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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 22, 1999
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Vitafort International Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-18438 68-0110509
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1800 Avenue of the Stars - Suite 480 90067
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (310) 552-6393
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On January 22, 1999, the Registrant completed the Closing under a series of
agreements including a Common Stock Purchase Agreement (the "CSPA"), dated as of
December 30, 1998, by and among the Registrant; Terra Healthy Living, Ltd, a
B.V.I. corporation ("Terra"); Sovereign Partners Limited Partnership, a
Connecticut limited partnership ("Sov"); and Dominion Capital Fund, Ltd., a
Bahamian corporation ("Dom"). Pursuant to the CSPA and the related documents:
Terra acquired 2,712,843 shares of the Registrant's common stock from Sov
and Dom for $235,000. Such shares were issued upon the conversion by Sov and
Dom of an aggregate of 235 shares of the Registrant's 1997 Series A Convertible
Preferred Stock ("Series A Preferred") for an average conversion price of
$.0866249 per share.
The Registrant borrowed $2,065,000 from Terra pursuant to a Promissory Note
With Warrant and Registration Rights (the "Terra Note"). The Terra Note is a
five year note bearing interest at 6% per annum. Interest on the Terra Note is
payable annually. The Terra Note provided for the issuance to Terra of a five
year warrant (the "Terra Warrant") for the purchase of 500,000 shares of the
Registrant's common stock at $.25 per share. The Terra Note further provides
that the first year's interest on the Terra Note shall be applied to the partial
exercise of the Terra Warrant. The Company and Terra have entered into a
Registration Rights Agreement requiring the registration under the Securities
Act of 1933, as amended (the "Act") of the securities issuable upon exercise of
the Terra Warrant.
The Registrant applied the $2,065,000 proceeds of the Terra Note to redeem
all 1,351 remaining shares of Series A Preferred held by Sov and Dom as well as
a convertible debenture in the amount of $548,352 held by Dom pursuant to an
Agreement and Consent to Redeem Series A Preferred Stock and Debentures (the
"Redemption Agreement").
The aggregate of $2,300,000 paid by Terra in connection with its purchase
of the 2,712,843 shares of the Registrant's common stock from Sov and Dom and in
connection with the Terra Note was satisfied through the delivery to Sov and Dom
of marketable securities having a value of $2,300,000. Under the CSPA, Terra
made certain assurances to Sov and Dom and assumed certain obligations to assure
that Sov and Dom would realize $2,300,000 on the sale of the marketable
securities including the delivery of additional securities to them.
The Registrant borrowed $300,000 from each of Sov and Dom pursuant to a
non-negotiable nine month promissory note bearing interest at 8% per annum (the
"Sov Note" and the "Dom Note"). These notes provide for their repayment, at the
option of the Registrant, in registered common stock of the Registrant which
shall be valued at the then market for such stock. The Sov Note and the Dom
Note provide for the issuance to each of Sov and Dom of 60,000 warrants which
expire on December 31, 2003, half of which are exercisable at $.40 and half of
which are exercisable at $.25. If the Registrant repays the Sov Note or the Dom
Note with common stock, as provided in such notes, then the exercise price of
the $.25 warrant is reduced to $.01. The Registrant entered into a Registration
Rights Agreement with Sov and Dom.
The CSPA granted the Registrant the right to redeem up to 2,000,000 of the
shares of its common stock acquired by Terra through June 30, 2000 based upon a
formula related to the market price of the common stock at the time of the
redemption.
In addition, the Registrant issued 571,232 shares of its common stock to
Sov in connection with Sov's prior conversion of 40 shares of Series A Preferred
Stock.
Pursuant to the CSPA, the Registrant reserved certain rights, including a
right to initiate an
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arbitration proceeding relating to its claims under Section 16(b) of the
Securities Exchange Act of 1934, as amended. These claims relate to sales and
purchases by Sov and/or Dom of the Registrant's common stock, including market
sales, including substantial short sales, of the Registrant's common stock which
the Registrant has been advised commenced on August 13, 1998.
The foregoing is a summary only of the documents involved in the
transaction and the reader is referred to the various agreements executed by the
parties which are filed as exhibits hereto and incorporated herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. None
(b) Pro Forma Financial Information. None
(c) Exhibits.
(1) Common Stock Purchase Agreement, dated as of December 30, 1998, by and
among the Registrant; Terra Healthy Living ("Terra"); Sovereign
Partners Limited Partnership ("Sov"); and Dominion Capital Fund, Ltd.
("Dom")
(2) Promissory Note with Warrant and Registration Rights, dated as of
December 31, 1998, in the principal amount of $2,065,000 issued to
Terra.
(3) Warrant, dated as of December 31, 1998, for the purchase of 500,000
shares issued to Terra.
(4) Registration Rights Agreement, dated as of December 31, 1998, between
the Registrant and Terra.
(5) Agreement and Consent to Redeem Series A Preferred Stock and
Debentures, dated as of December 31, 1998, by and among the
Registrant, sov and Dom.
(6) Promissory Note, dated as of December 31, 1998, in the principal
amount of $300,000, issued to Sov.
(7) Warrant, dated as of December 31, 1998, for the purchase of 30,000
shares at $.40 issued to Sov.
(8) Promissory Note, dated as of December 31, 1998, in the principal
amount of $300,000, issued to Dom.
(9) Warrant, dated as of December 31, 1998, for the purchase of 30,000
shares at $.40 issued to Dom.
(10) Form of Warrant for the purchase of 30,000, with an initial exercise
price of $.25, issued in connection with each of the Sov Note and the
Dom Note.
(11) Registration Rights Agreement, dated as of December 31, 1998, by and
among the Registrant; Sov and Dom.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Vitafort International Corporation
Date: February 19, 1999 By: /s/ Mark Beychok
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Mark Beychok, Chief Executive Officer
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EXHIBIT 1
COMMON STOCK PURCHASE AGREEMENT
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This Common Stock Purchase Agreement (this "Agreement"), dated as of
December 30, 1998, is made and entered into by and between VITAFORT
INTERNATIONAL CORPORATION, a Delaware corporation (the "Company" or "Vitafort"),
TERRA HEALTHY LIVING, LTD. a BVI company (the "Purchaser"), SOVEREIGN PARTNERS
LIMITED PARTNERSHIP ("Sovereign") and DOMINION CAPITAL FUND, LTD. ("Dominion")
(Dominion and Sovereign are sometimes referred to herein as the "Sellers").
B A C K G R O U N D
- - - - - - - - - -
The Sellers desire to sell and the Purchaser desires to purchase up
to 2,712,843 shares of the Company's free trading (as to United States
securities law restrictions) common stock, $.001 par value per share, to be sold
at a price and in accordance with and subject to the terms and conditions as set
forth in this Agreement.
A G R E E M E N T
- - - - - - - - -
In consideration of the above premises and the representations,
warranties, covenants and agreements contained in this Agreement, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
Section 1. Purchase and Sale of Common Stock.
1.1 The Common Stock. Upon the terms and conditions contained
herein, the Sellers agree to sell and the Purchaser agrees to purchase, an
aggregate of 2,712,843 shares of Common Stock at a price (the "Purchase Price")
of $235,000. The parties agree that December 31, 1998 shall be the date
established as the closing date for this transaction (the "Closing Date").
1.2 The Sellers agree to convert 235 shares of Vitafort's 1997
Series A Convertible Preferred Stock, together with accrued dividends and to
accept in exchange for such converted shares an aggregate of 2,712,843 shares of
Common Stock. The conversion of the 235 shares of 1997 Series A Convertible
Preferred Stock shall be made in accordance with the Seller's instructions so
that not more than 4.99 % of Vitafort's issued and outstanding common stock
shall be owned by either Seller at any time. Sellers shall request that
2,712,843 shares of the common stock be issued in the name of the Purchaser. The
Company agrees to process the conversion of the Series A Preferred Stock as
provided in this Agreement as soon as possible.
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1.3 Payment and Delivery. Purchaser shall make electronic delivery
to the account of Sovereign and Dominion at Dresdner Bank the following
securities (collectively the "Swiss Securities"):
3,185 free trading shares of Triple Tree Trust (TTTSW) listed on the Bern Stock
Exchange and 6,090 free trading shares of Terra Trust Investments (TETISW) also
listed on the Bern Stock Exchange shall be electronically delivered to the
Sovereign account at Dresdner Bank.
1,365 free trading shares of Triple Tree Trust (TTTSW) listed on the Bern Stock
Exchange and 2,610 free trading shares of Terra Trust Investments (TETISW) also
listed on the Bern Stock Exchange shall be electronically delivered to the
Dominion account at Dresdner Bank.
The Company shall deliver the 2,712,843 shares of common stock in the
name of Terra Healthy Living to Joseph B. LaRocco (the "Escrow Agent") to be
held by the Escrow Agent in accordance with the terms and conditions of the
escrow letter attached to this Agreement as Exhibit A. Sovereign and Dominion
will then deliver to the Escrow Agent any remaining unconverted Vitafort 1997
Series A Convertible Preferred Stock and any outstanding convertible debentures
of the Company so that the Escrow Agent can return them to Vitafort for
cancellation once Vitafort has honored the Notices of Conversion and Dominion
and Sovereign have received the $2,300,000 US of Swiss Securities. Upon receipt
by the Escrow Agent of an aggregate of 2,712,843 free trading shares, the Escrow
Agent shall fax a copy of the stock certificate(s) to Terra Healthy Living
stating that once the Swiss Securities are received by Sovereign and Dominion at
their accounts at Dresdner Bank in Switzerland, he will courier the 2,712,843
restricted shares of Vitafort stock per the written instructions of Terra
Healthy Living. In the event the average closing sale price of the Swiss
Securities over the period from the date the Swiss Securities are delivered to
Sovereign and Dominion through and including June 30,1999, when multiplied by
the number of shares of the Swiss Securities totals less than $2,300,000 US then
in such event Terra Healthy Living will issue such additional shares to make up
the balance of $2,300,000. This adjustment will be reduced by the proceeds of
the sale of any of the Swiss Securities sold during the period beginning upon
closing and ending June 30, 1999. The Purchaser may at its option deliver
written notice to the Escrow Agent that it has received, or has made
satisfactory arrangments to receive, the 2,712,843 shares of Common Stock
deliverable by the Company and such notice shall release the Escrow Agent of his
obligation to receive and hold such shares hereunder.
The Escrow Agent shall not be liable for any action taken or omitted
by him in good faith and in no event shall the Escrow Agent be liable or
responsible except for the Escrow Agent's own gross negligence or willful
misconduct. The Escrow Agent has made no representations or warranties in
connection with this transaction and has not been involved in the negotiation of
the terms of this Agreement or any matters
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relative thereto. The parties hereto each agree to indemnify and hold harmless
the Escrow Agent from and with respect to any suits, claims, actions or
liabilities arising in any way out of this transaction including the obligation
to defend any legal action brought which in any way arises out of or is related
to this Agreement, except that the Company, Seller and Purchaser will not
indemnify the Escrow Agent for his gross negligence or willful misconduct. The
Escrow Agent is not rendering securities advice to anyone with respect to this
proposed transaction; nor is the Escrow Agent opining on the compliance of the
proposed transaction under applicable securities law.
1.4 Cashless Redemption. (a) Up to 2,000,000 of the 2,712,843
shares of free trading common stock purchased by Terra Healthy Living may be
redeemed by Vitafort with a cashless redemption provision as follows: (a) from
December 30, 1999 through June 30, 1999 at $.60 per share; (b) from July 1, 1999
through December 31, 2000 at $.80 per share; and (c) from January 1, 2000
through June 30, 2000 at $1.00 per share.
(b) The cashless redemption will work as follows:
Example: If the five day average closing bid price is $.75 for the five days
prior to a redemption notice being given by facsimile transmission and the
cashless redemption price is $.60 then notice of a 100,000 share redemption
would mean Terra Healthy Living retains 80,000 of the 100,000 share redemption.
(100,000 shares @ $.60 equals $60,000 divided by $.75 equals 80,000 shares)
(c) Unless otherwise agreed by the Company, the share certificate
evidencing the shares to be acquired by the Purchaser pursuant to this Agreement
will bear an appropriate legend referencing the provisions of this Section 1.4
1.5 Sovereign and Dominion expressly disclaim that they are acting
as a "group" as defined in the Securities Exchange Act of 1934 as amended
thereafter.
Section 2. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Seller's (solely
as to Sections 2.1, 2.3, 2.4 and 2.5) and Purchaser that:
2.1 Corporate Power, Qualification and Standing. The Company and
its subsidiaries (the "Subsidiaries") are duly organized, validly existing and
in good standing under the laws of their respective jurisdictions of
incorporation and each of them is qualified to transact business and is in good
standing in each jurisdiction in which its ownership of property or conduct of
activities requires such qualification, except where the failure to so qualify
would not materially adversely affect the operations of the Company and its
Subsidiaries, taken as a whole. The Company has
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all requisite corporate power and authority to enter into and to carry out and
perform its obligations under this Agreement.
2.2 SEC Reports; Financial Statements. The Common Stock of the Company is
registered under Section 12(b) or (g) of the Securities Exchange Act of 1934
(the "1934 Act"). The Company has delivered to Purchaser its Annual Report to
stockholders and its Annual Reports on Form 10-K and its quarterly reports on
Form 10-Q and each other report, or other documents filed with the SEC since the
filing of the most recent Form 10-K (collectively, the "SEC Reports") or the
Sellers and Purchaser have had access thereto. The SEC Reports did not (as of
their respective dates) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited and unaudited financial statements of the Company
included in the SEC Reports (the "Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as stated in such Financial Statements or the notes thereto) and
fairly present the financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended. The Company has
timely filed with the SEC all reports required to be filed by the Company under
the 1934 Act since January 1, 1998.
2.3 Authorization; No Conflict. The Company's execution and delivery of this
Agreement and the transactions set forth herein have been duly authorized by all
necessary corporate action, and the Common Stock, when issued to the Purchaser
will be validly issued, fully paid and non-assessable. The execution, delivery
and performance by the Company of its obligations under this Agreement do not
and will not conflict with or violate (i) the Certificate of Incorporation or
bylaws of the Company, (ii) in any material respect any indenture, loan
agreement, lease, mortgage or other material agreement binding on the Company,
(iii) any order of a court or administrative agency binding on the Company, (iv)
any applicable law or governmental regulation; and such performance does not and
will not require the permission or approval of any governmental agency, and will
not result in the imposition or creation of any lien or charge against any
assets of the Company.
2.4 Binding Effect. This Agreement has been duly executed and delivered by
the Company and is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to creditor's rights generally and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law).
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2.5 No Defaults or Violations. Except for any alleged violations of the
existing agreements between the Company and the Sellers being resolved pursuant
to this Agreement, the Company is not, and immediately after the Closing will
not be, in default under or in violation of (a) its Certificate of Incorporation
or Bylaws, as amended, (b) any indenture, mortgage, loan agreement, or other
material agreement to which it is a party and which has been filed by the
Company with the SEC (c) any statute, rule, writ, injunction, judgment, decree,
order or regulation of any court or governmental authority having jurisdiction
over it, or (d) any license, permit, certification or approval or requirement of
any governmental authority or other, in each case, in any way that could
reasonably be expected to have a material adverse effect on the business or
condition (financial or otherwise) of the Company, or the Company's ability to
perform its obligations under this Agreement.
2.6 No Material Adverse Change. Since January 1, 1998, there have been no
material adverse changes in the business or condition (financial or otherwise)
of the Company that are not reflected in the SEC Reports and the Financial
Statements, except that the Company has continued to incur losses from
operations and decreases in working capital.
2.7 Material Liabilities. Except for liabilities disclosed in the Financial
Statements or the SEC Reports, the Company and its Subsidiaries have no material
liabilities or obligations, absolute or contingent, other than liabilities
arising in the ordinary course of business, subsequent to the date of the most
recent audited Financial Statements or SEC Reports.
2.8 Properties. The Company and its Subsidiaries (i) have good title to the
properties and assets reflected in the Financial Statements as owned by them,
(ii) have valid leasehold interests in the properties leased by them, and (iii)
own or have the right to use under valid license agreements all trademarks,
trade names, copyrights, patents and other intellectual property rights material
to its business and regularly utilized by them; subject in each case to no
material liens, security interests or adverse claims, except as disclosed in the
Financial Statements or the SEC Reports.
2.9 Litigation. There are no material legal actions, arbitrations, or
administrative proceedings pending against the Company, except for the matters
disclosed in the SEC Reports and no actions or proceedings are pending which
question the validity of this Agreement or the Common Stock.
2.10 Registered and Free Trading Common Stock. The Company represents,
covenants and warrants to the Sellers and Purchaser that the Common Stock to be
issued upon conversion by the Sellers of the 1997 Series A Convertible Preferred
Stock shall be registered, free trading, unrestricted Common Stock of the
Company.
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2.11 Capitalization. As of the date hereof, excluding the Common
Stock to be issued in connection with this Agreement and the shares of Series A
Preferred Stock held by the Sellers, there are 8,424,084 shares of the Company's
common stock and 1,000 shares of the preferred stock respectively, which are
issued and outstanding.
2.12 Required Approvals. The Company has obtained all permits,
approvals and certificates necessary to operate its business as presently
conducted at each of its locations.
Section 3. Investment Representations. The Purchaser represents and
acknowledges as follows:
(a) In evaluating the merits and risks of an investment in
the Common Stock, Purchaser has relied upon the advice of Purchaser's legal
counsel, tax advisors, and/or investment advisors;
(b) Purchaser is experienced in evaluating and investing in
companies such as the Company. The Company has afforded Purchaser or
Purchaser's advisors the opportunity during the course of negotiating the
transactions contemplated by this Agreement to ask questions of and secure
such information from the Company and its officers and directors as it
deems necessary to evaluate the merits of entering into this Agreement.
Purchaser also acknowledges that the Company has notified Purchaser that
the Company is contemplating (i) one or more acquisitions of companies in
the same or related industries as the Company and (ii) a possible private
placement and/or public offering of the Company's common stock at some
point in the future, however there can be no assurance either that any
acquisition or a private placement and/or public offering will ever be
completed;
(c) Purchaser is aware that an investment in securities of a
thinly-traded corporation such as the Company may be non-marketable and may
require Purchaser's capital to be invested for an indefinite period of
time, possibly without return. Purchaser has no need for liquidity in this
investment, has the ability to bear the economic risk of this investment,
and can afford a complete loss of its investment;
(d) Purchaser represents that Purchaser is familiar with Rule
144 promulgated under the Act, as presently in effect, and understands the
resale limitations imposed thereby and by the Act; and
(e) Purchaser agrees to make such filings as may be required
by law.
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Section 4. Limitations on Disposition. Purchaser agrees not to transfer the
Common Stock except in accordance with the express terms of this Section 4.
4.1 Compliance with Securities Laws. Without in any way limiting
the representations set forth above, Purchaser further agrees not to make any
disposition of all or any portion of the Common Stock, except in compliance with
applicable federal and state securities laws and unless and until such
disposition is made in accordance with Rule 144 under the Act.
Section 5. Covenants.
(a) The Company covenants to and agrees with the Purchaser that it
shall:
(i) file and keep available adequate current public
information as is required to be filed and kept available for holders of
restricted securities to be able to sell such securities pursuant to Rule
144 under the Act and any successor regulation; and
(ii) file with the SEC in a timely manner all reports and other
documents required to be filed under the 1934 Act and to cause its shares
of common stock to continue to be traded on the OTC Bulletin Board.
(b) The Sellers covenant and agree with the Company that neither
Seller shall directly or indirectly through any affiliated person or
entity:
(i) convert any shares of Series A Convertible Preferred Stock
or any portion of the outstanding convertible debentures of the Company
other than as expressly contemplated by this Agreement; or
(ii) engage in any "short sale" or establish or increase any
"put equivalent position" within the meaning of Rules 3B-3 and 16a-1(h)
under the Securities Exchange Act of 1934, as amended, with respect to any
of the Company's equity securities at any time after the Closing Date.
Section 6. Pending Dispute. Sovereign and/or Dominion and Vitafort hereby
acknowledge that they are currently involved in a securities dispute involving
the following: Schedule 13D of the Securities Exchange Act of 1934 and
securities issues involving the disgorgment of profits under Rule 16b of the
same Act. In the event that Sovereign and/or Dominion and Vitafort have not
resolved their securities dispute on or before March 31, 1999 then they agree to
resolve all the outstanding securities issues with a panel of three arbitrators
selected pursuant to and run in accordance with the Securities Arbitration Rules
(or the Commercial Arbitration Rules if no Securities Arbitration Rules are in
effect) of the American Arbitration Association. The parties
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agree that no other claims other than the claims mentioned in this paragraph 9
shall be brought, that the maximum award that may be claimed by Vitafort is
$600,000 and that the arbitration panel shall be limited to making an award in
the amount of not more than $600,000. The arbitration shall be held in New York,
NY. Each party shall bear its own attorney's fees and costs of such arbitration.
Any judgement or award rendered by arbitration may be entered in any court
having jurisdiction. The parties agree to waive any claims for attorney's fees
and costs against the other party in such arbitration. The parties further
acknowledge that the Agreement of the parties to amicably resolve this matter is
part of the consideration being exchanged by the parties with respect to this
Agreement.
Section 7. Miscellaneous.
7.1 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, and all of which together
shall constitute one and the same agreement and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.
7.2 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to the conflicts of laws principles thereof.
7.3 Jurisdiction. The parties irrevocably submit to the non-
exclusive jurisdiction of any New York or Federal court sitting in New York, New
York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Common Stock. To the fullest extent it may effectively do so
under applicable law, the parties irrevocably waive and agree not to assert, by
way of motion, as a defense or otherwise, any claim that it is not subject to
the jurisdiction of any such court, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
7.4 Consent to Service. The parties consent to service of process
in any suit, action or proceeding of the nature referred to in Section 6.3 by
mailing a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to its address specified in or designated pursuant to Section
6.7 herein. Such service (i) shall be deemed in every respect effective service
of process upon that party in any such suit, action or proceeding and (ii)
shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to that party.
7.5 Assignments. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
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7.6 WAIVER OF JURY TRIAL. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT IT
MAY HAVE NOW OR HEREAFTER TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY ONE OF THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY EXHIBITS HERETO OR ANY OF THE COMMON STOCK.
7.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when actually delivered
by hand, messenger, facsimile or courier service or, if mailed, four days after
deposit in the U.S. mail, addressed (a) if to the Purchaser, as indicated below
the Purchaser's signature, or at such other address as the Purchaser shall have
furnished to the Sellers and the Company in writing, or (b) if to the Sellers,
at their addresses as set forth below or at such other address as they shall
have furnished to the Purchaser and the Company in writing or (c) if to the
Company, at its address set forth below or at such other address as the Company
shall have furnished to the Sellers and Purchaser in writing.
7.8 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party to this Agreement (including any holder of
Common Stock), upon any breach or default of another party under this Agreement,
shall impair any such right, power or remedy of such party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. All remedies, either
under this Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
7.9 Severability. In any case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.10 Further Assurances. The Company agrees to take such actions and execute
such other documents which the Purchaser and Sellers may reasonably request to
carry out the intent of this Agreement and the transactions contemplated hereby.
7.11 Singular/Plural. All references in this Agreement to the singular shall
be deemed to include the plural if the context so requires and vice versa.
Reference in the collective or conjunctive shall also include the disjunctive
unless the context otherwise clearly requires a different interpretation.
7.12 Amendments/Modifications. Neither this Agreement nor any provision
hereof shall be amended, modified, waived, changed, discharged, terminated,
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revoked or canceled, except by an instrument in writing signed by the party
effecting the same against whom any change, discharge or termination is sought.
7.13 Entire Agreement. This Common Stock Purchase Agreement, together with
the Promissory Note from the Company to Sovereign in the amount of $300,000, the
Promissory Note from the Company to Dominion in the amount of $300,000, the
Warrants in favor of Dominion and Sovereign for 60,000 shares each, the
Registration Rights Agreement as to the Sovereign and Dominion Warrants, the
$2,065,000 Promissory Note from the Company to Terra Healthy Living with a
Warrant for 500,000 shares and a Registration Rights Agreement attached, are
incorporated herein by reference and made a part hereof, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and may be amended only by a writing executed by all parties hereto.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
THE COMPANY
VITAFORT INTERNATIONAL CORPORATION
Notice Address:
1800 Avenue of the Stars By: /s/ Mark Beychok
Suite 480 ____________________________
Los Angeles, California 90067 Name: Mark Beychok
Title: CEO
PURCHASER
TERRA HEALTHY LIVING, LTD.
Notice Address:
Pasea Estate By: /s/ Martin Brenner
P.O. Box 958 ____________________________
Road Town Tortola, BVI
Name: Martin Brenner
__________________________
CEO
Title:_________________________
SELLER
SOVEREIGN PARTNERS LIMITED PARTNERSHIP
Notice Address:
The Executive Pavillion By: /s/ Stephen Hicks
90 Grove Street, Suite 01 ___________________________
Ridgefield, CT 06877
Name: Stephen Hicks
_________________________
Title:_________________________
SELLER
DOMINION CAPITAL FUND, LTD.
Notice Address:
ATTN: Nina Ray By: /s/ Nina Ray
c/o Citco Fund Services ____________________________
(Bahamas) Ltd. Nina Ray
Bahamas Financial Centre Name:__________________________
Charlotte and Shirley Streets Inter Carribean Services
P.O. Box CB 13136 (Bahamas) Ltd.
Nassau, Commonwealth of the Title:_________________________
Bahamas
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<PAGE>
EXHIBIT 2
PROMISSORY NOTE WITH WARRANT
----------------------------
AND REGISTRATION RIGHTS
------------------------
$2,065,000.00 Los Angeles, California
December 31,1998
FOR VALUE RECEIVED, the undersigned, VITAFORT INTERNATIONAL CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay TERRA HEALTHY
LIVING (the "Lender") the principal amount of $2,065,000.00 in lawful money of
the United States of America in same day or other immediately available funds,
together with interest at the rate hereinafter set forth, payable on or before
January 22, 2004.
Interest on the principal balance of this Note from time to time
outstanding and unpaid shall be computed on the basis of a 360-day year for the
actual number of days elapsed at a simple interest rate per annum equal to six
percent (6%) commencing on January 22, 1999.
Principal and all accrued interest, at the rate of six percent (6%) per
annum, shall be payable annually ,without the necessity for demand or notice, on
January 22, of each year. All payments of principal and interest shall be paid
by wire transfer per the written instructions of Lender. As further
consideration for this loan, Borrower agrees to issue to Lender a Warrant
("Warrant A") to purchase 500,000 shares of the Borrower's common stock, par
value $0.01 per share, exercisable at $.25 per share for a period of five (5)
years together with registration rights. On December 31, 1999, accumulated
interest on the promissory note shall be credited to Terra Healthy Living and
used to exercise as much of Warrant A as is possible. Warrant A and the
Registration Rights Agreement are attached hereto and made apart hereof.
In the event Borrower is unable to pay in cash anytime prior to October 22,
1999, the full amount of principal and interest on either the $300,000
promissory note issued by Borrower in favor of Sovereign Partners Limited
Partnership or the $300,000 promissory note issued by Borrower in favor of
Dominion Capital Fund, Ltd., then in such event, Terra Healthy Living shall have
a right of first refusal to buy out either or both of the then outstanding
balances owed on those promissory notes. This right of first refusal shall
exist for Terra Healthy Living up to October 22, 1999, but this right shall
expire after that date. In the event that Terra Healthy Living buys the then
outstanding balances owed on either of those promissory notes, then in such
event the Warrant being held in escrow by Joseph B. LaRocco, Esq., in the name
of such noteholder ("Warrant B") will be transferred from escrow to Terra
Healthy Living.
Borrower hereby waives presentment, protest, notice of protest and notice
of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance.
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Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their respective
representatives, successors and assigns expressly (a) waive presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity, notice
of protest, diligence in collection, and the benefit of any applicable
exemptions, including, but not limited to, exemptions claimed under insolvency
laws, and (b) consent that the Lender may release or surrender, exchange or
substitute any property or other collateral or security now held or which may
hereafter be held as security for the payment of this Promissory Note, or may
release any guarantor, or may extend the time for payment or otherwise modify
the terms of payment of any part or the whole of the debt evidenced hereby.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that from
the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be used
solely for general corporate purposes.
(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower.
DEFAULT. If any of the following events occur (a "default") the entire
principal balance plus accrued interest shall be due and payable, and the
Borrower shall be liable for reasonable attorneys fees, costs and expenses:
(a) Borrower fails to pay when due any principal or interest under this
Note;
(b) Borrower fails to observe or perform any covenant or agreement set
forth in this Note;
(c) Borrower makes a general assignment for the benefit of its creditors,
files a petition in bankruptcy, for an arrangement with its creditors or for
reorganization under any federal or state bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition, which is not
dismissed or stayed within 90 days in bankruptcy or for the appointment of a
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<PAGE>
receiver, custodian, trustee or liquidator of the party or of all or
substantially all of its assets under any federal or state bankruptcy or other
insolvency law;
(e) Borrower is voluntarily or involuntarily terminated or dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters into
any merger or consolidation, or sale, lease, liquidation or other disposition of
all or substantially all of its assets; or
(g) Any judgment is entered against Borrower or any attachment upon or
garnishment of any property of Borrower is issued in an amount in excess of
$250,000.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based on
or arising out of, under, or in connection with, this Promissory Note shall be
brought and maintained exclusively in the courts of New York. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of New York for the purpose of any such litigation as set forth
above and irrevocably agree to be bound by any final judgment rendered thereby
in connection with such litigation. The Borrower further irrevocably consents
to the service of process by registered mail, postage prepaid, or by personal
service within or without New York. The Borrower hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Borrower has or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Lender or the Borrower.
The Borrower acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Lender entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
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<PAGE>
(b) Neither this Promissory Note nor any provision hereof shall be waived,
modified, changed, discharged, terminated, revoked or canceled, except by an
instrument in writing signed by the party effecting the same against whom any
change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by registered mail, return receipt requested, addressed: (i) if to the
Borrower, Mark Beychok, CEO at Vitafort International Corporation, 1800 Avenue
of the Stars, Suite 480, Los Angeles, CA 90067 and (ii) if to Lender to
________________________________________________________________.
(d) This Promissory Note shall be enforced, governed and construed in all
respects in accordance with the laws of Delaware, as such laws are applied by
Delaware courts to agreements entered into, and to be performed in, Delaware by
and between residents of Delaware, and shall be binding upon the Borrower, the
Borrower's successors and assigns and shall inure to the benefit of the Lender,
its successors and assigns. If any provision of this Promissory Note is invalid
or unenforceable under any applicable statue or rule of law, then such
provisions shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH WHICH
THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE TERMS OF
THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE BORROWER
HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE AS NOW
CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL PROCESS
AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
VITAFORT INTERNATIONAL CORPORATION
By /s/ Mark Beychok
_________________________________
Mark Beychok its CEO duly authorized
4
<PAGE>
EXHIBIT 3
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER
THIS WARRANT, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED
IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
VITAFORT INTERNATIONAL CORPORATION
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated: as of December 31, 1998
This certifies that, for value received
NAME: TERRA HEALTHY LIVING, LTD.
ADDRESS: PASEA ESTATE
P.O. BOX 958
ROAD TOWN TORTOLA, BVI
or registered assigns (the "Holder") are entitled, subject to the terms set
forth herein, to purchase from Vitafort International Corporation (the
"Company"), a Delaware corporation, having its offices at 1800 Avenue of the
Stars, Los Angeles, California 94941, Five Hundred Thousand (500,000) shares of
the Company's common stock subject to adjustment as set forth herein.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to the
Company's common stock including Underlying Securities, as more fully set forth
in Section 5 hereof.
(b) "Warrant Price" or "Common Share Price" shall be Twenty-five
Cents ($.25).
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<PAGE>
(c) "Underlying Securities" or "Underlying Shares" or "Underlying
Stock" shall refer to the Common Shares or other securities or property issuable
or issued upon exercise of the Warrant.
2. (a) The purchase rights represented by this Warrant may be exercised
by the Holder hereof, in whole or in part (but not as to less than a whole
Common Share), at any time, and from time to time, during the period commencing
this date, until December 31, 2003 (the "Expiration Date"), by the presentation
of this Warrant, with the purchase form attached duly executed, at the Company's
office (or such office or agency of the Company as it may designate in writing
to the Holder hereof by notice pursuant to the terms hereof), specifying the
number of Common Shares as to which the Warrant is being exercised, and upon
payment by the Holder to the Company in cash or by certified check or bank
draft, in an amount equal to the Warrant Price times the number of Common Shares
then being purchased hereunder. Notwithstanding the foregoing, on December 31,
1999, all accrued interest on the $2,065,000 promissory note issued to Terra
Healthy Living by the Company shall be credited to Terra Healthy Living and used
to exercise as much of this Warrant as is possible based on the amount of
accrued interest through December 31, 1999.
(b) The Company agrees that the Holder hereof shall be deemed the
record owner of such Underlying Securities as of the close of business on the
date on which this Warrant shall have been presented and payment made for such
Underlying Securities as aforesaid. Certificates for the Underlying Securities
so obtained shall be delivered to the Holder hereof within a reasonable time,
not exceeding seven (7) days, after the rights represented by this Warrant shall
have been so exercised. If this Warrant shall be exercised in part only or
transferred in part subject to the provisions herein, the Company shall, upon
surrender of this Warrant for cancellation or partial transfer, deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance of
the Underlying Shares which such Holder is entitled to purchase hereunder.
(c) Conversion. At any time after the expiration of the Registration
Period as defined in the Registration Rights Agreement dated as of December 31,
1998 between the Holder and the Company and provided that the shares of Warrant
Stock issuable upon the exercise of this Warrant are not then otherwise subject
to an effective registration statement under the Securities At of 1933, as
amended, the Holder may convert this Warrant (the "Conversion Right"), in whole
or in part, into the number of Warrant Shares (less the number of Warrant Shares
as to which this Warrant has previously been exercised or as to which the
Conversion Right has previously been exercised) calculated pursuant to the
following formula by surrendering this Warrant (with the notice of exercise form
attached hereto duly executed) at the principal office of the Company specifying
the number of Warrant Shares into which the Holder desires to convert this
Warrant:
Y (A-B)
--------
X = A
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<PAGE>
where: X = the number of shares of Warrant Stock to be
issued to the Holder;
Y = the number of shares of Warrant Stock subject to this
Warrant for which the Conversion Right is being
exercised;
A = the Market Price of the Warrant Stock (as defined
below), determined as of the trading day immediately
preceding the date of exercise of the Conversion Right;
and
B = the Warrant Price.
For purposes hereof, the term "Market Price of the Warrant Stock"
means the average of the closing sales prices of the Warrant Stock on all
securities exchanges on which the Warrant may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Warrant Stock is not so listed, the average of the
representative bid and asked prices quoted in The Nasdaq Stock Market, Inc. as
of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in
The Nasdaq Stock Market, Inc., the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Market Price of the Warrant Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Warrant Stock is
not listed on any securities exchange , the Market Price of the Warrant Stock
shall be determined by agreement between the Company and the Holder.
3. Subject to the provisions of the various restrictions contained or
incorporated herein, (i) this Warrant is exchangeable at the option of the
Holder at the aforesaid office of the Company for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of Common Shares as are purchasable hereunder; and (ii) this Warrant may
be divided or combined with other Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Warrants are to be issued, and the payment
of any transfer tax due in connection therewith.
4. Subject and pursuant to the provisions of this Section 4, the Warrant
Price and number of Common Shares subject to this Warrant shall be subject to
adjustment from time to time as set forth hereinafter in this Section 4.
(a) If the Company shall at any time subdivide its outstanding Common
Shares by recapitalization, reclassification, stock dividend, or split-up
thereof or other
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<PAGE>
means, the number of Common Shares subject to this Warrant
immediately prior to such subdivision shall be proportionately increased and the
Warrant Price shall be proportionately decreased, and if the Company shall at
any time combine the outstanding Common Shares by recapitalization,
reclassification or combination thereof or other means, the number of Common
Shares subject to this Warrant immediately prior to such combination shall be
proportionately decreased and the Warrant Price shall be proportionately
increased. Any such adjustment and adjustment to the Warrant Price shall become
effective at the close of business on the record date for such subdivision or
combination.
(b) If the Company after the date hereof shall distribute to all of
the holders of its Common Shares any securities including, but not limited to
Common Shares, or other assets (other than a cash distribution made as a
dividend payable out of earnings or out of any earned surplus legally available
for dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Warrant Price and the type and/or number of Underlying
Securities in effect immediately prior to the record date of such distribution
as may be necessary to preserve to the Holder of this Warrant rights
substantially proportionate to and economically equivalent to those enjoyed
hereunder by such Holder immediately prior to the happening of such
distribution. Any such adjustment made reasonably and in good faith by the
Board of Directors shall be final and binding upon the Holders and shall become
effective as of the record date for such distribution.
(c) No adjustment in the number of Common Shares subject to this
Warrant or the Warrant Price shall be required under this Section 4 unless such
adjustment would require an increase or decrease in such number of shares of at
least 1% of the then adjusted number of Common Shares issuable upon exercise of
the Warrant, provided, however, that any adjustments which by reason of the
foregoing are not required at the time to be made shall be carried forward and
taken into account and included in determining the amount of any subsequent
adjustment. If the Company shall make a record of the Holders of its Common
Shares for the purpose of entitling them to receive any dividend or distribution
and legally abandon its plan to pay or deliver such dividend or distribution
then no adjustment in the number of Common Shares subject to the Warrant shall
be required by reason of the making of such record.
(d) In case of any capital reorganization or reclassification or
change of the outstanding Common Shares (exclusive of a change covered by
Section 4(a) hereof or which solely affects the par value of such Common Shares)
or in the case of any merger or consolidation of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
change, capital reorganization or change in the ownership of the outstanding
Common Shares), or in the case of any sale or conveyance or transfer of all or
substantially all of the property of the Company and in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Warrant Price payable
hereunder immediately
4
<PAGE>
prior to such event, the kind and amount of shares of stock or other securities
or property receivable upon such reclassification, change, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, by a holder of the number of Common Shares of the
Company equal to the number of common shares obtainable upon exercise of this
Warrant immediately prior to such event; and if any reorganization,
reclassification, change, merger, consolidation, sale or transfer also results
in a change in Common Shares covered by Section 4(a), then such adjustment shall
be made pursuant to both this Section 4(d) and Section 4(a). The provisions of
this Section 4(d) shall similarly apply to successive reclassification, or
capital reorganizations, mergers or consolidations, changes, sales or other
transfers.
(e) The Company shall not be required to issue fractional Common
Shares upon any exercise of this Warrant. As to any final fraction of a Common
Share which the Holder of this Warrant would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the market value of a
share of such stock on the business day preceding the day of exercise or book
value as determined by the Company's independent public accountants if not
publicly traded. The Holder of this Warrant, by his acceptance hereof,
expressly waives any right to receive any fractional shares of stock upon
exercise of this Warrant.
(f) As used herein, the current market price ("Market Price") per
share at any date shall be the price of Common Shares on the business day
immediately preceding the event requiring an adjustment hereunder and shall be
(A) if the principal trading market for such securities is an exchange or the
NASDAQ National Market, the closing price on such exchange or the NASDAQ
National Market on such day provided if trading of such Common Shares is listed
on any consolidated tape, the price shall be the closing price set forth on such
consolidated tape or (B) if the principal market for such securities is the
over-the-counter market, the high bid price on such date as set forth by the
NASDAQ Small Cap Market or the NASDAQ Electronic Bulletin Board or, if the
security is not quoted on either the NASDAQ Small Cap Market or the NASDAQ
Electronic Bulletin Board, the high bid price as set forth in the NATIONAL
QUOTATION BUREAU sheet listing such securities for such day. Notwithstanding
the foregoing, if there is no reported closing price or high bid price, as the
case may be, on a date prior to the event requiring an adjustment hereunder,
then the current market price shall be determined as of the latest date prior to
such day for which such closing price or high bid price is available.
(g) Irrespective of any adjustments pursuant to this Section 4 in the
Warrant Price or in the number, or kind, or class of shares or other securities
or other property obtainable upon exercise of this Warrant, and without
impairing any such adjustment the certificate representing this Warrant may
continue to express the Warrant Price and the number of Common Shares obtainable
upon exercise at the same price and number of Common Shares as are stated
herein.
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<PAGE>
(h) Until this Warrant is exercised, the Underlying Shares, and the
Warrant Price shall be determined exclusively pursuant to the provisions hereof.
5. For the purposes of this Warrant, the terms "Common Shares" or "Common
Stock" shall mean (i) the class of stock designated as the common stock of the
Company on the date set forth on the first page hereof or (ii) any other class
of stock resulting from successive changes or reclassification of such Common
Stock consisting solely of changes from par value to no par value, or from no
par value to par value or changes in par value. If at any time, as a result of
an adjustment made pursuant to Section 4, the securities or other property
obtainable upon exercise of this Warrant shall include shares or other
securities of another corporation or other property, then thereafter, the
number of such other shares or other securities or property so obtainable shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 4, and all other provisions of this Warrant with respect to
Common Shares shall apply on like terms to any such other shares or other
securities or property. Subject to the foregoing, and unless the context
requires otherwise, all references herein to Common Shares shall, in the event
of an adjustment pursuant to Section 4, be deemed to refer also to any other
shares or other securities or property when obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by this
Warrant may be exercised, the Company shall, at all times, reserve and keep
available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant and at its expense will
obtain the listing thereof on all quotation systems or national securities
exchanges on which the Common Shares are then listed; and if at any time the
number of authorized Common Shares shall not be sufficient to effect the
exercise of this Warrant, the Company will take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose; the Company shall have
analogous obligations with respect to any other securities or property issuable
upon exercise of this Warrant;
(b) All Common Shares which may be issued upon exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof; and
(c) All original issue taxes payable in respect of the issuance of
Common Shares upon the exercise of the rights represented by this Warrant shall
be borne by the Company, but in no event shall the Company be responsible or
liable for income taxes or transfer taxes upon the transfer of any Warrants.
6
<PAGE>
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company.
8. No transfer of all or a portion of the Warrant or Underlying
Securities shall be made at any time unless the Company shall have been supplied
with evidence reasonably satisfactory to it that such transfer is not in
violation of the Securities Act of 1933, as amended (the "Act"). Subject to the
satisfaction of the aforesaid condition and upon surrender of this Warrant or
certificates for any Underlying Securities at the office of the Company, the
Company shall deliver a new Warrant or Warrants or new certificate or
certificates for Underlying Securities to and in the name of the assignee or
assignees named therein. Any such certificate may bear a legend reflecting the
restrictions on transfer set forth herein.
9. If this Warrant is lost, stolen, mutilated or destroyed, the Company
shall, on such terms as to indemnity or otherwise as the Company may reasonably
impose, issue a new Warrant of like denomination, tenor and date. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
10. Any Warrant issued pursuant to the provisions hereof as a replacement
Warrant, or upon transfer, exchange, division or partial exercise of this
Warrant or combination thereof with another Warrant or Warrants, shall set forth
each provision set forth in this Warrant as each such provision is set forth
herein, and shall be duly executed on behalf of the Company by its chief
executive officer.
11. Upon surrender of this Warrant for transfer or exchange or upon the
exercise hereof, this Warrant shall be canceled by the Company, and shall not be
reissued by the Company and, except as provided in Section 2 in case of a
partial exercise, Section 3 in case of an exchange or in case of mutilation.
Any new Warrant certificate shall be issued promptly but not later than fifteen
(15) days after receipt of the old Warrant certificate.
12. This Warrant shall inure to the benefit of and be binding upon the
Holder hereof, the Company and their respective successors, heirs, executors,
legal representatives and assigns.
13. All notices required hereunder shall be in writing and shall be deemed
given when telegraphed, delivered personally or within two (2) days after
delivery to a recognized air carrier, to the party to whom such notice is
intended, at the address of such other party as set forth on the first page
hereof, or at such other address of which the Company or Holder has been advised
by the notice hereunder.
14. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any
7
<PAGE>
way impaired thereby, it being intended that all of the rights and privileges of
the Holders shall be enforceable to the fullest extent permitted by law.
15. The validity, interpretation and performance of this Warrant and of
the terms and provisions hereof shall be governed by the laws of the State of
California applicable to agreements entered into and performed entirely in such
state.
16. This Warrant shall not be assigned by Holder without the express
written permission of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of December 31, 1998.
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
-------------------------------
Mark Beychok, Chief Executive
Officer duly authorized
8
<PAGE>
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned record holder of the within Warrant hereby irrevocably
elects to exercise the right to purchase Common Shares evidenced by
----------
the within Warrant, according to the terms and conditions thereof, and herewith
makes payment of the purchase price in full.
The undersigned requests that certificates for such shares and warrants
shall be issued in the name set forth below:
Dated:
NAME OF HOLDER:
Signature
Print Name and Title of Signatory
Name and address to whom certificates are to be issued if different from
above
Social Security No. or other identifying number of transferee
If said number of shares and warrants shall not be all the shares
purchasable under the within Warrant, the undersigned requests that a new
Warrant for the unexercised portion shall be registered in the name of:
(Please Print Name and Address)
Social Security No. or other identifying number
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby sells, assigns and transfers to
(Social Security or I.D. No. ) the within Warrant, or that
portion of this Warrant purchasable for common shares together with all
-----
rights, title and interest therein, and does hereby irrevocably constitute and
appoint attorney to transfer such Warrant on the register
-----------
of the within named Company, with full power of substitution.
Name of Holder
(Signature)
(Print Name and Title of Signatory)
Dated:
Signature Guaranteed:
10
<PAGE>
EXHIBIT 4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 31, 1998 ("this
Agreement"), is made by and between VITAFORT INTERNATIONAL CORPORATION, a
Delaware corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the Warrant, dated
as of December 31, 1998, issued to the Initial Investor by the Company (the
"Warrant"), the Company has agreed to issue and sell to the Initial Investor up
to 500,000 shares of the Company's Common Stock upon the terms and conditions
set forth in said Warrant; and
WHEREAS, in order to induce the Initial Investor to acquire the Warrant,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "Securities Act"), and
applicable state securities laws with respect to the Common Stock issuable upon
exercise of the Warrant;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agrees as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means December 31, 1998.
(ii) "Investor" means the Initial Investor;
(iii) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
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Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(iv) "Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(v) "Registrable Securities" means the Common Stock issuable upon
exercise of the Warrant.
(vi) "Registration Statement" means a registration statement or an amended
registration statement of the Company under the Securities Act.
(vii) As used in this Agreement, the term Investor includes (i) the Initial
Investor and (ii) each person who is a permitted transferee or assignee of the
Registrable Securities pursuant to the terms of the Warrants and Section 9 of
this Agreement.
2. Registration.
The Company shall either have the Registrable Securities registered under
(I) the Company's currently pending Form SB-2 Registration Statement or (ii)
under a separate Registration Statement to be filed by the Company's counsel at
the Company's sole cost and expense. In either event, an amendment to the Form
SB-2 Registration Statement or a new Registration Statement shall be filed by
the Company's counsel on or before February 15, 1999 or such later date as
agreed to by the Company and the Investor in writing signed by both parties. In
the event the Registration Statement is not filed on or before the foregoing
date, then in such event the Company shall pay the Investor $100 per day until
the Registration Statement is filed. The Investor is also granted additional
Piggy-back registration rights, subject to the rights of other holders of the
Company's securities entitled to registration rights, on any other Registration
Statement (other than Form S-8, Form S-4 and any similar or successor forms)
filings made by the Company. If at any time the number of shares of Common
Stock into which the Warrant(s) may be converted exceeds the aggregate number of
shares of Common Stock then registered, the Company shall, within ten (10)
business days after receipt of written notice from any Investor, either (i)
amend the Registration Statement filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by the
SEC at that time, to register all shares of Common Stock into which the
Warrant(s) may be converted, or (ii) if such Registration Statement has been
declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on Form SB-2 to register the shares of Common Stock into
which the Warrants may be converted that exceed the
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aggregate number of shares of Common Stock already registered. The above damages
shall continue until the obligation is fulfilled and shall be paid within 5
business days after each 30 day period, or portion thereof, until the
Registration Statement is filed. Failure of the Company to make payment within
said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
amendment to the Form SB-2 Registration Statement of a new Registration
Statement no later than February 15, 1999, will cause the Initial Investor to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement and the Warrant.
3. Obligation of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC in accordance with Section 2
above, an amendment to the currently pending Form SB-2 Registration Statement or
a new Registration Statement, and thereafter use its reasonable best efforts to
cause each Registration Statement relating to Registrable Securities to become
effective five business days after notice from the SEC that the Registration
Statement may be declared effective and keep the Registration Statement
effective at all times until the earlier of the date after Investor has
exercised all its Warrants and received free-trading unlegended common stock or
the date nine months after the date the Registration Statement is initially
declared effective by the SEC (the "Registration Period"). The amended or new
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration effective at all times during the Registration Period, and,
during the Registration Period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended
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<PAGE>
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable best efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
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therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and uses its reasonable best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
4
<PAGE>
(f) As promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of any notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
(g) Use its reasonable best efforts, if eligible, either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on
a national securities exchange and on each additional national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation of all
the Registrable Securities covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("NASDAQ") "Small
Capitalization" within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on the NASDAQ Small Cap Market; or if,
despite the Company's commercially reasonable efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in doing so, to secure NASD
authorization and quotation for such Registrable Securities on the over-the-
counter bulletin board and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such registrable
securities;
(h) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investor who holds Registrable Securities or,
(subject to receipt by the Company of appropriate notice and documentation, as
may be required by the Warrant or this Agreement), securities convertible into
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities or
securities convertible into Registrable Securities are included in such
Registration Statement) an appropriate instruction and opinion of such counsel;
provided, however, that nothing in this subparagraph shall be deemed to waive
any of the provisions regarding the conditions or method of conversion of the
Warrants into Registrable Securities;
5
<PAGE>
(j) The Company shall permit a single firm of counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(k) Notify the Holders of Registrable Securities to be sold, their
Counsel and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if request by any
such Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or post-
effective amendment to the Registration Statement is proposed to be filed; (B)
whenever the Commission notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or
representatives of the Company receive on its behalf) any oral or written
comments from the Commission respect of a Registration Statement (copies or, in
the case of oral comments, summaries of such comments shall be promptly
furnished by the Company to the Holders); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that to the best knowledge of
the Company makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. In
addition, the Company shall furnish the Holders with copies of all intended
written responses to the comments contemplated in clause (C) of this Section
3(d) not later than one (1) Business Day in advance of the filing of such
responses with the Commission so that the Holders shall have the opportunity to
comment thereon.
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(l) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investor in writing of the existence of a Potential Material Event,
the Investor shall not offer or sell any Registrable Securities, or engage in
any other transaction involving or relating to the Registrable Securities, from
the time of the giving of notice with respect to a Potential Material Event
until such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however, that the Company may not so
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suspend the right to such holders of Registrable Securities for more than one
forty-five (45) day period during any 12-month period ("Suspension Period") with
at least a ten (10) business day interval between such periods, during the
periods the Registration Statement is required to be in effect;
(m) Use its reasonable efforts to secure electronic over-the-counter
bulletin board authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities;
(n) Take all other reasonable actions necessary to expedite and facilitate
distribution to the Investor of the Registrable Securities pursuant to the
Registration Statement; and
4. Obligations of the Investor. In connection with the registration of
the Registrable Securities, the Investor shall have the following obligations;
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information"), if any. If at least two (2) business days prior to the filing
date the Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
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<PAGE>
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(d) In the event the Company is in breach of any of the provisions of this
Registration Rights Agreement, the Investor may choose any of the remedies or
damages already provided in this Agreement or the Warrant.
5. Expenses of Registration. (a) The Company shall bear all reasonable
expenses, other than underwriting discounts and commissions incurred in
connection with registrations, filing or qualifications pursuant to Section 3,
but including, without limitations, all registration, listing, and
qualifications fees, printers and accounting fees and the fees and disbursements
of counsel for the Company and reasonable fees and disbursements of one counsel
for the Initial Investor (not to exceed $2,500).
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Investor in this Agreement or
otherwise conflicts with the provisions hereof.
6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration
8
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Statement or any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or any prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or 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, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall reimburse the Investors, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(b) hereof; (ii) with respect to
any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(j) hereof; (iii) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (iv) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Each
Investor will indemnify the Company, its officers, directors and agents
(including Counsel) against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company to this Section 6.
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Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that an Indemnified Person or Indemnified Party shall have the right to
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retain its own counsel with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
--------
however, that (a) no contribution shall be made under circumstances where the
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maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to
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the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any permitted transferee of in excess
of fifty (50%) percent or more of the Registrable Securities (or all or any
portion of any Warrant of the Company which is convertible into such securities)
only if: (a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such transferee or assignee and (ii) the
securities with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, and (d) at or before
the time the Company received the written notice contemplated by clause (b) of
this sentence the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein. In the event of any delay
in filing or effectiveness of the Registration Statement as a result of such
assignment, the Company shall not be liable for any damages arising from such
delay, or the payments set forth in Section 2(c) hereof.
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10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company received conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company, at
its executive offices; (ii) if to the Initial Investor, at the address set forth
under its name in the Warrant, with a copy to its designated attorney and (iii)
if to any other Investor, at such address as such Investor shall have provided
in writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11(b), and shall be effective,
when personally delivered, upon receipt and, when so sent by certified mail,
four (4) business days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of Delaware in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Investor
for any reasonable legal fees and disbursements incurred by the Investor in
enforcement of or protection of any of its rights under this Agreement.
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(e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
VITAFORT INTERNATIONAL, CORPORATION
By: /s/ Mark Beychok
--------------------------------
Name: Mark Beychok
Title: Chief Executive Officer
TERRA HEALTHY LIVING, LTD.
By: /s/ Martin Brenner
--------------------------------
Name: Martin Brenner
Title: CEO
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EXHIBIT 5
AGREEMENT AND CONSENT TO REDEEM SERIES A
PREFERRED STOCK AND DEBENTURES
THIS NOTICE OF REDEMPTION, CONSENT AND AMENDMENT AGREEMENT (this
"Agreement") dated as of December 31, 1998, is by and between VITAFORT
INTERNATIONAL CORPORATION, a Delaware corporation (the "Company"), and each of
Sovereign Partners Limited Partnership ("Sovereign") and Dominion Capital Fund,
Ltd. ("Dominion"). Sovereign and Dominion are sometimes collectively referred
to herein as the Purchasers.
WHEREAS, the Company and the Purchasers entered into certain Subscription
Agreements and Sovereign received an assignment from FT Trading whereby
Sovereign currently owns 1,086 shares of the Company's Series A Preferred Stock,
par value $.10 per share (the "Series A Preferred Stock") and Dominion currently
owns 500 shares of the Series A Preferred Stock.
WHEREAS, the Company and Dominion entered into a certain Subscription
Agreement whereby Dominion currently owns a 6% Convertible Debenture (the
"Debenture") in the amount of $548,352 together with accrued interest and
liquidated damages.
WHEREAS, the Purchasers acknowledge that the Company intends to redeem the
entire Debenture and all shares of the Series A Preferred Stock held by
Sovereign and Dominion, for the total redemption price of $2,300,000 (the
"Redemption"). Sovereign and Dominion shall receive Swiss Securities (as that
term is defined in the Common Stock Purchase Agreement of even date herewith)
with a combined current market value totaling in the aggregate a market value of
at least $ 2,300,000 US, instead of $2,300,000 US in cash.
WHEREAS, the Company and the Purchasers have agreed to amend any documents
as necessary to effect the Redemption.
NOW, THEREFORE, in consideration of the above premises and the mutual
promises contained herein, each of the parties hereto agrees as follows:
(1) Prohibition on Conversions. The Purchasers agree that they will
not convert any additional shares of the Series A Preferred Stock
after January 15, 1999, or prior to the close of business on January
8, 1999, (the "Redemption Period"), and that any Notices of Conversion
sent by the Purchasers or received by the Company representing a
conversion during that period, except for conversion notices
outstanding as of December 31, 1998, shall be considered null and
void.
(2) Notice of Intent to Redeem. The Company hereby notifies the
Purchasers of its intent to redeem the outstanding shares of the
<PAGE>
Series A Preferred Stock, in whole or in part, at any time from the
date hereof until January 15, 1999. The Company will effect the
Redemption by having delivered to Purchaser's accounts at Dresdner
Bank in Switzerland that amount of Swiss Securities necessary for the
Redemption. When the necessary amount of Swiss Securities have been
received into the Purchasers' accounts at Dresdner Bank (the
"Redemption Date"), interest shall cease to accrue on those Shares
being redeemed and the Purchaser shall have no further rights as to
those Shares and Debentures that have been redeemed. The Purchasers
hereby agree that this Agreement shall satisfy the notice of
redemption provisions contained in the Subscription Agreements and the
Certificate of Designation, and that no further action or notice
period on the part of the Company is required to effect the Redemption
except for the delivery of the necessary amount of Swiss Securities to
the Escrow Agent; provided, however, that if the Company does not
consummate the Redemption during the Redemption Period, the Company
shall not be considered in breach of the Subscription Agreements or
Certificate of Designation and those agreements shall remain in full
force and effect upon the expiration of the Redemption Period.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
Sovereign Partners Limited Partnership Dominion Capital Fund, Ltd.
By: /s/ Stephen Hicks By: /s/ Nina Ray
------------------------------------ ------------------------------
Name: Stephen Hicks Name: Nina Ray
---------------------------------- ----------------------------
Its: Its: Inter Carribean Services
-----------------------------
(Bahamas) Ltd.
-----------------------------
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
------------------------------------
Mark Beychok its CEO duly authorized
<PAGE>
EXHIBIT 6
PROMISSORY NOTE
----------------
$300,000.00 Los Angeles, California
December 31,1998
FOR VALUE RECEIVED, the undersigned, VITAFORT INTERNATIONAL CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay to SOVEREIGN
PARTNERS LIMITED PARTNERSHIP (the "Lender") the principal amount of $300,000.00,
as provided herein, together with interest at the rate hereinafter set forth,
payable on or before October 20, 1999.
Interest on the principal balance of this Note from time to time
outstanding and unpaid shall be computed on the basis of a 360-day year for the
actual number of days elapsed at a simple interest rate per annum equal to eight
percent (8%) commencing on January 20, 1999.
Principal and all accrued interest, at the rate of eight percent (8%) per
annum, shall be payable without the necessity for demand or notice on October
20, 1999. All payments of principal and interest shall be paid by wire transfer
per the written instructions of Lender. As further consideration for this loan,
Borrower agrees to issue to Lender a Warrant to purchase 30,000 shares of the
Borrower's common stock, par value $0.01 per share, exercisable at $.40 per
share for a period of five (5) years ("Warrant A"), which shares of common stock
underlying the Warrant are subject to a Registration Rights Agreement between
the Borrower and Lender of even date herewith.
Borrower will also place in escrow with Joseph B. LaRocco, Esq. pursuant to
an escrow agreement of even date herewith, a second warrant to purchase 30,000
shares of Common Stock at an exercise price of $.25 per share ("Warrant B"). On
or before October 20, 1999 re-payment of the Note may be made by Borrower at its
option, in part or in full, in cash or common stock of the Borrower, free of
restrictions, restrictive legends or stop transfer instructions. In any event,
if any part or all of this Note remains unpaid on October 20, 1999 then Borrower
may pay this Note together with interest in cash or in free trading common stock
at Borrower's sole option. If paid in common stock the Borrower shall be
permitted to deliver the required shares in up to three monthly installments
(October, November and December) based on the previous five day average closing
bid price of Borrower's common stock prior to delivery of each installment.
Borrower agrees to issue shares of free trading common stock in increments of no
more than 4.99% of Borrower's issued and outstanding common stock. As
consideration for Lender taking such payment in common stock at the five day
average and over up to a three month period, rather than cash, the exercise
price of Warrant B shall be reduced in accordance with the terms thereof from
$.25 to $.01, which reduction shall only be made after Lender
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has received the common stock as repayment. If the Borrower pays this Note in
part in common stock of the Borrower and in part in cash, then in such event the
Warrant exercise price shall be reduced proportionately. If the principal amount
of this Note, plus accrued interest, is repaid in full in cash then Warrant B
shall be canceled.
In the event Borrower is unable to pay back the Note with interest on
October 20, 1999, then in such event Terra Healthy Living shall have a right of
first refusal to buy out the balance of this Note. This right of first refusal
shall be available for Terra Healthy Living up to 5:00 p.m. EST on October 20,
1999, but this right shall expire after that date. In the event that Terra
Healthy Living timely buys this Note then Warrant B shall be transferred from
escrow to Terra Healthy Living and Borrower shall then immediately reduce the
exercise price of Warrant B to $.01.
Borrower hereby waives presentment, protest, notice of protest and notice
of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance.
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their respective
representatives, successors and assigns (except as specifically provided in this
Note) expressly (a) waive presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, diligence in
collection, and the benefit of any applicable exemptions, including, but not
limited to, exemptions claimed under insolvency laws, and (b) consent that the
Lender may release or surrender, exchange or substitute any property or other
collateral or security now held or which may hereafter be held as security for
the payment of this Promissory Note, or may release any guarantor, or may extend
the time for payment or otherwise modify the terms of payment of any part or the
whole of the debt evidenced hereby.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that from
the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be used
solely for general corporate purposes.
(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
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<PAGE>
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower.
DEFAULT. If any of the following events occur (a "default") the entire principal
balance plus accrued interest shall be due and payable, and the Borrower shall
be liable for reasonable attorneys fees, costs and expenses:
(a) Borrower fails to pay when due any principal or interest under this
Note;
(b) Borrower fails to observe or perform any covenant or agreement set
forth in this Note;
(c) Borrower makes a general assignment for the benefit of its creditors,
files a petition in bankruptcy, for an arrangement with its creditors or for
reorganization under any federal or state bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition, which is not
dismissed or stayed within 90 days, in bankruptcy or for the appointment of a
receiver, custodian, trustee or liquidator of the party or of all or
substantially all of its assets under any federal or state bankruptcy or other
insolvency law;
(e) Borrower is voluntarily or involuntarily terminated or dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters into
any merger or consolidation, or sale, lease, liquidation or other disposition of
all or substantially all of its assets; or
(g) Any judgment is entered against Borrower or any attachment upon or
garnishment of any property of Borrower is issued in an amount above $250,000.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based on
or arising out of, under, or in connection with, this Promissory Note shall be
brought and maintained exclusively in the courts of New York. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of New York for the purpose of any such litigation as set forth
above and irrevocably agree to be bound by any final judgment rendered thereby
in connection with such litigation. The Borrower further irrevocably consents
to the service of process by registered mail, postage prepaid, or by personal
service within or without New York. The Borrower hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any
3
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such court referred to above and any claim that any such litigation has been
brought in any inconvenient forum. To the extent that the Borrower has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Lender or the Borrower.
The Borrower acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Lender entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
(b) Neither this Promissory Note nor any provision hereof shall be waived,
modified, changed, discharged, terminated, revoked or canceled, except by an
instrument in writing signed by the party effecting the same against whom any
change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by registered mail, return receipt requested, addressed: (i) if to the
Borrower, Mark Beychok, CEO at Vitafort International Corporation, 1800 Avenue
of the Stars, Suite 480, Los Angeles, CA 90067 and (ii) if to Lender C/O Joseph
B. LaRocco, Esq. 49 Locust Avenue, Suite 107, New Canaan, CT 06840.
(d) This Promissory Note shall be enforced, governed and construed in all
respects in accordance with the laws of Delaware, as such laws are applied by
Delaware courts to agreements entered into, and to be performed in, Delaware by
and between residents of Delaware, and shall be binding upon the Borrower, the
Borrower 's successors and assigns and shall inure to the benefit of the Lender,
its successors and assigns. If any provision of this Promissory Note is invalid
or unenforceable under any applicable statue or rule of law, then such
provisions shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
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<PAGE>
(e) This Note shall not be assigned by the Lender without the express
written permission of the Borrower.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH WHICH
THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE TERMS OF
THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE BORROWER
HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE AS NOW
CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL PROCESS
AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
VITAFORT INTERNATIONAL CORPORATION
By /s/ Mark Beychok
--------------------------------
Mark Beychok its CEO
duly authorized
5
<PAGE>
EXHIBIT 7
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER
THIS WARRANT, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED
IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
VITAFORT INTERNATIONAL CORPORATION
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated: as of December 31, 1998
This certifies that, for value received
NAME: SOVEREIGN PARTNERS LIMITED PARTNERSHIP
ADDRESS: The Executive Pavillion
90 Grove Street, Suite 01
Ridgefield, CT 06877
or registered assigns (the "Holder") are entitled, subject to the terms set
forth herein, to purchase from Vitafort International Corporation (the
"Company"), a Delaware corporation, having its offices at 1800 Avenue of the
Stars, Los Angeles, California 94941, Thirty Thousand (30,000) shares of the
Company's common stock subject to adjustment as set forth herein.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to the
Company's common stock including Underlying Securities, as more fully set forth
in Section 5 hereof.
(b) "Warrant Price" or "Common Share Price" shall be Forty Cents
($.40).
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(c) "Underlying Securities" or "Underlying Shares" or "Underlying
Stock" shall refer to the Common Shares or other securities or property issuable
or issued upon exercise of the Warrant.
2. (a) The purchase rights represented by this Warrant may be exercised
by the Holder hereof, in whole or in part (but not as to less than a whole
Common Share), at any time, and from time to time, during the period commencing
on the date of issuance hereof until December 31, 2003 (the "Expiration Date"),
by the presentation of this Warrant, with the purchase form attached duly
executed, at the Company's office (or such office or agency of the Company as it
may designate in writing to the Holder hereof by notice pursuant to the terms
hereof), specifying the number of Common Shares as to which the Warrant is being
exercised, and upon payment by the Holder to the Company in cash or by certified
check or bank draft, in an amount equal to the Warrant Price times the number of
Common Shares then being purchased hereunder.
(b) The Company agrees that the Holder hereof shall be deemed the
record owner of such Underlying Securities as of the close of business on the
date on which this Warrant shall have been presented and payment made for such
Underlying Securities as aforesaid. Certificates for the Underlying Securities
so obtained shall be delivered to the Holder hereof within a reasonable time,
not exceeding seven (7) days, after the rights represented by this Warrant shall
have been so exercised. If this Warrant shall be exercised in part only or
transferred in part subject to the provisions herein, the Company shall, upon
surrender of this Warrant for cancellation or partial transfer, deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance of
the Underlying Shares which such Holder is entitled to purchase hereunder.
(c) Conversion. At any time after the expiration of the Registration
Period as defined in the Registration Rights Agreement dated as of December 31,
1998 between the Holder and the Company and provided that the shares of Warrant
Stock issuable upon the exercise of this Warrant are not then otherwise subject
to an effective registration statement under the Securities At of 1933, as
amended, the Holder may convert this Warrant (the "Conversion Right"), in whole
or in part, into the number of Warrant Shares (less the number of Warrant Shares
as to which this Warrant has previously been exercised or as to which the
Conversion Right has previously been exercised) calculated pursuant to the
following formula by surrendering this Warrant (with the notice of exercise form
attached hereto duly executed) at the principal office of the Company specifying
the number of Warrant Shares into which the Holder desires to convert this
Warrant:
Y (A-B)
X = A
where: X = the number of shares of Warrant Stock to be
issued to the Holder;
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Y = the number of shares of Warrant Stock subject to this
Warrant for which the Conversion Right is being
exercised;
A = the Market Price of the Warrant Stock (as defined
below), determined as of the trading day immediately
preceding the date of exercise of the Conversion Right;
and
B = the Warrant Price.
For purposes hereof, the term "Market Price of the Warrant Stock"
means the average of the closing sales prices of the Warrant Stock on all
securities exchanges on which the Warrant may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Warrant Stock is not so listed, the average of the
representative bid and asked prices quoted in The Nasdaq Stock Market, Inc. as
of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in
The Nasdaq Stock Market, Inc., the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Market Price of the Warrant Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Warrant Stock is
not listed on any securities exchange , the Market Price of the Warrant Stock
shall be determined by agreement between the Company and the Holder.
3. Subject to the provisions of the various restrictions contained or
incorporated herein, (i) this Warrant is exchangeable at the option of the
Holder at the aforesaid office of the Company for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of Common Shares as are purchasable hereunder; and (ii) this Warrant may
be divided or combined with other Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Warrants are to be issued, and the payment
of any transfer tax due in connection therewith.
4. Subject and pursuant to the provisions of this Section 4, the Warrant
Price and number of Common Shares subject to this Warrant shall be subject to
adjustment from time to time as set forth hereinafter in this Section 4.
(a) If the Company shall at any time subdivide its outstanding Common
Shares by recapitalization, reclassification, stock dividend, or split-up
thereof or other means, the number of Common Shares subject to this Warrant
immediately prior to such subdivision shall be proportionately increased and the
Warrant Price shall be proportionately decreased, and if the Company shall at
any time combine the outstanding
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<PAGE>
Common Shares by recapitalization, reclassification or combination thereof or
other means, the number of Common Shares subject to this Warrant immediately
prior to such combination shall be proportionately decreased and the Warrant
Price shall be proportionately increased. Any such adjustment and adjustment to
the Warrant Price shall become effective at the close of business on the record
date for such subdivision or combination.
(b) If the Company after the date hereof shall distribute to all of
the holders of its Common Shares any securities including, but not limited to
Common Shares, or other assets (other than a cash distribution made as a
dividend payable out of earnings or out of any earned surplus legally available
for dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Warrant Price and the type and/or number of Underlying
Securities in effect immediately prior to the record date of such distribution
as may be necessary to preserve to the Holder of this Warrant rights
substantially proportionate to and economically equivalent to those enjoyed
hereunder by such Holder immediately prior to the happening of such
distribution. Any such adjustment made reasonably and in good faith by the
Board of Directors shall be final and binding upon the Holders and shall become
effective as of the record date for such distribution.
(c) No adjustment in the number of Common Shares subject to this
Warrant or the Warrant Price shall be required under this Section 4 unless such
adjustment would require an increase or decrease in such number of shares of at
least 1% of the then adjusted number of Common Shares issuable upon exercise of
the Warrant, provided, however, that any adjustments which by reason of the
foregoing are not required at the time to be made shall be carried forward and
taken into account and included in determining the amount of any subsequent
adjustment. If the Company shall make a record of the Holders of its Common
Shares for the purpose of entitling them to receive any dividend or distribution
and legally abandon its plan to pay or deliver such dividend or distribution
then no adjustment in the number of Common Shares subject to the Warrant shall
be required by reason of the making of such record.
(d) In case of any capital reorganization or reclassification or
change of the outstanding Common Shares (exclusive of a change covered by
Section 4(a) hereof or which solely affects the par value of such Common Shares)
or in the case of any merger or consolidation of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
change, capital reorganization or change in the ownership of the outstanding
Common Shares), or in the case of any sale or conveyance or transfer of all or
substantially all of the property of the Company and in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Warrant Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property receivable upon such reclassification,
change, capital reorganization, merger or consolidation, or upon the dissolution
following any sale or other transfer, by a holder of
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<PAGE>
the number of Common Shares of the Company equal to the number of common shares
obtainable upon exercise of this Warrant immediately prior to such event; and if
any reorganization, reclassification, change, merger, consolidation, sale or
transfer also results in a change in Common Shares covered by Section 4(a), then
such adjustment shall be made pursuant to both this Section 4(d) and Section
4(a). The provisions of this Section 4(d) shall similarly apply to successive
reclassification, or capital reorganizations, mergers or consolidations,
changes, sales or other transfers.
(e) The Company shall not be required to issue fractional Common
Shares upon any exercise of this Warrant. As to any final fraction of a Common
Share which the Holder of this Warrant would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the market value of a
share of such stock on the business day preceding the day of exercise or book
value as determined by the Company's independent public accountants if not
publicly traded. The Holder of this Warrant, by his acceptance hereof,
expressly waives any right to receive any fractional shares of stock upon
exercise of this Warrant.
(f) As used herein, the current market price ("Market Price") per
share at any date shall be the price of Common Shares on the business day
immediately preceding the event requiring an adjustment hereunder and shall be
(A) if the principal trading market for such securities is an exchange or the
NASDAQ National Market, the closing price on such exchange or the NASDAQ
National Market on such day provided if trading of such Common Shares is listed
on any consolidated tape, the price shall be the closing price set forth on such
consolidated tape or (B) if the principal market for such securities is the
over-the-counter market, the high bid price on such date as set forth by the
NASDAQ Small Cap Market or the NASDAQ Electronic Bulletin Board or, if the
security is not quoted on either the NASDAQ Small Cap Market or the NASDAQ
Electronic Bulletin Board, the high bid price as set forth in the NATIONAL
QUOTATION BUREAU sheet listing such securities for such day. Notwithstanding
the foregoing, if there is no reported closing price or high bid price, as the
case may be, on a date prior to the event requiring an adjustment hereunder,
then the current market price shall be determined as of the latest date prior to
such day for which such closing price or high bid price is available.
(g) Irrespective of any adjustments pursuant to this Section 4 in the
Warrant Price or in the number, or kind, or class of shares or other securities
or other property obtainable upon exercise of this Warrant, and without
impairing any such adjustment the certificate representing this Warrant may
continue to express the Warrant Price and the number of Common Shares obtainable
upon exercise at the same price and number of Common Shares as are stated
herein.
(h) Until this Warrant is exercised, the Underlying Shares, and the
Warrant Price shall be determined exclusively pursuant to the provisions hereof.
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5. For the purposes of this Warrant, the terms "Common Shares" or "Common
Stock" shall mean (i) the class of stock designated as the common stock of the
Company on the date set forth on the first page hereof or (ii) any other class
of stock resulting from successive changes or reclassification of such Common
Stock consisting solely of changes from par value to no par value, or from no
par value to par value or changes in par value. If at any time, as a result of
an adjustment made pursuant to Section 4, the securities or other property
obtainable upon exercise of this Warrant shall include shares or other
securities of another corporation or other property, then thereafter, the
number of such other shares or other securities or property so obtainable shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 4, and all other provisions of this Warrant with respect to
Common Shares shall apply on like terms to any such other shares or other
securities or property. Subject to the foregoing, and unless the context
requires otherwise, all references herein to Common Shares shall, in the event
of an adjustment pursuant to Section 4, be deemed to refer also to any other
shares or other securities or property when obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by this
Warrant may be exercised, the Company shall, at all times, reserve and keep
available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant and at its expense will
obtain the listing thereof on all quotation systems or national securities
exchanges on which the Common Shares are then listed; and if at any time the
number of authorized Common Shares shall not be sufficient to effect the
exercise of this Warrant, the Company will take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose; the Company shall have
analogous obligations with respect to any other securities or property issuable
upon exercise of this Warrant;
(b) All Common Shares which may be issued upon exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof; and
(c) All original issue taxes payable in respect of the issuance of
Common Shares upon the exercise of the rights represented by this Warrant shall
be borne by the Company, but in no event shall the Company be responsible or
liable for income taxes or transfer taxes upon the transfer of any Warrants.
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company.
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8. No transfer of all or a portion of the Warrant or Underlying
Securities shall be made at any time unless the Company shall have been supplied
with evidence reasonably satisfactory to it that such transfer is not in
violation of the Securities Act of 1933, as amended (the "Act"). Subject to the
satisfaction of the aforesaid condition and upon surrender of this Warrant or
certificates for any Underlying Securities at the office of the Company, the
Company shall deliver a new Warrant or Warrants or new certificate or
certificates for Underlying Securities to and in the name of the assignee or
assignees named therein. Any such certificate may bear a legend reflecting the
restrictions on transfer set forth herein.
9. If this Warrant is lost, stolen, mutilated or destroyed, the Company
shall, on such terms as to indemnity or otherwise as the Company may reasonably
impose, issue a new Warrant of like denomination, tenor and date. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
10. Any Warrant issued pursuant to the provisions hereof as a replacement
Warrant, or upon transfer, exchange, division or partial exercise of this
Warrant or combination thereof with another Warrant or Warrants, shall set forth
each provision set forth in this Warrant as each such provision is set forth
herein, and shall be duly executed on behalf of the Company by its chief
executive officer.
11. Upon surrender of this Warrant for transfer or exchange or upon the
exercise hereof, this Warrant shall be canceled by the Company, and shall not be
reissued by the Company and, except as provided in Section 2 in case of a
partial exercise, Section 3 in case of an exchange or in case of mutilation.
Any new Warrant certificate shall be issued promptly but not later than fifteen
(15) days after receipt of the old Warrant certificate.
12. This Warrant shall inure to the benefit of and be binding upon the
Holder hereof, the Company and their respective successors, heirs, executors,
legal representatives and assigns.
13. All notices required hereunder shall be in writing and shall be deemed
given when telegraphed, delivered personally or within two (2) days after
delivery to a recognized air carrier, to the party to whom such notice is
intended, at the address of such other party as set forth on the first page
hereof, or at such other address of which the Company or Holder has been advised
by the notice hereunder.
14. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
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15. The Holder shall have piggy-back rights to include the Underlying
Shares in a pre-effective amendment to the Company's Registration Statement on
Form SB-2 now pending before the Securities and Exchange Commission, or in the
event the Underlying Shares cannot be registered under the pending Form SB-2,
the Holder shall have demand registration rights in accordance with the
Registration Rights Agreement entered into between the parties.
16. The validity, interpretation and performance of this Warrant and of
the terms and provisions hereof shall be governed by the laws of the State of
California applicable to agreements entered into and performed entirely in such
state.
17. This Warrant shall not be assigned by Holder without the express
written permission of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of December 31, 1998.
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
-----------------------------------------------------
Mark Beychok, Chief Executive Officer duly authorized
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PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned record holder of the within Warrant hereby irrevocably
elects to exercise the right to purchase ____________ Common Shares evidenced by
the within Warrant, according to the terms and conditions thereof, and herewith
makes payment of the purchase price in full.
The undersigned requests that certificates for such shares and warrants
shall be issued in the name set forth below:
Dated:
NAME OF HOLDER:
Signature
Print Name and Title of Signatory
Name and address to whom certificates are to be issued if different from
above
Social Security No. or other identifying number of transferee
If said number of shares and warrants shall not be all the shares
purchasable under the within Warrant, the undersigned requests that a new
Warrant for the unexercised portion shall be registered in the name of:
(Please Print Name and Address)
Social Security No. or other identifying number
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby sells, assigns and transfers to
(Social Security or I.D. No. ) the within Warrant, or that portion of this
Warrant purchasable for _______ common shares together with all rights, title
and interest therein, and does hereby irrevocably constitute and appoint
_____________________ attorney to transfer such Warrant on the register of the
within named Company, with full power of substitution.
Name of Holder
(Signature)
(Print Name and Title of Signatory)
Dated: ,
Signature Guaranteed:
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EXHIBIT 8
PROMISSORY NOTE
---------------
$300,000.00 Los Angeles, California
December 31,1998
FOR VALUE RECEIVED, the undersigned, VITAFORT INTERNATIONAL CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay to DOMINION
CAPITAL FUND, LTD. (the "Lender") the principal amount of $300,000.00, as
provided herein, together with interest at the rate hereinafter set forth,
payable on or before October 20, 1999.
Interest on the principal balance of this Note from time to time outstanding
and unpaid shall be computed on the basis of a 360-day year for the actual
number of days elapsed at a simple interest rate per annum equal to eight
percent (8%) commencing on January 20, 1999.
Principal and all accrued interest, at the rate of eight percent (8%) per
annum, shall be payable without the necessity for demand or notice on October
20, 1999. Except as otherwise permitted hereunder, all payments of principal
and interest shall be paid by wire transfer per the written instructions of
Lender. As further consideration for this loan, Borrower agrees to issue to
Lender a Warrant to purchase 30,000 shares of the Borrower's common stock, par
value $0.01 per share, exercisable at $.40 per share for a period of five (5)
years ("Warrant A"), which shares of common stock underlying the Warrant are
subject to a Registration Rights Agreement between the Borrower and Lender of
even date herewith.
Borrower will also place in escrow with Joseph B. LaRocco, Esq., pursuant to
an escrow agreement of even date herewith, a second warrant to purchase 30,000
shares of Common Stock at an exercise price of $.25 per share ("Warrant B"). On
or before October 20, 1999 re-payment of the Note may be made by Borrower at its
option, in part or in full, in cash or common stock of the Borrower, free of
restrictions, restrictive legends or stop transfer instructions. In any event,
if any part or all of this Note remains unpaid on October 20, 1999 then Borrower
may pay this Note together with interest in cash or in free trading common stock
at Borrower's sole option. If paid in common stock the Borrower shall be
permitted to deliver the required shares in up to three monthly installments
(October, November and December) based on the previous five day average closing
bid price of Borrower's common stock prior to delivery of each installment.
Borrower agrees to issue shares of free trading common stock in increments of no
more than 4.99% of Borrower's issued and outstanding common stock. As
consideration for Lender taking such payment in common stock at the five day
average and over up to a three month period, rather than cash, the exercise
price of Warrant B shall be reduced in accordance with the
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terms thereof from $.25 to $.01, which reduction shall only be made after Lender
has received the common stock as repayment. If the Borrower pays this Note in
part in common stock of the Borrower and in part in cash, then in such event the
Warrant exercise price shall be reduced proportionately. If the principal amount
of this Note, plus accrued interest, is repaid in full in cash then Warrant B
shall be canceled.
In the event Borrower is unable to pay back the Note with interest on
October 20, 1999, then in such event Terra Healthy Living shall have a right of
first refusal to buy out the balance of this Note. This right of first refusal
shall be available for Terra Healthy Living up to 5:00 p.m. EST on October 20,
1999, but this right shall expire after that date. In the event that Terra
Healthy Living timely buys this Note then Warrant B shall be transferred from
escrow and Borrower shall then immediately reduce the exercise price of Warrant
B to $.01.
Borrower hereby waives presentment, protest, notice of protest and notice
of dishonor of this Note. The non-exercise by the Lender of any rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any other subsequent instance.
Nothing contained herein shall be deemed to establish or require the
payment of a rate of interest in excess of the maximum rate permitted by
applicable law. In the event that the rate of interest required to be paid
hereunder exceeds the maximum rate permitted by such law, such rate shall
automatically be reduced to the maximum rate permitted by such law.
The Borrower and any endorsers hereof, for themselves and their respective
representatives, successors and assigns (except as specifically provided in this
Note) expressly (a) waive presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, diligence in
collection, and the benefit of any applicable exemptions, including, but not
limited to, exemptions claimed under insolvency laws, and (b) consent that the
Lender may release or surrender, exchange or substitute any property or other
collateral or security now held or which may hereafter be held as security for
the payment of this Promissory Note, or may release any guarantor, or may extend
the time for payment or otherwise modify the terms of payment of any part or the
whole of the debt evidenced hereby.
AFFIRMATIVE COVENANTS OF BORROWER. Borrower covenants and agrees that from
the date hereof until payment and performance in full of the obligations
hereunder, unless Lender otherwise consents in writing:
(a) Use of Proceeds. The proceeds disbursed under the Note shall be used
solely for general corporate purposes.
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(b) Borrower represents and warrants that there are no actions, suits,
investigations or proceedings pending or threatened against or affecting the
validity or enforceability of this Note and there are no outstanding orders or
judgments of any court or governmental authority or awards of any arbitrator or
arbitration board against the Borrower.
DEFAULT. If any of the following events occur (a "default") the entire principal
balance plus accrued interest shall be due and payable, and the Borrower shall
be liable for reasonable attorneys fees, costs and expenses:
(a) Borrower fails to pay when due any principal or interest under this
Note;
(b) Borrower fails to observe or perform any covenant or agreement set
forth in this Note;
(c) Borrower makes a general assignment for the benefit of its creditors,
files a petition in bankruptcy, for an arrangement with its creditors or for
reorganization under any federal or state bankruptcy or other insolvency law;
(d) Borrower files or becomes the subject of a petition, which is not
dismissed or stayed within 90 days, in bankruptcy or for the appointment of a
receiver, custodian, trustee or liquidator of the party or of all or
substantially all of its assets under any federal or state bankruptcy or other
insolvency law;
(e) Borrower is voluntarily or involuntarily terminated or dissolved;
(f) Borrower or any accommodation maker, endorser or guarantor enters into
any merger or consolidation, or sale, lease, liquidation or other disposition of
all or substantially all of its assets; or
(g) Any judgment is entered against Borrower or any attachment upon or
garnishment of any property of Borrower is issued in an amount in excess of
$250,000.
LITIGATION.
(a) Forum Selection and Consent to Jurisdiction. Any litigation based on
or arising out of, under, or in connection with, this Promissory Note shall be
brought and maintained exclusively in the courts of New York. The parties
hereby expressly and irrevocably submit to the jurisdiction of the state and
federal courts of New York for the purpose of any such litigation as set forth
above and irrevocably agree to be bound by any final judgment rendered thereby
in connection with such litigation. The Borrower further irrevocably consents
to the service of process by registered mail, postage prepaid, or by personal
service within or without New York. The Borrower hereby expressly and
irrevocably
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waives, to the fullest extent permitted by law, any objection which it may have
or hereafter may have to the laying of venue of any such litigation brought in
any such court referred to above and any claim that any such litigation has been
brought in any inconvenient forum. To the extent that the Borrower has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to itself or its
property, the Borrower hereby irrevocably waives such immunity in respect of its
obligations under this agreement and the other loan documents.
(b) Waiver of Jury Trial. The Lender and the Borrower hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Lender or the Borrower.
The Borrower acknowledges and agrees that it has received full and sufficient
consideration for this provision and that this provision is a material
inducement for the Lender entering into this agreement.
MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
(b) Neither this Promissory Note nor any provision hereof shall be waived,
modified, changed, discharged, terminated, revoked or canceled, except by an
instrument in writing signed by the party effecting the same against whom any
change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by registered mail, return receipt requested, addressed: (i) if to the
Borrower, Mark Beychok, CEO at Vitafort International Corporation, 1800 Avenue
of the Stars, Suite 480, Los Angeles, CA 90067 and (ii) if to Lender C/O Joseph
B. LaRocco, Esq. 49 Locust Avenue, Suite 107, New Canaan, CT 06840.
(d) This Promissory Note shall be enforced, governed and construed in all
respects in accordance with the laws of Delaware, as such laws are applied by
Delaware courts to agreements entered into, and to be performed in, Delaware by
and between residents of Delaware, and shall be binding upon the Borrower, the
Borrower 's successors and assigns and shall inure to the benefit of the Lender,
its successors and assigns. If any provision of this Promissory Note is invalid
or unenforceable under any applicable statue or rule of law, then such
provisions shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
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law. Any provision hereof that may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
(e) This Note shall not be assigned by the Lender without the express
written permission of the Borrower.
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTIONS IN CONNECTION WITH WHICH
THIS NOTE WAS EXECUTED AND DELIVERED AND WHICH ARE CONTEMPLATED BY THE TERMS OF
THE AGREEMENT ARE, IN ALL CASES, COMMERCIAL TRANSACTIONS; AND THE BORROWER
HEREBY EXPRESSLY WAIVES ANY AND ALL CONSTITUTIONAL RIGHTS IT MAY HAVE AS NOW
CONSTITUTED OR HEREAFTER AMENDED, WITH REGARD TO NOTICE, ANY JUDICIAL PROCESS
AND ANY AND ALL OTHER RIGHTS IT MAY HAVE, AND THE LENDER MAY INVOKE ANY
PREJUDGMENT REMEDY AVAILABLE TO IT OR ITS SUCCESSORS OR ASSIGNS.
VITAFORT INTERNATIONAL CORPORATION
By /s/ Mark Beychok
--------------------------------
Mark Beychok its CEO
duly authorized
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EXHIBIT 9
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER
THIS WARRANT, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED
IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
VITAFORT INTERNATIONAL CORPORATION
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated: as of December 31, 1998
This certifies that, for value received
NAME: DOMINION CAPITAL FUND, LTD.
ADDRESS: Attention: Nina Ray
c/o Citco Fund Services (Bahamas) Ltd.,
Bahamas Financial Centre
Charlotte and Shirley Streets
P.O. Box CB 13136
Nassau, Commonwealth of the Bahamas
or registered assigns (the "Holder") are entitled, subject to the terms set
forth herein, to purchase from Vitafort International Corporation (the
"Company"), a Delaware corporation, having its offices at 1800 Avenue of the
Stars, Los Angeles, California 94941, Thirty Thousand (30,000) shares of the
Company's common stock subject to adjustment as set forth herein.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to the
Company's common stock including Underlying Securities, as more fully set forth
in Section 5 hereof.
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(b) "Warrant Price" or "Common Share Price" shall be Forty Cents
($.40).
(c) "Underlying Securities" or "Underlying Shares" or "Underlying
Stock" shall refer to the Common Shares or other securities or property issuable
or issued upon exercise of the Warrant.
2. (a) The purchase rights represented by this Warrant may be exercised
by the Holder hereof, in whole or in part (but not as to less than a whole
Common Share), at any time, and from time to time, during the period commencing
on the date of issuance hereof until December 31, 2003 (the "Expiration Date"),
by the presentation of this Warrant, with the purchase form attached duly
executed, at the Company's office (or such office or agency of the Company as it
may designate in writing to the Holder hereof by notice pursuant to the terms
hereof), specifying the number of Common Shares as to which the Warrant is being
exercised, and upon payment by the Holder to the Company in cash or by certified
check or bank draft, in an amount equal to the Warrant Price times the number of
Common Shares then being purchased hereunder.
(b) The Company agrees that the Holder hereof shall be deemed the
record owner of such Underlying Securities as of the close of business on the
date on which this Warrant shall have been presented and payment made for such
Underlying Securities as aforesaid. Certificates for the Underlying Securities
so obtained shall be delivered to the Holder hereof within a reasonable time,
not exceeding seven (7) days, after the rights represented by this Warrant shall
have been so exercised. If this Warrant shall be exercised in part only or
transferred in part subject to the provisions herein, the Company shall, upon
surrender of this Warrant for cancellation or partial transfer, deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance of
the Underlying Shares which such Holder is entitled to purchase hereunder.
(c) Conversion. At any time after the expiration of the Registration
Period as defined in the Registration Rights Agreement dated as of December 31,
1998 between the Holder and the Company and provided that the shares of Warrant
Stock issuable upon the exercise of this Warrant are not then otherwise subject
to an effective registration statement under the Securities At of 1933, as
amended, the Holder may convert this Warrant (the "Conversion Right"), in whole
or in part, into the number of Warrant Shares (less the number of Warrant Shares
as to which this Warrant has previously been exercised or as to which the
Conversion Right has previously been exercised) calculated pursuant to the
following formula by surrendering this Warrant (with the notice of exercise form
attached hereto duly executed) at the principal office of the Company specifying
the number of Warrant Shares into which the Holder desires to convert this
Warrant:
Y (A-B)
X = A
where: X = the number of shares of Warrant Stock to be
issued to the Holder;
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Y = the number of shares of Warrant Stock subject to this
Warrant for which the Conversion Right is being
exercised;
A = the Market Price of the Warrant Stock (as defined
below), determined as of the trading day immediately
preceding the date of exercise of the Conversion Right;
and
B = the Warrant Price.
For purposes hereof, the term "Market Price of the Warrant Stock"
means the average of the closing sales prices of the Warrant Stock on all
securities exchanges on which the Warrant may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Warrant Stock is not so listed, the average of the
representative bid and asked prices quoted in The Nasdaq Stock Market, Inc. as
of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in
The Nasdaq Stock Market, Inc., the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Market Price of the Warrant Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Warrant Stock is
not listed on any securities exchange , the Market Price of the Warrant Stock
shall be determined by agreement between the Company and the Holder.
3. Subject to the provisions of the various restrictions contained or
incorporated herein, (i) this Warrant is exchangeable at the option of the
Holder at the aforesaid office of the Company for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of Common Shares as are purchasable hereunder; and (ii) this Warrant may
be divided or combined with other Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Warrants are to be issued, and the payment
of any transfer tax due in connection therewith.
4. Subject and pursuant to the provisions of this Section 4, the Warrant
Price and number of Common Shares subject to this Warrant shall be subject to
adjustment from time to time as set forth hereinafter in this Section 4.
(a) If the Company shall at any time subdivide its outstanding Common
Shares by recapitalization, reclassification, stock dividend, or split-up
thereof or other means, the number of Common Shares subject to this Warrant
immediately prior to such subdivision shall be proportionately increased and the
Warrant Price shall be
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proportionately decreased, and if the Company shall at any time combine the
outstanding Common Shares by recapitalization, reclassification or combination
thereof or other means, the number of Common Shares subject to this Warrant
immediately prior to such combination shall be proportionately decreased and the
Warrant Price shall be proportionately increased. Any such adjustment and
adjustment to the Warrant Price shall become effective at the close of business
on the record date for such subdivision or combination.
(b) If the Company after the date hereof shall distribute to all of
the holders of its Common Shares any securities including, but not limited to
Common Shares, or other assets (other than a cash distribution made as a
dividend payable out of earnings or out of any earned surplus legally available
for dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Warrant Price and the type and/or number of Underlying
Securities in effect immediately prior to the record date of such distribution
as may be necessary to preserve to the Holder of this Warrant rights
substantially proportionate to and economically equivalent to those enjoyed
hereunder by such Holder immediately prior to the happening of such
distribution. Any such adjustment made reasonably and in good faith by the
Board of Directors shall be final and binding upon the Holders and shall become
effective as of the record date for such distribution.
(c) No adjustment in the number of Common Shares subject to this
Warrant or the Warrant Price shall be required under this Section 4 unless such
adjustment would require an increase or decrease in such number of shares of at
least 1% of the then adjusted number of Common Shares issuable upon exercise of
the Warrant, provided, however, that any adjustments which by reason of the
foregoing are not required at the time to be made shall be carried forward and
taken into account and included in determining the amount of any subsequent
adjustment. If the Company shall make a record of the Holders of its Common
Shares for the purpose of entitling them to receive any dividend or distribution
and legally abandon its plan to pay or deliver such dividend or distribution
then no adjustment in the number of Common Shares subject to the Warrant shall
be required by reason of the making of such record.
(d) In case of any capital reorganization or reclassification or
change of the outstanding Common Shares (exclusive of a change covered by
Section 4(a) hereof or which solely affects the par value of such Common Shares)
or in the case of any merger or consolidation of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
change, capital reorganization or change in the ownership of the outstanding
Common Shares), or in the case of any sale or conveyance or transfer of all or
substantially all of the property of the Company and in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Warrant Price payable
hereunder immediately prior to such event, the kind and amount of shares of
stock or other securities or property receivable upon such reclassification,
change, capital reorganization, merger or
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<PAGE>
consolidation, or upon the dissolution following any sale or other transfer, by
a holder of the number of Common Shares of the Company equal to the number of
common shares obtainable upon exercise of this Warrant immediately prior to such
event; and if any reorganization, reclassification, change, merger,
consolidation, sale or transfer also results in a change in Common Shares
covered by Section 4(a), then such adjustment shall be made pursuant to both
this Section 4(d) and Section 4(a). The provisions of this Section 4(d) shall
similarly apply to successive reclassification, or capital reorganizations,
mergers or consolidations, changes, sales or other transfers.
(e) The Company shall not be required to issue fractional Common
Shares upon any exercise of this Warrant. As to any final fraction of a Common
Share which the Holder of this Warrant would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the market value of a
share of such stock on the business day preceding the day of exercise or book
value as determined by the Company's independent public accountants if not
publicly traded. The Holder of this Warrant, by his acceptance hereof,
expressly waives any right to receive any fractional shares of stock upon
exercise of this Warrant.
(f) As used herein, the current market price ("Market Price") per
share at any date shall be the price of Common Shares on the business day
immediately preceding the event requiring an adjustment hereunder and shall be
(A) if the principal trading market for such securities is an exchange or the
NASDAQ National Market, the closing price on such exchange or the NASDAQ
National Market on such day provided if trading of such Common Shares is listed
on any consolidated tape, the price shall be the closing price set forth on such
consolidated tape or (B) if the principal market for such securities is the
over-the-counter market, the high bid price on such date as set forth by the
NASDAQ Small Cap Market or the NASDAQ Electronic Bulletin Board or, if the
security is not quoted on either the NASDAQ Small Cap Market or the NASDAQ
Electronic Bulletin Board, the high bid price as set forth in the NATIONAL
QUOTATION BUREAU sheet listing such securities for such day. Notwithstanding
the foregoing, if there is no reported closing price or high bid price, as the
case may be, on a date prior to the event requiring an adjustment hereunder,
then the current market price shall be determined as of the latest date prior to
such day for which such closing price or high bid price is available.
(g) Irrespective of any adjustments pursuant to this Section 4 in the
Warrant Price or in the number, or kind, or class of shares or other securities
or other property obtainable upon exercise of this Warrant, and without
impairing any such adjustment the certificate representing this Warrant may
continue to express the Warrant Price and the number of Common Shares obtainable
upon exercise at the same price and number of Common Shares as are stated
herein.
(h) Until this Warrant is exercised, the Underlying Shares, and the
Warrant Price shall be determined exclusively pursuant to the provisions hereof.
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<PAGE>
5. For the purposes of this Warrant, the terms "Common Shares" or "Common
Stock" shall mean (i) the class of stock designated as the common stock of the
Company on the date set forth on the first page hereof or (ii) any other class
of stock resulting from successive changes or reclassification of such Common
Stock consisting solely of changes from par value to no par value, or from no
par value to par value or changes in par value. If at any time, as a result of
an adjustment made pursuant to Section 4, the securities or other property
obtainable upon exercise of this Warrant shall include shares or other
securities of another corporation or other property, then thereafter, the
number of such other shares or other securities or property so obtainable shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 4, and all other provisions of this Warrant with respect to
Common Shares shall apply on like terms to any such other shares or other
securities or property. Subject to the foregoing, and unless the context
requires otherwise, all references herein to Common Shares shall, in the event
of an adjustment pursuant to Section 4, be deemed to refer also to any other
shares or other securities or property when obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by this
Warrant may be exercised, the Company shall, at all times, reserve and keep
available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant and at its expense will
obtain the listing thereof on all quotation systems or national securities
exchanges on which the Common Shares are then listed; and if at any time the
number of authorized Common Shares shall not be sufficient to effect the
exercise of this Warrant, the Company will take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose; the Company shall have
analogous obligations with respect to any other securities or property issuable
upon exercise of this Warrant;
(b) All Common Shares which may be issued upon exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof; and
(c) All original issue taxes payable in respect of the issuance of
Common Shares upon the exercise of the rights represented by this Warrant shall
be borne by the Company, but in no event shall the Company be responsible or
liable for income taxes or transfer taxes upon the transfer of any Warrants.
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company.
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<PAGE>
8. No transfer of all or a portion of the Warrant or Underlying
Securities shall be made at any time unless the Company shall have been supplied
with evidence reasonably satisfactory to it that such transfer is not in
violation of the Securities Act of 1933, as amended (the "Act"). Subject to the
satisfaction of the aforesaid condition and upon surrender of this Warrant or
certificates for any Underlying Securities at the office of the Company, the
Company shall deliver a new Warrant or Warrants or new certificate or
certificates for Underlying Securities to and in the name of the assignee or
assignees named therein. Any such certificate may bear a legend reflecting the
restrictions on transfer set forth herein.
9. If this Warrant is lost, stolen, mutilated or destroyed, the Company
shall, on such terms as to indemnity or otherwise as the Company may reasonably
impose, issue a new Warrant of like denomination, tenor and date. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
10. Any Warrant issued pursuant to the provisions hereof as a replacement
Warrant, or upon transfer, exchange, division or partial exercise of this
Warrant or combination thereof with another Warrant or Warrants, shall set forth
each provision set forth in this Warrant as each such provision is set forth
herein, and shall be duly executed on behalf of the Company by its chief
executive officer.
11. Upon surrender of this Warrant for transfer or exchange or upon the
exercise hereof, this Warrant shall be canceled by the Company, and shall not be
reissued by the Company and, except as provided in Section 2 in case of a
partial exercise, Section 3 in case of an exchange or in case of mutilation.
Any new Warrant certificate shall be issued promptly but not later than fifteen
(15) days after receipt of the old Warrant certificate.
12. This Warrant shall inure to the benefit of and be binding upon the
Holder hereof, the Company and their respective successors, heirs, executors,
legal representatives and assigns.
13. All notices required hereunder shall be in writing and shall be deemed
given when telegraphed, delivered personally or within two (2) days after
delivery to a recognized air carrier, to the party to whom such notice is
intended, at the address of such other party as set forth on the first page
hereof, or at such other address of which the Company or Holder has been advised
by the notice hereunder.
14. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holders shall be
enforceable to the fullest extent permitted by law.
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<PAGE>
15. The Holder shall have piggy-back rights to include the Underlying
Shares in a pre-effective amendment to the Company's Registration Statement on
Form SB-2 now pending before the Securities and Exchange Commission, or in the
event the Underlying Shares cannot be registered under the pending Form SB-2,
the Holder shall have demand registration rights in accordance with the
Registration Rights Agreement entered into between the parties.
16. The validity, interpretation and performance of this Warrant and of
the terms and provisions hereof shall be governed by the laws of the State of
California applicable to agreements entered into and performed entirely in such
state.
17. This Warrant shall not be assigned by Holder without the express
written permission of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of December 31, 1998.
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
-----------------------------------------------------
Mark Beychok, Chief Executive Officer duly authorized
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<PAGE>
PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned record holder of the within Warrant hereby irrevocably
elects to exercise the right to purchase ____________ Common Shares evidenced by
the within Warrant, according to the terms and conditions thereof, and herewith
makes payment of the purchase price in full.
The undersigned requests that certificates for such shares and warrants
shall be issued in the name set forth below:
Dated:
NAME OF HOLDER:
Signature
Print Name and Title of Signatory
Name and address to whom certificates are to be issued if different from
above
Social Security No. or other identifying number of transferee
If said number of shares and warrants shall not be all the shares
purchasable under the within Warrant, the undersigned requests that a new
Warrant for the unexercised portion shall be registered in the name of:
(Please Print Name and Address)
Social Security No. or other identifying number
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<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby sells, assigns and transfers to
(Social Security or I.D. No. ) the within Warrant, or that portion of
this Warrant purchasable for _______ common shares together with all rights,
title and interest therein, and does hereby irrevocably constitute and appoint
_____________________ attorney to transfer such Warrant on the register of the
within named Company, with full power of substitution.
Name of Holder
(Signature)
(Print Name and Title of Signatory)
Dated: ,
Signature Guaranteed:
10
<PAGE>
EXHIBIT 10
THIS WARRANT AND THE UNDERLYING COMMON STOCK HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NEITHER
THIS WARRANT, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED
IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
VITAFORT INTERNATIONAL CORPORATION
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
AS HEREIN DESCRIBED
Dated: as of December 31, 1998
This certifies that, for value received
NAME:
ADDRESS:
or registered assigns (the "Holder") are entitled, subject to the terms set
forth herein, to purchase from Vitafort International Corporation (the
"Company"), a Delaware corporation, having its offices at 1800 Avenue of the
Stars, Los Angeles, California 94941, Thirty Thousand (30,000) shares of the
Company's common stock subject to adjustment as set forth herein.
1. As used herein:
(a) "Common Stock" or "Common Shares" shall initially refer to the
Company's common stock including Underlying Securities, as more fully set forth
in Section 5 hereof.
(b) "Warrant Price" or "Common Share Price" shall be Twenty-five
Cents ($.25), however, in the event that the $300,000 Promissory Note, Dated
January __, 1999,
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<PAGE>
issued in favor of Dominion Capital Fund, Ltd. is paid by the Company, in whole
or in part, in its Common Stock, then in such event the Warrant Price or Common
Share Price shall automatically be reduced to $.01, on a proportionate basis.
(c) "Underlying Securities" or "Underlying Shares" or "Underlying
Stock" shall refer to the Common Shares or other securities or property issuable
or issued upon exercise of the Warrant.
2. (a) The purchase rights represented by this Warrant may be exercised
by the Holder hereof, in whole or in part (but not as to less than a whole
Common Share), at any time, and from time to time, during the period commencing
on October 20, 1999 until December 31, 2003 (the "Expiration Date"), by the
presentation of this Warrant, with the purchase form attached duly executed, at
the Company's office (or such office or agency of the Company as it may
designate in writing to the Holder hereof by notice pursuant to the terms
hereof), specifying the number of Common Shares as to which the Warrant is being
exercised, and upon payment by the Holder to the Company in cash or by certified
check or bank draft, in an amount equal to the Warrant Price times the number of
Common Shares then being purchased hereunder.
(b) The Company agrees that the Holder hereof shall be deemed the
record owner of such Underlying Securities as of the close of business on the
date on which this Warrant shall have been presented and payment made for such
Underlying Securities as aforesaid. Certificates for the Underlying Securities
so obtained shall be delivered to the Holder hereof within a reasonable time,
not exceeding seven (7) days, after the rights represented by this Warrant shall
have been so exercised. If this Warrant shall be exercised in part only or
transferred in part subject to the provisions herein, the Company shall, upon
surrender of this Warrant for cancellation or partial transfer, deliver a new
Warrant evidencing the rights of the Holder hereof to purchase the balance of
the Underlying Shares which such Holder is entitled to purchase hereunder.
(c) Conversion. At any time after the expiration of the Registration
Period as defined in the Registration Rights Agreement dated as of December 31,
1998 between the Holder and the Company and provided that the shares of Warrant
Stock issuable upon the exercise of this Warrant are not then otherwise subject
to an effective registration statement under the Securities At of 1933, as
amended, the Holder may convert this Warrant (the "Conversion Right"), in whole
or in part, into the number of Warrant Shares (less the number of Warrant Shares
as to which this Warrant has previously been exercised or as to which the
Conversion Right has previously been exercised) calculated pursuant to the
following formula by surrendering this Warrant (with the notice of exercise form
attached hereto duly executed) at the principal office of the Company specifying
the number of Warrant Shares into which the Holder desires to convert this
Warrant:
Y (A-B)
X = A
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<PAGE>
where: X = the number of shares of Warrant Stock to be
issued to the Holder;
Y = the number of shares of Warrant Stock subject to this
Warrant for which the Conversion Right is being
exercised;
A = the Market Price of the Warrant Stock (as defined
below), determined as of the trading day immediately
preceding the date of exercise of the Conversion Right;
and
B = the Warrant Price.
For purposes hereof, the term "Market Price of the Warrant Stock"
means the average of the closing sales prices of the Warrant Stock on all
securities exchanges on which the Warrant may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Warrant Stock is not so listed, the average of the
representative bid and asked prices quoted in The Nasdaq Stock Market, Inc. as
of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in
The Nasdaq Stock Market, Inc., the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar successor organization,
in each such case averaged over a period of 21 days consisting of the day as of
which the Market Price of the Warrant Stock is being determined and the 20
consecutive business days prior to such day. If at any time the Warrant Stock is
not listed on any securities exchange , the Market Price of the Warrant Stock
shall be determined by agreement between the Company and the Holder.
3. Subject to the provisions of the various restrictions contained or
incorporated herein, (i) this Warrant is exchangeable at the option of the
Holder at the aforesaid office of the Company for other Warrants of different
denominations entitling the Holder thereof to purchase in the aggregate the same
number of Common Shares as are purchasable hereunder; and (ii) this Warrant may
be divided or combined with other Warrants which carry the same rights, in
either case, upon presentation hereof at the aforesaid office of the Company
together with a written notice, signed by the Holder hereof, specifying the
names and denominations in which new Warrants are to be issued, and the payment
of any transfer tax due in connection therewith.
4. Subject and pursuant to the provisions of this Section 4, the Warrant
Price and number of Common Shares subject to this Warrant shall be subject to
adjustment from time to time as set forth hereinafter in this Section 4.
(a) If the Company shall at any time subdivide its outstanding Common
Shares by recapitalization, reclassification, stock dividend, or split-up
thereof or other
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<PAGE>
means, the number of Common Shares subject to this Warrant immediately prior to
such subdivision shall be proportionately increased and the Warrant Price shall
be proportionately decreased, and if the Company shall at any time combine the
outstanding Common Shares by recapitalization, reclassification or combination
thereof or other means, the number of Common Shares subject to this Warrant
immediately prior to such combination shall be proportionately decreased and the
Warrant Price shall be proportionately increased. Any such adjustment and
adjustment to the Warrant Price shall become effective at the close of business
on the record date for such subdivision or combination.
(b) If the Company after the date hereof shall distribute to all of
the holders of its Common Shares any securities including, but not limited to
Common Shares, or other assets (other than a cash distribution made as a
dividend payable out of earnings or out of any earned surplus legally available
for dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Warrant Price and the type and/or number of Underlying
Securities in effect immediately prior to the record date of such distribution
as may be necessary to preserve to the Holder of this Warrant rights
substantially proportionate to and economically equivalent to those enjoyed
hereunder by such Holder immediately prior to the happening of such
distribution. Any such adjustment made reasonably and in good faith by the
Board of Directors shall be final and binding upon the Holders and shall become
effective as of the record date for such distribution.
(c) No adjustment in the number of Common Shares subject to this
Warrant or the Warrant Price shall be required under this Section 4 unless such
adjustment would require an increase or decrease in such number of shares of at
least 1% of the then adjusted number of Common Shares issuable upon exercise of
the Warrant, provided, however, that any adjustments which by reason of the
foregoing are not required at the time to be made shall be carried forward and
taken into account and included in determining the amount of any subsequent
adjustment. If the Company shall make a record of the Holders of its Common
Shares for the purpose of entitling them to receive any dividend or distribution
and legally abandon its plan to pay or deliver such dividend or distribution
then no adjustment in the number of Common Shares subject to the Warrant shall
be required by reason of the making of such record.
(d) In case of any capital reorganization or reclassification or
change of the outstanding Common Shares (exclusive of a change covered by
Section 4(a) hereof or which solely affects the par value of such Common Shares)
or in the case of any merger or consolidation of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
change, capital reorganization or change in the ownership of the outstanding
Common Shares), or in the case of any sale or conveyance or transfer of all or
substantially all of the property of the Company and in connection with which
the Company is dissolved, the Holder of this Warrant shall have the right
thereafter (until the expiration of the right of exercise of this Warrant) to
receive upon the exercise hereof, for the same aggregate Warrant Price payable
hereunder immediately
4
<PAGE>
prior to such event, the kind and amount of shares of stock or other securities
or property receivable upon such reclassification, change, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, by a holder of the number of Common Shares of the
Company equal to the number of common shares obtainable upon exercise of this
Warrant immediately prior to such event; and if any reorganization,
reclassification, change, merger, consolidation, sale or transfer also results
in a change in Common Shares covered by Section 4(a), then such adjustment shall
be made pursuant to both this Section 4(d) and Section 4(a). The provisions of
this Section 4(d) shall similarly apply to successive reclassification, or
capital reorganizations, mergers or consolidations, changes, sales or other
transfers.
(e) The Company shall not be required to issue fractional Common
Shares upon any exercise of this Warrant. As to any final fraction of a Common
Share which the Holder of this Warrant would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the market value of a
share of such stock on the business day preceding the day of exercise or book
value as determined by the Company's independent public accountants if not
publicly traded. The Holder of this Warrant, by his acceptance hereof,
expressly waives any right to receive any fractional shares of stock upon
exercise of this Warrant.
(f) As used herein, the current market price ("Market Price") per
share at any date shall be the price of Common Shares on the business day
immediately preceding the event requiring an adjustment hereunder and shall be
(A) if the principal trading market for such securities is an exchange or the
NASDAQ National Market, the closing price on such exchange or the NASDAQ
National Market on such day provided if trading of such Common Shares is listed
on any consolidated tape, the price shall be the closing price set forth on such
consolidated tape or (B) if the principal market for such securities is the
over-the-counter market, the high bid price on such date as set forth by the
NASDAQ Small Cap Market or the NASDAQ Electronic Bulletin Board or, if the
security is not quoted on either the NASDAQ Small Cap Market or the NASDAQ
Electronic Bulletin Board, the high bid price as set forth in the NATIONAL
QUOTATION BUREAU sheet listing such securities for such day. Notwithstanding
the foregoing, if there is no reported closing price or high bid price, as the
case may be, on a date prior to the event requiring an adjustment hereunder,
then the current market price shall be determined as of the latest date prior to
such day for which such closing price or high bid price is available.
(g) Irrespective of any adjustments pursuant to this Section 4 in the
Warrant Price or in the number, or kind, or class of shares or other securities
or other property obtainable upon exercise of this Warrant, and without
impairing any such adjustment the certificate representing this Warrant may
continue to express the Warrant Price and the number of Common Shares obtainable
upon exercise at the same price and number of Common Shares as are stated
herein.
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<PAGE>
(h) Until this Warrant is exercised, the Underlying Shares, and the
Warrant Price shall be determined exclusively pursuant to the provisions hereof.
5. For the purposes of this Warrant, the terms "Common Shares" or "Common
Stock" shall mean (i) the class of stock designated as the common stock of the
Company on the date set forth on the first page hereof or (ii) any other class
of stock resulting from successive changes or reclassification of such Common
Stock consisting solely of changes from par value to no par value, or from no
par value to par value or changes in par value. If at any time, as a result of
an adjustment made pursuant to Section 4, the securities or other property
obtainable upon exercise of this Warrant shall include shares or other
securities of another corporation or other property, then thereafter, the
number of such other shares or other securities or property so obtainable shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 4, and all other provisions of this Warrant with respect to
Common Shares shall apply on like terms to any such other shares or other
securities or property. Subject to the foregoing, and unless the context
requires otherwise, all references herein to Common Shares shall, in the event
of an adjustment pursuant to Section 4, be deemed to refer also to any other
shares or other securities or property when obtainable as a result of such
adjustments.
6. The Company covenants and agrees that:
(a) During the period within which the rights represented by this
Warrant may be exercised, the Company shall, at all times, reserve and keep
available out of its authorized capital stock, solely for the purposes of
issuance upon exercise of this Warrant, such number of its Common Shares as
shall be issuable upon the exercise of this Warrant and at its expense will
obtain the listing thereof on all quotation systems or national securities
exchanges on which the Common Shares are then listed; and if at any time the
number of authorized Common Shares shall not be sufficient to effect the
exercise of this Warrant, the Company will take such corporate action as may be
necessary to increase its authorized but unissued Common Shares to such number
of shares as shall be sufficient for such purpose; the Company shall have
analogous obligations with respect to any other securities or property issuable
upon exercise of this Warrant;
(b) All Common Shares which may be issued upon exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof; and
(c) All original issue taxes payable in respect of the issuance of
Common Shares upon the exercise of the rights represented by this Warrant shall
be borne by the Company, but in no event shall the Company be responsible or
liable for income taxes or transfer taxes upon the transfer of any Warrants.
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<PAGE>
7. Until exercised, this Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a shareholder of the Company.
8. No transfer of all or a portion of the Warrant or Underlying
Securities shall be made at any time unless the Company shall have been supplied
with evidence reasonably satisfactory to it that such transfer is not in
violation of the Securities Act of 1933, as amended (the "Act"). Subject to the
satisfaction of the aforesaid condition and upon surrender of this Warrant or
certificates for any Underlying Securities at the office of the Company, the
Company shall deliver a new Warrant or Warrants or new certificate or
certificates for Underlying Securities to and in the name of the assignee or
assignees named therein. Any such certificate may bear a legend reflecting the
restrictions on transfer set forth herein.
9. If this Warrant is lost, stolen, mutilated or destroyed, the Company
shall, on such terms as to indemnity or otherwise as the Company may reasonably
impose, issue a new Warrant of like denomination, tenor and date. Any such new
Warrant shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.
10. Any Warrant issued pursuant to the provisions hereof as a replacement
Warrant, or upon transfer, exchange, division or partial exercise of this
Warrant or combination thereof with another Warrant or Warrants, shall set forth
each provision set forth in this Warrant as each such provision is set forth
herein, and shall be duly executed on behalf of the Company by its chief
executive officer.
11. Upon surrender of this Warrant for transfer or exchange or upon the
exercise hereof, this Warrant shall be canceled by the Company, and shall not be
reissued by the Company and, except as provided in Section 2 in case of a
partial exercise, Section 3 in case of an exchange or in case of mutilation.
Any new Warrant certificate shall be issued promptly but not later than fifteen
(15) days after receipt of the old Warrant certificate.
12. This Warrant shall inure to the benefit of and be binding upon the
Holder hereof, the Company and their respective successors, heirs, executors,
legal representatives and assigns.
13. All notices required hereunder shall be in writing and shall be deemed
given when telegraphed, delivered personally or within two (2) days after
delivery to a recognized air carrier, to the party to whom such notice is
intended, at the address of such other party as set forth on the first page
hereof, or at such other address of which the Company or Holder has been advised
by the notice hereunder.
14. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be in any
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<PAGE>
way impaired thereby, it being intended that all of the rights and privileges of
the Holders shall be enforceable to the fullest extent permitted by law.
15. The validity, interpretation and performance of this Warrant and of
the terms and provisions hereof shall be governed by the laws of the State of
California applicable to agreements entered into and performed entirely in such
state.
16. This Warrant shall not be assigned by Holder unless it is assigned
to Terra Healthy Living pursuant to the purchase by Terra Healthy Living of a
Promissory Note dated December 31, 1998 issued to Holder by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of December 31, 1998.
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
--------------------------------------------------------
Mark Beychok, Chief Executive Officer duly authorized
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PURCHASE FORM
To Be Executed
Upon Exercise of Warrant
The undersigned record holder of the within Warrant hereby irrevocably
elects to exercise the right to purchase ____________ Common Shares evidenced by
the within Warrant, according to the terms and conditions thereof, and herewith
makes payment of the purchase price in full.
The undersigned requests that certificates for such shares and warrants
shall be issued in the name set forth below:
Dated:
NAME OF HOLDER:
Signature
Print Name and Title of Signatory
Name and address to whom certificates are to be issued if different from
above
Social Security No. or other identifying number of transferee
If said number of shares and warrants shall not be all the shares
purchasable under the within Warrant, the undersigned requests that a new
Warrant for the unexercised portion shall be registered in the name of:
(Please Print Name and Address)
Social Security No. or other identifying number
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED , hereby sells, assigns and transfers to
(Social Security or I.D. No. ) the within Warrant, or that
portion of this Warrant purchasable for _______ common shares together with all
rights, title and interest therein, and does hereby irrevocably constitute and
appoint _____________________ attorney to transfer such Warrant on the register
of the within named Company, with full power of substitution.
Name of Holder
(Signature)
(Print Name and Title of Signatory)
Dated: ,
Signature Guaranteed:
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EXHIBIT 11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 31, 1998 ("this
Agreement"), is made by and between VITAFORT INTERNATIONAL CORPORATION, a
Delaware corporation (the "Company"), and the persons or entities named on the
signature page hereto (the "Initial Investors").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of certain Warrants,
dated as of December 31, 1998, issued to the Initial Investors by the Company
(the "Warrants"), the Company has agreed to issue and sell to the Initial
Investors shares of the Company's Common Stock upon the terms and conditions set
forth in said Warrants;
WHEREAS, the the Company desires to borrow from the Initial Investors
$600,000 US, upon certain terms and conditions; and
WHEREAS, to induce the Initial Investor to loan the $600,000 US to the
Company, the Company has agreed to has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Common Stock issuable upon exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agrees as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meaning:
(i) "Closing Date" means December 31, 1998
(ii) "Investors" mean the Initial Investors;
(iii) "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
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be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.
(iv) "Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(v) "Registrable Securities" means the Common Stock issuable upon exercise
of the Warrants.
(vi) "Registration Statement" means a registration statement or an amended
registration statement of the Company under the Securities Act.
(vii) As used in this Agreement, the term Investor includes (i) each
Initial Investor and (ii) each person who is a permitted transferee or assignee
of the Registrable Securities pursuant to the terms of the Warrants and Section
9 of this Agreement.
2. Registration. The Company shall either have the Registrable Securities
registered under (I) the Company's currently pending Form SB-2 Registration
Statement or (ii) under a separate Registration Statement to be filed by the
Company's counsel at the Company's sole cost and expense. In either event, an
amendment to the Form SB-2 Registration Statement or a new Registration
Statement shall be filed by the Company's counsel on or before the date required
under Section 2 of the Registration Rights Agreement dated as of this date
between the Company and Terra Healthy Living. In the event the Registration
Statement is not filed on or before the foregoing date or the Company fails to
use its reasonable best efforts to have the Registration Statement declared
effective as promptly as feasible, then in such event the Company shall pay the
Investor $100 per day until the Registration Statement is filed. The Investor
is also granted additional Piggy-back registration rights, subject to the rights
of other holders of the Company's securities entitled to registration rights, on
any other Registration Statement (other than Form S-8, Form S-4 and any similar
or successor forms) filings made by the Company. If at any time the number of
shares of Common Stock into which the Warrant(s) may be converted exceeds the
aggregate number of shares of Common Stock then registered, the Company shall,
within ten (10) business days after receipt of written notice from any Investor,
either (i) amend the Registration Statement filed by the Company pursuant to the
preceding sentence, if such Registration Statement has not been declared
effective by the SEC at that time, to register all shares of Common Stock into
which the Warrant(s) may be converted, or (ii) if such Registration Statement
has been declared effective by the SEC at that time,
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file with the SEC an additional Registration Statement on Form SB-
2 to register the shares of Common Stock into which the Warrants may be
converted that exceed the aggregate number of shares of Common Stock already
registered. The above damages shall continue until the obligation is fulfilled
and shall be paid within 5 business days after each 30 day period, or portion
thereof, until the Registration Statement is filed. Failure of the Company to
make payment within said 5 business days shall be considered a default.
The Company acknowledges that its failure to file with the SEC, said
amendment to the Form SB-2 Registration Statement of a new Registration
Statement no later than February 15, 1999, will cause the Initial Investor to
suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a
provision for liquidated damages. The parties acknowledge and agree that the
liquidated damages provision set forth in this section represents the parties'
good faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to register the Common Stock and deliver the Common Stock
pursuant to the terms of this Agreement and the Warrant.
3. Obligation of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
(a) Prepare promptly, and file with the SEC in accordance with Section 2 of
this Agreement, an amendment to the currently pending Form SB-2 Registration
Statement or a new Registration Statement, and thereafter use its reasonable
best efforts to cause each Registration Statement relating to Registrable
Securities to become effective five business days after notice from the SEC that
the Registration Statement may be declared effective and keep the Registration
Statement effective at all times until the earlier of the date after Investor
has exercised all its Warrants and received free-trading unlegended common stock
or the date nine months after the date the Registration Statement is initially
declared effective by the SEC (the "Registration Period"). The amended or new
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration effective at all times during the Registration Period, and,
during the Registration Period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the
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Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable best efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions:
provided, however, that the Company shall not be required in connection
- -------- -------
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and uses its reasonable best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and deliver a
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<PAGE>
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of any notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
(g) Use its reasonable best efforts, if eligible, either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on
a national securities exchange and on each additional national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation of all
the Registrable Securities covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System ("NASDAQ") "Small
Capitalization" within the meaning of Rule 11Aa2-1 of the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on the NASDAQ Small Cap Market; or if,
despite the Company's commercially reasonable efforts to satisfy the preceding
clause (i) or (ii), the Company is unsuccessful in doing so, to secure NASD
authorization and quotation for such Registrable Securities on the over-the-
counter bulletin board and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such registrable
securities;
(h) Provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities or,
(subject to receipt by the Company of appropriate notice and documentation, as
may be required by the Warrant or this Agreement), securities convertible into
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered pursuant
to the Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities or
securities convertible into Registrable Securities are included in such
Registration Statement) an appropriate instruction and opinion of such counsel;
provided, however, that nothing in this subparagraph shall be deemed to waive
any of the provisions
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regarding the conditions or method of conversion of the Warrants into
Registrable Securities;
(j) The Company shall permit a single firm of counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three (3)
business days) prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects.
(k) Notify the Holders of Registrable Securities to be sold, their
Counsel and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than five (5) days prior to such filing) and (if request by any
such Person) confirm such notice in writing no later than one (1) Business Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or post-
effective amendment to the Registration Statement is proposed to be filed; (B)
whenever the Commission notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or
representatives of the Company receive on its behalf) any oral or written
comments from the Commission respect of a Registration Statement (copies or, in
the case of oral comments, summaries of such comments shall be promptly
furnished by the Company to the Holders); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that to the best knowledge of
the Company makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. In
addition, the Company shall furnish the Holders with copies of all intended
written responses to the comments contemplated in clause (C) of this Section
3(d) not later than one (1) Business Day in advance of the filing of such
responses with the Commission so that the Holders shall have the opportunity to
comment thereon.
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(l) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing of the existence of a Potential Material
Event, the Investors shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
--------- --------
Company may not so suspend the right to such holders of Registrable Securities
for more than one forty-five (45) day period in the aggregate during any 12-
month period ("Suspension Period") with at least a ten (10) business day
interval between such periods, during the periods the Registration Statement is
required to be in effect;
(m) Use its reasonable efforts to secure electronic over-the-counter
bulletin board authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities;
(n) Take all other reasonable actions necessary to expedite and facilitate
distribution to the Investor of the Registrable Securities pursuant to the
Registration Statement; and
4. Obligations of the Investors. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations;
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information"), if any. If at least two (2) business days prior to the filing
date the Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by
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the Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
above, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(d) In the event the Company is in breach of any of the provisions of this
Registration Rights Agreement, the Investor may choose any of the remedies or
damages already provided in this Agreement or the Warrant.
5. Expenses of Registration. (a) The Company shall bear all reasonable
expenses, other than underwriting discounts and commissions incurred in
connection with registrations, filing or qualifications pursuant to Section 3,
but including, without limitations, all registration, listing, and
qualifications fees, printers and accounting fees and the fees and disbursements
of counsel for the Company and reasonable fees and disbursements of one counsel
for the Initial Investor (not to exceed $2,500).
(b) Neither the Company nor any of its subsidiaries has, as of the date
hereof, nor shall the Company nor any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Investor in this Agreement or
otherwise conflicts with the provisions hereof.
6. Indemnification. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration
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Statement or any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any post-effective amendment thereof
or any prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or 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, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall reimburse the Investors, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(b) hereof; (ii) with respect to
any preliminary prospectus, inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that
are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(j) hereof; (iii) be available to the extent such Claim is
based on a failure of the Investor to deliver or cause to be delivered the
prospectus made available by the Company; or (iv) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Each
Investor will indemnify the Company, its officers, directors and agents
(including Counsel) against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Investor, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company to this Section 6.
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Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
--------
however, that an Indemnified Person or 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, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
--------
however, that (a) no contribution shall be made under circumstances where the
- -------
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to
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the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Warrant of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either
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generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and investors who
hold a majority in interest of the Registrable Securities. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company received conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered (by hand,
by courier, by telephone line facsimile transmission, receipt confirmed, or
other means) or sent by certified mail, return receipt requested, properly
addressed and with proper postage pre-paid (i) if to the Company, at its
executive offices; (ii) if to the Initial Investor, at the address set forth
under its name in the Warrant, with a copy to its designated attorney and (iii)
if to any other Investor, at such address as such Investor shall have provided
in writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11(b), and shall be effective,
when personally delivered, upon receipt and, when so sent by certified mail,
four (4) business days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the State of Delaware in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non coveniens, to the bringing of any such proceeding in such jurisdictions. To
the extent determined by such court, the Company shall reimburse the Investor
for any reasonable legal fees and disbursements incurred by the Investor in
enforcement of or protection of any of its rights under this Agreement.
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(e) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance could
result in loss to the Investors, and the Company agrees that, in addition to any
other liability the Company may have by reason of such failure or delay, the
Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.
(k) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
VITAFORT INTERNATIONAL, CORPORATION
By: /s/ Mark Beychok
------------------------------------
Name: Mark Beychok
Title: Chief Executive Officer
DOMINION CAPITAL FUND, LTD.
By: /s/ Nina Ray
------------------------------------
Name: Nina Ray
Title: Inter-Carribean Services
(Bahamas) Ltd.
SOVEREIGN PARTNERS LIMITED PARTNERSHIP
By: /s/ Stephen Hicks
------------------------------------
Name: Stephen Hicks
Title:
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