-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CVsxVEo3EeNuuj7PNh8KT6i789PXJCRQOmCQ4QGLpOGBGd3BaSOPC0JYgRoPASmH xWz3vHszrRq2yqNHrlB6VA== 0000891836-03-000495.txt : 20030829 0000891836-03-000495.hdr.sgml : 20030829 20030829110952 ACCESSION NUMBER: 0000891836-03-000495 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20030829 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VITAL LIVING INC CENTRAL INDEX KEY: 0001145700 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 880485596 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-79189 FILM NUMBER: 03872858 BUSINESS ADDRESS: STREET 1: 5080 NORTH 40TH STREET, SUITE 105 CITY: PHOENIX STATE: AZ ZIP: 85018 BUSINESS PHONE: 602-952-9909 MAIL ADDRESS: STREET 1: 5080 NORTH 40TH STREET, SUITE 105 CITY: PHOENIX STATE: AZ ZIP: 85018 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SKYEPHARMA PLC CENTRAL INDEX KEY: 0001018117 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: X0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 105 PICADILLY LONDON W1V9FN ENGLAND CITY: LONDON BUSINESS PHONE: 0114417149 MAIL ADDRESS: STREET 1: 105 PICADILLY LONDON W1V9FN CITY: LONDON ENGLAND SC 13D 1 sc0261.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE EXCHANGE ACT OF 1934 INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) VITAL LIVING, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 92846Y100 ------------------------------------------------------- (CUSIP Number) - -------------------------------------------------------------------------------- DONALD NICHOLSON KATHRYN A. CAMPBELL, ESQ. SKYEPHARMA PLC SULLIVAN & CROMWELL LLP 105 PICCADILLY 1 NEW FETTER LANE LONDON W1J 7NJ, ENGLAND LONDON EC4A 1AN, ENGLAND +44 20 7491 1777 +44 20 7959 8900 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) AUGUST 20, 2003 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box []. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act. (continued on following pages) - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 2 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 Names Of Reporting Persons I.R.S. Identification Nos. of Above Persons SKYEPHARMA PLC 330387911 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_| (b) |X| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC, OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) |_| - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION ENGLAND AND WALES - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 0 NUMBER OF ----------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 36,018,973(1)(2) EACH REPORTING ----------------------------------------------------------- PERSON WITH 9 SOLE DISPOSITIVE POWER 15,204,548(2) ----------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 15,204,548(1)(2) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |X| - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 27.66%(2)(3) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- 1 In order to facilitate the consummation of the transaction contemplated by the Agreement and Plan of Merger by and among Vital Living, Inc. (the "Issuer"), VLEN Acquisition - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 3 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- Corp., Inc. ("VLEN") and E-Nutriceuticals, Inc. ("ENI"), dated as of August 20, 2003 (the "Merger Agreement", and the transaction contemplated thereby, the "Merger"), SkyePharma PLC ("SkyePharma") entered into a Stockholders' Agreement with the Issuer and the other parties listed therein, dated as of August 20, 2003 (the "Stockholders' Agreement"), whereby each of Bradley Edson ("Mr. Edson"), Stuart Benson ("Mr. Benson") and Donald Hannah (Mr. Hannah, and with Mr. Edson and Mr. Benson, the "Founders Group"), Fifth Avenue Capital, Inc. ("Fifth Avenue Capital") and Stephen Morris ("Mr. Morris, and with Fifth Avenue Capital, the "Morris Group"), and SkyePharma (collectively, the "Stockholders") agreed to vote its shares of common stock, par value $0.001 per share (the "Common Stock") of Vital Living, options, warrants or convertible securities to purchase Common Stock, and other voting securities (the "Shares") of the Issuer to elect the directors nominated by the other Stockholders. SkyePharma does not have the right to dispose or direct the disposition of any of the 20,814,425 shares of Common Stock or securities convertible or exercisable into Common Stock owned by the other parties to the Stockholders' Agreement. Accordingly, SkyePharma expressly disclaims beneficial ownership of all such shares. 2 SkyePharma is currently the beneficial owner of 14,204,548 shares of Common Stock and 1,000,000 shares of Series D Convertible Preferred Stock, par value $0.001 per share, of the Issuer (the "Preferred Stock"). Accordingly, SkyePharma has beneficial ownership of 15,204,548 shares of Common Stock, assuming the conversion of all shares of Preferred Stock owned or to be purchased by SkyePharma into Common Stock at the current conversion price of $1.00. 3 Based on 54,965,726 shares of Common Stock outstanding on consummation of the Merger on August 20, 2003, as described in Section 3.4(c) of the Subscription Agreement between SkyePharma and the Issuer, dated as of August 20, 2003 (the "Subscription Agreement") and the conversion of 1,000,000 shares of Preferred Stock into 1,000,000 shares of Common Stock. ITEM 1 SECURITY AND ISSUER This statement on Schedule 13D (the "Statement") relates to the Common Stock of Vital Living, Inc., a Nevada corporation, including such Common Stock issuable upon conversion of Preferred Stock held by SkyePharma. The Issuer's principal executive offices are located at 5080 North 40th Street, Suite #105, Phoenix, Arizona, 85018. ITEM 2 IDENTITY AND BACKGROUND SkyePharma is a company incorporated under the laws of England and Wales. The principal business of SkyePharma is the use of its multiple drug delivery technologies, specifically oral, injectable, inhalation, topical and enhanced solubility, to create a product pipeline for out-licensing to marketing partners. The business address of SkyePharma is SkyePharma PLC, 105 Piccadilly, London, England W1J 7NJ. Neither SkyePharma, nor, to its knowledge and belief, any of its executive officers or directors, has during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 4 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- Annex A hereto sets forth with respect to each executive officer and director of SkyePharma the following information: (i) name, (ii) residence or business address, (iii) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted and (iv) citizenship. ITEM 3 SOURCES AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The source of funds for the 1,000,000 shares of Preferred Stock to which this Statement relates was SkyePharma's working capital. The total amount was $1,000,000 in cash, which was paid on August 21, 2003, in accordance with the Subscription Agreement. The consideration for the 14,204,548 shares of Common Stock was SkyePharma's shares of ENI common stock, as determined pursuant to the Merger Agreement. To SkyePharma's knowledge and belief, none of its executive officers or directors named in Annex A hereto, beneficially owns any shares of Common Stock. ITEM 4 PURPOSE OF THE TRANSACTION The purpose of the acquisition of the Common Stock and the Preferred Stock by SkyePharma was and is for investment. The Preferred Stock was acquired pursuant to the Subscription Agreement simultaneous with and as a condition to consummation of the Merger of ENI and VLEN, a wholly-owned subsidiary of the Issuer. The Common Stock was acquired by SkyePharma pursuant to the Merger Agreement in exchange for its interest in ENI, which interest was also held for investment purposes. SkyePharma's ENI common stock, were converted and exchanged for shares of Common Stock of the Issuer on August 20, 2003. As a result of the Merger, VLEN's separate corporate existence ceased and ENI became the wholly-owned subsidiary of the Issuer, in which SkyePharma has a 27.66% interest, including the 1,000,000 shares of Common Stock issuable on conversion of the Preferred Stock based on a current conversion price of $1.00. Pursuant to the terms of the Commitment Letter between SkyePharma and the Issuer, dated as of August 20, 2003, executed pursuant to Section 5 of the Merger Agreement, SkyePharma has committed to invest 1,000,000 U.S. dollars in the event that the Issuer raises an additional 3,000,000 U.S. dollars in an equity offering completed within 90 days of the Closing of the Merger, as defined in the Merger Agreement, subject to the terms of such Commitment Letter. This obligation, if consummated, would be expected to result in an additional holding of 1,000,000 preferred convertible securities (the "Additional Preferred Stock") convertible into approximately 1,000,000 shares of Common Stock or more, depending on the price of such issuance and the conversion price and other terms of the Additional Preferred Stock. SkyePharma is continuously evaluating the business and business prospects of the Issuer, and its present and future interests in, and intentions with respect to the Issuer and at any time may decide to acquire additional shares or dispose of any or all of the shares of Common Stock or Preferred Stock owned by it. SkyePharma currently intends to exercise its rights as shareholder in the Issuer, and in connection therewith, may, from time to time, (i) have discussion with management and/or other shareholders of the Issuer concerning various operational and financial aspects of the Issuer's business, (ii) make one or more proposals to the Issuer or other shareholders of the Issuer relating to joint ventures, mergers, business combinations or extraordinary transactions, and (iii) solicit proxies. - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 5 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- Pursuant to the terms of the Stockholders' Agreement, SkyePharma will vote its Common Stock and Preferred Stock which vote with the Common Stock together with certain other shareholders of the Issuer after the Merger, as described in more detail in Item 6 of this Statement. Except as set forth in this Statement, as of the date of the filing of this Statement, neither SkyePharma, nor, to its knowledge and belief, any of its executive officers or directors, has any other plan or proposal which relates to or would result in any of the actions specified in subparagraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5 INTEREST IN SECURITIES OF THE ISSUER (a) The percentage interest held by SkyePharma presented below is based on 54,965,726 shares of Common Stock outstanding on consummation of the Merger on August 20, 2003, as represented by the Issuer in Section 3.4(c) of the Subscription Agreement. Assuming the conversion of all shares of Preferred Stock owned by SkyePharma into Common Stock at a conversion price of $1.00, SkyePharma is the beneficial owner of 15,204,548 shares of Common Stock, including Common Stock issuable on the conversion of convertible securities of the Issuer, representing approximately 27.66% of the Common Stock issued and outstanding. The information in this Statement with respect to the parties listed below in this Item 5(a) is based solely on information provided by the Issuer to SkyePharma. Mr. Edson is the beneficial owner of 5,046,950 shares of Common Stock, including Common Stock issuable on the conversion of convertible securities and the exercise of options and warrants, representing approximately 9.18% of the Common Stock issued and outstanding. Mr. Benson is the beneficial owner of 6,340,000 shares of Common Stock, including Common Stock issuable on the conversion of convertible securities and the exercise of options and warrants, representing approximately 11.53% of the Common Stock issued and outstanding. Mr. Hannah is the beneficial owner of 536,900 shares of Common Stock, representing approximately 0.98% of the Common Stock issued and outstanding. Fifth Avenue Capital is the beneficial owner of 8,860,575 shares of Common Stock, representing approximately 16.12% of the Common Stock issued and outstanding. Stephen Morris is a principal of Fifth Avenue Capital. Mr. Morris is individually the beneficial owner of 30,000 shares of Common Stock issuable on the conversion of convertible securities and the exercise of options and warrants, representing approximately 0.05% of the Common Stock issued and outstanding. Except as set forth in this Item 5, neither SkyePharma, nor to its knowledge and belief, any of its executive officers or directors named in Annex A hereto, beneficially owns any shares of Common Stock. (b) SkyePharma has the shared power to vote or to direct the vote of, and the sole power to dispose or direct the disposition of, its 1,000,000 shares of Common Stock that would be issued on the conversion of all of its shares of Preferred Stock based on the current conversion price and its 14,204,548 shares of Common Stock. Each of the Persons listed in Item 5(a) has the shared power to vote or direct the vote and the sole power to dispose or direct the disposition of the shares of Common Stock attributed to them in that Item. Mr. Edson, a citizen of the United States of America, is the Chief Executive Officer and Chairman of the Board of Vital Living. Mr. Benson, a citizen of the United States of America, is the President of Vital Living. Mr. Hannah, a citizen of the United States of America, is a Non-executive Director of Vital Living. The business address for Mr. - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 6 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- Edson, Mr. Benson and Mr. Hannah is 5080 North 40th Street, Suite 105, Phoenix, Arizona 85018. Mr. Morris, a citizen of the United Kingdom, is the sole officer and director of ENI and president of Fifth Avenue Capital. His business address is 32 Lancaster Mews, London, W2 3QE, England. Fifth Avenue Capital, a British Virgin Islands corporation, is a company that invests in international business opportunities, with its principal offices located at Suite 1601-1603, Kinwick Centre, 32 Hollywood Road, Central Hong Kong. None of the persons listed in Item 5(a), to SkyePharma's knowledge, has during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (c) There have been no transactions by SkyePharma nor, to SkyePharma's knowledge, by any of the other persons listed in Item 5(a) in the class of securities reported on in this Statement that were effected during the past sixty days other than (i) the grant by the Issuer to Mr. Edson of 1,300,000 shares of Common Stock and (ii) the amendment of the warrant agreement with Mr. Benson eliminating the full ratchet anti-dilution protection provision therein and settling the total number of shares of Common Stock subject to or issuable under any warrant agreements or other derivative securities to Mr. Benson to be 6,310,000 after the Effective Time, and (iii) otherwise, as set forth in this Statement. (d) No person other than SkyePharma has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, its Common Stock or Preferred Stock. ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER SkyePharma and the Issuer entered into the Subscription Agreement pursuant to which SkyePharma purchased 1,000,000 shares of Preferred Stock convertible into Common Stock subject to the conditions set forth in Sections 5 and 6 thereof. Pursuant to the terms of the Commitment Letter between SkyePharma and the Issuer, dated as of August 20, 2003, executed pursuant to Section 5 of the Merger Agreement, SkyePharma has committed to invest 1,000,000 U.S. dollars in the event that the Issuer raises an additional 3,000,000 U.S. dollars in an equity offering completed within 90 days of the Closing of the Merger, subject to the terms of such Commitment Letter. This obligation, if consummated, would be expected to result in an additional holding of 1,000,000 preferred convertible securities (the "Additional Preferred Stock") convertible into approximately 1,000,000 shares of Common Stock or more, depending on the price of such issuance and the conversion price and other terms of the Additional Preferred Stock. SkyePharma, the Issuer, Mr. Edson, Mr. Benson, Mr. Morris, Mr. Hannah and Fifth Avenue Capital have entered into a Stockholders' Agreement, dated as of August 20, 2003, which contains the terms that are summarized below: Board of Directors The Board of the Issuer will consist of nine members. So long as the Founders Group beneficially owns in aggregate at least 65% of the shares of Common Stock (including any share of Capital Stock of the Issuer Convertible into Common Stock) owned by it at the date of the - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 7 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- execution of the Stockholders' Agreement, it is entitled to nominate four directors. So long as the Morris Group beneficially owns in aggregate at least 65% of the shares of Common Stock (including any share of Capital Stock of the Issuer Convertible into Common Stock) owned by it at the date of the execution of the Stockholders' Agreement, it is entitled to nominate one director. So long as SkyePharma beneficially owns in aggregate at least 65% of the shares of Common Stock (including any share of Capital Stock of the Issuer Convertible into Common Stock) owned by it at the date of execution of the Stockholders' Agreement, it is entitled to nominate one director. Each of the Founders Group, the Morris Group and SkyePharma covenants that it will vote in favor of the other Stockholders' nominee or nominees. Each Stockholder furthermore agrees that it will not take any action, or cause the Issuer to take any action, to remove, with or without cause, a director nominated by another Stockholder. Vacancies At any time a vacancy is created or exists on the Board of the Issuer, the remaining directors (if any) representing the Stockholder whose Board seat is vacant shall have the right to designate the person to fill the vacancy. If no directors representing the Stockholder remain, the Stockholder shall have the right to designate the person to fill the vacancy. All other Stockholders are obligated to vote in favor of such nominee. To SkyePharma's knowledge and belief, none of its executive officers or directors named in Annex A hereto, have entered into any contracts, arrangements, understandings or relationships (legal or otherwise) with respect to any securities of the Issuer. SkyePharma and the Issuer entered into a Registration Rights Agreement, dated as of August 20, 2003 (the "Registration Rights Agreement"), pursuant to which the Issuer is obligated to prepare and file with the Securities and Exchange Commission (the "SEC") as soon as reasonably practicable after March 31, 2004 a registration statement (the "Registration Statement") to permit the offering and sale pursuant to Rule 415 of SkyePharma's restricted shares, as defined in the Registration Rights Agreement (the "Restricted Shares"). If the Issuer fails to file and maintain the Registration Statement, SkyePharma is entitled to demand the filing of the Registration Statement within 20 days of the notice of demand and the Issuer is obligated to comply. The Registration Rights Agreement also provides for "piggyback" registration, whereby if the Issuer intends to register shares under the Securities Act of 1933 (the "Securities Act") other than on Form S-4 or S-8, it must provide SkyePharma with notice of the proposed registration, and SkyePharma can require the Issuer to include its Restricted Shares in the registration statement and offering on the same terms and conditions as the shares otherwise being sold in such registration. The Registration Rights Agreement also contains covenants whereby the Issuer must use its best efforts to ensure that SkyePharma has a readily realizable market for its shares of Common Stock, including using its reasonable best efforts to obtain a listing for the Common Stock prior to December 31, 2003 and, in the event the Common Stock is not listed by such date, using its best efforts to procure purchasers for SkyePharma's Restricted Shares. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS. Exhibit 1. Registration Rights Agreement between Vital Living, Inc. and SkyePharma PLC, dated as of August 20, 2003. Exhibit 2. Subscription Agreement between Vital Living, Inc. and SkyePharma PLC, dated as of August 20, 2003. Exhibit 3. Commitment Letter of SkyePharma PLC, dated as of August 20, 2003. - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 8 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- Exhibit 4. Stockholders' Agreement, between SkyePharma PLC, Vital Living Inc., Bradley Edson, Stuart Benson, Donald Hannah, Stephen Morris and Fifth Avenue Capital Inc., dated as of August 20, 2003. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. August 29, 2003 SkyePharma PLC By: /s/Donald Nicholson --------------------------------------- Name: Donald Nicholson Title: Finance Director - -------------------------------------------------------------------------------- CUSIP NO. 92846Y100 PAGE 9 OF 9 PAGES --- ---- - -------------------------------------------------------------------------------- ANNEX A The name, position, present principal occupation and address thereof and citizenship of each director and executive officer of SkyePharma is set forth below. The business address for SkyePharma and each of the executive officers and directors listed below is SkyePharma PLC, 105 Piccadilly, London, England W1J 7NJ.
NAME POSITION PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND ADDRESS(1) CITIZENSHIP Ian Gowrie-Smith Executive Chairman Australian Michael Ashton Chief Executive Australian Officer Donald Nicholson Finance Director British and Executive Director Air Chief Marshal Senior Independent Retired British Sir Michael Beavis Non-executive Director Dr. David Ebsworth Non-executive Non-executive Director of Clal Biotechnology British Director Industries and CuraGen Corporation R. Stephen Harris Non-executive Non-executive Chairman of Proteome Sciences plc British Director and Non-executive Director of Advanced Medical Solutions Group plc, Microscience Ltd, Prophilian plc, Sinclair Pharma Limited and GeneMedix plc Dr. Keith Mansford Non-executive External Director of Sepracor Inc., Chairman British Director of Mansford Associates, Non-executive Chairman of Conve Limited and Professor of Biochemistry at the University of Buckingham. Dr. Argeris Non-executive Partner at Care Capital LLC, External Director of American (Jerry) Karabelas Director Human Genome Sciences, Fox Chase Cancer Center, The University of the Sciences in Philadephia, Member of the Scientific Advisory Committee of the Massachusetts General Hospital, Boston, Director of NitroMed Inc., Halsey Pharmaceuticals, Anadys, Renolvo and a Member of the Scientific Advisory Board of Epigenesis. Torao Yamamoto Non-executive Senior Managing Director of the Pharmaceutical Division Japanese Director of Kowa Company Limited in Japan, Member of the Board of Directors of Kowa Company Limited, Kowa Pharmaceutical Europe, Ltd., and Kowa Research Europe, Ltd. - ----------------------- 1 If Principal Employment is not with SkyePharma.
EX-99.1 3 ex-1.txt REGISTRATION RIGHTS AGMT EXHIBIT 1 VITAL LIVING REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "Agreement"), dated as of August 20, 2003, is between SkyePharma PLC, a company incorporated under the laws of England and Wales (the "Holder") and Vital Living, Inc., a Nevada corporation (the "Corporation"). WHEREAS, the Holder will acquire 14,204,548 shares of the Corporation's common stock, par value $0.001 (the "Shares") pursuant to the terms of that certain Merger Agreement (the "Merger Agreement" and the Shares issued thereby, the "Merger Shares"), dated August 20, 2003, by and between the Corporation, VLEN Acquisition Corp., Inc., a wholly owned subsidiary of the Corporation, and e-nutriceuticals, inc., a Delaware corporation. WHEREAS the Holder will acquire additional Shares (together with the Merger Shares, the "Subject Shares") upon conversion of shares of preferred stock of the Corporation to be issued to the Holder pursuant to a Subscription Agreement, dated August 20, 2003 by and between the Holder and the Corporation (the "Subscription Agreement"); NOW THEREFORE, in consideration of mutual covenants, obligations and agreements contained herein, in the Merger Agreement and in the Subscription Agreement, and intending to be legally bound hereby, the parties hereto agree as follows: Section 1. Definitions. Except as otherwise specified herein, defined terms used in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. Unless otherwise specified all references to "days" shall be deemed to be references to calendar days. For purposes of this Agreement the following terms shall have the following meanings: (a) "Affiliate" shall mean, with respect to any Person, any other Person who, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by appointment of directors, by contract or otherwise. (b) "Business Day" shall mean any day other than a business day on which banking institutions in New York are authorized or obligated by law to close for business. (c) "Commission" shall mean the U.S. Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. (d) "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as amended, or any successor Federa1 statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. (e) "Closing Date" shall have the meaning set forth in the Merger Agreement. 1 (f) "Merger Shares" shall have the meaning set forth in the Recitals. (g) "Merger Agreement" shall have the meaning set forth in the Recitals. (h) "Person" or "persons" mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof (i) "Registrable Shares" shall mean the Shares held by Holder that constitute Restricted Shares. (j) "Restricted Shares" shall mean (i) the Subject Shares issued to the Holder pursuant to the Purchase Agreement, and (ii) any securities received in respect of the Subject Shares, that (x) are held by the Holder and (y) theretofore have not been sold to the public pursuant to a registration statement under the Securities Act or pursuant to Rule 144 or that may not be freely sold by the Holder without registration under Rule 144(k). (k) "Rule 144" shall mean Rule 144 promulgated under the Securities Act or successor or complementary rule thereto. (l) "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. (m) "Shares" shall mean shares of Common Stock, par value $ 0.001 per share, of the Corporation. (n) "Transfer" shall mean any disposition of any Restricted Shares or of any interest therein that would constitute a sale thereof within the meaning of the Securities Act other than any such disposition pursuant to an effective registration statement under the Securities Act and complying with all applicable state securities and "blue sky" laws. Section 2. Representations and Warranties of the Corporation. (a) Representations and Warranties of the Corporation. The Corporation represents and warrants to the Holder as follows: (i) The execution, delivery and performance by the Corporation of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Corporation and the Agreement shall have been duly executed and delivered by the Corporation and is in full force and effect. The Agreement constitutes the valid and binding obligations of the Corporation, enforceable in accordance with its terms, subject as to enforcement to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 2 (ii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and compliance with the provisions hereof by the Corporation will not (a) violate any law or statute or order, judgment or decree of any court, administrative agency or other governmental body applicable to the Corporation, or its properties or assets, (b) conflict in any respect with or result in any breach of any of the terms or provisions or constitute (without due notice or lapse of time, or both) a default under the Certificate of Incorporation or By-laws of the Corporation, (c) result in a breach or violation of, or a default under, or acceleration of any obligations pursuant to any note, indenture, mortgage, lease, agreement, contract, understanding, arrangement or instrument ("Contracts") to which the Corporation is a party or by which it or any of its properties or assets may be bound or affected, (d) result in any change in the rights or obligations of any party under the Contracts, or (e) result in the creation or imposition of any lien, claim, judgment, charge, mortgage, security interest, pledge, escrow equity or other encumbrance of any nature whatsoever upon any of the properties or assets of the Corporation. (b) Representations and Warranties of the Holder. The Holder represents and warrants to the Corporation that it has all requisite power and authority to execute this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Holder. This Agreement has been duly executed and delivered by the Holder and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Holder, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to, creditors' rights and general principles of equity. Section 3. Piggyback Registration. Subject to the terms and conditions set forth in this Agreement, if the Corporation at any time after March 31, 2004, proposes for any reason to register Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto, or any post-effective amendment relative to a registration statement previously filed), it shall as promptly as practicable (but in no event less than thirty (30) days prior to the date the registration statement is filed with the Commission) give written notice to the Holder of its intention to effect such registration. If within twenty (20) days of delivery of such notice the Holder submits a written request to the Corporation specifying the amount of Registrable Shares held by the Holder and the intended method of disposition of such Registrable Shares, the Corporation shall include in the registration statement and offering, the Registrable Shares specified in the request on the same terms and conditions as the Shares otherwise being sold in such registration and use its best efforts to cause such registration statement to become effective. If the managing underwriter determines in good faith and advises the Holder in writing that the inclusion in the registration statement and offering of all the Registrable Shares proposed to be included would interfere with the successful marketing of all securities proposed to be registered, then the Holder shall agree to a downward adjustment in the number of Registrable Shares to be included in such underwriting sufficient to alleviate such marketing concern (provided that if securities are being offered for 3 the account of Persons other than the Corporation, then such securities intended to be offered for the account of such other Person shall be reduced first). Section 4. Shelf and Demand Registration. As soon as reasonably practicable after March 31, 2004, the Corporation shall prepare and file with the SEC a registration statement (the "Shelf Registration Statement") under form S-3 (or any successor form, if permitted) to permit offerings and sales of Registrable Shares by the Holder pursuant to Rule 415 under the Securities Act and shall use its reasonable best efforts to maintain such Shelf Registration Statement effective and current. The Corporation shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration Statement, if required by the Securities Act or if reasonably requested by the Holder. In the event that the Corporation has failed to or is unable to file and maintain a Registration Statement as contemplated by this Section 4 and until such failure or inability is remedied, the Holder shall have the right to make at any time a written demand upon the Corporation (each, a "Demand Notice") to have the Corporation as promptly as practical register under the Securities Act for offer and sale all Registrable Shares specified to the Corporation by the Holder within 20 days of the date of the Demand Notice and the Corporation agrees to so register such Registrable Shares. Notwithstanding the foregoing, if the Corporation shall furnish a certificate to the Holder signed by the Chief Executive Officer of the Corporation (a "Blackout Notice"), the Corporation may suspend the use, or delay the delivery or filing (but not the preparation) of the Registration Statement or any amendment or supplements thereto, for a limited period of time (which in no event shall be longer than forty-five (45) days after the date of the Blackout Notice ("Suspension Right"), if the Corporation determines in good faith that (i) it is in possession of material, non-public information concerning an acquisition, merger, recapitalization, consolidation, reorganization or other material transaction by or of the Corporation or concerning pending or threatened litigation and disclosure of such information would jeopardize any such transaction or litigation or otherwise materially harm the Corporation, or (ii) in the case of a Demand Notice, the filing of the registration statement would occur after February 15 of any year but before the filing by the Corporation of its annual report on Form 10-K; and, in either case, (iii) the Corporation shall have so stated in the Blackout Notice; provided, however, that the Corporation may not exercise such Suspension Right more than twice in any twelve month period. Section 5. Registration Mechanics. In connection with any registration of the Registrable Shares effected pursuant to Sections 3 or 4 the Corporation shall: (a) prepare and file the registration statement and such amendments and supplements to the registration statement and the prospectus or offering circular used in connection therewith as may be necessary to keep the registration statement current and effective and to comply with the provisions of the Securities Act and the rules and regulations thereunder with respect to the disposition of all the Registrable Shares covered by the registration statement for the period required to effect the distribution thereof, and to use its best efforts to make any corrections or updates to the registration statement or prospectus as promptly as practicable; 4 (b) furnish to the Holder such number of copies of any prospectus, prospectus supplement or offering circu1ar, including a preliminary prospectus, and of a full registration statement and exhibits in conformity with the requirements of the Securities Act and the rules and regulations thereunder, as the Holder may reasonab1y request in order to facilitate the disposition of such securities; (c) use its best efforts to register or qualify the Registrable Shares covered by the registration statement under the securities or "blue sky" laws of such state jurisdictions of the United States as the Holder may reasonably request, and to accomplish any and all other acts and things which may be necessary or advisable to permit sales in such jurisdictions of such Registrable Shares and keep such registration or qualification in effect for so long as the registration statement remains in effect; (d) in connection with an underwritten public offering, to enter into an underwriting agreement in form and substance customary under the circumstances, which shall include (i) provisions for any "lock up" period, during which the sale of Shares and securities convertible into Shares by the Corporation or its Affiliates will be restricted, that may reasonably be required by the managing underwriter thereof and (ii) indemnification and contribution provisions and procedures that are no less favorable to the underwriters than those set forth in Section l0 hereof and otherwise reasonably satisfactory to the managing underwriter; (e) in connection with any underwritten public offering, obtain opinions of counsel to the Corporation (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter) addressed to the Holder and the underwriters, covering such matters as are customarily covered in opinions requested in underwritten offerings of equity and convertible debt securities and such other matters as may be reasonably requested by the Holder and the underwriters (it being agreed that the matters to be covered by such opinions shall include, without limitation, the absence from the registration statement and the prospectus, including the documents incorporated by reference therein and any prospectus supplement thereto, 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 not misleading); (f) at any time when a prospectus relating thereto is required to be delivered under the Securities Act, notify the Holder upon discovery that, or upon 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 any material facts required to be stated therein or necessary to make the statements therein not mis1eading, in the light of the circumstances under which they were made, and (subject to the good faith determination of the Board of Directors as to whether to cease all sales under such registration statement) unless such untrue statement or omission has been made upon and in conformity with information furnished in writing to the Corporation by the Holder or any underwriter or any person who controls any of them within the meaning of Section 15 of the Securities Act or any director or officer of any of the foregoing, as the case may be, specifically for use in connection with the preparation of the registration statement, at the request of the Holder prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary 5 so that, as thereafter delivered to the Holders of such securities, such prospectus shall not 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 not misleading, in the light of the circumstances under which they were made; (g) in connection with any underwritten public offering, obtain "cold comfort" letters and updates thereof from the independent public accountants of the Corporation (and, if necessary, from the independent public accountants of any subsidiary of the Corporation or of any business acquired by the Corporation for which financial statements and financial data are, or are required to be, included in the relevant registration statement), addressed to the Holder (if the Holder has provided such letter, representations or documentation, if any, required for such "cold comfort" letter to be so addressed) and the underwriters, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; (h) use its best efforts to cause the Registrable Shares to be listed on or included for quotation on any stock exchange or trading system on which the Shares then primarily trade; (i) provide a CUSIP number for all Registrable Securities, not later than the effective date of such registration statement; (j) if requested by any managing underwriter or underwriters of Registrable Shares, participate and use its best efforts to cause its executive officers to participate in any "roadshow" or other marketing activities intended to aid in the successful disposition of the Registrable Shares; and (k) upon the request of the Holder take reasonable efforts to make available for inspection by the Holder and the underwriters, if any, and their respective advisers all financial and other records, pertinent corporate documents of the Corporation and cause the Corporation's officers, directors and employees to take reasonable efforts to supply all information reasonably requested by the Holder, the underwriters, if any, or any such adviser in connection with such registration (as long as such registration shall not have been postponed, delayed or withdrawn, or the effectiveness thereof terminated). Section 6. Information Provided by the Holder. Whenever under this Agreement Registrable Shares are being registered, the Holder shall provide the Corporation on a timely basis with such information and materials as the Corporation may reasonably request in order to effect the registration of the Registrable Shares. Section 7. Rule 144. With a view to making available to the Holder the benefits of Rule 144, the Corporation agrees to use its best efforts to make available adequate current public information with respect to it within the meaning of, and as required pursuant to, Rule 144(c). Section 8. Selection of Underwriters. If the offering pursuant to any piggy back registration pursuant to Section 3 hereof is to be made by or through underwriters, the Corporation shall 6 have the right to designate the managing underwriter which shall be reasonably satisfactory to the Holder. If the offering pursuant to any registration of Registrable Shares pursuant to a demand by the Holder under Section 4 hereof is to be made by or through underwriters, the Holder shall have the right to designate the managing underwriter which shall be reasonably satisfactory to the Corporation. Section 9. Expenses. All expenses incurred by the Corporation in effecting a registration and sale of Registrable Shares under this Agreement, including, without limitation, all registration and filing fees (including all expenses incidental to filing with the NASD), fees and expenses of complying with securities and "blue sky" laws, printing expenses, expenses incurred by the Corporation in marketing and assisting in the marketing of such Registrable Shares, the fees, disbursements and expenses of the managing underwriter or underwriters, the fees and expenses of counsel and independent auditors for the Corporation including fees of counsel and accountants incurred in connection with the preparation of customary opinions of counsel and independent auditors, and the reasonable fees and expenses of one counsel for the Holder, shall be borne by the Corporation, provided, however, that any underwriting commissions or concessions incurred in effecting a registration and sale of the Holder's Registrable Shares shall not be borne by the Corporation. Section 10. Indemnification. (a) In connection with any registration of any Registrable Shares under the Securities Act pursuant to this Agreement, the Corporation shall indemnify and hold harmless the Holder, and the officers, directors and other Persons, if any, that may be deemed to control the Holder within the meaning of the Exchange Act, and each underwriter, broker, dealer or other Person active on behalf of the Holder, against any losses, claims, damages or liabilities, joint or several (or actions in respect thereof), to which the Holder and such Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the registration statement (including the documents incorporated therein by reference) under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus, final prospectus or prospectus supplement contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, or (ii) 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 not misleading or, with respect to any prospectus or prospectus supplement, necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (iii) arise out of any violation by the Corporation of the Securities Act or state securities or "blue sky" laws applicable to the Corporation and relating to action or inaction required of the Corporation in connection with such registration or qualification under state securities or "blue sky" laws; provided, however, that the Corporation sha1l not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue, statement or al1eged untrue statement or omission or alleged omission made in said registration statement, preliminary prospectus, final prospectus, prospectus supplement, amendment, 7 supplement or document incident to registration or qualification of any Registrable Shares in reliance upon written information furnished to the Corporation by the Holder with respect to information regarding the Holder expressly for inclusion therein. (b) In connection with any registration of Registrable Shares under the Securities Act pursuant to this Agreement, the Holder shall indemnify and hold harmless (in the same manner and to the same extent as set forth in Section l0(a)) the Corporation, each director of the Corporation, each officer of the Corporation who shall sign such registration statement, each underwriter, broker, dealer or other Person acting on behalf of the Corporation and each Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act with respect to any statement or omission from such registration statement, any preliminary prospectus, final prospectus or prospectus supplement contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, if such statement or omission was made in reliance upon written information furnished by the Holder to the Corporation or such underwriter expressly for inclusion in such registration statement, preliminary prospectus, final prospectus, prospectus supplement, amendment, supplement or document, provided that the liability of the Holder under this Section 10(b) shall not exceed the aggregate proceeds received by the Holder upon the sale of Registrable Shares by such investor pursuant to such registration. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section 10, such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its ejection so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that an indemnified party shall have the right to retain its own counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if such indemnified party shall have been advised in writing by counsel that representation of such indemnified party or parties by the counse1 retained by the indemnifying party or parties would be inappropriate due to actual or potential differing interests between such indemnified party or parties and any other party represented by such counsel in such proceeding. (d) If the indemnification provided for in this Section 10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in 8 such loss, claim, damage, liability or action as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Section 11. Listing; Market for Shares; Legend. The Corporation shall use its best efforts to ensure that the Holder has a readily realisable market for its outstanding shares of Common Stock from January 1, 2004 (the "Liquidity Covenant"). The Liquidity Covenant includes, without limitation, that (i) the Corporation shall use its reasonable best efforts to obtain a listing on the American Stock Exchange or a quotation on NASDAQ for its common stock prior to December 31, 2003, and (ii) in the event the Corporation fails to obtain such a listing or quotation, the Corporation shall use its best efforts to procure purchasers of Shares held by the Holder, on terms and conditions satisfactory to the Holder. Notwithstanding any other agreement between the Corporation and the Holder, the Corporation shall at the request of the Holder promptly remove any legends on the Registrable Shares at any time on or after March 31, 2004. Section 12. Termination. (a) This Agreement shall terminate and be of no further force or effect when there shall not be any Restricted Shares, provided that the rights of the Holder and obligations of the Corporation under Sections 3 and 4 hereof shall earlier terminate and be of no further force or effect with respect to the Holder, and the Corporation vis-a-vis the Holder at such earlier time as it or its assigns no longer holds any Restricted Shares. (b) Notwithstanding anything to the contrary contained herein, Section 9 of this Agreement shall survive any termination hereof and shall remain in full force and effect. Section 13. Successors and Assigns. This Agreement shall bind and inure to the benefit of the Corporation and the Holder and the respective successors, assigns, heirs and legal representatives (as the case may be) of the Corporation and the Holder. Section 14. No Inconsistent Rights; Other Agreements. (a) The Corporation shall not grant, and has not granted, any other Person rights to register securities of the Corporation on terms that would reasonably be likely to restrict the ability of the Corporation fully to perform its obligations to the Holder pursuant to this Agreement. (b) The Corporation shall not amend any registration rights agreement with any other Person nor shall the Corporation waive any provision under any registration rights agreement 9 that it would be entitled to waive thereunder if such waiver would reasonably be likely to adversely affect the Holder's rights under this Agreement. Section 15 Assignment. The rights granted pursuant to this Agreement may not be assigned or otherwise conveyed by the Holder or by any subsequent assign of any of such rights without the written consent of the Corporation, which consent sha1l not unreasonably be withheld; provided, however, that no such written consent shall be required if the transfer is to any Affiliate or partner of the Holder or if such assign acquires at least a majority of the capital stock of the Corporation owned by the Holder. The rights granted pursuant to this Agreement with respect to the Restricted Shares shall be deemed to be assigned subject to the provisions of this Section 14 (with respect to such Restricted Shares) to any assign of such Restricted Shares, unless the documentation executed by the Holder to effect the transfer of such Restricted Shares provides that rights under this Agreement are not being assigned to such assign. The Holder shall be deemed to include any party to whom the Holders rights with respect to particular Restricted Shares have been assigned in accordance with this Section 15. Section 16. Entire Agreement. This Agreement, which shall be effective as of the date hereof, contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements or understandings with respect thereto. Section 17. Severability. Whenever possible, each provision or portion of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law, rule or regulation in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or a portion of any provision shall have been replaced with a provision or a portion of any provision, which shall, to the maximum extent permissible under such applicable law, rule or regulation, give effect to the intention of the parties as expressed in such invalid, illegal or unenforceable provision. Section 18. Notices. All notices and other communications pursuant to this Agreement shall be in writing and deemed to be sufficient if delivered personally, by telecopier, sent by nationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses: 10 (a) if to the Corporation, to: VITAL LIVING, INC. 5080 North 40th Street Suite 105 Phoenix, AZ 85018-2147 Attn: Mr. Brad Edson Telephone 602-952-9909 Facsimile: 602-952-7129 with a copy to: Kelly Lytton & Vann LLP 1900 Avenue of the Stars, Suite 1450 Los Angeles, CA 90067 Attention: Bruce Vann Esq. Telephone No.: 310-277-5333 Facsimile No.: 310-277-5953 (b) if to the Holder, to: SkyePharma PLC 105 Piccadilly London, England WIJ 7NJ Attn: Company Secretary Telephone No.: +44 20 7491 1777 Facsimile No.: +44 20 7491 3338 with a copy to: Sullivan & Cromwell LLP 1 New Fetter Lane London, England EC4A 1AN Attn: Kathryn A. Campbell, Esq. Telephone: +44 30 7959 8580 Facsimile No.: +44 20 79598950 or to such other address as the party to whom notice is tope given may have furnished to the other parties hereto in writing in accordance herewith. Any such notice or communication shall be deemed to have been delivered and received (i) in the case of personal delivery or delivery by telecopier, on the date of such delivery, (ii) in the case of a nationally-recognized overnight courier, on the next business day after the date when sent and (iii) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. Section 19. Modifications; Amendments; Waiver. The terms and provisions of this Agreement may only be amended or waived either (i) with the written consent of the Corporation and the Holder or (ii) in writing by the party against whom such amendment or waiver is sought to be enforced. The failure of a party to insist upon strict adherence to any term of this Agreement on 11 one or more occasions shall not be considered a waiver of or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Section 20. Counterparts. This Agreement may be executed in any number of separate counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement. Section 21. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. Section 22. Governing Law; Submission to Jurisdiction; Selection of Forum. This Agreement shall be construed in accordance with the laws of the State of New York, without regard to conflict of law provisions thereof. Each party hereto agrees that it shall bring up any action or proceeding in respect of any claim arising out of or related to this agreement or the transactions contained in and contemplated by this Agreement, whether in tort or contract or at law or in equity, exclusively in the United States District Court for the Southern District of New York or, if such court is not available, the Supreme Court of the State of New York (the "Chosen Courts") and solely in connection with claims arising under this Agreement or the transactions contained in or contemplated by this Agreement (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts and agrees not to commence any action in respect of any such claim in any other court or forum, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto, (iv) waives any right to a trial by jury and (v) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 18 of this Agreement. Without limiting the foregoing, each of the Corporation and the Holder hereby appoints, in the case of any such action or proceeding brought in the courts of or in the State of New York, CT Corporation System with offices on the date hereof at 111 8th Avenue, 13th Floor, New York, N.Y. 10011 to receive, for it and on its behalf, service of process in the State of New York with respect thereto, provided the Corporation and the Holder may appoint any other person, reasonably acceptable to the other party, with offices in the State of New York to replace such agent for service of process upon delivery to the other party of a reasonably acceptable agreement of such new agent agreeing to act. 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first written above. Vital Living, Inc. By: /s/ Bradley D. Edson ------------------------------ Its: Chief Executive Officer ----------------------------- By: /s/ Stuart A. Benson ------------------------------ Its: President ----------------------------- SkyePharma PLC By: /s/ Donald Nicholson ------------------------------ Its: Finance Director ----------------------------- 13 EX-99.2 4 ex-2.txt SUBSCRIPTION AGREEMENT EXHIBIT 2 ================================================================================ SUBSCRIPTION AGREEMENT by and between Vital Living, Inc. and SkyePharma PLC Dated as of August 20, 2003 ================================================================================ TABLE OF CONTENTS 1. Certain Filings...........................................................1 2. Purchase and Sale of Securities; Closing..................................2 2.1 Authorization of Preferred Shares....................................2 2.2 Purchase and Sale....................................................2 2.3 The Closing..........................................................2 2.4 Delivery of Convertible Preferred Shares.............................2 2.5 Delivery of the Registration Rights Agreement........................2 3. Representations and Warranties of the Corporation.........................3 3.1 Organization Standing and Power......................................3 3.2 Authorization of Preferred Shares....................................3 3.3 Authorization of Reserved Common Shares..............................3 3.4 Capitalization.......................................................4 3.5 Authority............................................................5 3.6 No Undisclosed Liabilities...........................................6 3.7 Deferred Compensation................................................6 3.8 No Changes...........................................................7 3.9 Taxes................................................................8 3.10 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment and Inventory ..........................................8 3.11 Intellectual Property................................................9 3.12 Agreements, Contracts and Commitments................................9 3.13 Interested Party Transactions........................................11 3.14 Governmental Authorization...........................................11 3.15 Litigation...........................................................12 3.16 Brokers' and Finders' Fees...........................................12 3.17 Employee Benefit Plans and Compensation..............................12 3.18 Environmental Matters................................................13 3.19 Insurance............................................................14 3.20 Compliance with Laws.................................................14 3.21 Disclosure...........................................................14 3.22 Stock Exchange Documents; Corporation Financial Statements; Other Representations......................................................14 3.23 Acknowledgement Regarding Securities.................................15 3.24 Agreements Regarding Confidential Information, Proprietary Information and Intellectual Property 15 3.25 Registration Rights..................................................15 3.26 Rights of First Refusal; Voting and Registration Rights..............16 3.27 Issuances Exempt.....................................................16 3.28 No Integrated Offering...............................................16 3.29 Securities Offerings.................................................17 3.30 Investment Company Act...............................................17 3.31 Nevada Corporate Statutes............................................17 3.32 Use of Proceeds......................................................18 4. Representations and Warranties of the Purchaser...........................18 4.1 Due Organization.....................................................18 4.2 Authorization; Execution and Delivery of Agreement...................18 4.3 No Consent or Approval Required......................................18 4.4 Brokers' and Finders' Fees...........................................18 4.5 Access to Information................................................18 4.6 Acquisition For Own Account..........................................19 4.7 Accredited Investor..................................................19 5. Conditions to Obligations of the Purchaser at the Closing under this Agreement............................................................19 5.1 Corporate Proceedings; Consents; Etc.................................20 5.2 Blue Sky Matters.....................................................20 5.3 Registration Rights Agreement........................................20 5.4 Merger Agreement.....................................................20 5.5 Filings and Documents................................................20 5.6 Regulatory Approvals.................................................20 5.7 Representations, Warranties and Covenants............................21 5.8 No Litigation........................................................21 5.9 No Prohibition.......................................................21 5.10 Opinion of Counsel...................................................21 6. Conditions to Obligations of Corporation at the Closing under this Agreement............................................................21 6.1 Representations and Warranties.......................................21 6.2 Registration Rights Agreement........................................21 6.3 No Litigation........................................................22 6.4 No Prohibition.......................................................22 7. Covenants.................................................................22 7.1 Insurance............................................................22 7.2 Ongoing Filing Requirements..........................................22 7.3 Public Disclosure of Transactions....................................22 7.4 Information Rights...................................................22 7.5 Nevada Corporate Statutes............................................24 8. Indemnification; Survival.................................................24 8.1 Indemnification by the Corporation...................................24 8.2 Indemnification by the Purchaser.....................................24 8.3 Procedures Relating to Third Party Claims............................24 8.4 Survival of Representations, Warranties and Agreements...............25 9. Expenses..................................................................25 10. Notices...................................................................25 11. Successors and Assigns....................................................27 12. Amendments................................................................27 13. Entire Agreement..........................................................27 14. Termination...............................................................27 15. Counterparts..............................................................27 16. Headings..................................................................27 17. Governing Law; Submission to Jurisdiction; Selection of Forum.............28 VITAL LIVING, INC. SUBSCRIPTION AGREEMENT ---------------------- SUBSCRIPTION AGREEMENT (this "Agreement") dated as of August 20, 2003 by and between Vital Living, Inc., a Nevada corporation (the "Corporation"), and SkyePharma PLC, a company incorporated under the laws of England and Wales (the "Purchaser"). WHEREAS, the Purchaser will acquire 14,204,548 shares of the Corporation's Common Stock pursuant to the merger of e-nutriceuticals, Inc. ("ENI") with the Corporation (the "Merger"), subject to the terms and conditions set forth in the Agreement and Plan of Merger (the "Merger Agreement") between the Corporation, VLEN Acquisition Corp., Inc., a wholly-owned subsidiary of the Corporation, and ENI, dated as of the date hereof; WHEREAS, the Purchaser wishes to purchase from the Corporation, and the Corporation wishes to sell to the Purchaser, 1,000,000 shares of the Corporation's Series D Convertible Preferred Stock, at a price of US$1.00 per share of Convertible Preferred Stock, subject to the terms and conditions set forth herein; and WHEREAS, the Purchaser and the Corporation are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. CERTAIN FILINGS --------------- The Corporation has filed with the Secretary of State of the State of Nevada (a) the Amended and Restated Articles of Incorporation of the Corporation in the form of EXHIBIT A attached hereto (the "Articles of Incorporation"), pursuant to which the Board of Directors of the Corporation is authorized to establish a series of preferred stock consisting of 1,000,000 shares, par value $0.001 per share, to be designated as Series D Convertible Preferred Stock of the Corporation (the "Convertible Preferred Stock") and (b) a Certificate of Designations, Preferences and Relative, Participating, Optional or Other Special Rights of Series D Convertible Preferred Stock of the Corporation, in the form of EXHIBIT B attached hereto (the "Certificate of Designations"), designating the voting powers, designations, preferences and other special rights, and qualifications, limitations and restrictions of the Convertible Preferred Stock. 2. PURCHASE AND SALE OF SECURITIES; CLOSING ---------------------------------------- 2.1 Authorization of Preferred Shares --------------------------------- On the terms and subject to the conditions hereof the Corporation has authorized the issuance of an aggregate of 1,000,000 shares of Convertible Preferred Stock (the "Preferred Shares") and has authorized the reservation of that number of shares of common stock of the Corporation (the "Common Stock") which will be issuable upon conversion of the Preferred Shares (the "Reserved Common Shares"). 2.2 Purchase and Sale ----------------- At the Closing (as defined herein), upon the terms and subject to the conditions hereinafter set forth, the Corporation will sell to the Purchaser and the Purchaser shall purchase from the Corporation, one million newly-issued shares of Convertible Preferred Stock at a purchase price of $1.00 per share and $1,000,000 in the aggregate. 2.3 The Closing ----------- The closing (the "Closing") hereunder with respect to the Preferred Shares will take place at the offices of Becker Glynn Melamed & Muffly LLP, New York, New York on the date of the execution of this Agreement, subject to the prior satisfaction or waiver of all conditions set forth in Sections 5 and 6 hereof (other than any such conditions which, by their terms, cannot be satisfied until the Closing), or at such other time and place as the Corporation and the Purchaser may agree. The date on which the Closing occurs is referred to as the "Closing Date". 2.4 Delivery of Convertible Preferred Shares ---------------------------------------- At the Closing, the Corporation shall deliver to the Purchaser a stock certificate representing one million shares of Convertible Preferred Stock, registered in the name of the Purchaser, or at the direction of the Purchaser, in the name of one of its affiliates, and dated the Closing Date, against payment in full of the Purchase Price (defined below) to be satisfied by receipt by the Corporation of a certified or official bank check payable to the Corporation, or a wire transfer of immediately available funds, to an account designated by the Corporation at least one business day prior to the Closing Date of $1,000,000 (the "Purchase Price"). 2.5 Delivery of the Registration Rights Agreement --------------------------------------------- At the Closing, the Corporation and the Purchaser shall deliver to the other duly executed copies of even date herewith of the Registration Rights Agreement, by and between the Corporation and the Purchaser, in the form attached hereto as EXHIBIT C (the "Registration Rights Agreement"). 2 3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION ------------------------------------------------- For the purpose of inducing the Purchaser to enter into this Agreement and to approve the Merger contemplated in the Merger Agreement, the Corporation represents and warrants to the Purchaser subject to the exceptions specifically disclosed in the disclosure schedule, set forth as Exhibit D hereto (referencing the appropriate section number) supplied by the Corporation (the "Disclosure Schedule"), as follows: 3.1 Organization Standing and Power ------------------------------- The Corporation is a corporation duly organized, validly existing and in good standing under the laws of Nevada. The Corporation has the corporate power to own its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing in Arizona and each other jurisdiction in which the failure to be so qualified would have a material adverse effect on the ability of the Corporation to consummate the transactions contemplated hereby. 3.2 Authorization of Preferred Shares --------------------------------- The issuance, sale and delivery of the Preferred Shares have been duly authorized by all requisite corporate action of the Corporation; and the Preferred Shares have been duly authorized and duly reserved for issuance pursuant to this Agreement, and when issued, sold and delivered in accordance with the terms of this Agreement and the Certificate of Designations, the Preferred Shares will be validly issued and outstanding, fully paid and nonassessable and will not create or vest any preemptive or other similar rights, or cause any adjustment in the number of securities issuable pursuant to, or the conversion or exercise price of, any outstanding rights to purchase, acquire or subscribe to shares in the Corporation or securities convertible into shares of the Corporation by any of the beneficial holders of shares of the Corporation or any securities convertible into, or exercisable for, shares of the Corporation, and will be free and clear of all liens, pledges, charges, claims, security interests or other encumbrances of any sort ("Liens"). 3.3 Authorization of Reserved Common Shares --------------------------------------- The Reserved Common Shares have been duly authorized and duly reserved for issuance upon conversion of the Preferred Shares. When and if issued, sold and delivered in accordance with the terms of the Certificate of Designations, the Reserved Common Shares will be duly authorized, validly issued and outstanding, fully paid and nonassessable and will not create or vest any preemptive or other similar rights, or cause any adjustment in the number of securities issuable pursuant to, or the conversion or exercise price of, any outstanding rights to purchase, acquire or subscribe to shares in the Corporation or securities convertible into shares of the Corporation by any of the beneficial holders of shares of the Corporation or any securities convertible into, or exercisable for, shares of the Corporation, and will be free and clear of all Liens. 3 3.4 Capitalization (a) The authorized capital stock of the Corporation consists solely of 100,000,000 shares of Common Stock, par value $0.001 per share (the "Common Stock"), of which 21,267,116 shares are issued and outstanding, and 50,000,000 shares of Preferred Stock, par value $0.001 per share ("Preferred Stock"), of which 5,592,488 shares are issued and outstanding. All of the outstanding shares of Common Stock and Preferred Stock of the Corporation have been duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights. (b) Section 3.4(b) of the Disclosure Schedule sets forth the capital structure of the Corporation (computed without taking into account the full-ratchet anti-dilution adjustments for the warrants issued to Stuart Benson (i) which will be cancelled and of no further force and (ii) in place of which a finite number of warrants shall be established as set forth in Section 3.4(c) of the Disclosure Schedule, as of the Effective Time as defined in the Merger Agreement). Except as set forth in Section 3.4(b) of the Disclosure Schedule there are no (i) outstanding warrants, options, agreements, convertible securities or other commitments or instruments pursuant to which the Corporation is or may become obligated to issue or sell any shares of capital stock or other securities of the Corporation, (ii) equity interests, stock appreciation rights, phantom stock, profit participation rights or other equity or equity derivative security of any kind of the Corporation, (iii) preemptive or similar rights to purchase or otherwise acquire shares of capital stock of the Corporation pursuant to any provision of law, the Articles of Incorporation or Bylaws of the Corporation or any agreement to which the Corporation is a party or otherwise, (iv) obligation (contingent or otherwise) of the Corporation to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof or (v) voting trusts, voting agreements, proxies or other agreements or instruments with respect to the voting of the Corporation's Common Stock or other securities to which the Corporation is a party, or to the best knowledge of the Corporation, among or between any individual, corporation, partnership, limited liability company, joint venture association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof (any "Persons") other than the Corporation. (c) Section 3.4(c) of the Disclosure Schedule sets forth the post-merger capital structure of the Corporation, on a fully diluted basis, as it will exist upon consummation of the Closing. Upon consummation of the Closing, the Corporation will have 54,965,726 shares of Common Stock issued and outstanding and 6,592,488 shares of Preferred Stock issued and outstanding. If all of the shares of Common Stock issuable after consummation of the Merger Agreement and assuming the conversion of all securities convertible at any time into shares of Common Stock and the exercise of all options or warrants or other rights to 4 purchase or receive shares of the Common Stock, whether or not immediately exercisable, as described in Section 3.4(c) of the Disclosure Schedule, were issued, the Corporation would have 81,379,212 shares of Common Stock issued and outstanding, not including the Contingent Equity Issuances (as defined in Section 3.4(b) of the Disclosure Schedule) and options exercisable into 600,000 shares of Common Stock under the Christopher's Original Formulas, Inc. incentive compensation arrangements. Upon the purchase and sale of the Preferred Shares described herein, in combination with the shares of Common Stock to be acquired by the Purchaser pursuant to the Merger Agreement, the Purchaser will hold at least 18.68% of the fully diluted Common Stock, assuming for purposes of this Section 3.4(c) the conversion of all securities convertible at any time into shares of Common Stock and the exercise of all options or warrants or other rights to purchase or receive shares of the Common Stock, whether or not immediately exercisable, as set forth in the third sentence of this paragraph. It shall not be a breach of this Section 3.4(c) if the number of shares of Common Stock listed in the third sentence of this paragraph is inaccurate up to a maximum of 100,000 shares of Common Stock in the aggregate. (d) Except for its ownership of 100% of the capital stock of Nature Systems Inc. and VLEN Acquisition Corp., Inc. and 100% of the limited liability company interests of MAF BioNutritionals, LLC (the "Subsidiaries"), the Corporation does not own and has not owned any interest, beneficially or of record, in any corporation, partnership, joint venture or organization, whether incorporated or unincorporated. 3.5 Authority --------- The Corporation has all requisite power and authority to enter into this Agreement, the Registration Rights Agreement, the Merger Agreement and the Assignment and Assumption Agreement executed on the date hereof by ENI, the Purchaser and the Corporation (collectively, the "Transaction Agreements"), as applicable, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Transaction Agreements and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Corporation. The Corporation's Board of Directors has duly approved the Transaction Agreements, as applicable. This Agreement has been duly executed and delivered, and the other Transaction Agreements, when delivered, will have been duly executed and delivered by the Corporation and constitute valid and binding obligations of the Corporation, enforceable in accordance with their terms except as such enforceability may be limited by principles of public policy and subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The execution and delivery of the Transaction Agreements by the Corporation and the consummation of the transactions contemplated thereby do not conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict") (i) any provision of 5 the Articles of Incorporation of the Corporation or the Subsidiaries, as amended, or (ii) any material mortgage, indenture, lease, contract or other material agreement or instrument applicable to the Corporation or the Subsidiaries or its or their properties or assets. No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or Commission ("Governmental Entity") or any third party or any shareholder or shareholders of the Corporation, including a party to any agreement with the Corporation or the Subsidiaries (so as not to create or cause any Conflict), is required by or with respect to the Corporation or the Subsidiaries in connection with the execution and delivery of the Transaction Agreements or the consummation of the transactions contemplated thereby (including in order so that the securities issued by the Corporation pursuant to the Transaction Agreements shall be free and clear of any restrictions imposed on the Purchaser under the laws of Nevada or any other statute that are not imposed generally upon the holders of each security and that the Purchaser shall have available to it all rights and privileges of the securities which any other stockholder of the Corporation could exercise) except for such consents, waivers, approvals, orders, authorizations, registrations, declarations, and filings as may be required under applicable securities laws thereby. 3.6 No Undisclosed Liabilities -------------------------- Except as set forth in Section 3.6 of the Disclosure Schedule, to the best knowledge of the Corporation, except for obligations incurred in the ordinary course of business which are not material and not required under U.S. generally accepted accounting principles ("GAAP") to be set forth or reflected on a balance sheet or the notes thereto, neither the Corporation nor the Subsidiaries have any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any type, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in financial statements in accordance with GAAP), which individually or in the aggregate, (i) has not been reflected in the Corporation's financial statements as filed in the Corporation's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2002 (the "Annual Report") and the Corporation's Quarterly Report on Form 10-Q for the six months ended June 30, 2003 (the "Quarterly Report"), or (ii) has not been specifically described in this Agreement and specifically identified herein as not being included in such financial statements. 3.7 Deferred Compensation --------------------- Other than Brad Edson, Stuart Benson, Robert Scott and Jim Jepson, there are no employees, directors and consultants who are eligible for any deferred compensation, bonuses, profit participation or expenses payable to the employee, director or consultant. No compensation is owed by the Corporation or the Subsidiaries to such individuals or to any other employees, directors or consultants of the Corporation or the Subsidiaries other than ordinary payroll payable by the Corporation at the end of each pay period. Additionally, each of the individuals set forth above are eligible by the terms of their employment agreements to participate in a plan allocating 6% of the 6 Corporation's pre-tax profit, if and when such a plan is adopted by the Corporation's Board of Directors. 3.8 No Changes. ----------- Except as set forth in Section 3.8 of the Disclosure Schedule, since June 30, 2003, neither the Corporation nor any Subsidiary has suffered any change or development which has had a material adverse effect or has conducted their respective businesses other than in the ordinary and usual course consistent with past practices and has not: (a) sold, leased, transferred or otherwise disposed of any of the assets (other than dispositions in the ordinary course of business consistent with past practices); (b) terminated or amended in any material respect any material contract or lease to which the Corporation or any Subsidiary is a party or to which the Corporation or any Subsidiary is bound or to which the Corporation's or any Subsidiary's properties are subject; (c) suffered any loss, damage or destruction, whether or not covered by insurance, which has had a material adverse effect; (d) made any change in the accounting methods or practices the Corporation or any Subsidiary follows, whether for general, financial or tax purposes; (e) incurred any liabilities (other than in the ordinary course of business or contractual liabilities) which, individually or in the aggregate, have had a material adverse effect; (f) incurred, created or suffered to exist any Liens (other than non-material Liens) on the Corporation's or any Subsidiary's assets; (g) increased the compensation payable, or to become payable, to any of the Corporation's or any Subsidiary's officers or employees or increased any bonus, severance, accrued vacation, insurance, pension or other employee benefit plan, payment or arrangement made by the Corporation or any Subsidiary for or with any such officers or employees out of the ordinary course of business; (h) suffered any labor dispute, strike, or other work stoppage; (i) made or obligated the Corporation or any Subsidiary to make any capital expenditures in excess of $50,000 individually; (j) entered into any contract or other agreement requiring the Corporation or any Subsidiary to make payments in excess of $50,000 individually; 7 (k) other than as disclosed in the Registration Statement on Form SB-2/A of the Corporation filed on July 22, 2003 (the "Registration Statement"), paid any dividends, whether in cash or property, on account of, or repurchased any of, the Common Stock; or (l) entered into any agreement to do any of the foregoing. 3.9 Taxes ----- The Corporation and each Subsidiary have filed all Tax Returns and paid all Taxes shown thereon to be due, if any, that are required to have been filed on or before the Closing with appropriate federal, state, foreign, county and local governmental agencies or instrumentalities, except where the failure to do so would not have a material adverse effect upon the business of the Corporation or any Subsidiary. As of the date hereof, there are not pending or, to the best knowledge of the Corporation threatened, any audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters. There are not, to the best knowledge of the Corporation, any unresolved questions or claims concerning the Corporation's Tax liability that are reasonably likely to have a material adverse effect on the business of the Corporation. Neither the Corporation nor any Subsidiary has any liability with respect to any income, payroll, withholding, franchise or similar Taxes. As used in this Agreement, (i) the term "Tax" (including, with correlative meaning, the terms "Taxes" and "Taxable") includes all federal, state and local income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term "Tax Return" includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes. 3.10 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment and Inventory ------------------------------------------------------- (a) The Registration Statement contains a true, accurate and complete list of all real property currently leased by the Corporation and any Subsidiary, the name of the lessor, the date of the lease and each amendment thereto and the aggregate annual rental and/or other fees payable under any such lease. All such leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default). Neither the Corporation nor any of its Subsidiaries owns any real property. (b) Each of the Corporation and the Subsidiaries has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, 8 all of its tangible properties and assets as defined below free and clear of any Liens, except (i) as reflected in the Registration Statement, (ii) for liens for taxes not yet due and payable and such imperfections of title, (iii) for encumbrances, if any, which are not material in character, amount or extent, and which do not materially detract from the value, or materially interfere with the present use, of the property subject thereto or affected thereby, and (iv) all Liens on any asset of the Corporation, as set forth on Section 3.10(b) of the Disclosure Schedule. 3.11 Intellectual Property --------------------- Section 3.11 of the Disclosure Schedule sets forth a complete list of all patents or patents pending or any trademark, trade names, service marks and copyrights of the Corporation and its Subsidiaries (the "Intellectual Property Rights" and individually, an "Intellectual Property Right"), and any applications therefor in respect of any of the foregoing, included in the Intellectual Property Rights, and specifies, where applicable, the jurisdictions in which each such Intellectual Property Right has been issued or registered or in which an application for such issuance and registration has been filed, including the respective registration or application numbers and the names of all registered owners. No claims with respect to the Intellectual Property Rights have been asserted against the Corporation or any Subsidiary, nor are threatened against the Corporation or any Subsidiary or have been asserted or threatened against a third party, nor is the Corporation or any Subsidiary aware, except as disclosed on Section 3.11 of the Disclosure Schedule, of any reasonable basis for any claims (i) against the use by the Corporation or any Subsidiary of any distribution rights, trademarks, service marks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in the Corporation's or any Subsidiary's business as currently conducted or (ii) challenging the validity, effectiveness, or ownership by the Corporation or any Subsidiary of any of the Intellectual Property Rights. All registered patents, trademarks, service marks and copyrights held by the Corporation and each Subsidiary are valid and subsisting. To the knowledge of the Corporation and its Subsidiaries, there is no unauthorized use, infringement or misappropriation of any of the Intellectual Property Rights owned by the Corporation or any Subsidiary by any third party, including any employee or former employee of the Corporation or any Subsidiary. No Intellectual Property Right or product of the Corporation or any Subsidiary is subject to any outstanding decree, order, judgment, or stipulation restricting in any manner the licensing thereof by the Corporation or any Subsidiary. Neither the Corporation nor any Subsidiary has entered into any agreement under which the Corporation or any Subsidiary is restricted from selling, licensing or otherwise distributing any of its products to any class of customers, in any geographic area, during any period of time or in any segment of the market other than as described in the Registration Statement. 3.12 Agreements, Contracts and Commitments. -------------------------------------- Except as set forth in Section 3.12 of the Disclosure Schedule, neither the Corporation nor any of its Subsidiaries has continuing obligations under, is not a party to nor is it bound by: 9 (a) any collective bargaining agreements; (b) any agreements or arrangements that contain any severance pay or post-employment liabilities or obligations; (c) any bonus, deferred compensation, pension, profit sharing or retirement plans, or any other employee benefit plans or arrangements; (d) any employment, sales or consulting agreement, contract or commitment with an employee, individual consultant or salesperson or consulting or sales agreement, contract or commitment with a firm or other organization; (e) any agreement or plan, including, without limitation, any stock option plan, stock appreciation rights plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by the Transaction Agreements or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by the Transaction Agreements, except as provided herein; (f) any fidelity or surety bond; (g) any lease of personal property having annual lease payments individually in excess of $50,000; (h) any agreement of indemnification or guaranty other than in the ordinary course of business; (i) any agreement, contract or commitment containing any covenant limiting the freedom of the Corporation or any Subsidiary to engage in any line of business or to compete with any Person; (j) any agreement, contract or commitment relating to capital expenditures and involving future payments in excess of $50,000; (k) any agreement, contract or commitment relating to the disposition or acquisition of material assets or any interest in any business enterprise outside the ordinary course of the Corporation's business; (l) any purchase order or contract for the purchase of raw materials involving $50,000 or more; (m) any construction contracts; (n) any agreement, contract or commitment, including distribution or agency or sales representative agreements, with any party which, during the last two fiscal years of the Corporation, accounted for, or is expected to account 10 during the Corporation's current fiscal year, for more than five percent (5%) of the Corporation's revenue or trade payables; (o) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit. Each of the Corporation and its Subsidiaries has not breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the material terms or conditions of (i) any agreement, contract or commitment set forth in Section 3.12 of the Disclosure Schedule, or (ii) any other material agreement, contract or commitment to which it is a party or by which it is bound (any such agreement, contract or commitment, a "Contract"). Each Contract is in full force and effect and, except as otherwise disclosed in Section 3.12 of the Disclosure Schedule, is not subject to any default thereunder of which the Corporation is aware by any party obligated to the Corporation or any Subsidiary pursuant thereto, other than late payments. Each of the Corporation and its Subsidiaries has obtained all necessary consents, waivers and approvals of parties to any Contract as are required in connection with the transactions contemplated by the Transaction Agreements, or as are required or advisable in order to remain in effect without modification after the transactions contemplated by the Transaction Agreements. Each Contract requiring any consent, waiver or third-party approval as a result of the transactions contemplated by the Transaction Agreements is disclosed in Section 3.12 of the Disclosure Schedule. Neither the execution of the Transaction Agreements nor consummation of the transactions contemplated thereby will cause any default or breach under any Contract, including without limitation any key man clause in any Contract, or the acceleration of any payment obligation of the Corporation or any Subsidiary. 3.13 Interested Party Transactions ----------------------------- Except as disclosed in the section entitled "Certain Transactions and Related Transactions" in the Registration Statement, no officer, director or employee or stockholder (nor any spouse of any of such persons, or any trust, partnership or corporation in which any of such persons has or has had an interest), has or has had, directly or indirectly, (i) an interest in any entity which furnished or sold, or furnishes or sells, services or products that the Corporation or any Subsidiary furnishes or sells, or proposes to furnish or sell, or (ii) any interest in any entity that purchases from or sells or furnishes to, the Corporation or any Subsidiary any goods or services or (iii) a beneficial interest in any contract or agreement with the Corporation or any Subsidiary, other than Robert Eide, who will be receiving a portion of the proceeds of the compensation arrangements with HCFP Brenner Securities described in Section 3.16, in his capacity as a principal of Aegis Capital Corp. 3.14 Governmental Authorization -------------------------- Each material consent, license, grant, permit or other authorization issued to the Corporation or any Subsidiary by any Governmental Entity (i) pursuant to which 11 the Corporation or any Subsidiary currently operates or holds any interest in any of its properties or (ii) which is required for the operation of its business or the holding of any such interest (herein collectively called "Corporation Authorizations") are in full force and effect. The Corporation Authorizations constitute all Corporation Authorizations required to permit the Corporation and its Subsidiaries to operate or conduct their business or hold any interest in their properties or assets. 3.15 Litigation ---------- There is no action, suit, claim or proceeding of any nature pending, or threatened against the Corporation or any Subsidiary, its properties or any of its officers or directors, in their capacities as agents of the Corporation or any Subsidiary. To the best knowledge of the Corporation, there is no investigation pending or threatened against the Corporation or any Subsidiary, its properties or any of its officers or directors, in their capacities as agents of the Corporation or any Subsidiary by or before any Governmental Entity. No Governmental Entity has at any time challenged or questioned the legal right of the Corporation or any Subsidiary to manufacture, offer or sell any of its products in the present manner or style thereof. 3.16 Brokers' and Finders' Fees -------------------------- Other than the issuance to HCFP Brenner Securities of 1,150,000 shares of Common Stock and $150,000 as payment for advisory services, and $60,000 which remains owing to HCFP Brenner Securities as payment for previously delivered advisory services and will be paid upon the Closing, neither the Corporation nor any Subsidiary has incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with the Transaction Agreements or any transaction contemplated thereby or hereby. 3.17 Employee Benefit Plans and Compensation --------------------------------------- (a) No employee of the Corporation or any Subsidiary is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with the Corporation or any Subsidiary or any other party as a result of the nature of the business presently conducted or proposed to be conducted by the Corporation or any Subsidiary. Neither the Corporation nor any Subsidiary has any collective bargaining agreement covering any of its employees. (b) Neither the Corporation nor any Subsidiary has any employee benefit plan covering employees, whether subject to ERISA or otherwise. (c) Neither the Corporation nor any entity which is considered one employer with the Corporation under Section 4001 of ERISA or Section 414 of the Code has ever maintained or contributed to any employee benefit plan subject to Title IV of ERISA. All contributions required to be made under the terms of any plan have been timely made or have been reflected on the Corporation's financial statements. 12 (d) Neither the Corporation nor any Subsidiary has any obligations for retiree health and life benefits under any benefit plan. (e) The consummation of the transactions contemplated by this Agreement and the Transaction Agreements will not (x) entitle any employees to severance pay or (y) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Corporation's or Subsidiary's employee benefit plans. 3.18 Environmental Matters --------------------- (a) Except as would not, individually or in the aggregate, have a material adverse effect on the Corporation: (i) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation, action, claim, suit, proceeding or review is pending or, to the best knowledge of the Corporation or its Subsidiaries, is threatened by any governmental entity or other Person relating to or arising out of any Environmental Law (as defined below); (ii) each of the Corporation and any Subsidiary is and has been in compliance with all Environmental Laws and all Environmental Permits (as defined below); and (iii) there are no liabilities of or relating to the Corporation or any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law and there are no facts, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such liability. (b) "Environmental Laws" means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or requirement or any agreement with any governmental authority or other third party, relating to human health and safety or the environment and arising from the use, presence, disposal, discharge or release of pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials. "Environmental Permits" means, with respect to any Person, all permits, licenses, franchises, certificates, approvals and other similar authorizations of governmental 13 authorities relating to or required by Environmental Laws and affecting, or relating in any way to, the business of such Person as currently conducted. 3.19 Insurance --------- The Corporation maintains insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors of the Corporation and its Subsidiaries that provide full and adequate coverage for its business. There is no claim by the Corporation or any Subsidiary pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Corporation and any Subsidiary are otherwise in material compliance with the terms of such policies and bonds. The Corporation has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. 3.20 Compliance with Laws -------------------- Each of the Corporation and each Subsidiary has complied with, is not in violation of, and has not received any notices of violation with respect to, any foreign, federal, state or local statute, law or regulation. 3.21 Disclosure ---------- Neither this Agreement nor any exhibit or schedule hereto nor any statement, document, list or certificate delivered or shown to Purchaser pursuant hereto or pursuant to any request therefor, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 3.21 shall diminish or derogate from any of the other representations and warranties of the Corporation contained in this Section 3. 3.22 Stock Exchange Documents; Corporation Financial Statements; Other Representations ----------------------------------------------- The Corporation has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the United States Securities and Exchange Commission (the "SEC") pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, (the "Exchange Act"), (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the "Exchange Documents"). The Corporation has furnished to the Purchaser true and complete copies of the Annual Report and the Quarterly Report. As of their respective filing dates, the Exchange Documents complied in all material respects with the requirements of the Exchange Act and none of the Exchange Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were 14 made, not misleading, except to the extent corrected by a subsequently filed document with the SEC. The financial statements of Corporation, including the notes thereto, included in the Exchange Documents comply as to form in all material respects with applicable accounting requirements in effect at the time of filing of such Exchange Documents and with the published rules and regulations of the SEC with respect thereto in effect at the time of filing of such Exchange Document, and have been prepared in accordance with GAAP consistently applied (except as may be indicated in the notes thereto) and present fairly the consolidated financial position of Corporation at the dates thereof and of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal audit adjustments). There have been no material adverse changes in the business, operations, or financial condition of the Corporation that are not reflected in such Exchange Documents or that have occurred since the period covered by the most recent of such Exchange Documents. 3.23 Acknowledgement Regarding Securities ------------------------------------ The Corporation acknowledges that its obligation to issue Common Stock upon conversion of the Preferred Shares, in accordance with the terms of this Agreement and the Certificate of Designations, is absolute and unconditional, regardless of the dilution that such issuance may have on the ownership interests of other stockholders of the Corporation. Taking the foregoing into account, the Corporation's Board of Directors has determined in its good faith business judgment that the issuance of the Preferred Shares hereunder and the consummation of the other transactions contemplated hereby are (a) in the best interests of the Corporation and its stockholders and (b) do not breach (with or without the passage of time or the giving of notice) any obligations of the Corporation the result of which would have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), operations, prospects, business, assets, liabilities or earnings of the Corporation. The Corporation's Board of Directors has approved the terms of this Agreement and the Certificate of Designations and the transactions contemplated hereby and thereby. There are no adjustments, Liens or rights that would be triggered by the issuance of the Preferred Shares pursuant to agreements between the Corporation and any lender or holder of an equity interest or other securities of the Corporation. 3.24 Agreements Regarding Confidential Information, Proprietary Information and Intellectual Property ------------------------------------------------- The Corporation has caused employees and consultants of the Corporation or any Subsidiary to execute and deliver such agreements with the Corporation or any Subsidiary with respect to non-disclosure, non-competition and assignment of Intellectual Property Rights that provide full and adequate coverage for the Intellectual Property Rights. 3.25 Registration Rights ------------------- Except as provided in the Registration Rights Agreement, and in the registration rights agreement, dated as of November 20, 2002, between the Corporation 15 and the holders of the Series A Preferred Stock, copies of which have been previously delivered to Purchaser, the Corporation is not under any contractual obligation to register any of its outstanding securities. 3.26 Rights of First Refusal; Voting and Registration Rights ------------------------------------------------------- To the best of the Corporation's knowledge, no party has any right of first refusal, right of first offer, right of co-sale, preemptive right or other similar right regarding the Corporation's securities. There are no provisions of the Articles of Incorporation or the Bylaws of the Corporation, no agreements to which the Corporation is a party and no agreements by which the Corporation, or the Preferred Shares are bound, which (a) may affect or restrict the voting rights of the Purchaser with respect to the Preferred Shares in its capacity as a stockholder of the Corporation, (b) restrict the ability of the Purchaser, or any successor thereto or assignee or transferee thereof, to transfer the Preferred Shares, (c) would adversely affect the Corporation's or the Purchaser's right or ability to consummate the transactions contemplated by the Transaction Agreements or to comply with the terms of the transactions contemplated hereby or thereby, (d) require the vote of more than a majority of the Corporation's issued and outstanding Common Stock, voting together as a single class, to take or prevent any corporate action, other than those matters requiring a class vote under Nevada law, or (e) entitle any party to nominate or elect any director of the Corporation or require any of the Corporation's stockholders to vote for any such nominee or other person as a director of the Corporation in each case. 3.27 Issuances Exempt ---------------- All shares of Common Stock and other securities issued by the Corporation prior to or on the Closing Date have been issued in transactions either registered under the Securities Act of 1933, as amended (the "Securities Act") or exempt from the registration requirements under the Securities Act and all applicable state securities or "blue sky" laws, and in compliance with all applicable corporate laws. The Corporation has not offered any of its Common Stock or any other securities for sale, or solicited any offers to buy, any of the foregoing from the Corporation or otherwise approached or negotiated with any other Person in respect thereof in such a manner as to require registration under the Securities Act. No holder of any of the Corporation's capital stock has any rescission or pre-emptive rights. 3.28 No Integrated Offering ---------------------- Neither the Corporation nor any other Person acting on the Corporation's behalf has directly or indirectly engaged in any form of general solicitation or general advertising with respect to the Preferred Shares nor have any of such Persons made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration of the Preferred Shares under the Securities Act or cause this offering of Preferred Shares to be integrated with any prior offering of securities of the Corporation for purposes of the Securities Act. 16 3.29 Securities Offerings -------------------- Subject to the accuracy of the Purchaser's representations and warranties made in Section 4 hereof to the Corporation, (i) the offer, sale and issuance of the Preferred Shares to the Purchaser in conformity with the terms of this Agreement, and (ii) the issuance to the Purchaser of the Reserved Common Shares, each constitute or will constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and the registration or qualification requirements of any applicable state securities or "blue sky" laws. 3.30 Investment Company Act ---------------------- The Corporation is not now, and after giving effect to the sale of the Preferred Shares and the application of the proceeds thereof will not be, required to register as an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. 3.31 Nevada Corporate Statutes ------------------------- (a) The provisions of Nevada Revised Statutes 78.378-3793 (the "Nevada Acquisition Statute") are or have been made inapplicable to the Corporation and to the Purchaser, and, after the Closing and the consummation of the Merger and the other transactions contemplated by the Transaction Agreements, the Purchaser shall not be an "acquiring person" or hold a "controlling interest" under, and shall no way be prohibited in the exercise of its rights, privileges, power or authority with respect to voting any of its shares of the Corporation's capital stock, by the Nevada Acquisition Statute. (b) The provisions of Nevada Revised Statutes 78.411-444 (the "Nevada Moratorium Statute") are or have been made inapplicable to the Purchaser, and, after the Closing and the consummation of the Merger and the other transactions contemplated by the Transaction Agreements, the Purchaser shall not be an "interested stockholder" for purposes of the Nevada Moratorium Statute. (c) The securities issued by the Corporation pursuant to the Transaction Agreements shall be free and clear of any restrictions imposed on the Purchaser under the laws of Nevada or any other statute that are not imposed generally upon the holders of each security, and the Purchaser shall have available to it all rights and privileges of the securities which any other stockholder of the Corporation could exercise. The Corporation has taken all necessary corporate action prior to the Closing, including but not limited to, amending the Articles of Incorporation and Bylaws and convening any required stockholders' meetings, to effect the foregoing representation and warranty contained in this Section 3.31. 17 3.32 Use of Proceeds --------------- The Corporation will utilize the net proceeds from the sale of the Preferred Shares for general corporate purposes. 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ----------------------------------------------- The Purchaser hereby represents and warrants to the Corporation as follows: 4.1 Due Organization ---------------- The Purchaser is a company duly organized and validly existing under the laws of England and Wales. 4.2 Authorization; Execution and Delivery of Agreement -------------------------------------------------- The Purchaser has all requisite power and authority to execute this Agreement and the Registration Rights Agreement, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary actions on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and this Agreement constitutes the legal, valid, binding and enforceable obligation of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 4.3 No Consent or Approval Required ------------------------------- Other than as a result of the reporting requirements of the Exchange Act, no consent, approval, order or authorization of, or registration, declaration, filing with or notice to, any authority is required to be made or obtained by the Purchaser in order to execute or deliver this Agreement or to consummate the transactions contemplated hereby. 4.4 Brokers' and Finders' Fees -------------------------- No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Purchaser, for which the Corporation will become liable. 4.5 Access to Information --------------------- The Purchaser has had adequate opportunity to ask questions of, and receive answers from, the Corporation's officers, employees, agents, accountants, and representatives concerning the Corporation's business, operations, financial condition, assets, liabilities, and all other matters relevant to its investment in the Preferred Shares. 18 The foregoing, however, does not limit or modify the representations and warranties of the Corporation in Section 3 of this Agreement or the right of the Purchaser to rely thereon. 4.6 Acquisition For Own Account --------------------------- (a) The Purchaser, by reason of its business and financial experience, has such knowledge, sophistication and experience in business and financial matters as to be capable of evaluating the merits and risks of its investment in the Preferred Shares, and is purchasing the Preferred Shares hereunder for its own account, for investment and not with a view to, or any present intention of, effecting a distribution of such securities or any part thereof. The Purchaser acknowledges that the Preferred Shares to be purchased hereunder and the shares of common stock issuable upon the conversion thereof have not been registered under the Securities Act, or the securities laws of any state or other jurisdiction and cannot be disposed of unless they are subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. Furthermore, the Purchaser acknowledges that the Corporation shall place upon each certificate representing the Preferred Shares and such shares of common stock, a legend substantially in the following form; provided, however, that the Preferred Shares and such shares of common stock will not be required to bear a legend more restrictive than the legend provided for or for a longer period of time than as provided in the Registration Rights Agreement. "The securities represented by this certificate have been issued without registration or qualification under the Securities Act of 1933, as amended (the "Securities Act"), or any applicable state securities laws (the "State Acts"). Such securities may not be sold, assigned, transferred or otherwise disposed of, beneficially or on the records of the company, unless the securities represented by this certificate have been registered or qualified under the Securities Act and the applicable State Acts or an exception therefrom is available." 4.7 Accredited Investor ------------------- The Purchaser is an "accredited investor" (as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act). 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER AT THE CLOSING UNDER THIS AGREEMENT --------------------------------------------------------- The obligation of the Purchaser to consummate the Closing is subject to the satisfaction of the following conditions on or prior to the Closing: 19 5.1 Corporate Proceedings; Consents; Etc. ------------------------------------- All corporate and/or other proceedings to be taken by the Corporation, its officers, directors and stockholders and all waivers, filings and consents to be obtained by the Corporation in connection with the transactions contemplated by the Transaction Agreements shall have been taken or obtained, other than those filings which must be made after the Closing. 5.2 Blue Sky Matters ---------------- All consents, approvals, qualifications and/or registrations required to be obtained or effected under any applicable state securities or "blue-sky" laws in connection with the execution and delivery of the Preferred Shares shall have been obtained or effected. 5.3 Registration Rights Agreement ----------------------------- The Registration Rights Agreement, in the form of Exhibit C attached hereto, shall have been executed and delivered by the Corporation. 5.4 Merger Agreement ---------------- The Merger shall have been consummated pursuant to Section 1.2 of the Merger Agreement. 5.5 Filings and Documents --------------------- (a) The Certificate of Designations in the form of Exhibit B hereto shall have been duly authorized by the Board of Directors of the Corporation, duly executed on behalf of the Corporation and filed with the Secretary of State of the State of Nevada. (b) The Corporation shall have delivered to the Purchaser a certificate of the Secretary of the Corporation at the Closing certifying that attached thereto is: (i) a true and complete copy of the Corporation's Articles of Incorporation, as in effect at the Closing; (ii) a true and complete copy of its Bylaws, as in effect at the Closing; (iii) a true and complete copy of the Certificate of Designations; and (iv) a true and complete copy of all resolutions duly adopted by its Board of Directors (x) authorizing the execution, delivery and performance of this Agreement, and (y) authorizing the consummation of the transactions contemplated hereby. 5.6 Regulatory Approvals -------------------- All approvals and authorizations of, filings and registrations with, and notifications to, all Governmental Entities required for the consummation of the transactions contemplated by this Agreement shall have been obtained or made and shall be in full force and effect. 20 5.7 Representations, Warranties and Covenants ----------------------------------------- Each representation and warranty of the Corporation shall be true and correct in all respects as of the Closing Date (other than representations and warranties that expressly speak only as of a prior date); the Corporation shall have complied in all respects with its covenants and agreements to be performed at or prior to the Closing; and the Corporation shall have delivered to the Purchaser a certificate of the Chief Executive Officer of the Corporation in a form previously agreed between the parties, certifying as to the foregoing matters. 5.8 No Litigation ------------- No litigation or other formal proceeding shall have been instituted or threatened seeking to enjoin any of the transactions contemplated hereby or seeking damages in respect thereof, and no injunction or temporary restraining order shall have been issued with respect to any of the transactions contemplated hereby. 5.9 No Prohibition -------------- There shall be no federal and state statutes, laws, rules, regulations, codes and ordinances of any Governmental Entity in effect that prohibits the purchase of the Preferred Shares by the Purchaser or that would otherwise impose a material penalty upon the Purchaser in respect of the purchase of the Preferred Shares. 5.10 Opinion of Counsel ------------------ The Purchaser shall have received an opinion, dated as of the Closing Date, of Kelly Lytton & Vann LLP in the form attached hereto as Exhibit D. 6. CONDITIONS TO OBLIGATIONS OF CORPORATION AT THE CLOSING UNDER THIS AGREEMENT ----------------------------------------------- The obligations of the Corporation to consummate the Closing is subject to the satisfaction of the following conditions on or prior to the Closing: 6.1 Representations and Warranties ------------------------------ Each representation and warranty of the Purchaser shall be true and correct in all respects as of the Closing Date (other than representations and warranties that expressly speak only as of a prior date). 6.2 Registration Rights Agreement ----------------------------- The Registration Rights Agreement, in the form of Exhibit C attached hereto, shall have been executed and delivered by the Purchaser. 21 6.3 No Litigation ------------- No litigation or other formal proceeding shall have been instituted or threatened seeking to enjoin any of the transactions contemplated hereby or seeking damages in respect thereof, and no injunction or temporary restraining order shall have been issued with respect to any of the transactions contemplated hereby. 6.4 No Prohibition -------------- There shall be no federal and state statutes, laws, rules, regulations, codes and ordinances of any Governmental Entity in effect that prohibits the sale of the Preferred Shares by the Corporation or that would otherwise impose a material penalty upon the Corporation in respect of the sale of the Preferred Shares. 7. COVENANTS --------- 7.1 Insurance --------- The Corporation shall as promptly as practicable after the date hereof purchase professional liability, errors and omissions, general liability, property and casualty and business interruption insurance as the Board of Directors deems adequate. The Corporation shall also use its best efforts to purchase any other type of insurance reasonably requested by the Purchaser. Such insurance policies shall provide full and adequate coverage for all normal risks incident to the business of the Corporation and its directors, officers and other personnel, properties and assets, and shall be in character and amount at least equivalent to that carried by Persons engaged in similar businesses and subject to the same or similar perils or hazards. 7.2 Ongoing Filing Requirements --------------------------- Corporations shall file any Exchange Documents required to be filed when and as required by the Securities and Exchange Commission. 7.3 Public Disclosure of Transactions --------------------------------- Neither the Corporation nor the Purchaser shall, without the prior consent of the other party, directly or indirectly issue any public disclosure with respect to the Transaction Agreements or the investment by the Purchaser pursuant to, or the other transactions contemplated by, the Transaction Agreements, except as may be required by applicable law (or under the rules and regulations of any securities exchange on which the Purchaser's capital stock is listed), in which case the Corporation and the Purchaser, as the case may be, shall issue any required statement only after consulting with the other party and furnishing such disclosure to the other party prior to such consultation. 7.4 Information Rights ------------------ (a) From the date hereof and thereafter for so long as the Purchaser owns any Preferred Shares issued hereunder the Corporation shall, and shall cause 22 each Subsidiary to, afford to the Purchaser, the affiliates of the Purchaser and each of their respective officers, directors, employees, advisors, counsel and other authorized representatives (collectively the "Representatives"), during normal business hours, reasonable access, upon reasonable advance notice, to all of the books, records and properties of the Corporation and any Subsidiary or future subsidiaries and all officers and employees of the Corporation and any Subsidiary or future subsidiaries. The Purchaser shall keep confidential information obtained by it in connection with any such inspection, except that the Purchaser shall be permitted to disclose the information relating to the Corporation's business (i) to such of its representatives as need to know such information relating to the Corporation's business for the sole purpose of evaluating the business of the Corporation, provided such Persons are informed of the confidential nature of the information relating to the Corporation's business and the restrictions imposed hereby; (ii) to the extent required by law, rule or regulation or legal process; (iii) to the extent such information relating to the Corporation's or any Subsidiary's or future subsidiary's breach is or becomes publicly available other than as a result of a breach of this Section 7.4(a); or (iv) to the extent the Corporation shall have consented to such disclosure. (b) From the Closing Date and thereafter for so long as the Purchaser owns at least ten percent (10%) of the Preferred Shares issued pursuant to this Agreement or ten percent (10%) of the Reserved Common Shares, the Corporation shall furnish promptly to the Purchaser: (A) notification in writing of the existence of any default under any material agreement or instrument to which the Corporation or any Subsidiary or future subsidiary is a party or by which any of their assets are bound; (B) upon specific request, copies of all financial statements, reports, press releases, notices, proxy statements and other documents sent by the Corporation or any Subsidiary or future subsidiary to its stockholders generally or released to the public and copies of all regular and periodic reports, if any, filed by the Corporation or any Subsidiary or future subsidiary with the SEC, any securities exchange or the NASD and copies of all reports prepared for or delivered to the management of the Corporation or any Subsidiary or future subsidiary by its accountants; and (C) upon specific request, any other routinely collected financial or other information available to management of the Corporation or any Subsidiary or future subsidiary (including without limitation, routinely collected statistical data). 23 7.5 Nevada Corporate Statutes ------------------------- (a) The Corporation shall at all times maintain provisions of its Articles of Incorporation and Bylaws to ensure that the Nevada Acquisition Statute and the Nevada Moratorium Statute are inapplicable to the Purchaser. 8. INDEMNIFICATION; SURVIVAL ------------------------- 8.1 Indemnification by the Corporation ---------------------------------- The Corporation hereby agrees to indemnify and hold harmless the Purchaser and its respective affiliates, directors, officers and employees (collectively, the "Purchaser Indemnified Parties") from and against any and all liabilities, judgments, claims, settlements, losses, damages (including any diminution in value of its investment in the Corporation), reasonable fees (including attorneys' and other experts' fees and disbursements), Liens, Taxes, penalties, obligations and expenses (collectively, "Losses") incurred or suffered by any such Person arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or covenant of the Corporation pursuant to this Agreement (for the period such representation, warranty or covenant survives) or any certificate or other document delivered by the Corporation under this Agreement. This indemnification provision shall be in addition to the rights of the Purchaser to bring an action against the Corporation for breach of any term of the Transaction Agreements. 8.2 Indemnification by the Purchaser -------------------------------- The Purchaser hereby agrees to indemnify and hold harmless the Corporation and its affiliates, directors, officers and employees (the "Corporation Indemnified Parties"), from and against any and all Losses incurred or suffered by any such Person arising from, by reason of or in connection with any misrepresentation or breach of any representation, warranty or covenant of the Purchaser contained in this Agreement (for the period such representation, warranty or covenant survives) or any certificate or other document delivered by the Purchaser under this Agreement. Notwithstanding anything else to the contrary, the Purchaser's maximum liability in the Agreement under this Section 8.2 shall not exceed the amount of the purchase price paid by the Purchaser hereunder. This indemnification provision shall be in addition to the rights of the Corporation to bring an action against the Purchaser for breach of any term of this Agreement and the Registration Rights Agreement. 8.3 Procedures Relating to Third Party Claims ----------------------------------------- A party seeking indemnification pursuant to Section 8.1 or 8.2 (an "Indemnified Party") shall give prompt notice to the party from whom such indemnification is sought (the "Indemnifying Party") of the assertion of any claim or assessment, or the commencement of any action, suit or proceeding, by a third party in respect of which indemnity may be sought hereunder (a "Third Party Claim") and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the 24 Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual and material prejudice thereby). The Indemnifying Party shall have the right, exercisable by written notice (the "Notice") to the Indemnified Party within 14 days of receipt of notice from the Indemnified Party of commencement of or assertion of any Third Party Claim, to assume the defense of such Third Party Claim, using counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided, that the Indemnifying Party shall not have the right to assume a Third Party Claim if the Indemnified Party shall have been advised in writing by counsel that a conflict will arise in the event both the Indemnified Party and the Indemnifying Party are represented by the same counsel with respect to the Third Party Claim, in which case such Indemnified Party shall have the right to control the defense of such Third Party Claim and all Losses in connection therewith shall be reimbursed by the Indemnifying Party from time to time upon demand of the Indemnified Party. In addition, if the Indemnifying Party fails to give the Indemnified Party the Notice complying with the provisions stated above within the stated time period, the Indemnified Party shall have the right to assume control of the defense of the Third Party Claim and all Losses in connection therewith shall be reimbursed by the Indemnifying Party from time to time upon the demand of the Indemnified Party. In no event may any Indemnifying Party settle or compromise any Third Party Claim without the prior written consent of an Indemnified Party. 8.4 Survival of Representations, Warranties and Agreements ------------------------------------------------------ Notwithstanding any investigation conducted or notice or knowledge obtained by or on behalf of any party hereto, each representation and warranty in this Agreement and each agreement or covenant in this Agreement shall survive the execution and delivery of this Agreement, the Closing and any termination of this Agreement pursuant to Section 14 until 90 days after the filing of audited accounts for the year to December 31, 2005. 9. EXPENSES -------- The Corporation, on the one hand, and Purchaser on the other hand, each shall bear its own expenses in connection with the preparation for and consummation of the transactions contemplated by this Agreement. 10. NOTICES ------- All notices, advice and communications to be given or otherwise made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered in person or by telecopier or duly sent by first class registered or certified mail, return receipt requested, postage prepaid, or by overnight courier, or by electronic mail, with a copy thereof to be sent by mail (as aforesaid) within 24 hours of such electronic mail, addressed to such party at the address set forth below or at such other address as may hereafter be designated in writing by the addressee to the addresser listing all parties: 25 (a) if to the Corporation, to: Vital Living, Inc. 5080 North 40th Street, Suite 105 Phoenix, Arizona 85018-2158 Attention: Bradley D. Edson, CEO Telecopier: +1 602 952 6907 with a copy to: Kelly Lytton & Vann LLP 1900 Avenue of the Stars Los Angeles, CA 90067 Attention: Bruce P. Vann Telecopier: +1 350 277 5953 -and- (b) if to the Purchaser, to: SkyePharma PLC 105 Piccadilly London, England, W1J 7NJ Attention: Company Secretary Telecopier: +44 20 7491 3338 with a copy to: Sullivan & Cromwell LLP 1 New Fetter Lane London, England, EC4A 1AN Attention: Kathryn A. Campbell, Esq. Telecopier: +44 20 7959 8950 or to such other address as the party to whom notice is to be given may have furnished to the other parties hereto in writing in accordance herewith. Any such notice or communication shall be deemed to have been delivered and received (i) in the case of personal delivery, delivery by telecopier or transmittal by electronic mail, on the date of such delivery, (ii) in the case of nationally-recognized overnight courier, on the next business day after the date when sent and (iii) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. As used in this Section 10, "business day" shall mean any day other than a day on which banking institutions in the State of New York are legally closed, or authorized to close, for business. 26 11. SUCCESSORS AND ASSIGNS ---------------------- Except as otherwise expressly provided herein, this Agreement shall bind and inure to the benefit of the parties hereto and the respective successors and permitted assigns of the parties hereto. Neither this Agreement, nor the rights and obligations hereunder, is assignable by any party hereto (except to a successor-in-interest by operation of law) without the prior written consent of the other. Any such purported assignment made without such prior written consent shall be null and void. No Person other than the parties hereto, the Purchaser Indemnified Parties (in respect of Section 8 only) and the Corporation Indemnified Parties (in respect of Section 8 only) and their respective successors and permitted assigns shall have any rights or claims under this Agreement. 12. AMENDMENTS ---------- The terms and provisions of this Agreement may only be amended or waived either (a) with the written consent of the parties hereto or (b) in a writing by the party against whom such amendment or waiver is sought to be enforced. 13. ENTIRE AGREEMENT ---------------- This Agreement and the other writings or documents referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 14. TERMINATION ----------- This Agreement may be terminated by either party if the other party is in material breach of this Agreement and such breach is not cured within twenty-one days following the delivery of written notice thereof. Such termination right may be exercised only by the delivery of written notice of such termination by the terminating party to the other party and such termination will not relieve any party of liability for its prior breach. This Agreement may also be terminated by the mutual written consent of the parties hereto except that each representation and warranty in this Agreement and each agreement or covenant in this Agreement shall survive such termination. 15. COUNTERPARTS ------------ This Agreement may be executed in any number of separate counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 16. HEADINGS -------- The headings of the various sections of and schedules to this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 27 17. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM ------------------------------------------------------------- This Agreement shall be construed in accordance with the laws of the State of New York, without regard to conflict of law provisions thereof. Each party hereto agrees that it shall bring up any action or proceeding in respect of any claim arising out of or related to this Agreement or the transactions contained in and contemplated by this Agreement, whether in tort or contract or at law or in equity, exclusively in the United States District Court for the Southern District of New York or, if such court is not available, the Supreme Court of the State of New York for the county of New York (the "Chosen Courts") and solely in connection with claims arising under this Agreement or the transactions contained in or contemplated by this Agreement (i) irrevocably submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen Courts and agrees not to commence any action in respect of any such claim in any other court or forum, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto, (iv) waives any right to a trial by jury and (v) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 10 of this Agreement. Without limiting the foregoing, each of the Corporation and the Purchaser hereby appoints, in the case of any such action or proceeding brought in the courts of or in the State of New York, CT Corporation system with its offices at 111 8th Avenue, 13th Floor, New York, N.Y. 10011 to receive, for it and on its behalf, service of process in the State of New York with respect thereto, provided the Corporation and the Purchaser may appoint any other Person, reasonably acceptable to the other party, with offices in the State of New York to replace such agent for service of process upon delivery to the other party of a reasonably acceptable agreement of such new agent agreeing to act. 28 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. VITAL LIVING, INC. By: /s/ Bradley D. Edson ------------------------------------ Name: Bradley Edson Title: Chairman of the Board and Chief Executive Officer By: /s/ Stuart A. Benson ------------------------------------ Name: Stuart Benson Title: President SKYEPHARMA PLC By: /s/ Donald Nicholson ------------------------------------ Name: Donald Nicholson Title: Finance Director 29 EX-99.3 5 ex-3.txt COMMITMENT LETTER EXHIBIT 3 [SKYEPHARMA LETTERHEAD] Vital Living, Inc. 5080 North 40th Street, Suite 105 Phoenix, Arizona 85018-2158 United States 20 August 2003 We refer to the Agreement and Plan of Merger (the "Merger Agreement"), by and among you ("Vital Living"), VLEN Acquisition Corp., Inc. ("Merger Sub") and e-nutriceuticals, Inc. ("ENI"), dated as of the date hereof (the "Closing Date"). Whereas it is one of the conditions to close of the merger contemplated by the Merger Agreement that SkyePharma PLC enter into a binding commitment to invest $1,000,000 in Vital Living subject to certain conditions being fulfilled within 90 days, we hereby agree as follows. Subject to (a) the Closing of the merger contemplated by the Merger Agreement and (b) the receipt of final and satisfactory documentation, acceptable to us in our reasonable discretion, establishing the consummation of a financing and the actual receipt of $3,000,000 in a private equity offering of capital stock of Vital Living on or before the 90 day anniversary of the Effective Time (as defined in the Merger Agreement), we agree to invest $1,000,000 on the same terms as the investors in such financing, provided that if such private investors are offered differing terms, the investment will be made on terms no less favorable than the most favorable terms provided to such investors. SKYEPHARMA PLC By: /s/ Donald Nicholson ----------------------- Donald Nicholson Finance Director EX-99.4 6 ex-4.txt VOTING AGREEMENT EXHIBIT 4 STOCKHOLDERS' AGREEMENT BY AND AMONG BRADLEY D. EDSON STUART A. BENSON DONALD HANNAH SKYEPHARMA PLC STEPHEN MORRIS FIFTH AVENUE CAPITAL, INC. AND VITAL LIVING, INC. (A NEVADA CORPORATION) DATED: AUGUST 20, 2003 STOCKHOLDERS' AGREEMENT TABLE OF CONTENTS Page ---- 1. CORPORATE GOVERNANCE 3 3 1.1. Board of Directors. 6 1.2. Obligations of the Company. 6 1.3. Articles of Incorporation and the By-Laws. 2. MISCELLANEOUS 6 2.1. Term. 6 2.2. No Conflicting Agreements. 6 2.3. Injunctive Relief. 6 2.4. Notices. 7 2.5. Governing Law. 8 2.6. Headings. 8 2.7. Entire Agreement; Amendment. 8 2.8. No Waiver. 8 2.9. Counterparts. 8 STOCKHOLDERS' AGREEMENT AGREEMENT dated as of August 20, 2003 by and among BRADLEY D. EDSON, an individual having an office at 5080 North 40th Street, Phoenix, AZ 85018, ("EDSON"); STUART A. BENSON, an individual having an office at 5080 North 40th Street, Phoenix, AZ 85018 ("BENSON"), DONALD HANNAH, an individual having an office at 5080 North 40th Street, Phoenix, AZ 85018 ("HANNAH"), SKYEPHARMA PLC, a company incorporated under the laws of England and Wales having its office at 105 Piccadilly, London, England W1J 7NJ ("Skye"), FIFTH AVENUE CAPITAL INC, a corporation having its offices at 10 E. 63rd Street, New York, New York 10021 ("Fifth Avenue Capital"), and STEPHEN MORRIS, an individual having his office at 10 E. 63rd Street, New York, New York 10021 ("Morris") and VITAL LIVING, INC., a Nevada corporation having an office at 5080 North 40th Street, Suite 105, Phoenix, AZ 85018-2158 (THE "COMPANY"). Edson, Benson, and Hannah and are collectively referred to as the "FOUNDERS Group", and Fifth Avenue Capital and Morris are collectively referred to herein as the "MORRIS GROUP" and Skye and the Morris Group are together referred to herein as the "ENI GROUP". Each of the parties hereto (other than the Company) and any other person who shall hereafter become a party to or agree to be bound by the terms of this agreement (the "Agreement") is sometimes referred to as a "STOCKHOLDER" and all of such parties are referred to as the "STOCKHOLDERS." W I T N E S S E T H: WHEREAS, the Company, VLEN Acquisition Corp., Inc., a wholly owned subsidiary of the Company and e-nutriceuticals, Inc., a Delaware corporation ("e-nut") are parties to a Merger Agreement dated August 20, 2003 (the "Merger Agreement"), WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the Merger Agreement, WHEREAS, (i) pursuant to the Merger Agreement, the members of the ENI Group listed on the signature pages hereto will be issued an aggregate of 23,065,123 shares of Common Stock ("ACQUISITION STOCK"); of which 8,860,575 shares of Acquisition Stock of the Morris Group are being held in escrow pursuant to the terms of the Merger Agreement and a certain Securities Escrow Agreement of even date herewith (the "Escrow Agreement") and (ii) Skye will be purchasing 1,000,000 shares of Series D Convertible Preferred Stock (the transactions described by clauses (i) and (ii), the "Transactions"); WHEREAS, as of the closing of the Transactions, the holdings of Common Stock and options, warrants or convertible securities to purchase Common Stock, and other voting securities of the Company (collectively "Shares") by the Founders Group and the ENI Group) will be as follows: 2
- ------------------------------------------------------------------------------------------ STOCKHOLDER NAME NUMBER OF SHARES NUMBER OF OPTIONS, WARRANTS OR CONVERTIBLES - ------------------------------------------------------------------------------------------ Bradley D. Edson 4,046,950 1,000,000 - ------------------------------------------------------------------------------------------ Stuart A. Benson 30,000 6,310,000 - ------------------------------------------------------------------------------------------ Donald Hannah 536,900 Zero - ------------------------------------------------------------------------------------------ Fifth Avenue Capital, Inc. 8,860,575 0 - ------------------------------------------------------------------------------------------ Stephen Morris * 30,000 - ------------------------------------------------------------------------------------------ Skye 14,204,548 1,000,000 - ------------------------------------------------------------------------------------------ *See Fifth Avenue Capital, Inc.
WHEREAS, the parties hereto deem it in their best interests and in the best interests of the Company to provide consistent and uniform management for the Company and to regulate certain of their rights in connection with their interests in the Company, and desire to enter into this Agreement in order to effectuate those purposes. NOW, THEREFORE, in consideration of the premises and of the covenants, terms and conditions herein contained, the parties hereto mutually agree as follows: 1. CORPORATE GOVERNANCE 1.1. BOARD OF DIRECTORS. (A) NUMBER OF DIRECTORS. The Company shall be governed by a Board of Directors consisting of nine (9) members, with three vacancies existing at the consummation of the Transactions. (B) NOMINATION AND ELECTION OF DIRECTORS. The following procedures shall govern the nomination and election of directors of the Company: (i) For so long as the Founders Group shall beneficially own, in the aggregate, at least 65% of the Shares held by them on the date hereof, after the consummation of the Transactions, they shall be entitled to nominate and have elected four (4) directors acceptable to them in their sole discretion (the "Founders Directors"). (ii) For so long as the Morris Group shall beneficially own at least 65% of the Shares held by them on the date hereof, after the consummation of the Transactions, they shall be entitled to nominate and have elected one (1) director (the "Morris Director"); (iii) For so long as Skye shall beneficially own at least 65% of the Shares held by Skye on the date hereof after the consummation of the Transactions, Skye 3 shall be entitled to nominate and have elected one (1) director (the "Skye Director", and, together with the Morris Director, the "ENI Directors"). (C) BOARD OF DIRECTORS. The Board of Directors of the Company shall consist of the following seven members: ----------------------------------------------------------------------- NAME OF DIRECTOR TYPE OF DIRECTOR ----------------------------------------------------------------------- Bradley D. Edson Founders Director ----------------------------------------------------------------------- Stuart A. Benson Founders Director ----------------------------------------------------------------------- Robert J. Eide Founders Director ----------------------------------------------------------------------- Donald Hannah Founders Director ----------------------------------------------------------------------- David Allen Independent Director ----------------------------------------------------------------------- Carson Beadle Independent Director ----------------------------------------------------------------------- Leslie C. Quick III Independent Director ----------------------------------------------------------------------- The ENI Directors shall be appointed in accordance with Section 1.1(e) hereto subsequent to the consummation of the Transactions. For purposes hereof, the term "Independent Director" shall mean a person who is independent of the Company's management and who is not a director, officer, in the Group of, or an employee of any Stockholder. "Group" shall mean, in the case of any Stockholder, such Stockholder and (i) all affiliates of such Stockholder, (ii) all partners of such Stockholder if such Stockholder is a partnership, (iii) any person to which such Stockholder transfers all or substantially all of its assets or any entity into which such Stockholder merges, and (iv) in the case of a Stockholder that is an individual, the spouse and lineal descendants of such Stockholders, any trust for the benefit of such spouse or any such lineal descendant, or any other family member of such Stockholder. (D) REMOVAL OF DIRECTORS. Any director of the Company may be removed from the Board in the manner allowed by law and the Company's Certificate of Incorporation or By-Laws, except as otherwise provided in this Section 1.1(d). With respect to the Founders Directors, the Morris Director and the Skye Director, each holder of Shares agrees not to take any action or to cause the Company to take such action to remove, with or without cause, such director of the Company. Notwithstanding the foregoing, the Morris Group and/or the Morris Director shall at all times have the right to recommend the removal, with or without cause, of any Morris Director; Skye and/or the Skye Director shall at all times have the right to recommend the removal, with or without cause, of the Skye Director; and the Founders Group and the Founders Directors shall have the right to recommend the removal, with or without cause, of any Founders Directors. If the removal of any director is recommended as provided in the immediately preceding sentence, then the Stockholders shall immediately cause a special meeting of stockholders to be held, or shall act by written consent without a meeting, for the purpose of removing such director, and each Stockholder agrees to vote all its Shares, or to execute a written consent in respect of all such Shares, for the removal of such director. 4 (E) VACANCIES. If at any time a vacancy is created or exists on the Board of Directors, the remaining directors (if any) representing the Stockholder whose Board seat is vacant shall have the right to designate and elect the person to fill such vacancy; subject to consultation with the other parties hereto, it being acknowledged that the final determination shall be made by the Stockholder whose board position is affected by such vacancy. If no directors representing the Stockholder remain as a result of such vacancy, the Stockholder shall have the right to designate and elect the person to fill such vacancy. All Stockholders shall vote in favor of electing such designated director to fill the vacancy and all such persons shall take the necessary actions to amend the by-laws to reflect the provisions of this Agreement. (F) COVENANT TO VOTE. Each of the Stockholders agrees to vote, in person or by proxy, all of the Shares beneficially owned by such Stockholder whether currently owned or hereinafter acquired (which for all purposes shall include all Acquisition Shares held pursuant to the Escrow Agreement unless Acquisition Shares are returned to the Company under the terms thereof, in which event those returned shares shall be excluded), at any annual or special meeting of stockholders of the Company called for the purpose of voting on the election of directors or by consensual action of stockholders without a meeting with respect to the election of directors, in favor of the election of the directors nominated by Skye, the Morris Group and the Founders Group, respectively, as the case may be, in accordance with Section 1.1(b) hereof. Each Stockholder shall vote the Shares owned by such Stockholder and shall take all other actions necessary to ensure that the Company's Articles of Incorporation and By-Laws do not at any time conflict with the provisions of this Agreement. Each Stockholder agrees that such Stockholder shall not deposit any Shares in a voting trust or subject the Shares to any agreement, arrangement or understanding with respect to the voting of the Shares of Common Stock inconsistent with this Agreement. (G) QUORUM. No action shall be taken at any meeting of the Board of Directors of the Company, except for the adjournment of such meeting, unless a quorum shall be present and included at such meeting shall be one Independent Director. For purposes of a quorum, any director may be present at any meeting in person, by means of telephone or similar communications equipment by means of which each person participating in the meeting can hear and speak to each other or, to the extent permitted under applicable law, by proxy or by nominee director. No action shall be taken at any meeting of stockholders of the Company unless a majority of the Shares beneficially owned by the Founders Group and Skye are represented at the meeting, in person or by proxy. (H) COMMITTEES OF THE BOARD. The Board shall appoint such committees, including an audit committee and a compensation committee, as shall be permissible under applicable provisions of the Business Corporation Law of the State of Nevada and as at all times the Board shall deem reasonable and necessary. (I) SPECIAL MEETINGS OF DIRECTORS. Special meetings of the Board may be called by the President of the Company and shall be called by the President of the Company or the Secretary of the Company upon the written request of any Director. To the extent necessary, the parties hereto agree, as Stockholders, to approve any amendment to effectuate the foregoing. 5 (J) SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of stockholders may be called by the Board and shall be called by the President of the Company or the Secretary of the Company upon the written request of any Director. To the extent necessary, the parties hereto agree, as Stockholders, to approve any amendment to effectuate the foregoing. (K) BOARD OF DIRECTORS AND OFFICERS OF SUBSIDIARIES. The composition of the board of directors and officers of e-nut shall require the approval of a majority of the Directors. 1.2 OBLIGATIONS OF THE COMPANY. The Company agrees to use its best efforts to ensure that the rights granted hereunder are effective and that the parties hereto enjoy the benefits hereof. Such actions include, without limitation, the use of the Company's best efforts to cause the nomination and election of the directors designated as provided above. 1.3 ARTICLES OF INCORPORATION AND THE BY-LAWS. The Articles of Incorporation and the By-Laws shall be amended as necessary and appropriate to give effect to the provisions set forth in this Agreement. 2. MISCELLANEOUS 2.1. TERM. This Agreement shall terminate on the date of the first to occur of the following events: (i) with respect to any Stockholder, at such point in time when such Stockholder and its Group no longer beneficially owns 50% of the Shares beneficially owned by such Stockholder on the date hereof after consummation of the Transactions; (ii) Bankruptcy, receivership, or dissolution of the Company; (iii) the sale, lease, assignment or other transfer of all or substantially all of the assets of the Company to a third party, whether effected through an asset transaction, a stock transaction, a Merger, or otherwise; (iv) the voluntary agreement of all the parties who are then bound by the terms hereof; (v) the acquisition of all the Shares by one of the Stockholders; or (vi) three years from the date of this Agreement. 2.2. NO CONFLICTING AGREEMENTS.Each party hereto represents and warrants to the other parties that it is not party to any other voting agreement with respect to the Company's Common Stock which would conflict with its duty to vote its shares as required under this Agreement and its other obligations hereunder. To the extent that conflicting obligations result from contractual obligations arising from agreements or understanding either before or after the date of this Agreement, each party including the Company covenants to effect the provisions of this Agreement. 2.3. INJUNCTIVE RELIEF. It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved person will be irreparably damaged and will not have an adequate remedy at law. Any such person shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the 6 provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 2.4. NOTICES. All notices, statements, instructions or other documents required to be given hereunder, shall be in writing and shall be given either by hand delivery, by overnight delivery service, by facsimile transmission or by mailing the same in a sealed envelope, first-class mail, postage prepaid and either certified or registered, return receipt requested, addressed as follows:
- ---------------------------------------------------------------------------------------------- IF TO THE FOUNDERS GROUP, TO: Vital Living, Inc. 5080 North 40th Street Suite 105 Phoenix, AZ 85018-2158 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- WITH A COPY TO THEIR COUNSEL: Bruce P. Vann, Esq. Kelly Lytton & Vann LLP 1900 Avenue of the Stars Los Angeles, CA 90067 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- IF TO THE MORRIS GROUP, SEND NOTICES TO Stephen Morris THEM AT THE NOTICE ADDRESS GIVEN ON c/o Fifth Avenue Capital THE SIGNATURE PAGE HEREOF: 10 E. 63rd Street New York, NY 10021 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- WITH A COPY TO THEIR COUNSEL: Michael Dougherty, Esq. Becker Glynn Melamed & Muffly LLP 299 Park Avenue New York, NY 10171 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- IF TO SKYE: Attn: Company Secretary SkyePharma PLC 105 Piccadilly London, England, W1J 7NJ - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- WITH A COPY TO THEIR COUNSEL: Kathryn A. Campbell, Esq. Sullivan & Cromwell LLP 1 New Fetter Lane London EC4A 1AN, England ==============================================================================================
and to the other parties at their addresses reflected in the stock records of the Company. Each Stockholder, by written notice given to the Company in accordance with this Section 2.4 may change the address to which notices, statements, instruction or other documents are to be sent to such Stockholder. All notices, statements, instructions and other documents hereunder that are 7 (i) mailed shall be deemed to have been given on the date of mailing, (ii) sent by hand delivery or by facsimile transmission shall be deemed to have been given when received, or (iii) sent by overnight delivery service shall be deemed to have been given one business day after sent. Whenever pursuant to this Agreement any notice is required to be given by any Stockholder to any other Stockholder or Stockholders, such Stockholder may request from the Company a list of addresses of all Stockholders of the Company, which list shall be promptly furnished to such Stockholder. 2.5. GOVERNING LAW. Regardless of the place of execution, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, applicable to contracts made and to be performed entirely within such state. 2.6. HEADINGS. All headings are inserted herein for convenience only and do not form a part of this Agreement. 2.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other agreements referenced herein contain the entire agreement among the parties hereto with respect to the transactions contemplated herein and supersede all prior written agreements including any voting agreements or arrangements and negotiations and oral understandings, if any, and this Agreement may not be amended, supplemented or discharged except by an instrument in writing signed by all the Stockholders. Concurrently with such amendment or modification of this Agreement the Articles of Incorporation and By-Laws of the Company shall be amended by necessary corporate action. In the event that any Stockholder, or the Company shall be required, as a result of the enactment, amendment or modification, subsequent to the date hereof, of any applicable law or regulations, or by the order of any governmental authority, to take any action which is inconsistent with or which would constitute a violation or breach of any terms of this Agreement, then the Stockholders, and the Company shall use their best efforts to negotiate an appropriate amendment or modification of, or waiver of compliance with, such terms. 2.8. NO WAIVER. No failure to exercise and no delay in exercising any right, power or privilege of a party hereunder shall operate as a waiver nor a consent to the modification of the terms hereof unless given by that party in writing. 2.9. 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 instrument. Fax copy signatures shall be given the same effect as original signatures. [rest of page left blank intentionally - next page is signature page] 8 IN WITNESS WHEREOF, the parties here have caused this Agreement to be duly executed on the date first written above. SKYEPHARMA PLC VITAL LIVING, INC. By: /s/ Donald Nicholson By: /s/ Bradley D. Edson ----------------------------- ------------------------------- Bradley D. Edson, President /s/ Stephen Morris By: /s/ Stuart A. Benson - -------------------------------- ------------------------------- Stephen Morris, Individually Stuart A. Benson, Executive Vice President /s/ Bradley D. Edson FIFTH AVENUE CAPITAL INC. - -------------------------------- Bradley D. Edson, Individually By: /s/ Stephen Morris ------------------------------- /s/ Stuart A. Benson Stephen Morris, President - -------------------------------- Stuart A. Benson, Individually /s/ Donald Hannah - -------------------------------- Donald Hannah, Individually 9 -----END PRIVACY-ENHANCED MESSAGE-----