Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the underwriters participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain opinions
of counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Date of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement
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and the Prospectus, including any documents incorporated by reference therein,
of an untrue statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they were
made) not misleading, subject to customary limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the
Exchange Act shall be an "AFFILIATE" (as defined in Rule 2729(b)(1) of the rules
and regulations of the National Association of Securities Dealers, Inc. (the
"NASD RULES") (or any successor provision thereto)) of the Company or has a
"CONFLICT OF INTEREST" (as defined in Rule 2720(b)(7) of the NASD Rules (or any
successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "QUALIFIED INDEPENDENT UNDERWRITER" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the offering price of such Registrable Securities, (B) indemnifying
such qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof, and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the NASD Rules.
(S) The Company shall exercise best efforts to maintain the
listing or quotation of the Common Stock on the Over the Counter Bulletin Board
(the "Principal Market"), and as soon as practicable (but in any event prior to
the Initial Closing Date) will take such action, if any, so as to cause the
Shares and the Warrant Shares to be listed on the Principal Market. The Company
further shall, if the Company applies to have the Common Stock traded on any
other market, including the American Stock Exchange or NASDAQ (a "Other
Principal Market"), include in such application the Shares and the Warrant
Shares, and shall take such other action as is necessary or desirable in the
opinion of the Investor to cause the Common Stock to be listed on such Other
Principal Market as promptly as possible.
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4. OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. As least fourteen
Business Days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor, via facsimile or email if
possible, of the information the Company requires from each such Investor (the
"REQUESTED INFORMATION") if such Investor elects to have any of its Registrable
Securities included in the Registration Statement. If no response is received
within 5 days from the date of the initial notice, the Company shall prepare a
follow up notice, and disseminate the same, if possible via facsimile or email.
If, at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from an Investor (a "NON-RESPONSIVE
INVESTOR"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor and have no
further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 3(e)
or 3(f), it shall immediately discontinue its disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(e) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. EXPENSES OF REGISTRATION
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All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, but including, without limitation, all registration, listing,
and qualifications fees, printing and engraving fees, accounting fees, and the
fees and disbursements of counsel for the Company, and the reasonable fees of
one firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. INDEMNIFICATION AND CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify
and hold harmless each Investor and each underwriter, if any, which facilitates
the disposition of Registrable Securities, and each of their respective officers
and directors and each person who controls such Investor or underwriter within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each such person being sometimes hereinafter referred to as an "INDEMNIFIED
PERSON") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an 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 arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Prospectus or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred; provided, however, that
the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.
(b) INDEMNIFICATION BY THE INVESTORS AND UNDERWRITERS. Each
Investor agrees, as a consequence of the inclusion of any of its Registrable
Securities in a Registration Statement, and each underwriter, if any, which
facilitates the disposition of Registrable Securities shall agree, as a
consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any person who, with his or her consent, is named in the
Registration Statement as a director nominee of the Company), its officers who
sign any Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in light of the circumstances under
which they were made, in the case of the Prospectus),
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not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such holder or underwriter expressly for use therein; provided,
however, that no Investor or underwriter shall be liable under this Section 6(b)
for any amount in excess of the net proceeds paid to such Investor or
underwriter in respect of shares sold by it, and (ii) reimburse the Company for
any reasonable legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred. For the avoidance of doubt, nothing in this Section 6(b) shall be
deemed to provide that any Investor has joint liability with any other Investor.
(c) NOTICE OF CLAIMS, ETC. Promptly after receipt by a party
seeking indemnification pursuant to this Section 6 (an "INDEMNIFIED PARTY") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "CLAIM"), the
Indemnified Party promptly shall notify the party against whom indemnification
pursuant to this Section 6 is being sought (the "INDEMNIFYING PARTY") of the
commencement thereof; but the omission to so notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is materially prejudiced
and forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
11
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an Indemnified
Person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section 6, in no
event shall any (i) Investor be required to undertake liability to any person
under this Section 6 for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
(f) The obligations of the Company under this Section 6 shall be
in addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
12
7. RULE 144
With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144;
and
(b) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Investor, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
8. ASSIGNMENT
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by the Investors to any
permitted transferee of all or any portion of such Registrable Securities (or
all or any portion of any Shares or Warrants of the Company which is convertible
into such securities) only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
9. AMENDMENT AND WAIVER
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 9 shall be binding
upon each Investor and the Company.
10. MISCELLANEOUS
13
(a) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section 2(a)
effective under the Securities Act, the Company grants to any Person any
registration rights with respect to any Company securities which are more
favorable to such other Person than those provided in this Agreement, then the
Company forthwith shall grant (by means of an amendment to this Agreement or
otherwise) identical registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, or by
facsimile transmission, and shall be deemed given when so delivered personally
or by overnight courier service, or, if mailed, three days after the date of
deposit in the United States mails, or, if by facsimile transmission, upon
confirmation of delivery of the transmission, as follows:
(i) if to the Company, to:
Vital Living, Inc.
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP
1900 Avenue of the Stars
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇ ▇▇▇▇
(ii) if to the Investors, at such addresses as set forth
on Exhibit A next to their names.
The parties may change their respective addresses by notice given pursuant to
this Section 10(c).
(d) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
14
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(g) The Company shall not enter into any agreement with respect
to its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
(h) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(i) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(j) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(k) The Company acknowledges that any failure by the Company to
perform its obligations under Sections 2 and 3, or any delay in such performance
could result in direct
15
damages to the Investors and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure or delay, the
Company shall be liable for all direct damages caused by such failure or delay.
(l) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. A facsimile transmission of this signed Agreement shall
be legal and binding on all parties hereto.
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS
AGREEMENT TO BE DULY EXECUTED AND DELIVERED AS OF THE DATE FIRST ABOVE WRITTEN.
"COMPANY"
VITAL LIVING, INC.
By:
-----------------------------------
Name:
Title:
"INVESTORS"
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
16
EXHIBIT A
Name of Investor Number of Shares Number of Warrants
---------------- ---------------- ------------------
17