<PAGE>
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 31, 2000
OMNI NUTRACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
UTAH 0-18160 87-046822
(STATE OF OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
5310 BEETHOVEN STREET
LOS ANGELES, CA 90066
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 306-3636
N/A
(FORMER NAME AND FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
1
<PAGE>
OMNI NUTRACEUTICALS, INC.
TABLE OF CONTENTS
FOR
CURRENT REPORT ON FORM 8-K
Page No.
Item 5. Other Events .............................................. 3
Item 7. Exhibits .................................................. 4
Signature ........................................................... 6
2
<PAGE>
ITEM 5. OTHER EVENTS
Omni Nutraceuticals, Inc. (the Company) has completed an equity transaction
with American Equities, LLC and Corporate Financial Enterprises, Inc. that will
provide up to $5,000,000 of capital to the Company and its wholly owned Internet
subsidiary HealthZone.com ("HealthZone").
Under the terms of the transaction, the Company will issue up to
4,500,000 shares of its newly created 5% Convertible Preferred Stock, Series
A ("Preferred Shares") and seven year warrants to purchase up to an aggregate
of 775,000 shares of common stock at an exercise price of $2.25 per share,
subject to adjustment. The aggregate purchase price for the Preferred Shares
and warrants is $4,000,000 payable in two installments, the first in the
amount of $2,000,000, which has been funded, and, subject to the satisfaction
of certain performance targets, the second in the amount of $2,000,000.
Concurrently with the first installment payment, HealthZone issued 222,222
shares of its common stock (representing approximately 10% of HealthZone's
issued and outstanding shares of common stock) and a seven year warrant to
purchase up to 37,000 shares of its common stock at an exercise price,
subject to adjustment, equal to the lesser of $1.00 or 70% of the lowest
price received by HealthZone on future sales of its capital stock, for a
purchase price of $1,000,000. The Company has also agreed to lend HealthZone
$1,000,000 out of second installment proceeds. The Company will use the
proceeds from the sale of its securities to reduce indebtedness and for
working capital purposes. The Preferred Shares are convertible into an
aggregate of 3,000,000 shares of Company common stock (assuming issuance of
the full amount of Preferred Shares), subject to adjustment. The Preferred
Shares are not redeemable but may be subject to mandatory conversion under
certain circumstances. The Preferred Shares will vote together with the
common stockholders on an as converted basis and will have separate class
voting rights to elect one director and in connection with certain corporate
changes. The Preferred Shares will carry a liquidation preference of $.60 per
share and an annual dividend rate of $.05 per share, payable semi-annually.
The Company may elect to pay the dividend in additional Preferred Shares at a
rate of .05.
In connection with the above transaction, the Company has (i) amended
its Articles of Incorporation to provide for the Preferred Shares, (ii)
amended the Settlement Agreement between the Company and Klee Irwin as it
related to certain funding provisions of HealthZone, and (iii) entered into
two separate consulting agreements, one of which requires the Company to
issue 560,000 shares of its Common Stock.
3
<PAGE>
The Company was previously notified by Nasdaq that it failed to meet
NASDAQ's tangible minimum net worth requirement, and an oral hearing is
scheduled on February 10, 2000 for the Company before a panel authorized by
the Nasdaq Stock Market Board of Directors to determine the Company's
continued listing on the Nasdaq National Market System. The Company believes
that funding of this transaction now enables it to satisfy the minimum net
worth requirement for continued listing on the NASDAQ National Market System.
ITEM 7. EXHIBITS
The following material is filed as an exhibit to this Current Report on Form
8-K:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
<S> <C>
2.07 Articles of Amendment of Articles of
Incorporation of Omni Nutraceuticals, Inc.
4.08 Stock Purchase Agreement by and Among Omni
Nutraceuticals, Inc. and HealthZone.com,
Inc. and American Equities, LLC and
Corporate Financial Enterprises, Inc.
dated as of January 24, 2000.
4.09 Registration Rights Agreement Among Omni
Nutraceuticals, Inc. and American
Equities, LLC and Corporate Financial
Enterprises, Inc. dated as of January 24,
2000.
4.10 Warrant Agreement Among Omni
Nutraceuticals, Inc. and American
Equities, LLC and Corporate Financial
Enterprises, Inc. dated as of January 24,
2000.
4.11 Warrant Agreement between HealthZone.com,
Inc. and American Equities, LLC and
Corporate Financial Enterprises, Inc.
dated as of January 24, 2000
10.17 Amendment No. 1 to Settlement Agreement
dated October 8, 1999
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
between Omni Nutraceuticals, Inc., and
Klee Irwin
10.18 Consulting Agreement by and between Omni
Nutraceuticals, Inc. and Corporate
Financial Enterprises, Inc. dated as of
January 24, 2000
10.19 Consulting Agreement by and between Omni
Nutraceuticals, Inc. and Monfort
Investissments dated as of January 24, 2000
10.20 Lock up Agreement by Klee Irwin and R.
Lindsey Duncan
10.21 Indemnity Agreement between Omni
Nutraceuticals, Inc. and Reid Breitman
</TABLE>
5
<PAGE>
SIGNATURE
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.
OMNI NUTRACEUTICALS, INC.
Date: January 31, 2000 By: /s/ Corey E. Fischer
-------------------------------
Corey E. Fischer
Chief Financial Officer
6
<PAGE>
EXHIBIT 2.07
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
OMNI NUTRACEUTICALS, INC.
(Pursuant to Sections 16 -10a-602 and 16-10a-1002
of the General Corporation Law of Utah)
THE UNDERSIGNED duly authorized officer of OMNI NUTRACEUTICALS, INC., a
Utah corporation (the "Company"), hereby certifies that:
I. The name of the Company is Omni Nutraceuticals, Inc.
II. The Articles of Incorporation of the Company are hereby amended by
the addition of the following provision stating the number,
designation, relative rights, preferences, and limitation of the
shares of a new series of preferred stock, par value $0.01 per
share, of the Company designated as 5% Convertible Preferred
Stock, Series A.
"Pursuant to the authority expressly granted and vested in the
Board of Directors of the Company by the Company's Articles of Incorporation, as
amended to date, the Board of Directors hereby creates a new series of the
Company's authorized but unissued preferred stock, $0.01 par value per share, to
be designated "5% Convertible Preferred Stock, Series A" and to consist of
6,000,000 shares, and hereby fixes the voting powers, designations, preferences
and relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof:
1. NUMBER OF SHARES AND DESIGNATION. The shares of this series
of preferred stock shall be designated as "5% Convertible Preferred Stock,
Series A," $0.01 par value per share (the "Preferred Stock"), and the number of
shares constituting this series shall be 6,000,000.
2. DEFINITIONS. For purposes of the Preferred Stock, the
following terms shall have the meanings indicated:
"BOARD OF DIRECTORS" shall mean the board of directors of the
Company or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Preferred
Stock.
Page 1
<PAGE>
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the City of Los Angeles,
California are authorized or obligated by law or executive order
to close.
"COMMON STOCK" shall mean the Common Stock of the Company, $0.01
par value per share, and any capital stock of the Company which
has the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage,
into which the Common Stock may hereafter be classified by
appropriate amendment to the Company's Articles of Incorporation,
as amended.
"COMPANY WARRANT" shall mean collectively the warrants to purchase
up to an aggregate of 775,000 shares of Common Stock issued to
American Equities, LLC, a California limited liability company and
Corporate Financial Enterprises, Inc., a Delaware corporation, in
connection with the issuance of the Preferred Stock.
"CONVERSION PRICE" shall mean the rate per share of Preferred
Stock at which such Preferred Stock is convertible into shares of
Common Stock, as such Conversion Price may be adjusted pursuant to
Section 8 hereof. The Conversion Price will be determined as set
forth in Section 8 hereof.
"DIVIDEND PAYMENT DATE" shall have the meaning set forth in
Subsection 3.2 hereof.
"DIVIDEND PAYMENT RECORD DATE" shall have the meaning set forth in
Subsection 3.2 hereof.
"DIVIDEND PERIODS" shall mean semi-annual dividend periods
commencing on the first day of January and July of each year and
ending on and including the day preceding the first day of the
next succeeding Dividend Period (other than the initial Dividend
Period which shall commence on the Original Issue Date).
"HOLDERS" shall mean the purchasers of the Preferred Stock of the
Company and their successors and assigns of record on the stock
record books of the Company.
"LIQUIDATION VALUE" shall mean, as to each share of Preferred
Stock, $0.60.
"MINIMUM VALUE" shall have the meaning set forth in Subsection
8.4(b) hereof.
"ORGANIC CHANGE" shall have the meaning set forth in Subsection
8(g) hereof.
"ORIGINAL ISSUE DATE" shall mean the date on which shares of
Preferred Stock are issued.
"PERSON" shall mean any individual, firm, partnership,
corporation, limited liability company, association, joint stock
company, trust, joint venture or other entity, and shall include
any successor (by merger or otherwise) of such entity.
Page 2
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"STOCK PURCHASE AGREEMENT" means that certain Stock Purchase
Agreement by and among the Company, American Equities, LLC and
Corporate Financial Enterprises, Inc. dated January 24, 2000.
3. DIVIDENDS.
3.1 GENERAL. The holders of shares of the Preferred Stock shall
be entitled to receive cumulative dividends at an annual rate of 0.05 shares of
Preferred Stock per share of Preferred Stock, or, at the option of the Company,
$0.05 per share of Preferred Stock; provided, however, that if the closing price
of the Common Stock of the Company is reported to be greater than $3.75 for 20
trading days during any 30 consecutive trading day period following January 24,
2000, and so long as the Common Stock issuable upon conversion of the Preferred
Stock is then covered by an effective registration statement, then the Preferred
Stock shall no longer bear cumulative dividends, but, rather, shall bear
dividends when, as and if declared by the Board of Directors.
3.2 DIVIDEND PREFERENCE AND PAYMENT DATES. Except as otherwise
provided in Subsection 3.1 above, dividends on the Preferred Stock shall be
cumulative from the Original Issue Date, whether or not in any Dividend Period
or Periods there shall be assets of the Company legally available for the
payment of such dividends and whether or not such dividends are declared, and
shall be payable semi-annually, on January 1 and July 1 in each year (each a
"Dividend Payment Date"), commencing on July 1, 2000 when, as and if declared by
the Board of Directors. If any Dividend Payment Date shall be on a day other
than a Business Day, then the Dividend Payment Date shall be the next succeeding
Business Day. Each such dividend shall be payable in arrears to the holders of
record of shares of the Preferred Stock, as they appear on the stock records of
the Company at the close of business on those dates (each such date, a "Dividend
Payment Record Date"), not less than 10 days nor more than 60 days preceding the
Dividend Payment Dates thereof, as shall be fixed by the Board of Directors.
Except as otherwise provided in Subsection 3.1 above, dividends on the Preferred
Stock shall accrue (whether or not declared) on a daily basis from the Original
Issue Date and accrued dividends for each Dividend Period shall accumulate to
the extent not paid on the Dividend Payment Date first following the Dividend
Period for which they accrue. As used herein, the term "accrued" with respect to
dividends includes both accrued and accumulated dividends. Accrued and unpaid
dividends for any past Dividend Periods may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to holders of record on
such date, not exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
3.3 COMPUTATION OF DIVIDENDS FOR PARTIAL DIVIDEND PERIODS. The
amount of dividends payable for each full Dividend Period for the Preferred
Stock shall be computed by dividing the annual dividend rate by two. The amount
of dividends payable for the initial Dividend Period on the Preferred Stock, or
any other period shorter or longer than a full Dividend Period on the Preferred
Stock, shall be computed on the basis of a 365-day year.
Page 3
<PAGE>
3.4 PRIORITY AND DIVIDEND PARTICIPATION/PARITY STOCK. (a) So
long as any shares of the Preferred Stock are outstanding, no dividends, except
as described in the next succeeding sentence, shall be declared or paid or set
apart for payment on any class or series of stock of the Company ranking, as to
dividends, on a parity with the Preferred Stock, for any period unless full
cumulative dividends on the Preferred Stock have been or contemporaneously are
declared and paid for all Dividend Periods terminating on or prior to the date
of payment.
(b) So long as any shares of the Preferred Stock are
outstanding, no other stock of the Company ranking on a parity with the
Preferred Stock as to dividends or upon liquidation, dissolution or winding up
shall be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund or otherwise for the
purchase or redemption of any shares of any such stock) by the Company (except
by conversion into or exchange for stock of the Company ranking junior to the
Preferred Stock as to dividends and upon liquidation, dissolution or winding up)
unless (a) the full cumulative dividends, if any, accrued on all outstanding
shares of the Preferred Stock shall have been paid for all past Dividend Periods
and (b) sufficient funds shall have been set apart for the payment of the
dividend for the current Dividend Period with respect to the Preferred Stock.
3.5 PRIORITY AND DIVIDEND PARTICIPATION/JUNIOR STOCK. So long
as any shares of the Preferred Stock are outstanding, no dividends (other than
dividends or distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Common Stock or other stock ranking junior
to the Preferred Stock as to dividends and upon liquidation, dissolution or
winding up) shall be declared or paid or set apart for payment and no other
distribution shall be declared or made or set apart for payment, in each case
upon the Common Stock or any other stock of the Company ranking junior to the
Preferred Stock as to dividends or upon liquidation, dissolution or winding up,
nor shall any Common Stock nor any other such stock of the Company ranking
junior to the Preferred Stock as to dividends or upon liquidation, dissolution
or winding up be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund or otherwise for
the purchase or redemption of any shares of any such stock) by the Company
(except by conversion into or exchange for stock of the Company ranking junior
to the Preferred Stock as to dividends and upon liquidation, dissolution or
winding up) unless, in each case (a) the full cumulative dividends, if any,
accrued on all outstanding shares of the Preferred Stock and any other stock of
the Company ranking on a parity with the Preferred Stock as to dividends shall
have been paid or set apart for payment for all past Dividend Periods and all
past dividend periods with respect to such other stock and (b) sufficient funds
shall have been set apart for the payment of the dividend for the current
Dividend Period with respect to the Preferred Stock and for the current dividend
period with respect to any other stock of the Company ranking on a parity with
the Preferred Stock as to dividends.
4. LIQUIDATION VALUE.
4.1 GENERAL. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, before any payment
or distribution of the assets of the Company (whether capital or surplus) shall
be made to or set apart for the holders of Common Stock or any
Page 4
<PAGE>
other series or class or classes of stock of the Company ranking junior to the
Preferred Stock upon liquidation, dissolution or winding up, the holders of the
shares of Preferred Stock shall be entitled to receive $0.60 per share (the
"Liquidation Value"). No payment on account of any liquidation, dissolution or
winding up of the Company shall be made to the holders of any class or series of
stock ranking on a parity with the Preferred Stock in respect of the
distribution of assets upon dissolution, liquidation or winding up unless there
shall likewise be paid at the same time to the holders of the Preferred Stock
like proportionate amounts determined ratably in proportion to the full amounts
to which the holders of all outstanding shares of Preferred Stock and the
holders of all outstanding shares of such parity stock are respectively entitled
with respect to such distribution. If, upon any liquidation, dissolution or
winding up of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of the shares of Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares of stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Preferred Stock, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares of Preferred
Stock and any such other stock ratably in accordance with the respective amounts
which would be payable on such shares of Preferred Stock and any such other
stock if all amounts payable thereon were paid in full. For the purposes of this
Section 4, (a) a consolidation or merger of the Company with one or more
corporations or other entities, (b) a sale, lease, exchange or transfer of all
or any part of the Company's assets or (c) a statutory share exchange shall not
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.
4.3 NOTICE OF LIQUIDATION, DISSOLUTION OR WINDING UP. Written
notice of any liquidation, dissolution or winding up of the Company, stating the
payment date or dates when and the place or places where the amounts
distributable in such circumstances shall be payable, shall be given by first
class mail, postage prepaid, not less than 30 days prior to any payment date
stated therein, to the holders of record of the Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
5. TRANSFERS. Each certificate of Preferred Stock presented
for transfer, exchange or conversion shall be duly endorsed or accompanied by a
written instruction of transfer in form reasonably satisfactory to the Company
or to its registrar therefor duly executed by such Holder or its attorney, duly
authorized in writing.
6. REDEMPTION; MANDATORY CONVERSION. The Preferred Stock shall
not be redeemable. The Company may convert the Preferred Stock into Common Stock
at the then effective Conversion Price at any time after the date which is the
earlier of (i) 3 years after January 24, 2000 (the "Closing Date") or (ii) when
and so long as the Common Stock shall have traded for 20 trading days during the
30 consecutive trading day period prior to the conversion date at a closing bid
price per share in the principal market in which the Common Stock is then traded
equal to or greater than $3.75 or (iii) the date of the Arbitral Award rendered
in favor of Omni pursuant to the provisions of Section 1.1(d) of the Stock
Purchase Agreement.
Page 5
<PAGE>
7. SHARES TO BE RETIRED. All shares of Preferred Stock
purchased, redeemed, exchanged or converted by the Company shall be retired and
canceled and shall be restored to the status of authorized but unissued shares
of the Company's preferred stock, without designation as to series and may
thereafter be reissued.
8. CONVERSION. Holders of shares of Preferred Stock shall have
the right to convert all or a portion of such shares into shares of Common
Stock, as follows:
8.1 RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Section 8, a holder of shares of Preferred Stock shall have
the right, at such holder's option, at any time after the date which is six
months after the Original Issuance Date to convert any of such shares into
shares of Common Stock at a rate equal to the quotient of $1.00 divided by the
Conversion Price for each share of Preferred Stock, and by surrender of such
shares of Preferred Stock to the Company, such surrender to be made in the
manner provided in Subsection 8.2 hereof. The "Conversion Price" shall initially
be $1.50, subject to adjustment as provided herein. No fractional shares or
securities representing fractional shares of Common Stock will be issued upon
conversion, and instead such amounts as would have been paid in fractional
shares will be paid in cash as provided in Subsection 8.3 hereof.
8.2 MECHANICS OF CONVERSION. (a) In order to exercise the
conversion right pursuant to Subsection 8.1 above, the holder of each share of
Preferred Stock (or fraction thereof) to be converted shall surrender the
certificate representing such share(s), duly endorsed or assigned to the Company
or in blank, at the office of the Company, accompanied by written notice to the
Company that the holder thereof elects to convert the enclosed shares of
Preferred Stock or a specified portion thereof. If any of the shares issuable on
conversion are to be issued in a name other than the name in which such share(s)
of Preferred Stock are registered, such shares surrendered for conversion shall
be accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the Holder or such Holder's duly authorized attorney.
(b) Holders of shares of Preferred Stock at the close of
business on a Dividend Payment Record Date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such Dividend Payment Record
Date and prior to such Dividend Payment Date. Upon any conversion of Preferred
Stock, the Company shall pay all accrued but unpaid dividends on such converted
shares of Preferred Stock.
(c) Within five (5) days after the surrender of certificates
for shares of Preferred Stock as aforesaid, the Company shall issue and shall
deliver to such holder, or on such holder's written order, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares in accordance with such holder's notice and the
provisions of this Section 8, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as provided in
Subsection 8.3 hereof.
(d) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of Preferred Stock shall have been
Page 6
<PAGE>
surrendered and such notice received by the Company as aforesaid, and the person
or persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby at such
time on such date, and such conversion shall be at the Conversion Price in
effect at such time on such date, unless the stock transfer books of the Company
shall be closed on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such shares shall have been surrendered and such notice received by the Company.
All shares of Common Stock delivered upon conversion of the Preferred Stock will
upon delivery be duly and validly issued and fully paid and nonassessable.
8.3 PAYMENT OF FRACTIONAL INTERESTS. Instead of any fractional
interest in a share of Common Stock which would otherwise be deliverable upon
the conversion of a share of Preferred Stock, the number of shares of Common
Stock issuable upon such conversion shall be rounded to the nearest whole share.
If more than one share of Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Preferred Stock so surrendered. No fractional shares of Preferred
Stock shall be issued and instead if Holder is entitled to receive a fractional
share of Preferred Stock it will be rounded up to the nearest whole share.
8.4 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(a) SPECIAL DEFINITIONS. For purposes of this Subsection 8.4,
the following definitions shall apply:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 8.4(c),
deemed to be issued) by the Company after January 24, 2000
other than shares of Common Stock issued or issuable at any
time:
(i) upon conversion of shares of Preferred Stock
or exercise of the Company Warrant;
(ii) upon exercise of options or warrants
outstanding on January 24, 2000, or up to
2,000,000 additional options or other awards
granted or to be granted under the Company's
Long-Term Stock Incentive Plan, as amended
from time to time;
(iii) as a dividend or distribution on the
Preferred Stock; or
(iv) by way of dividend or other distribution on
shares of Common Stock excluded from the
definition of Additional Shares of Common
Stock by the foregoing clauses (i), (ii),
(iii) or this clause (iv).
Page 7
<PAGE>
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
"OPTION" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
(b) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
Stock, unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Company is less than the greater of
either (i) $1.50 or (ii) 15% less than the last reported sale price of the
Common Stock as reported on any securities exchange or on the Nasdaq National
Market System, Nasdaq Small Cap Market, or on the National over-the-counter
market (the "Minimum Value").
(c) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK.
(i) OPTIONS AND CONVERTIBLE SECURITIES. In the event the
Company at any time or from time to time after the
Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for
the determination of holders of any class of securities
entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon
the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of
business on such record date, provided that Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to Subsection 8.4(e) hereof), of such
Additional Shares of Common Stock would be less than the
Minimum Value per share:
(A) no further adjustment in the Conversion Price shall
be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange
of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or
decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
record date
Page 8
<PAGE>
with respect thereto), and any adjustments
to the Conversion Price based on the
issuance of such Options or Convertible
Securities shall, upon any such increase or
decrease becoming effective, be recomputed
to reflect such increase or decrease insofar
as it affects such Options or the rights of
conversion or exchange under such
Convertible Securities;
(ii) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND SUBDIVISIONS. In
the event the Company at any time or from time to time
after the Original Issue Date shall declare or pay any
dividend or make any other distribution on the Common Stock
payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock),
then and in any such event, Additional Shares of Common
Stock shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the
record date for the determination of holders of any
class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date
upon which such corporate action becomes effective.
If such record date shall have been fixed and such dividend shall
not have been fully paid on the date fixed therefor, the
adjustment previously made in the Conversion Price which became
effective on such record date shall be canceled as of the close of
business on such record date, and thereafter the Conversion Price
shall be adjusted pursuant to this Subsection 8.4(c)(ii) as of the
time of actual payment of such dividend.
(d) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL SHARES
OF COMMON STOCK. In the event the Company shall issue or shall be
deemed to issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
Subsection 8.4(c), but excluding Additional Shares of Common Stock
issued pursuant to Subsection 8.4(c)(ii), which event is dealt
with in Subsection 8.4(f) hereof), without consideration or for a
consideration per share less than the Minimum Value per share on
the date of and immediately prior to such issue, then and in case
of such issue, the Conversion Price shall be reduced, concurrently
with such issue in order to increase the number of shares of
Common Stock into which the Preferred Stock is convertible, to the
lower of (A) the price per share at which such Additional Shares
of Common Stock are issued, or (B) a price determined by
multiplying the existing Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock
(on a fully diluted basis) outstanding immediately prior to such
issuance, and the denominator of which shall
Page 9
<PAGE>
be the number of shares of Common Stock (on a fully diluted basis) outstanding
immediately after such issuance.
(e) DETERMINATION OF CONSIDERATION. For purposes of this Subsection
8.4, the consideration received by the corporation for the issuance of any
Additional Shares of Common Stock shall be computed as follows:
(i) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate net amount of cash received by the
Company;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board
of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration
so received, computed as provided in clauses (A) and
(B) above, as determined in good faith by the Board
of Directors.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
share received by the Company for Additional Shares of
Common Stock deemed to have been issued pursuant to
Subsection 8.4(c)(i), relating to Options and Convertible
Securities, shall be determined by dividing (x) the total
amount, if any, received or receivable by the Company as
consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable
to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
(f) ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS OF COMMON
STOCK. In the event the Company shall issue Additional Shares of Common Stock
pursuant to Subsection 8.4(c)(ii) in a stock dividend, stock distribution or
subdivision, or decrease the number of outstanding shares of Common Stock
pursuant to a reverse stock split or similar capital reorganization, the
Conversion
Page 10
<PAGE>
Price in effect immediately prior to such stock dividend, distribution,
subdivision, recombination or split shall, concurrently with the effectiveness
of such stock dividend, stock distribution or subdivision, recombination or
split be proportionately decreased or increased, as the case may be.
(g) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of any
recapitalization, reorganization, reclassification, consolidation, merger or the
conveyance of all or substantially all of the assets of the Company pursuant to
which the holders of Common Stock are entitled to receive (either directly or on
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock (an "Organic Change"), the Company shall make
appropriate provisions to insure that each share of Preferred Stock shall
thereafter be convertible into the number of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of the
Company deliverable upon conversion of such Preferred Stock would have been
entitled upon such consolidation, merger or conveyance and that appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the holders of the Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes in and
other adjustments of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the conversion of the Preferred Stock. The
Company shall not effect any such Organic Change unless prior to the
consummation thereof, the successor entity (if other than the Company) assumes
by written instrument the obligations set forth herein.
8.5 NO IMPAIRMENT. The Company will not, by amendment of its Articles
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 8.
8.6 CERTIFICATE AS TO ADJUSTMENTS. Whenever the Conversion Price is
adjusted as herein provided, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price,
the facts requiring such adjustment and upon which such adjustments are based
and the date on which such adjustment becomes effective and shall mail such
notice of such adjustment of the Conversion Price to the holder of each share of
Preferred Stock at such holder's last address as shown on the stock records of
the Company.
8.7 DEFERRAL OF ISSUANCE OF ADDITIONAL SHARES. In any case in which
Subsection 8.4 provides that an adjustment shall become effective immediately
after a record date for an event and the date fixed for conversion pursuant to
Section 8 occurs after such record date but before the occurrence of such event,
the Company may defer until the actual occurrence of such event issuing to the
holder of any share of Preferred Stock surrendered for conversion the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment.
Page 11
<PAGE>
8.8 COMPUTATION OF OUTSTANDING COMMON STOCK. For purposes of this
Section 8, the number of shares of Common Stock at any time outstanding shall
not include any shares of Common Stock then owned or held by or for the account
of the Company or any corporation controlled by the Company.
8.9 MULTIPLE ADJUSTMENTS IN A SINGLE TRANSACTION. Notwithstanding any
other provision herein to the contrary, the issuance of any shares of Common
Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan shall not be
deemed to constitute an issuance of Common Stock. There shall be no adjustment
of the Conversion Price in case of the issuance of any stock of the Company in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 8. If any action or transaction would require
adjustment of the Conversion Price pursuant to more than one Section of this
Section 8, only one adjustment shall be made and such adjustment shall be the
amount of adjustment which has the highest absolute value.
8.10 FURTHER ADJUSTMENT BY THE BOARD OF DIRECTORS. In case the Company
shall take any action affecting the Common Stock, other than action described in
this Section 8, which in the opinion of the Board of Directors would materially
and ADVERSELY affect the conversion rights of the holders of the shares of
Preferred Stock, the Conversion Price for the Preferred Stock may be adjusted
lower, to the extent permitted by law, in such manner, if any, and at such time,
as the Board of Directors may determine to be equitable in the circumstances.
8.11 PAYMENT OF DOCUMENTARY STAMP AND TRANSFER TAXES. The Company will
pay any and all documentary stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of the shares of Preferred Stock (or any other
securities issued on account of the Preferred Stock pursuant hereto) or shares
of Common Stock on conversion of the Preferred Stock pursuant hereto; provided
that the Company shall not be required to pay any tax which may be payable in
respect to any transfer involved in the issuance and delivery of any certificate
in a name other than that of the Holder.
8.12 RESERVATION OF COMMON STOCK. The Company shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock.
8.13 DE MINIMUS EXCEPTION. No adjustment in the Conversion Price shall
be required unless such adjustment would require an increase or decrease of at
least one cent ($.01) in the Conversion Price; provided, however, that any
adjustments which by reason of this Subsection 8.13 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Page 12
<PAGE>
9. RANKING. Any class or classes of stock of the Company shall be
deemed to rank:
(a) prior to the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding
up, if the holders of such class shall be entitled to the receipt
of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the holders of Preferred Stock, and Holders of a
majority of the outstanding shares of Preferred Stock have
consented to the designation and issuance of such series or class
of stock;
(b) on a parity with the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding
up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different
from those of the Preferred Stock, if the holders of such class of
stock and the Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to
their respective amounts of accrued and unpaid dividends per share
or liquidation prices, without preference or priority of one over
the other; and
(c) junior to the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding
up, if such stock shall be Common Stock or holders of Preferred
Stock shall otherwise be entitled to receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in preference or priority to the holders of
shares of such stock.
10. VOTING.
10.1 VOTING RIGHTS WITH COMMON STOCK. The holders of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
By-Laws of the Company, and, for each share of Preferred Stock, shall be
entitled to a number of votes equal to the number of shares of Common Stock into
which each share of Preferred Stock is then convertible on all matters submitted
to the stockholders for approval. In either case described in this Section 10,
shares held by the Company or any entity controlled by the Company shall be
excluded and shall have no voting rights.
10.2 BOARD REPRESENTATION. Subject to amendment of the Company's bylaws
to increase the number of directors by at least one director creating a vacancy
to be filled by the nominee of the Holders, the Holders shall, by majority vote,
be entitled to nominate and elect one member to the Company's Board of
Directors. The Company shall reimburse any reasonable expense incurred by such
Director in attending meetings or otherwise on behalf of the Company. At any
time the Holders shall not be legally entitled to nominate or elect or shall not
have nominated and elected one director to the Board of Directors, at its sole
discretion, such Holders shall have the right to appoint one observer who shall
be present at all meetings of the Board of Directors, and shall receive copies
of all notices and other information or documents given to any other members of
the Board of
Page 13
<PAGE>
Directors, and shall be entitled to the same reimbursement rights as if such
observer were a director but who shall not be entitled to vote as a director.
11. EVENTS OF DEFAULT.
11.1 EVENTS OF DEFAULT DEFINED. Each of the events specified in the
following Subsections 11.1(a) through (f) shall be an Event of Default, provided
that an Event of Default may be waived in writing by Holders of a majority of
the outstanding shares of Preferred Stock.
(a) the Company shall breach or default in the performance of
or compliance with, any representation or warranty,
covenant, agreement, condition or term contained in these
Articles of Amendment, including the payment of any
dividend amount hereunder, and such default shall not have
been remedied within thirty (30) days after written notice
thereof shall have been given to the Company; or
(b) the Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay
its debts as they become due, or an order for relief is
entered against the Company under any bankruptcy laws or
the Company shall file any petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, dissolution or similar relief under any
present or future statute, law or regulation, or shall file
an answer admitting the material allegations of a petition
filed against the Company in any such proceeding, or shall
seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of the Company, or the
Company or its board of directors or its stockholders shall
take any action looking to the dissolution or liquidation
of the Company and such has not been remedied within 30
days after written notice thereof shall have been given to
the Company; or
(c) within 60 days after the commencement of any proceeding
against the Company seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation, such proceeding shall not have
been dismissed or, within 60 days after the appointment
without the consent or acquiescence of the Company of any
trustee, receiver or liquidator of the Company of all or
any substantial part of the properties of the Company, such
appointment shall not have been vacated.
11.2 OTHER REMEDIES. The holders of a majority of the Preferred Stock
outstanding at the time of any Event of Default may proceed to protect and
enforce the rights of said holders by a suit in equity, action at law or other
appropriate proceeding, including but not limited to the enforcement of any
rights under any of the other documents executed and delivered in connection
herewith, for
Page 14
<PAGE>
the specific performance of any agreement contained herein or in any other
documents executed and delivered in connection herewith, or for any injunction
against a violation of any of the terms or provisions hereof or thereof or in
aid of the exercise of any power granted hereby or thereby or by law. Such
holders shall not be required to post bond. The Company will pay to the holders
thereof such further amount as shall be sufficient to cover the cost and expense
of any action instituted by the holders upon such Event of Default, including
(without limitation) reasonable attorneys fees. If the holders shall give any
notice or take any action in respect of a claimed default, the Company will
forthwith give written notice thereof to all other such holders at the time
outstanding, describing the notices or action and the nature of the claimed
default. No course of dealing and no delay on the part of any holders in
exercising any right shall operate as a waiver thereof or otherwise prejudice
such holders' rights. No remedy conferred hereby or by any of the other
documents executed and delivered in connection herewith shall be exclusive of
any other remedy referred to herein or therein or now or hereafter available at
law, in equity, by statute or otherwise.
12. COVENANTS. In addition to any other rights provided by law or
agreement, so long as at least 1,000,000 shares of the Preferred Stock remain
outstanding, without first obtaining the affirmative vote or written consent of
the holders of not less than 50% of the shares of Preferred Stock then
outstanding, the Company shall not:
(a) create, authorize, sell or issue any class or series of
capital stock ranking senior to the Preferred Stock with
respect to voting, liquidation or dividend rights;
(b) issue additional shares of Preferred Stock, other than in
payment of dividends on the Preferred Stock;
(c) enter into any merger or consolidation where the Company is
not the surviving corporation, unless provision is made in
such merger or consolidation for the issuance to Holders of
securities with substantially similar rights, privileges
and preferences as the Preferred Stock;
(d) sell any capital stock of any subsidiary of the Company to
any affiliate of the Company (other than holders of the
Preferred Stock or pursuant to the exercise of the "put"
and "call" options granted in that certain Settlement
Agreement dated October 8, 1999 by and among the Company
and Mr. Klee Irwin, as amended) without the approval of the
Board of Directors;
(e) change or amend the relative rights, privileges and
preferences of the Preferred Stock;
(f) Until the date which is not less than 180 days after the
date a registration statement covering shares of capital
stock of HealthZone.com in an initial public offering of
such shares is declared effective, the Company shall not
spin-off any of the common stock of HealthZone.com, or
approve a reverse
Page 15
<PAGE>
merger of HealthZone.com, or approve any other similar
transaction in connection with HealthZone.com which would
have the effect of impeding an initial public offering of
the capital stock of HealthZone.com.
13. RECORD HOLDER. The Company may deem and treat the record holder of
any shares of Preferred Stock as the true and lawful owner thereof for all
purposes, and the Company shall not be affected by any notice to the contrary.
14. NOTICE. Except as may otherwise be provided for herein, all
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given upon receipt. In the case of a notice of conversion
given to the Company as contemplated in Subsection 8.2 hereof, or, in all other
cases, upon the earlier of receipt of such notice or three Business Days after
the mailing of such notice if sent by registered mail (unless first class mail
shall be specifically permitted for such notice under the terms of this
Certificate) with postage prepaid, addressed: if to the Company, to its offices
at 5310 Beethoven Street, Los Angeles, California 90066, or such other place as
designated in a written notice to the holders of the Preferred Stock, or other
agent of the Company designated as permitted by this Certificate, or, if to any
holder of the Preferred Stock, to such holder at the address of such holder of
the Preferred Stock as listed in the stock record books of the Company; or to
such other address as the Company or holder, as the case may be, shall have
designated by notice similarly given.
III. The foregoing amendment to the Company's Articles of Incorporation
was duly adopted on January 21, 2000, by the Board of Directors of
the Company pursuant to authority conferred on the Board of
Directors by the provisions of the Articles of Incorporation of
the Company (as amended) and in accordance with the provisions of
the General Corporation Law of Utah, without shareholder approval
and, pursuant to Section 16-10a-602 of the General Corporation Law
of Utah, shareholder approval of such amendment was not required.
IN WITNESS WHEREOF, this Certificate has been executed on behalf of the
Company by the undersigned on January 24, 2000.
OMNI NUTRACEUTICALS, INC.
By: /s/ Louis Mancini
----------------------------
Louis Mancini
Chief Executive Officer
/s/ Corey Fischer
- -----------------------
Secretary
Page 16
<PAGE>
EXHIBIT 4.08
STOCK PURCHASE AGREEMENT
BY AND AMONG
OMNI NUTRACEUTICALS, INC.
AND
HEALTHZONE.COM, INC.
AND
AMERICAN EQUITIES, LLC
AND
CORPORATE FINANCIAL ENTERPRISES, INC.
DATED AS OF JANUARY 24, 2000
================================================================================
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered into
as of January 24, 2000, among Omni Nutraceuticals, Inc., a Utah corporation
("Omni"), HealthZone.com, a California corporation and a wholly owned subsidiary
of Omni ("HealthZone," and, together with Omni, the "Company") and American
Equities, LLC, a California limited liability company ("American Equities") and
Corporate Financial Enterprises, Inc., a Delaware corporation ("CFE") and,
together with American Equities and their respective designees and/or assignees,
the "Investor").
WHEREAS, Omni desires to sell, and the Investor desires to purchase, on
the terms and conditions of this Agreement, (i) up to 4,500,000 shares of the 5%
Convertible Preferred Stock, Series A of the Company, $0.01 par value (the
"Preferred Stock"), in the form attached hereto as Exhibit A, and (ii) a
seven-year warrant (the "Omni Warrant") to purchase up to 775,000 shares of the
common stock, $0.01 par value, of Omni (the "Omni Common Stock") at an exercise
price of $2.25 per share (together with the Preferred Stock and the Omni
Warrant, the "Omni Securities").
WHEREAS, HealthZone desires to sell, and the Investor desires to
purchase, on the terms and conditions of this Agreement, (i) 222,222 shares of
the common stock, $0.01 par value, of HealthZone (the "HealthZone Common
Stock"), and (ii) a seven-year warrant (the "HealthZone Warrant," and together
with the Omni Warrant, the "Warrants") to purchase up to 37,000 shares of the
HealthZone Common Stock at an exercise price equal to the lesser of (x) $1.00,
or (y) seventy percent (70%) of the lowest price per share of HealthZone Common
Stock received by HealthZone or Omni in any sale or issuance of HealthZone
Common Stock or other capital stock (as if converted to HealthZone Common Stock)
subsequent to the Closing Date (together with the HealthZone Common Stock, the
"HealthZone Securities," and, together with the Omni Securities, the
"Securities").
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Investor agrees
as follows:
SECTION I. SALE AND PURCHASE OF THE SECURITIES; CLOSING.
1.1 SALE AND PURCHASE OF SECURITIES.
(a) Subject to the terms and conditions hereof, the Omni agrees to sell
to Investor and Investor agrees to purchase from Omni on the First Tranche
Closing Date (as hereinafter defined), (i) the 3,000,000 shares of Preferred
Stock for a purchase price of $1,900,000, and (ii) the Omni Warrant for a
purchase price of $100,000 (the "First Tranche Omni Securities"), each to be
allocated as between American Equities and CFE as set forth on Schedule 1.1(a)
hereto.
(b) Subject to the terms and conditions hereof, HealthZone agrees to sell
to Investor and Investor agrees to purchase from HealthZone on the First Tranche
Closing Date, (i) 222,222
1
<PAGE>
shares of HealthZone Common Stock for a purchase price of $950,000, and (ii) and
the HealthZone Warrant for a purchase price of $50,000, each to be allocated as
between American Equities and CFE as set forth on Schedule 1.1(b) hereto.
(c) The aggregate purchase price for the First Tranche Omni Securities
and the HealthZone Securities (the "Purchase Price") shall be Three Million
Dollars ($3,000,000), payable as follows: $2,000,000 payable to Omni by wire
transfer on the First Tranche Closing Date in immediately available funds for
deposit into an account to be designated by Omni (the "Omni Account"), and
$1,000,000 payable to HealthZone by wire transfer on the First Tranche Closing
Date in immediately available funds for deposit into an account of HealthZone to
be designated by Omni.
(d) (i) Subject to the conditions set forth in Section 4.2, at any
time on or prior to the date which is 200 days after the First Tranche Closing
Date, by written notice to the Investor from Omni (the "Second Tranche Notice"),
Investor shall purchase at a Closing on a closing date specified in the Second
Tranche Notice (the "Second Tranche Closing Date") an additional 1,500,000
shares of Preferred Stock (the "Second Tranche Securities") for an aggregate
cash purchase price of Two Million Dollars ($2,000,000), payable to Omni by wire
transfer of immediately available funds for deposit in the Omni Account upon
issuance of such Preferred Stock (the "Second Tranche Purchase"), such Second
Tranche Securities to be allocated by written notice to Omni not less than five
(5) Business Days prior to the Second Tranche Closing Date.
(ii) Investor shall have the right to cancel the Second Tranche
Purchase upon at least five (5) Business Days prior written notice to Omni (the
"Dispute Notice"), if Investor reasonably determines that Omni has not achieved
the performance targets set forth on Exhibit A for the six month period ending
June 30, 2000 or satisfied the conditions to closing set forth in Section 4.2.
(1) The Dispute Notice will set forth in reasonable
detail the basis on which the Investor has elected to cancel the Second Tranche
Purchase and shall be deemed notice of the Investor's election to assert its
right to arbitration as herein provided. If after a period of ten (10) days
after receipt of the Dispute Notice by Omni (the "Mediation Period") the parties
are unable to resolve their differences, the parties agree to arbitrate their
differences in the City of Los Angeles, California in accordance with the rules
of the American Arbitration Association ("AAA") then obtaining (except to the
extent modified hereby) before a panel of three arbitrators ("the Arbitrators").
Omni shall select one arbitrator and the Investor shall select one arbitrator.
Omni and the Investors shall each make their selection of an arbitrator within
fifteen (15) days after the expiration of the Mediation Period (the "Arbitrator
Selection Period"). The two arbitrators shall select a third arbitrator within
fifteen (15) days after the expiration of the Arbitrator Selection Period and
upon his or her selection, the third arbitrator shall act as the Chair of all
proceedings under the arbitration. In the event the two arbitrators fail to
select the third arbitrator within such fifteen (15) day period, either party
may apply to a California Court of
2
<PAGE>
general jurisdiction sitting in Los Angeles County to have such Court appoint
such third arbitrator.
(2) With respect to all pre-hearing matters, the
arbitration shall be governed by the California Code of Civil Procedure (the
"CCP") and the parties shall be deemed to have all of the rights and
responsibilities as are provided for therein. In connection therewith, to the
extent permitted by law, the Arbitrators shall be vested with such authority and
discretion as if they were presiding as a California State Court Judge and as if
this were a civil action pending before him. This shall include, inter alia, the
authority to entertain and decide dispositive motions under the CCP; provided,
however, nothing in the foregoing shall entitle the Arbitrators to amend the
express terms of the Agreement and in connection with determining whether Omni
has met the performance targets set forth on Exhibit A, the information in
Omni's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000
as filed with Securities and Exchange Commission shall be deemed conclusive
evidence (absent manifest error) as to whether or not Omni has met such
performance targets, unless Omni or its auditor determines that the relevant
information contained in such Form 10-Q is not accurate, or such information is
restated prior to the date of the Arbitral Award.
(3) The losing party shall pay the fees of the
Arbitrators and all reasonable fees in connection with the arbitration.
(4) As soon as Arbitrators have been appointed, the
parties shall have the right to commence and conduct discovery pursuant to all
means available under the CCP. The parties agree that each side will be limited
to three (3) depositions. In addition, each party may depose the other parties'
designated expert(s). The Arbitrators shall have the power to limit discovery
which they deem not to be in compliance with the CCP.
(5) All discovery shall be completed within thirty (30)
days of the appointment of the Arbitrators. The matter shall be set for hearing
on a date as soon as practical but no later than thirty (30) days after the
completion of discovery. The hearing shall be completed as quickly as possible
and in no event later than sixty (60) days after the first day of the hearing.
The Arbitrators' award (the "Arbitral Award") shall be rendered within thirty
(30) days of the completion of the hearing on the merits. Any delays in the
foregoing schedule shall not prejudice the rights of the parties.
(6) The Arbitral Award shall be final and conclusive on
the parties. In the event the Arbitral Award is rendered in favor of Omni, (A)
the Second Tranche Closing will occur within thirty (30) business days after the
delivery of the Arbitral Award to the parties and the Investor shall wire
transfer the $2,000,000 amount of the Second Tranche Purchase in immediately
available funds for deposit in the Omni Account against delivery of certificates
evidencing the Second Tranche Securities, together with interest on the
$2,000,000 purchase price for the Second Tranche Securities computed at the same
rate of interest then being charged Omni under its revolving credit loan with
First Source Financial or other bank lender (but not to exceed 9.5% per annum)
for the period from the Second Tranche Closing Date as originally
3
<PAGE>
specified in Omni's Second Tranche Notice to the date of such Second Tranche
Closing; (B) the Preferred Shares shall be deemed to have been mandatorily
converted at the prevailing Conversion Price effective on the date of the
Arbitral Award with no further notice required to be given by Omni, and (C) the
receipt of a copy of the Arbitral Award by the Investor shall be deemed to
constitute notice of cashless exercise of the Omni Warrants then outstanding by
the holders thereof.
(7) In the event that one or more of the Arbitrators
named above refuse to act, or become incapable, incompetent or unfit to act
before the hearing on the merits has been completed or before an Arbitral Award
has been entered, a successor arbitrator shall be appointed by agreement of the
parties or by application by either party to a California Court of general
jurisdiction sitting in Los Angeles County.
(8) The Arbitrators shall be governed by the Agreement
and shall apply the substantive law of the State of California in making their
Arbitral Award. Any dispute arising between the parties during the course of the
arbitration concerning the interpretation and enforcement of these arbitration
provisions shall be resolved by the Arbitrators in accordance with the
provisions hereof.
1.2 CLOSING. The closing of the transactions (the
"Transactions") contemplated by this Agreement (the "Closing"), shall take place
at the offices of CFE, 2224 Main Street, Santa Monica, California 90405, at
10:00 a.m., Pacific Standard time, on January 24, 2000 (the "First Tranche
Closing Date") or at such other place or day as may be mutually acceptable to
the Investor and the Company.
1.3 DELIVERY; PAYMENT. At the Closing, the Company will deliver
to Investor each of the following (which, together with this Agreement, are
referred to herein as the "Transaction Documents"):
(a) certificates representing the Securities purchased by such
Investor, registered in its name;
(b) an irrevocable proxy representing not less than 73% of the
outstanding Omni Common Stock as of the First Tranche Closing Date to vote such
shares in favor of an amendment to Omni's Bylaws to increase the number of
directors on Omni's Board of Directors (the "Board") by at least one director,
and to nominate and elect a director (designated by the holders of a majority of
the outstanding shares of Preferred Stock) to the Board to fill the vacancy
created thereby;
(c) a duly executed Registration Rights Agreement, dated as of the
date hereof, by and between Omni and the Investors (the "Registration Rights
Agreement");
(d) a duly executed Warrant Agreement, dated as of the date hereof, by
and between Omni and the Investors (the "Warrant Agreement");
4
<PAGE>
(e) the duly executed Omni Warrants issued pursuant to the Warrant
Agreement;
(f) a duly executed Warrant Agreement, dated as of the date hereof, by
and between HealthZone and the Investors (the "HealthZone Warrant Agreement");
(g) a duly executed Consulting Agreement, by and between Omni and
American Equities, LLC, dated as of the date hereof (the "Consulting
Agreement");
(h) a duly executed Lock-Up Agreement, by and between Mr. Klee Irwin
and Mr. Lindsey Duncan, dated as of the date hereof;
(i) a duly executed Amendment to Articles of Incorporation, setting
forth the rights, preferences and designation of the Preferred Stock;
(j) a duly executed Amendment No. 1 to Settlement Agreement, dated as
of the date herof, by and between Omni and Mr. Klee Irwin;
(k) a duly executed Articles of Amendment to the Articles of
Incorporation of HealthZone;
SECTION II. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Investor to enter into this Agreement and to purchase
the Securities, the Company hereby represents and warrants to Investor as
follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Omni
and HealthZone is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its respective jurisdiction of
incorporation, and each has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Each of the Company's subsidiaries is
a corporation duly incorporated, validly existing and in good standing under the
laws of its state or country of jurisdiction and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted. The
Company and each of its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary except where the
failure so to qualify shall not have a material adverse effect on the business
or financial condition of the Company taken as a whole ("Material Adverse
Effect").
2.2 ARTICLES OF INCORPORATION AND BYLAWS. The Company has
heretofore furnished to Investor a complete and correct copy of the Articles of
Incorporation and bylaws of the Company and each of its subsidiaries as amended
to date. The Articles of Incorporation and bylaws of the Company and each of its
subsidiaries are in full force and effect. As of the date of
5
<PAGE>
this Agreement, neither the Company nor any of its subsidiaries is in violation
of any of the provisions of their respective Articles of Incorporation or
bylaws.
2.3 CAPITALIZATION.
(a) The authorized capital stock of Omni consists of 50,000,000 shares
of common stock and 5,000,000 shares of preferred stock. As of the date hereof,
(i) 27,273,141 shares of common stock were issued and outstanding, all of which
were validly issued, fully paid and nonassessable, and (ii) no shares of
preferred stock were issued and outstanding (prior to the issuance of the
Preferred Stock pursuant to this Agreement). As of the date hereof, options and
warrants to purchase 5,604,172 shares of common stock have been granted and are
outstanding. Except as set forth in Schedule 2.3(a) or described above or
contemplated hereby, there are, and as of the Closing Date there will be, no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Omni or
obligating Omni to issue or sell any shares of capital stock of, or other equity
interests in, Omni. All shares of Omni's capital stock subject to issuance, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth on Schedule 2.3(a) or as contemplated hereby,
there are no shareholder agreements, voting trusts or other agreements relating
to voting or disposition of any shares of Omni's capital stock or granting to
any person or group of persons the right to elect, or to designate or nominate
for election, a director to Omni's board of directors.
(b) Upon filing of an amendment to the Articles of Incorporation of
HealthZone, which shall be done within ten days following the Closing Date, the
authorized capital stock of HealthZone shall consist of 20,000,000 shares of
HealthZone Common Stock and 5,000,000 shares of preferred stock. As of the such
date, (i) 2,222,222 shares of HealthZone Common Stock shall be issued and
outstanding (including the shares issued pursuant hereto), all of which shall be
validly issued, fully paid and nonassessable, and (ii) no shares of preferred
stock shall be issued and outstanding. Except as set forth in Schedule 2.3(b),
as of the date hereof, no options or warrants to purchase HealthZone Common
Stock have been granted or are outstanding. Except as set forth on Schedule
2.3(b), and except as described above or contemplated hereby, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of HealthZone or
obligating HealthZone to issue or sell any shares of capital stock of, or other
equity interests in, HealthZone. All shares of HealthZone's capital stock
subject to issuance, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Schedule
2.3(b), there are no shareholder agreements, voting trusts or other agreements
relating to voting or disposition of any shares of HealthZone's capital stock or
granting to any person or group of persons the right to elect, or to designate
or nominate for election, a director to HealthZone's board of directors.
6
<PAGE>
2.4 AUTHORITY RELATIVE TO THE TRANSACTION AGREEMENTS. The
Company has all necessary corporate power and authority to execute and deliver
the Transaction Documents, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated thereby (the "Transactions").
The execution and delivery of the Transaction Documents and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the
part of the Company are necessary to authorize the Transaction Documents or to
consummate the Transactions. The Transaction Documents have been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Investor, constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and to general principles of equity.
2.5 MATERIAL CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS.
(a) The term "Material Contracts" shall mean each agreement, contract
or other instrument (including all amendments thereto) to which the Company is a
party or by which the Company is bound which would require the Company to pay in
excess of $100,000 in the aggregate, or which provides that the Company will
receive more than $100,000 in the aggregate, or which would otherwise obligate
the Company to provide services or products with an aggregate value of in excess
of $100,000.
(b) Neither the Company nor, to the knowledge of the Company, any
party other than the Company, is in default in any material respect in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any Material Contract to which the Company
is a party. All of the Material Contracts are in full force and effect, and are
the valid, legal and binding obligations of the Company, and, to the Company's
knowledge, all of the other parties thereto.
(c) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not (i) conflict
with or violate the Articles of Incorporation or bylaws of the Company, (ii)
conflict with or violate in any material respect any foreign or domestic
(federal, state or local) law, statute, ordinance, rule, regulation, permit,
injunction, writ, judgment, decree or order ("Law") applicable to the Company or
by which any asset of the Company is bound or affected, or (iii) materially
conflict with, result in any material breach of or constitute a material default
(or an event that with notice or lapse of time or both would become a material
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or require any material payment under, or
result in the creation of a lien, claim, security interest or other charge or
encumbrance on any material asset of the Company pursuant to, any Material
Contract.
(d) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval,
7
<PAGE>
authorization or permit of, or filing with or notification to, any United States
(federal, state or local) or foreign government or governmental, regulatory or
administrative authority, agency, commission, board, bureau, court or
instrumentality or arbitrator of any kind ("Governmental Authority"), except (i)
for applicable requirements, if any, of the Securities Act of 1933, as amended
(the "Exchange Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and state securities laws, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not preventconsummation of the Transactions or otherwise
prevent the Company from performing its obligations under this Agreement.
2.6 FINANCIAL STATEMENTS.
(a) Omni has heretofore made available to Investor a true and complete
copy of the unaudited financial statements of Omni contained in its quarterly
report on Form 10-Q for the quarter ended September 30, 1999 (the "September 30
Financials"), and the audited financial statements of the Company contained in
its annual report on Form 10-K for the fiscal year ended December 31, 1998, as
amended (the "1998 Financials," and, together with the September 30 Financials,
the "Financials"). The Financials fairly present, in all material respects, the
financial position and results of operations of Omni as at the respective dates
thereof and for the respective periods indicated therein, subject, in the case
of the financial statements dated as of and for the fiscal period ended
September 30, 1999, to normal recurring year-end adjustments and the absence of
notes.
(b) Except as and to the extent set forth on, or reserved against on,
the balance sheet of Omni as of September 30, 1999 contained in the Financials,
Omni has no liability or obligation of any nature (whether accrued, absolute,
contingent, fixed, liquidated, unliquidated or otherwise) as of the date of
execution and delivery of this Agreement that would be required to be reflected
on, or reserved against in, a balance sheet of Omni, or in the notes thereto,
prepared in accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business since
September 30, 1999.
(c) Except in each case as disclosed in the Financials, the Company is
not indebted to any director or executive officer of the Company (except for
amounts due as normal salaries and bonuses or in reimbursement of ordinary
expenses) and except as disclosed in the Financials no such person is indebted
to the Company.
(d) The information contained in all reports or other filings filed by
or on behalf of the Company or its predecessors (including Irwin Naturals 4
Health, Irwin Naturals/4health Inc., or 4 Health, Inc.) with the Securities and
Exchange Commission on or after January 1, 1998, as each may have been amended
prior to the January 21, 2000, is true and correct, and does not contain any
misrepresentation of a material fact, or any omission to state a material fact
which, in light of the circumstances made, was necessary to make the statements
contained in such reports or other filings not misleading.
8
<PAGE>
(e) HealthZone has heretofore made available to Investor a true and
complete copy of the unaudited financial statements of HealthZone as of
September 30, 1999. Such financial statements fairly present, in all material
respects, the financial position and results of operations of HealthZone as at
the respective dates thereof and for the respective periods indicated therein,
subject, in the case of the financial statements dated as of and for the fiscal
period ended September 30, 1999, to normal recurring year-end adjustments and
the absence of notes.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30,
1999, except as contemplated by this Agreement, the Company has conducted its
business only in the ordinary course and in a manner consistent with past
practice and, since such date to the date hereof, there has not been (a) any
material change by the Company in its accounting methods, principles or
practices, (b) any revaluation by the Company of any material asset (including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable), other than in the ordinary course of business
consistent with past practice, (c) entry by the Company into any commitment or
transaction material to the Company, except in the ordinary course of business
and consistent with past practice, or (d) any agreement by the Company to take
any of the actions described in this Section 2.7 except as expressly
contemplated by this Agreement, other than for such events that would not,
individually or in the aggregate, have a Material Adverse Effect.
2.8 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY ASSETS. The Company is the exclusive owner
of all Intellectual Property Assets, or has the full right to own, use and
exploit such assets, subject to the lien of First Source Financial. The term
"Intellectual Property Assets" includes all of the following which are owned,
used or licensed by the Company and which are material to the conduct of the
Company's business:
(i) all trademarks, service marks, trade and trading names,
logos, marketing symbols, fictional business names, and all protective
properties therefor, including trademark and service mark registrations and
applications therefor (collectively, "Marks"); and
(ii) all know-how, trade secrets, confidential information,
customer lists, software, technical and business information and data, process
specifications, plans, diagrams, drawings, and blue prints (collectively, "Trade
Secrets");
(b) AGREEMENTS. The Company is not obligated to pay royalties or
license fees to any person other than for royalties and license fees which the
Company is obligated to pay in the ordinary course of its business and for
licenses implied by the sale of a product and perpetual paid-up licenses for
commonly available software.
9
<PAGE>
(c) TRADEMARKS.
(i) The Company is the owner of all right, title and interest
in and to each of its Marks, free and clear of all encumbrances, subject to the
lien of First Source Financial.
(ii) To the Company's knowledge, no Mark is infringed or has
been challenged or threatened in any way. To the Company's knowledge, none of
the Marks used by the Company infringes or is alleged to infringe any trade
name, trademark, or service mark or designation of origin of any third party.
2.9 LITIGATION. As of the date of this Agreement, except as set
forth in Schedule 2.9 hereto or in the Company's quarterly report on Form 10-Q
for the fiscal quarter ended September 30, 1999, there is no suit, claim,
action, proceeding or investigation pending, or, to the Company's best
knowledge, threatened against the Company.
2.10 BROKERS. Except as contemplated hereunder, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company.
2.11 SHARES FULLY PAID, ETC. The shares of Securities to be sold
to Investor pursuant hereto, when issued and paid for pursuant to the terms of
this Agreement and the Warrants, will be duly authorized, validly issued and
outstanding, fully paid and nonassessable and shall be free and clear of all
pledges, liens, encumbrances and restrictions. The common stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants, when issued in
accordance with the terms of thereof, will be duly authorized, validly issued
and outstanding, fully paid, nonassessable and free and clear of all pledges,
liens, encumbrances and restrictions.
2.12 SHARES OF COMMON STOCK. The outstanding shares of common
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable, and, assuming the accuracy and completeness of the
representations and warranties of the Investors herein, have been issued in full
compliance with the Securities Act, the corporations code of the Company's state
of incorporation and any other applicable blue sky laws.
2.13 EMPLOYEE BENEFIT PLAN. Each employee benefit plan which
covers employees of the Company has been maintained in compliance in all
material respects with all applicable laws.
2.14 INSURANCE. The Company is insured with reputable insurers
against such risks and in such amounts as are prudent in accordance with
industry practices. All of the insurance policies, binders or bonds maintained
by the Company (the "Policies") have been maintained in accordance with their
respective terms and will remain in full force and effect after the Closing. The
Company has not received any notice of default with respect to any provision of
any such Policies.
10
<PAGE>
SECTION III. REPRESENTATIONS OF THE INVESTOR.
3.1 INVESTOR REPRESENTS THAT:
(a) INVESTMENT INTENT.
(i) The Securities being acquired by Investor are being
acquired for investment for Investor's own account and not with the view to, or
for resale in connection with, any distribution or public offering thereof. Such
Investor understands that the Securities have not been registered under the
Securities Act or any state or foreign securities laws (collectively,
"Securities Laws") by reason of their contemplated issuance in transactions
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof and applicable Securities Laws, and that the reliance of
the Company and others upon these exemptions is predicated in part upon this
representation by Investor. Such Investor further understands that the
Securities may not be transferred or resold and agrees not to transfer or resell
the Securities without (i) registration under the Securities Laws, or (ii) an
exemption from the registration requirements of the Securities Laws.
(ii) Each certificate representing Securities shall be endorsed
with the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
OR BLUE SKY OR FOREIGN SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER SUCH SECURITIES LAWS OR THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER SUCH SECURITIES LAWS IS NOT REQUIRED.
3.2 LOCATION OF PRINCIPAL OFFICE, ACCESS TO INFORMATION,
ABILITY TO ACCEPT RISK OF INVESTMENT. The state in which Investor's principal
office (or domicile, if such Investor is an individual) is located is
California. Investor acknowledges that the Company has made available to
Investor at a reasonable time prior to the execution of this Agreement the
opportunity to ask questions and receive answers concerning the Company, its
financial condition, business and prospects and the terms and conditions of the
sale of Securities contemplated by this Agreement and to obtain any additional
information (which the Company possesses or can acquire without unreasonable
effort or expense) as may be necessary to verify the accuracy of information
furnished to Investor. Investor (a) is able to bear the loss of its entire
investment in the Securities without any material adverse effect on its
business, operations or prospects, and (b) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment to be made by it pursuant to this Agreement.
11
<PAGE>
3.3 ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary action on the part of Investor, has been duty
executed and delivered by Investor, and is a valid and binding agreement of
Investor.
3.4 ACCREDITED INVESTOR. The Investor is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act.
3.5 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. CFE is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and American Equities is a limited liability company duly
organized, validly existing and in good standing under the laws of California,
and each of them has the requisite power and authority and all necessary
governmental approvals to enter into and perform this Agreement and the
Transaction Documents to which they are parties and to own, lease and operate
its properties and to carry on its business as it is now being conducted. The
Investors have no subsidiaries.
3.6 ARTICLES OF INCORPORATION AND BYLAWS. The organizing
documents of Investor are in full force and effect. As of the date of this
Agreement, the Investor is not in violation of any of the provisions of its
organizing documents or of any material contract to which either of them is a
party.
3.7 AUTHORITY RELATIVE TO THE TRANSACTION AGREEMENTS. The
Investor has all necessary legal power and authority to execute and deliver this
Agreement and the Transaction Documents to which they are parties, to perform
its obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement and the consummation by the Investor of the
Transactions have been duly and validly authorized by all necessary legal action
and no other proceedings on the part of the Investor are necessary to authorize
this Agreement or to consummate the Transactions. This Agreement and the
Transaction Documents to which they are parties have been duly and validly
executed and delivered by the Investor and, assuming the due authorization,
execution and delivery by the Company, constitutes the legal, valid and binding
obligation of the Investor, enforceable against the Investor in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity.
3.8 NO CONFLICT. The execution and delivery of this Agreement
and the Transaction Documents to which they are parties by the Investor does
not, and the performance of this Agreement and the Transaction Documents to
which they are parties by the Investor will not (i) conflict with or violate the
organizing documents of the Investor, or (ii) conflict with or violate any Law
applicable to the Investor or by which any asset of the Investor is bound or
affected or (iii) materially conflict with, or result in any material breach or
constitute a material default (or an event that with or without notice or the
passage of time would become a material default) under any material contract to
which Investor is subject or its properties are bound.
12
<PAGE>
3.9 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Investor.
3.10 LITIGATION. As of the date of this Agreement, there is no
suit, claim, action, proceeding or investigation pending, or, to the Investor's
knowledge, threatened, against the Investor which would impede the ability of
the Investor to enter into this Agreement and consummate the transactions
contemplated hereby.
SECTION IV. CONDITIONS OF INVESTOR'S OBLIGATION
4.1 FIRST TRANCHE. The obligation to purchase and pay for the
Securities which Investor has agreed to purchase on the First Tranche Closing
Date is subject to the fulfillment prior to or on the First Tranche Closing
Date, of the conditions set forth in this Section 4.1.
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company under this Agreement which are qualified as to materiality shall
have been true and correct (as so qualified) when made and shall be true and
correct (as so qualified) at and as of the Closing Date, as if made on and as of
such date. The representations and warranties of the Company under this
Agreement which are not qualified as to materiality shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date, as if made on and as of such
date.
(b) COMPLIANCE WITH AGREEMENT. The Company shall have performed and
complied with all agreements or covenants required by this Agreement to be
performed and complied with by it prior to or as of the Closing Date.
(c) INJUNCTIONS, RESTRAINING ORDER OR ADVERSE LITIGATION. No order,
judgment or decree of any court, arbitral tribunal, administrative agency or
other governmental or regulatory authority or agency shall purport to enjoin or
restrain the Investor from acquiring the Securities or the Company from selling
the Securities.
(d) APPROVAL OF SCHEDULES. Investor shall have approved the schedules
attached hereto as of the Closing Date.
4.2 SECOND TRANCHE. Investor's obligation to purchase and pay
for the Second Tranche Securities on the Second Tranche Closing Date is subject
to (i) the fulfillment prior to the Second Tranche Closing Date of the
conditions set forth in Section 4.1 (other than 4.1(d)) as they apply to Omni
alone (exclusive of HealthZone), and any representations and warranties which
are being given as of a specified date will be true and correct as of such date,
(ii) the further conditions set forth in Section 1.1(d), and (iii) that Omni
shall have complied with all of its covenants and obligations under the
Transaction Documents.
13
<PAGE>
SECTION V. CONDITIONS TO COMPANY'S OBLIGATIONS.
The obligation to sell the Securities which the Company has agreed to
sell on the Closing Date is subject to the fulfillment prior to or on the
Closing Date of the conditions set forth in this Section 5.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor under this Agreement shall be true and correct in all
material respects as of the Closing Date with the same effect as though made on
and as of the Closing Date.
5.2 COMPLIANCE WITH AGREEMENT. The Investor shall have
performed and complied with all agreements or covenants required by this
Agreement to be performed and complied with by it prior to or as of the Closing
Date.
5.3 INJUNCTIONS, RESTRAINING ORDER OR ADVERSE LITIGATION. No
order, judgment, investigation or decree of any court, arbitral tribunal,
administrative agency or other governmental or regulatory authority or agency
shall purport to enjoin or restrain or impede the Investor from acquiring the
Securities or the Company from selling the Securities.
SECTION VI. CERTAIN COVENANTS OF THE INVESTOR AND THE COMPANY.
6.1 APPROVALS, ETC. Subject to the terms and conditions
provided herein, each of the parties hereto agrees to (i) use all reasonable
efforts to take all action and to do all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement; and (ii) use all reasonable efforts
to obtain all necessary or appropriate waivers contemplated by this Agreement.
6.2 WAIVER OF RIGHT TO NOMINATE AND ELECT DIRECTOR. Investor
hereby waives its right to nominate and elect a director to the Board until the
earlier of (i) the date of the next meeting of shareholders, or (ii) May 15,
2000. Omni shall not be obligated to compensate the director nominated and
elected to the Board by Investor. Omni shall use its reasonable best efforts to
amend its Bylaws to increase the number of directors on the Board to at least
six as soon as reasonably practicable.
6.3 INFORMATION RIGHTS. So long as the HealthZone Warrant
remains outstanding or Investor beneficially owns HealthZone Common Stock,
HealthZone shall permit Investor, during normal business hours and upon at least
24 hours prior written notice, to inspect the books and records of HealthZone,
and HealthZone shall deliver to Investor quarterly unaudited financial
statements of HealthZone within 45 days after the end of each fiscal quarter and
annual audited financial statements within 90 days after the end of each fiscal
year. This Section 6.3 shall not be applicable at any time during which
HealthZone is subject to the periodic reporting requirements of the Exchange
Act, and timely files all reports required thereunder.
6.4 HEALTHZONE RIGHT OF FIRST OFFER.
14
<PAGE>
(a) Prior to any sale of any securities of HealthZone, including,
without limitation, HealthZone Common Stock, preferred stock, or any securities
exercisable or exchangeable for, or convertible into, HealthZone Common Stock
(an "Issuance"), HealthZone shall, not less than 15 business days prior to such
Issuance, provide to Investor written notice of the proposed financial terms and
conditions of such issuance (the "Sale Notice"). Investor shall have 15 business
days following receipt of the Sale Notice to purchase all or any portion of such
securities upon the financial terms and conditions set forth in such Sale
Notice. In the event Investor shall not purchase all of the securities offered
to them, HealthZone shall have the right to sell up to the amount of securities
offered to Investor in the Sale Notice, upon the same terms, or upon terms more
favorable to HealthZone, for a period of 90 days following the date of the Sale
Notice.
(b) In the event that Omni shall determine to transfer, assign, sell
or otherwise distribute any shares of HealthZone Common Stock or any other
security of HealthZone at any time prior to the date which is 180 days following
the effective date of a registration statement registering a fully underwritten
initial public offering of capital stock of HealthZone (other than a sale to
Klee Irwin pursuant to Omni's presently existing "Put" rights or Mr. Irwin's
presently existing "Call" rights each as amended pursuant hereto), then, not
less than 15 business days prior to such transfer, assignment, sale or other
distribution, Omni shall provide to Investor written notice of the proposed
terms and conditions of such transfer, assignment, sale or other
distribution(the "Transfer Notice"). Investor shall have 15 business days
following receipt of the Transfer Notice to purchase all or any portion of such
securities upon the financial terms and conditions set forth in such Transfer
Notice. In the event Investor shall not purchase all of the securities offered
to them, Omni shall then offer such securities to HealthZone upon the same
financial terms and conditions contained in the Transfer Notice. If HealthZone
shall not purchase all of the securities so offered, Omni shall then have the
right to transfer, assign, sell or otherwise distribute such securities to any
third party for a period of 90 days following the date of the Transfer Notice.
6.5 MODIFICATION OF HEALTHZONE "CALL" AND "PUT" OPTION. Omni
agrees that it shall, on or prior to the Closing Date, enter into an agreement
with Mr. Klee Irwin (i) eliminating Mr. Irwin's right to call the capital stock
of HealthZone from Omni without the consent of the Investors and (ii) making
Omni's right to put it's shares of HealthZone to Mr. Irwin immediately
exercisable, subject to its right to repurchase a portion of such securities
from Mr. Irwin in accordance with that certain letter agreement of even date
herewith between Omni and Mr. Irwin.
6.6 USE OF PROCEEDS. Promptly upon Closing, Omni shall use the
proceeds of the sale of the Omni Securities to repay an amount equal to
$2,000,000 to the holder of its revolving loan, of which approximately $583,000
shall be applied to the term loan, so long as such payment shall increase the
borrowing availability under such revolving loan by at least 70% of such
payment. Omni shall use the borrowing availability created by such payment to
fund its working capital requirements. HealthZone shall use the proceeds of the
sale of the HealthZone Securities to fund its general working capital
requirements and to develop its business. Upon the consummation, by Investor of
the Second Tranche Purchase, Omni shall use $1,000,000 of the
15
<PAGE>
proceeds thereof to repay Omni's revolving loan (so long as such payment shall
increase the borrowing availability under such revolving loan by at least 90% of
such payment), and shall deliver the balance of such proceeds to HealthZone in
exchange for a promissory note, bearing interest at not more than 7% per annum,
with quarterly interest only payments, and which shall be due and payable on the
earliest to occur of (i) ten days following the date of the effectiveness of a
registration statement filed in connection with an initial public offering of
the capital stock of HealthZone, or (ii) sixty months from the date such
promissory note is issued.
6.7 COVENANTS AND AGREEMENTS IN CONNECTION WITH HEALTHZONE. In
order to induce Investor to enter into this Agreement, Omni and HealthZone
hereby agree as follows:
(a) Omni and HealthZone hereby terminate any and all agreements,
covenants or obligations between them (other than for advances by Omni to
HealthZone up to a maximum amount of $75,000), including those under any tax
sharing and indemnification agreement, any restriction, guarantee or warranty of
HealthZone made to, in favor of, or otherwise benefitting Omni or any of its
officers, directors or affiliates, including without limitation, any
obligations, agreements, covenants or restrictions contained in that certain
Settlement Agreement, made as of October 8, 1999, by and between Omni and Mr.
Klee Irwin (the "Settlement Agreement"), provided however, nothing in the
forgoing shall limit or restrict Mr. Irwin's personal obligations under the
Settlement Agreement, including, without limitation his indemnity agreements and
Omni's "put" right (but not including any restrictions relating to the
operations or management of HealthZone, including the provisions of Exhibit B to
the settlement agreement, or his rights to vote his shares of HealthZone capital
stock, all of which are hereby terminated). Notwithstanding the foregoing, it is
agreed that all directors of HealthZone shall be entitled to equal
indemnification rights, and all officers of HealthZone shall be entitled to
equal indemnification rights.
(b) Omni hereby agrees to approve any sale or issuance of equity
securities of HealthZone approved by a majority of the board of directors of
HealthZone, provided the price per equivalent share of common stock of
HealthZone shall be equal to or exceed an amount which would represent a
pre-money valuation of HealthZone of $2,300,000. Nothing herein shall imply that
any such approval of Omni shall be required prior to any such sale or issuance.
(c) Unless waived in writing by American Equities, LLC, upon the First
Tranche Closing Date, and thereafter at any time upon the request of American
Equities, LLC, Omni and HealthZone shall, and Omni hereby agrees to vote any
securities of HealthZone which it owns or controls in favor of any action
required to nominate and elect (i) a designee of American Equities, LLC as a
member of the board of directors of HealthZone, and (ii) Mr. Klee Irwin as a
member of the board of directors of HealthZone. Omni and HealthZone agree not to
increase the number of directors on the HealthZone board of directors to a
number greater than three without the prior written consent of American
Equities, LLC. Omni agrees that it shall not take any action which would cause
the removal of (i) any director designated by American Equities, LLC or (ii) Mr.
Klee Irwin from the board of directors of HealthZone.
16
<PAGE>
(d) After the First Tranche Closing Date, so long as Omni shall own
50% or more of the common stock of HealthZone on a fully diluted basis,
HealthZone shall not incur any indebtedness for borrowed money (other than
purchase money financing) in excess of $75,000 without the consent of Omni,
which shall not be unreasonably withheld.
6.8 CHARTER AMENDMENTS. Omni and HealthZone shall file
amendments to their respective Articles of Incorporation as contemplated herein
within 10 days following the Closing Date.
VII. INDEMNIFICATION; REMEDIES
7.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement and any certificate or document delivered pursuant to this Agreement
will survive the Closing and will expire on the second anniversary of the First
Tranche Closing Date. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
7.2 INDEMNIFICATION. Each of the parties hereto (as applicable,
the "Indemnifying Party") will indemnify and hold harmless the other party and
its respective representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by the
Indemnifying Party in this Agreement or any other certificate or document
delivered by the Indemnifying Party pursuant to this Agreement;
(b) any breach of any representation or warranty made by the
Indemnifying Party in this Agreement as if such representation or warranty were
made on and as of the Closing Date;
(c) any breach by the Indemnifying Party of any covenant or obligation
of the Indemnifying Party in this Agreement;
17
<PAGE>
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with the Indemnifying Party (or any
person acting on its behalf) in connection with any of the Transactions.
The remedies provided in this Section 7.2 will not be exclusive of or limit any
other remedies that may be available to Investor or the other Indemnified
Persons.
7.3 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an the Indemnified Party under this
Section 7 of notice of the commencement of any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced or brought against it (a
"Proceeding"), such the Indemnified Party will, if a claim is to be made against
an the Indemnifying Party under such Section, give notice to the Indemnifying
Party of the commencement of such claim, but the failure to notify the
Indemnifying Party will not relieve the Indemnifying Party of any liability that
it may have to any the Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that the defense of such action is prejudiced by
the Indemnifying Party's failure to give such notice.
(b) If any Proceeding referred to in Section 7.3(a) is brought against
an the Indemnified Party and it gives notice to the Indemnifying Party of the
commencement of such Proceeding, the Indemnifying Party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
Indemnifying Party is also a party to such Proceeding and the Indemnified
Party's counsel determines in good faith that joint representation would be
inappropriate, or (ii) the Indemnifying Party fails to provide reasonable
assurance to the Indemnified Party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel reasonably satisfactory to
the Indemnified Party and, after notice from the Indemnifying Party to the
Indemnified Party of its election to assume the defense of such Proceeding, the
Indemnifying Party will not, as long as it diligently conducts such defense, be
liable to the Indemnified Party under this Section 7 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the Indemnified Party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
Indemnifying Party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the Indemnifying
Party without the Indemnified Party's consent (which shall not be unreasonably
withheld) unless (1) there is no finding or admission of any violation of law,
statute, rule, regulation, order or decree or any violation of the rights of any
person or entity and no effect on any other claims that may be made against the
Indemnified Party, and (2) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party; and (iii) the Indemnified Party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an the
18
<PAGE>
Indemnifying Party of the commencement of any Proceeding and the Indemnifying
Party does not, within ten days after the Indemnified Party's notice is given,
give notice to the Indemnified Party of its election to assume the defense of
such Proceeding, the Indemnifying Party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the Indemnified
Party.
(c) The Indemnifying Party hereby consents to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agrees that process may be served on the Indemnifying Party with
respect to such a claim anywhere in the world.
7.4 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
7.5 LIMITATION ON INDEMNIFICATION RIGHTS. Notwithstanding
anything in this Section 7 to the contrary, an Indemnifying Party shall not be
required to indemnify any Indemnified Party for any consequential, special or
punitive damages, and its obligation to indemnify the Indemnified Parties shall
be limited to the amount of the aggregate Purchase Price for the Securities. An
Indemnifying Party shall only be required to indemnify any Indemnified Party if
the amount of Damages which such Indemnifying Party is obligated to pay
hereunder exceeds $25,000 individually or in the aggregate
SECTION VIII. MISCELLANEOUS.
8.1 NO WAIVERS; CUMULATIVE REMEDIES. No failure or delay on the
part of the Investor in exercising any right, power or remedy hereunder or under
any Transaction Document shall operate as waiver thereof; nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder or thereunder. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
8.2 CHANGES, WAIVERS, ETC. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
8.3 EXPENSES. Each party shall pay its own expenses in
connection with the Transactions contemplated hereby and by the Transaction
Documents, except that Omni shall pay to American Equities the sum of $15,000
upon closing to defray transaction costs incurred by American Equities.
19
<PAGE>
8.4 NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail.
(a) if to Investor, addressed to such Investor at its address as shown
on the books of the Company, or at such other address as such holder may specify
by written notice to the Company; or
(b) if to the Company, at
5310 Beethoven Street
Los Angeles, California 90066
Telecopier: (310) 306-4840
Attention: Chief Executive Officer
, or; or at such other address as the Company may specify by written notice to
the Investor.
8.5 ASSIGNMENT.
(a) This Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(b) Investor may assign its rights under this Agreement to any of its
affiliates only upon receipt of the prior written consent of the Company. Any
such permitted assignee will be required to make the identical representations,
warranties and agreements as made by the Investors herein.
8.6 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
8.7 ENTIRE AGREEMENT. This Agreement and exhibits and schedules
hereto and the other Transaction Documents contain the entire agreement between
the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
8.8 GOVERNING LAW. The internal law, without regard to
conflicts of laws principles, of the State of California shall govern all
questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement.
20
<PAGE>
8.9 COUNTERPARTS. This Agreement may be executed concurrently
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(Signature Pages Follow)
21
<PAGE>
IN WITNESS WHEREOF, the Company and the Investor have caused this
Agreement to be executed by its duly authorized representative.
THE COMPANY:
OMNI NUTRACEUTICALS, INC. HEALTHZONE.COM
a Utah corporation a California corporation
By: /s/ Louis Mancini By: /s/ Klee Irwin
--------------------------------- ------------------------------
Louis Mancini Name: Klee Irwin
President Title:
INVESTOR:
AMERICAN EQUITIES, LLC CORPORATE FINANCIAL ENTERPRISES, INC.
a California limited liability company a Delaware corporation
By: /s/ Reid Breitman By: /s/ Regis Possino
--------------------------------- ------------------------------
Reid Breitman Regis Possino
President President
22
<PAGE>
SCHEDULE 1.1(a)
OMNI PREFERRED STOCK:
1,800,000 shares to American Equities, LLC
1,200,000 shares to Corporate Financial Enterprises, Inc.
OMNI WARRANTS:
405,000 warrants to American Equities, LLC
370,000 warrants to Corporate Financial Enterprises, Inc.
SCHEDULE 1.1(b)
HEALTHZONE COMMON STOCK:
133,333 shares to American Equities, LLC
88,889 shares to Corporate Financial Enterprises, Inc.
HEALTHZONE WARRANTS:
22,200 warrants to American Equities, LLC
14,800 warrants to Corporate Financial Enterprises, Inc.
23
<PAGE>
SCHEDULE 2.3(a)
OUTSTANDING OPTIONS 4,104,172
OUTSTANDING WARRANTS
Allen & Company Warrants to
acquire 1,000,000
shares of common
stock at $6.00 per
share, expiring
2002; Warrants to
acquire 250,000
shares of common
stock at $4.00 per
share, expiring
2002.
Michael Driver Warrants to
acquire 250,000
shares of common
stock at $4.00 per
share; expiring
December 31, 2005.
COMMITMENTS TO ISSUE ADDITIONAL SHARES AND OPTIONS
Dr. Dean Pasha (European Joint Venture)
Shares due upon closing $700,000 of shares
Shares issuable upon achieving
earnings benchmarks 700,000
Number of options to acquire shares
at $3.50 per share 250,000
Mr. Michael Driver (consulting services) 70,000 shares;
payable 5,000
shares a quarter
until December 31,
2002.
SHAREHOLDERS AND VOTING RIGHTS AGREEMENTS
On October 8, 1999, the Company and Mr. Klee Irwin entered into a settlement
agreement (the "Settlement Agreement') in order to resolve certain mutual
claims that had arisen between the Company and Mr. Irwin. In connection with
the settlement, Mr. Irwin and Omni's chairman R. Lindsey Duncan, who together
own approximately 74% of the outstanding shares of voting capital stock of
Omni, each entered into a five-year voting agreement pursuant to which Mr.
Irwin has agreed to certain stand-still provisions and he and Mr. Duncan have
agreed to vote their respective shares of Omni common stock for their
respective nominees for Class I and II directors and the candidate for Class
III director nominated by the two Class II directors.
24
<PAGE>
SCHEDULE 2.3(b)
OUTSTANDING OPTIONS AND WARRANTS OF HealthZone.com
None.
AGREEMENTS RELATING TO THE ISSUED OR UNISSUED SHARES OF HealthZone.com
On October 8, 1999, the Company and Mr. Klee Irwin entered into a
settlement agreement (the "Settlement Agreement') in order to resolve certain
mutual claims that had arisen between the Company and Mr. Irwin. In
connection with the settlement,
(a) The Company granted Mr. Irwin a "call" option on the Company's
shares of HealthZone for the greater of $2.3 million or
HealthZone's market value commencing March 31, 2000 if the
spin-off is not consummated before then.
(b) Mr. Irwin granted the Company a "put" option on its shares of
HealthZone for $2.3 million commencing June 1, 2000 if the
spin-off is not consummated before then or the Company's shares
of HealthZone are not sold for at least $2,300,000.
25
<PAGE>
SCHEDULE 2.9
LITIGATION
On December 23, 1999, a lawsuit was filed against the Company, the
Company's former President and Chief Executive Officer, Klee Irwin, and the
Company's current President, Louis Mancini, entitled DAVID MANDEL, JEFFREY D.
SEGAL AND GORDON D. BARKER V. OMNI NUTRACEUTICALS, INC., KLEE IRWIN, LOUIS
MANCINI AND DOES 1 THROUGH 50 (Superior Court of the State of California,
County of Los Angeles -- Central District, Case No. BC222263). The lawsuit
includes various causes of action, including fraud, negligent
misrepresentation, misappropriation of trade secrets, unjust enrichment,
unfair business practices and violations of the Racketeer Influenced and
Corrupt Organizations Act (RICO) (under which triple damages have been
claimed). The lawsuit is based on various alleged claims, including that the
plaintiffs, the sole shareholders of Health & Vitamin Express ("HVE"), were
fraudulently induced to enter into a merger agreement pursuant to which HVE
became a wholly owned subsidiary of the Company based on false
representations of the defendants. The lawsuit does not specify the amount
of damages claimed. The Company believes that the claims made in the lawsuit
are without merit and that it has meritorious defenses to each claim. The
Company intends to vigorously defend itself against the lawsuit. Pursuant to
the terms of a Settlement Agreement dated October 8, 1999 by and among the
Company and Mr. and Mrs. Irwin, Mr. Irwin agreed to assume the defense of
this lawsuit and has indemnified the Company and its officers, directors and
shareholders from all uninsured liability incurred in connection therewith.
26
<PAGE>
EXHIBIT A
PERFORMANCE TARGETS
<TABLE>
<CAPTION>
<S> <C>
Sales Target for the six months ended June 30, 2000 $23,064,000
Performance Target x 90%
-----------
$20,757,600
-----------
-----------
</TABLE>
27
<PAGE>
EXHIBIT 4.09
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 24, 2000, between
Omni Nutraceuticals, Inc., a Utah corporation (together with any successors, the
"Corporation"), and Corporate Financial Enterprises, Inc., a Delaware
corporation ("CFE"), and American Equities, LLC, a California limited liability
company ("AELLC," and, together with CFE, "Investor").
The Investors own 3,000,000 shares (and may acquire an additional
1,500,000 shares) of the Company's 5% Convertible Preferred Stock, Series A (the
"Preferred Stock"), which are convertible into shares of Common Stock (as
defined) of the Corporation, warrants to purchase up to 775,000 shares of Common
Stock, and up to 782,000 shares of Common Stock to be designated by CFE. The
Corporation and the Investors deem it to be in their respective best interests
to set forth the rights of the Investors in connection with public offerings and
sales of shares of Common Stock and are entering into this Agreement as a
condition to and in connection with the Securities Purchase Agreement (as
defined).
NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Corporation and the
Investor hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "COMMON STOCK" shall mean the Common Stock, $0.01 par
value per share, of the Corporation.
(b) "COMMISSION" shall mean the Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act.
(c) "PREFERRED STOCK" shall mean the Company's 5%
Convertible Preferred Stock.
(d) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934 or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
(e) "INFORMATION" has the meaning ascribed thereto in
SECTION 6(i).
(f) "INITIAL PUBLIC OFFERING" means the first underwritten
public offering of Common Stock for sale to the public for the account of the
Corporation and offered on a "firm commitment" or "best efforts" basis pursuant
to an offering registered with the Commission under the Securities Act.
(g) "INSPECTORS" has the meaning ascribed thereto in
SECTION 6(i).
<PAGE>
(h) "INVESTOR" shall mean the Investors or any successor to,
or assignee or transferee of, Investors.
(i) "INVESTORS' COUNSEL" has the meaning ascribed thereto in
SECTION 6(b).
(j) "MAJORITY INVESTORS" has the meaning ascribed thereto in
SECTION 2(d).
(k) "MATERIAL TRANSACTION" means any material transaction in
which the Corporation or any of its Subsidiaries proposes to engage or is
engaged, including a purchase or sale of assets or securities, financing,
merger, consolidation, tender offer or any other transaction that would require
disclosure pursuant to the Exchange Act, and with respect to which the board of
directors of the Corporation reasonably has determined in good faith that
compliance with this Agreement may reasonably be expected to either materially
interfere with the Corporation's or such Subsidiary's ability to consummate such
transaction in a timely fashion or require the Corporation to disclose material,
non-public information prior to such time as it would otherwise be required to
be disclosed.
(l) "OTHER SHARES" shall mean at any time those shares of
Common Stock which do not constitute Primary Shares or Registrable Shares.
(m) "PERSON" shall be construed as broadly as possible and
shall include, without limitation, an individual, a partnership, an investment
fund, a limited liability company, a corporation, an association, a joint shares
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
(n) "PRIMARY SHARES" shall mean at any time authorized but
unissued shares of Common Stock or shares of Common Stock held by the
Corporation in its treasury.
(o) "REGISTRABLE SHARES" shall mean any Restricted Shares or
Warrant Securities.
(p) "RESTRICTED SHARES" means, at any time, with respect to
any Investor, shares of Common Stock then owned by such Investor, as well as
shares of Common Stock issued or issuable upon conversion of Preferred Stock,
and includes: (i) Common Stock which may be issued as a dividend or
distribution; (ii) any other securities which by their terms are exercisable or
exchangeable for or convertible into Common Stock issued or issuable upon
conversion of the Preferred Stock; and (iii) any securities received in respect
of, or upon exercise, exchange or conversion of, the foregoing, in each case in
CLAUSES (i) through (iii) which at any time are held by such Investor, or any
transferee of Investor. As to any particular shares of Restricted Shares, such
shares shall cease to be shares of Restricted Shares when: (A) they have been
registered under the Securities Act, the registration statement in connection
therewith has been declared effective and they have been disposed of pursuant to
and in the manner described in such effective registration statement; (B) they
are sold or distributed pursuant to Rule 144 or
2
<PAGE>
may be sold or distributed by the holder thereof pursuant to Rule 144(k); (C)
they have been otherwise transferred and new certificates or other evidences of
ownership for them not bearing a restrictive legend and not subject to any stop
transfer order or other restriction on transfer have been delivered by the
Corporation or the issuer of other securities issued in exchange for the shares
of Restricted Shares; or (D) they have ceased to be outstanding.
(q) "REGISTRATION DATE" shall mean the date upon which the
registration statement pursuant to which the Corporation shall have initially
registered shares of Common Stock under the Securities Act for sale to the
public shall have been declared effective.
(r) "RULE 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule thereto
(such as Rule 144A).
(s) "SECURITIES ACT" shall mean the Securities Act of 1933
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
(t) "STOCK PURCHASE AGREEMENT" shall mean the Stock Purchase
Agreement, dated as of the date hereof, between the Corporation and the
Investors (as the same may be amended, restated, supplemented or otherwise
modified from time to time).
(u) "SUBSIDIARY" means, with respect to any Person, any
other Person of which the securities having a majority of the ordinary voting
power in electing the board of directors (or other governing body) of such other
Person, at the time as of which any determination is being made, are owned by
such first Person either directly or through one or more of its Subsidiaries.
(v) "WARRANT SECURITIES" means the shares of Common Stock
purchasable or purchased from time to time under the warrants issued pursuant to
the Warrant Agreement, dated as of the date hereof, between the Company and the
Investors, or acquirable or acquired upon any transfer of such warrants,
together with all additional securities receivable or received in payment of
dividends or distributions on or splits of those securities or received as a
result of adjustments provided for in said Warrant Agreement.
SECTION 2. DEMAND REGISTRATION.
If the Corporation shall, at any time after one year following the
date hereof be requested by the holders of at least 50% of the Restricted Shares
issued and sold by the Corporation pursuant to the Stock Purchase Agreement and
then outstanding (on a Common Stock equivalent basis) to effect a single
registration under the Securities Act of Registrable Shares constituting at
least 25% of the Registrable Securities, the Corporation shall, within 120 days
of such request, effect the registration under the Securities Act of the
Registrable Shares which the Corporation has been so requested to register;
PROVIDED, HOWEVER, that the Corporation shall not be obligated to effect any
registration under the Securities Act except in accordance with the following
provisions:
3
<PAGE>
(a) The Corporation may delay the filing or effectiveness of
any registration statement for a period of up to 120 days after the date of a
request for registration pursuant to this SECTION 2 if at the time of such
request (i) the Corporation is engaged, or has fixed plans to engage within 120
days after the date of such request, in a firm commitment underwritten public
offering of Primary Shares in which the holders of Registrable Shares may
include Registrable Shares pursuant to SECTION 3 or (ii) a Material Transaction
exists, PROVIDED that the Corporation may only so delay the filing or
effectiveness of its registration statements (if any) once in any 12-month
period pursuant to this SECTION 2(a).
(b) With respect to any registration pursuant to this
SECTION 2, the Corporation may include in such registration any Primary Shares
or Other Shares; PROVIDED, HOWEVER, that, if the managing underwriter advises
the Corporation that the inclusion of all Registrable Shares, Primary Shares and
Other Shares proposed to be included in such registration would interfere with
the successful marketing (including pricing) of the Registrable Shares proposed
to be included in such registration, then the number of Registrable Shares,
Primary Shares and Other Shares proposed to be included in such registration
shall be included in the following order:
(i) FIRST, the Registrable Shares requested to
be included in such registration (or, if necessary, such Registrable
Shares PRO RATA among the holders thereof based upon the number of
Registrable Shares requested to be registered by each such holder);
(ii) SECOND, the Primary Shares; and
(iii) THIRD, the Other Shares.
(c) At any time before the registration statement covering
Registrable Shares becomes effective, either Investors holding a majority of the
Registrable Shares requested to be registered (the "MAJORITY INVESTORS") may
request the Corporation to withdraw or not to file the registration statement or
the Corporation may withdraw or not file the registration if in the reasonable
judgement of the Corporation's Board of Directors such withdraw or failure to
file is reasonably required to comply with applicable laws or the interpretation
of the Staff of the Commission or to avoid a substantial liability (other than
expenses of such registration) which would have a material adverse effect on the
Corporation's financial condition; provided, however, that the Corporation shall
refile such registration statement within 180 days of the Corporation's withdraw
or determination not to file. In that event, if such request of withdrawal by
the Majority Investors shall not have been caused by the Corporation or its
financial condition, the holders shall have used their demand registration
rights under this SECTION 2 and the Corporation shall no longer be obligated to
register Registrable Shares pursuant to the exercise of such registration right
pursuant to this SECTION 2 and the expenses incurred by the Corporation through
the date of such request shall be reimbursed. In the event the Corporation shall
withdraw or fail to file the registration statement, the holders shall not have
used their demand registration rights under this SECTION 2 and shall be entitled
to reimbursement of their expenses through the date of such withdrawal or
failure to file. A registration shall not count as
4
<PAGE>
a registration statement initiated pursuant to SECTION 2(a) unless it becomes
effective and the selling holders are able to sell at least 80% of their
Registrable Shares requested to be included in such registration statement, or
except as otherwise provided in this Section 2(c).
(d) Notwithstanding anything in Section 2, 3 or 4 provided
to the contrary, the Corporation's obligation to register shares of Common Stock
under the Securities Act hereunder shall be suspended during any time (i) such
shares of Common Stock are registered pursuant to a then effective registration
statement under the Act or (ii) the Registrable Securities become eligible for
sale pursuant to Rule 144(k).
SECTION 3. PIGGYBACK REGISTRATION.
If the Corporation at any time proposes for any reason to register
shares of Common Stock under the Securities Act (other than on Form S-4, F-4 or
S-8 promulgated under the Securities Act or any successor forms thereto), it
shall promptly give written notice to the Investor of its intention to so
register such shares and, upon the written request, delivered to the Corporation
within 30 days after delivery of any such notice by the Corporation, of the
Investor to include in such registration Registrable Shares and/or Warrant
Securities (which request shall specify the number of Registrable Shares and/or
Warrant Securities proposed to be included in such registration), the
Corporation shall cause all such Registrable Shares and/or Warrant Securities to
be included in such registration on the same terms and conditions as the
securities otherwise being sold in such registration; PROVIDED, HOWEVER, that,
if the managing underwriter advises the Corporation that the inclusion of all
Registrable Shares and/or Warrant Securities requested to be included in such
registration would interfere with the successful marketing (including pricing)
of the Primary Shares or Other Shares proposed to be registered by the
Corporation, then the number of Primary Shares, Registrable Shares, Warrant
Securities and Other Shares proposed to be included in such registration shall
be included in the following order of priority:
(i) FIRST, the Primary Shares;
(ii) SECOND, the Registrable Shares and Warrant
Securities requested to be included in such registration (or, if
necessary, PRO RATA among the holders thereof, based upon the number
of Registrable Shares and Warrant Securities requested to be
registered by each such holder); and
(iii) THIRD, the Other Shares.
SECTION 4. REGISTRATIONS ON FORM S-3.
Anything contained in SECTION 2 to the contrary notwithstanding, at
such time as the Corporation shall have qualified for the use of Form S-3
promulgated under the Securities Act or any successor form thereto, the Investor
shall have the right to request in writing one registration on Form S-3 (or any
successor form thereto) of Registrable Shares and/or Warrant
5
<PAGE>
Securities within any 12-month period, which request or requests shall: (i)
specify the number of Registrable Shares and/or Warrant Securities intended to
be sold or disposed of and the holders thereof; (ii) state the intended method
of disposition of such Registrable Shares and/or Warrant Securities; and (iii)
relate to Registrable Shares and/or Warrant Securities having an aggregate gross
offering price of at least $500,000. A requested registration in compliance with
this SECTION 4 shall not count as a registration statement initiated pursuant to
SECTION 2, so long as such registration remains current and effective.
SECTION 5. REQUIRED REGISTRATION.
The Company shall, within 90 days of the date hereof (the "Required
Filing Date"), file a registration statement covering the Common Stock
underlying the Preferred Stock and the Warrants. Such registration statement
shall be effective within 150 days of the date hereof (the "Required Effective
Date"). If, for any reason, such registration statement is not filed within such
90 day period, or declared effective within such 150 day period, the holders of
the Preferred Stock and Warrants shall be entitled to liquidated damages equal
to 0.067% of the purchase price of the Preferred Stock pursuant to the Stock
Purchase Agreement for each day following the Required Filing Date and/or
Required Effective Date until the registration statement is declared effective
("Delay Damages"). The Company shall pay all registration expenses (other than
commissions and selling expenses) associated with such registration, and shall
keep such registration statement effective and current for a period of not less
than the sooner of (i) two years from the date of this Agreement, or (ii) the
date on which all the shares of Common Stock registered under such registration
statement have been disposed or (iii) the date on which such shares of Common
Stock become eligible for sale pursuant to Rule 144(k) or its equivalent. No
other securities will be included in the registration statement other than the
securities described above without the written consent of Investor, other than
the shares of Common Stock described on Exhibit A attached hereto. The Company
shall amend such registration statement to include the Common Stock underlying
any additional shares of Preferred Stock purchased by Investor pursuant to the
Stock Purchase Agreement.
SECTION 6. PREPARATION AND FILING.
If, and whenever, the Corporation is under an obligation pursuant to
this Agreement to effect the registration of any Registrable Shares, the
Corporation shall, as expeditiously as practicable:
(a) cause a registration statement that registers such
Registrable Shares to become and remain effective for a period of one year or
such earlier period in which all of such Registrable Shares have been disposed
of or become eligible for sale pursuant to Rule 144(k) or its equivalent;
(b) furnish, at least five business days before filing a
registration statement that registers such Registrable Shares, a prospectus
relating thereto or any amendments or supplements relating to such a
registration statement or prospectus, to one counsel selected by the Majority
Investors (the "INVESTORS' COUNSEL"), copies of all such documents proposed to
be
6
<PAGE>
filed (it being understood that such five-business-day period need not apply to
successive drafts of the same document proposed to be filed so long as such
successive drafts are supplied to the Investors' Counsel in advance of the
proposed filing by a period of time that is customary and reasonable under the
circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least a period of one year or such earlier period in which all of such
Registrable Shares have been disposed of or become eligible for sale pursuant to
Rule 144(k) or its equivalent and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of such Registrable
Shares;
(d) notify in writing the Investors' Counsel promptly of (i)
the receipt by the Corporation of any notification with respect to any comments
by the Commission with respect to such registration statement or prospectus or
any amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) the receipt by the Corporation of any notification with respect to
the issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or prospectus or any amendment or supplement thereto
or the initiation or threatening of any proceeding for that purpose (and the
Corporation shall use its best efforts to prevent the issuance thereof or, if
issued, to obtain its withdrawal) and (iii) the receipt by the Corporation of
any notification with respect to the suspension of the qualification of such
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purposes;
(e) register or qualify such Registrable Shares under such
other securities or blue sky laws of such jurisdictions as the Investor
reasonably requests, to keep such registrations or qualifications in effect for
so long as the registration statement covering such Registrable Shares remains
in effect and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Investor to consummate the disposition in
such jurisdictions of the Registrable Shares owned by the Investor; provided,
however, the Corporation shall not be required to qualify to do business in any
such jurisdictions;
(f) furnish to the Investor or other holders of such
Registrable Shares such number of copies of a summary prospectus, if any, or
other prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such Investor or
holders may reasonably request in order to facilitate the public sale or other
disposition of such Registrable Shares;
(g) cause such Registrable Shares to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Corporation to enable the
Investor or other holders of such Registrable Shares to consummate the
disposition of such Registrable Shares;
7
<PAGE>
(h) notify on a timely basis the Investor or other holders
of such Registrable Shares at any time when a prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act within
the appropriate period mentioned in SUBSECTION (a) of this SECTION 6, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of the Investor or other holders
of Registrable Shares, prepare and furnish to Investor or such other holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the offerees
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(i) make available upon reasonable notice and during normal
business hours, for inspection by the Investor or other holders of such
Registrable Shares any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent retained
by the Investor or underwriter (collectively, the "INSPECTORS"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Corporation (collectively, the "RECORDS"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Corporation's officers, directors and employees to supply all information
(together with the Records, the "INFORMATION") reasonably requested by any such
Inspector in connection with such registration statement. Any of the Information
which the Corporation determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors, unless (i) the disclosure of such Information is necessary to avoid
or correct a misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or (iii) such Information has been made
generally available to the public through no breach of any duty owed the
Corporation. The Investors agree that they will, upon learning that disclosure
of such Information is sought in a court of competent jurisdiction, give notice
to the Corporation and allow the Corporation, at the Corporation's expense, to
undertake appropriate action to prevent disclosure of the Information deemed
confidential;
(j) use its best efforts to obtain from its independent
certified public accountants "COLD COMFORT" letters in customary form and at
customary times and covering matters of the type customarily covered by cold
comfort letters;
(k) use its best efforts to obtain from its counsel an
opinion or opinions in customary form, naming the Investor as an additional
addressee or party who may rely thereon;
(l) provide a transfer agent and registrar (which may be the
same entity and which may not be the Corporation) for such Registrable Shares;
8
<PAGE>
(m) issue to any underwriter to which the Investor holding
such Registrable Shares may sell shares in such offering certificates evidencing
such Registrable Shares;
(n) list such Registrable Shares on any national securities
exchange on which any shares of Common Stock are listed or, if shares of Common
Stock are not listed on a national securities exchange, use its best efforts to
qualify such Registrable Shares for inclusion on the automated quotation system
of the National Association of Securities Dealers, Inc. (the "NASD"), or such
other national securities exchange as the holders of a majority of such
Registrable Shares shall reasonably request and provided that the Corporation
meets the listing criteria of such exchange; and
(o) otherwise comply with all applicable rules of the
Commission, and timely file all reports required to be filed pursuant to the
Securities and Exchange Act of 1934, as amended; and
(p) use its best efforts to take all other commercially
reasonable steps necessary to effect the registration of such Registrable Shares
contemplated hereby.
Each holder of Registrable Shares which are being or have been
registered pursuant to this Agreement shall provide to the Corporation, upon the
request of the Corporation, such written information and materials as the
Corporation may reasonably request in order to effect or maintain such
registration. Each holder of Registrable Shares, upon receipt of any notice from
the Corporation of any event of the kind described in SECTION 6(h), shall
forthwith discontinue the disposition of such Registrable Shares pursuant to the
registration statement covering such Registrable Shares until such holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
SECTION 6(h), and, if so directed by the Corporation, such holder shall deliver
to the Corporation all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering such Registrable Shares at the
time of receipt of such notice.
SECTION 7. EXPENSES.
All expenses (other than underwriting discounts and commissions
relating to the Registrable Shares, as provided in the last sentence of this
SECTION 7) incurred by the Corporation or any Investor in complying with this
Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NYSE, AMEX, NASD and other
domestic or foreign exchanges, as applicable), fees and expenses of complying
with securities and blue sky laws, printing expenses, fees and expenses of the
Corporation's counsel and accountants and fees and expenses of one legal counsel
for the Investors (the "Investors' Counsel"), shall be paid by the Corporation;
PROVIDED, HOWEVER, that all underwriting discounts and selling commissions (but
not non-accountable expense allowances) applicable solely to the Registrable
Shares and Other Shares shall be borne by the holders selling such Registrable
Shares and Other Shares, in proportion to the number of Registrable Shares and
Other Shares sold by each such holder.
9
<PAGE>
SECTION 8. INDEMNIFICATION.
(a) To the extent permitted by law, in connection with any
registration of any Registrable Shares under the Securities Act pursuant to this
Agreement, the Corporation shall indemnify and hold harmless each holder of
Registrable Shares and any other Person acting on behalf of the holders of
Registrable Shares and each other Person, if any, who controls any of the
foregoing Persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several (or actions in respect
thereof), to which any of the foregoing Persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or allegedly untrue statement of a material fact contained in
the registration statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein or otherwise filed with the Commission, any amendment or
supplement thereto or any document incident to registration or qualification of
any Registrable Shares, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or, with respect to
any prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Corporation of the Securities Act or state securities or blue sky laws
applicable to the Corporation and relating to action or inaction required of the
Corporation in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse the holders of
Registrable Shares, such other Person acting on behalf of the holders of
Registrable Shares and each such controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Corporation shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action (including any legal or other
expenses incurred) arises out of or is based upon an untrue statement or
allegedly untrue statement or omission or alleged omission made in said
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document incident to registration or qualification of any
Registrable Shares in reliance upon and in conformity with written information
furnished to the Corporation through an instrument duly executed by the holders
of Registrable Shares specifically for use in the preparation thereof;
(b) To the extent permitted by law, in connection with any
registration of Registrable Shares under the Securities Act pursuant to this
Agreement, each seller of Registrable Shares shall severally and not jointly
indemnify and hold harmless (in the same manner and to the same extent as set
forth in SECTION 8(a)) the Corporation, each director of the Corporation, each
officer of the Corporation who shall sign such registration statement, each
underwriter, broker or other Person acting on behalf of the holders of
Registrable Shares and each Person who controls any of the foregoing Persons
within the meaning of the Securities Act with respect to any statement or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, if such statement or omission was made
in reliance upon and in
10
<PAGE>
conformity with written information furnished to the Corporation or such
underwriter through an instrument duly executed by such seller specifically for
use in connection with the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment, supplement or document;
PROVIDED, HOWEVER, that the maximum amount of liability in respect of such
indemnification shall be in proportion to and limited to, in the case of each
seller of Registrable Shares, an amount equal to the net proceeds actually
received by such seller (i) from the sale of Registrable Shares effected
pursuant to such registration and (ii) any Delay Damages.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in SECTIONS 8(a)
and 8(b), such indemnified party will, if a claim in respect thereof is made
against an indemnifying party, give written notice to the latter of the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; PROVIDED, HOWEVER, that, if any indemnified party shall have
reasonably concluded that there may be one or more legal or equitable defenses
available to such indemnified party which are additional to or conflict with
those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this SECTION 8, then the indemnifying party shall not have
the right to assume the defense of such action on behalf of such indemnified
party and such indemnifying party shall reimburse such indemnified party and any
Person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which is reasonably
related to the matters covered by the indemnity agreement provided in this
SECTION 8. The indemnifying party shall not be liable to indemnify any
indemnified party for any settlement of any claim or action effected without the
consent of the indemnifying party, which consent may not be unreasonably
withheld. The indemnifying party may not settle any claim or action brought
against an indemnified party unless such indemnified party is released from all
and any liability as part of such settlement.
(d) If the indemnification provided for in this SECTION 8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or action referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amounts paid or payable by such
indemnified party as a result of such loss, claim, damage, liability or action
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations; PROVIDED, HOWEVER, that, if the circumstances described in
either proviso of SECTION 8(a) apply to the indemnified party, then the
indemnifying party shall not be obligated to contribute with respect to such
loss, claim, damage, liability or action to the extent set forth in
11
<PAGE>
such proviso. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Corporation and the sellers of Registrable Shares
agree that it would not be just and equitable if contribution pursuant to
SECTION 8(d) were determined by PRO RATA allocation (even if the holders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in SECTIONS 8(c) and 8(c). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in SUBSECTION (d) of this SECTION 8 shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
SECTION 9. UNDERWRITING AGREEMENT.
Notwithstanding the provisions of SECTIONS 5, 6, 7 and 8, to the
extent that the sellers of Registrable Shares shall enter into an underwriting
or similar agreement, which agreement contains provisions covering one or more
issues addressed in such Sections, the provisions contained in such agreement
addressing such issue or issues shall control; PROVIDED, HOWEVER, that any such
agreement to which the Corporation is not a party shall not be binding upon the
Corporation.
SECTION 10. OBLIGATIONS OF THE INVESTORS.
(a) Each seller of Registrable Shares shall furnish to the
Corporation such written information regarding such seller and the distribution
proposed by the sellers as the Corporation may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
(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 Statement(s) 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, thereby waiving its
rights to have its Registrable Securities registered thereunder.
(c) In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
12
<PAGE>
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s), thereby waiving its
rights to have its Registrable Securities registered thereunder.
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 6(h), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement(s) covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(h) and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) all copies in such Investor's possession of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
relating to such underwritten registration, (ii) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, lock-up agreements
for periods up to 180 days, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements, and (iii)
agrees to pay its pro rata share of all underwriting discounts and commissions.
SECTION 11. EXCHANGE ACT COMPLIANCE.
From the Registration Date or such earlier date as a registration
statement filed by the Corporation pursuant to the Securities Act relating to
any class of the Corporation's securities shall have become effective, the
Corporation shall comply with all of the reporting requirements of the Exchange
Act applicable to it (whether or not it shall be required to do so) and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Shares. The Corporation shall cooperate with the Investor in
supplying such information as may be necessary for the Investor to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
SECTION 12. MERGERS, ETC.
The Corporation shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Corporation shall not be
the surviving corporation unless the surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of the Corporation under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to include the
common stock, if any, that holders of Registrable Shares would be entitled to
receive in exchange for Common Stock under any such merger, consolidation or
reorganization; PROVIDED, HOWEVER, that,
13
<PAGE>
to the extent holders of Registrable Shares receive securities that are by their
terms convertible into common stock of the issuer thereof, then only such shares
of common stock as are issued or issuable upon conversion of said convertible
securities shall be included within the definition of "Registrable Shares."
SECTION 13. NEW CERTIFICATES.
As expeditiously as possible after the effectiveness of any
registration statement filed pursuant to this Agreement, the Corporation will
deliver in exchange for any legended certificate evidencing Restricted Shares so
registered, new stock certificates not bearing any restrictive legends, PROVIDED
that, in the event less than all of the Restricted Shares evidenced by such
legended certificate are registered, the holder thereof agrees that a new
certificate evidencing such unregistered shares will be issued bearing the
appropriate restrictive legend.
SECTION 14. NO CONFLICT OF RIGHTS.
The Corporation represents and warrants to the Investor that the
registration rights granted to the Investor hereby do not conflict with any
other registration rights granted by the Corporation. The Corporation shall not,
after the date hereof, grant any registration rights which conflict with or
impair the registration rights granted hereby.
SECTION 15. TERMINATION.
This Agreement shall terminate and be of no further force or effect
on the date on which all the Registrable Shares have been registered under the
Securities Act and have been disposed or have become eligible for sale under
Rule 144(k) or its equivalent.
SECTION 16. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and inure to the benefit of the
Corporation and the Investor and, subject to SECTION 17, the respective
successors and assigns of the Corporation and the Investor.
SECTION 17. ASSIGNMENT.
Investor may assign its rights hereunder to any purchaser or
transferee of Registrable Shares, whereupon such purchaser or transferee shall
have the benefits of, and shall be subject to the restrictions contained in,
this Agreement as if such purchaser or transferee was originally included in the
definition of "Investor" herein and had originally been a party hereto. Within a
reasonable time following such assignment, the assignee shall provide to the
Corporation a written notice of the name and address of such transferee or
assignee, and such other information as the Corporation may reasonably request.
14
<PAGE>
SECTION 18. SEVERABILITY.
It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 19. ENTIRE AGREEMENT.
This Agreement and the other writings referred to therein or
delivered pursuant thereto, contain the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
SECTION 20. NOTICES.
All notices, requests, demands, claims, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, telecopied, sent by internationally-recognized overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to the Corporation, to:
Omni Nutraceuticals, Inc.
5310 Beethoven Street
Los Angeles, California 90066
Telecopier: (310) 306-4840
Attention: Chief Executive Officer
(ii) If to Investor, to:
Corporate Financial Enterprises, Inc.
2224 Main Street
Santa Monica, California 90405
Telecopy: (310) 581-6806
15
<PAGE>
And:
American Equities, LLC
3172 Abington Drive
Beverly Hills, California 90210
Telecopy: (310) 785-0040
All such notices and other communications shall be deemed to have
been given and received (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of delivery by
internationally-recognized overnight courier, on the first business day
following such dispatch and (c) in the case of mailing, on the third business
day following such mailing.
SECTION 21. MODIFICATIONS; AMENDMENTS; WAIVERS.
The terms and provisions of this Agreement may not be modified or
amended, nor may any provision be waived, except pursuant to a writing signed by
the Corporation and the holders of at least a majority of the Registrable Shares
then outstanding; PROVIDED, HOWEVER, that no such modification, amendment or
waiver that would treat any holder of Registrable Shares then outstanding in a
non-ratable, discriminatory manner shall be made without the prior written
consent of such holder. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
SECTION 22. COUNTERPARTS; FACSIMILE SIGNATURES.
This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement. A facsimile
counterpart signature to this Agreement shall be acceptable if the originally
executed counterpart is delivered within a reasonable period thereafter.
SECTION 23. HEADINGS.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
SECTION 24. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with
the domestic laws of the State of California, without giving effect to any
choice of law or conflicting provision or rule.
16
<PAGE>
SECTION 25. JURISDICTION AND VENUE.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself or himself and its or his property, to the
non-exclusive jurisdiction of any California court or federal court of the
United States of America sitting in the State of California, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such California court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Should any party
institute any action, suit or other proceeding arising out of or relating to
this Agreement, the prevailing party shall be entitled to receive from the
losing party reasonable attorneys' fees and costs incurred in connection
therewith, along with all costs of defense, investigation, preparation, experts
and collection.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it or he may legally and
effectively do so, any objection that it or he may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
the Agreement in any of the courts referred to in SECTION 25(a). Each of the
parties hereto irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) The parties further agree that the mailing by certified
or registered mail, return receipt requested, of any process required by any
such court shall constitute valid and lawful service of process against them,
without the necessity for service by any other means provided by law.
SECTION 26. WAIVER OF JURY TRIAL.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.
* * * * *
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
Omni Nutraceuticals, Inc.
By: /s/ Louis Mancini
------------------------------
Louis Mancini
Chief Executive Officer
American Equities, LLC
By: /s/ Reid Breitman
------------------------------
Reid Breitman
President
Corporate Financial Enterprises, Inc.
By: /s/ Regis Possino
------------------------------
Regis Possino
President
18
<PAGE>
EXHIBIT A
SHARES OF COMMON STOCK OF OMNI
NUTRACEUTICALS, INC. TO BE REGISTERED
1. All common shares owned by Klee and Margareth Irwin.
2. 25,000 shares issued to Joe Theisman.
3. $700,000 of shares to be issued to Dr. Dean Pasha (or his designee) in
connection with the proposed Passion/Omni joint venture.
4. 25,000 shares each to be issued to Andy Vollero, Sandy Panzarella and
Jonathan Diamond, the Company's Independent Directors.
5. Shares issuable to Mike Driver under his existing consulting agreement
(not to exceed 75,000 shares).
6. All shares to be issued under the Company's Stock Option plan.
7. An aggregate of 600,000 shares to be designated by Corporate Financial
Enterprises.
<PAGE>
EXHIBIT 4.10
WARRANT AGREEMENT
among
OMNI NUTRACEUTICALS, INC.
and
AMERICAN EQUITIES, LLC
and
CORPORATE FINANCIAL ENTERPRISES, INC.
Dated as of January 24, 2000
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is dated as of January 24,
2000, and executed by and among Omni Nutraceuticals, Inc., a Utah corporation
(the "Company"), American Equities, LLC, a California limited liability company
("American Equities"), and Corporate Financial Enterprises, Inc. ("CFE," and,
together with American Equities, the "Investor").
WHEREAS, the Company has agreed to grant to Investor or its assigns
common stock purchase warrants in substantially the form attached hereto as
EXHIBIT A hereto (the "WARRANTS") to acquire up to an aggregate of 775,000
shares of the Company's Common Stock (the "Exercise Quantity"). This Agreement
sets forth certain rights and obligations of the Company and Investor with
respect to the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements contained in this
Agreement, the parties hereto agree as follows:
I. DEFINITIONS
Section 1.01 DEFINED TERMS. As used in this agreement, the
following capitalized terms shall have the meanings respectively assigned to
them below, which meanings shall be applicable equally to the singular and
plural forms of the terms so defined.
"COMMON STOCK" shall mean the common stock, par value $0.01, of
the Company.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants
(including, without limitation, the Warrants), securities of any kind
(including, without limitation, securities convertible into or exchangeable or
exercisable for Common Stock) and other rights (in each case whether now
existing or hereafter issued or arising) to acquire from the Company shares of
Common Stock (without regard to whether such options, warrants, securities and
other rights are then exchangeable, exercisable or convertible in full, in part
or at all).
"COMPANY" shall have the meaning set forth in the preamble.
"DIVIDEND" means, as to any Person, any declaration or payment of
any dividend or distribution (other than a dividend of Common Stock) on any
shares of capital stock of such Person.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and any successor
provisions thereto.
2
<PAGE>
"EXERCISE PRICE" shall have the meaning given in each Warrant. The
Exercise Price and the number of shares of Common Stock purchasable pursuant to
the Warrants shall be subject to adjustment from time to time as hereinafter set
forth in Article V hereof.
"EXPIRATION PERIOD" means January 24, 2007.
"EXERCISE QUANTITY" shall mean the number of shares of Common
Stock, determined from time to time, taking into account all shares of Common
Stock theretofore issued upon exercise of the Warrants, required to be issued by
the Company to the holders of the Warrants. Exercise Quantity shall initially
have the meaning given in each Warrant, and may be adjusted from time to time,
pursuant to the provisions of the Warrants and this Agreement.
"FAIR VALUE" as of a particular date shall mean, with respect to
the Common Stock, the closing asked price of the Common Stock as reported on a
national securities exchange or on the NASDAQ SmallCap, National Market System
or OTC Bulletin Board Service (collectively, and as applicable, "NASDAQ") or, if
a last asked quotation is not available for the Common Stock, the last sale
price of the Common Stock as reported by NASDAQ, or if not so reported, as
listed in the National Quotation Bureau, Inc.'s "Pink Sheets." If such
quotations are unavailable, or with respect to other appropriate security,
property, assets, business or entity, "Fair Value" shall mean the fair value of
any such item as determined by mutual agreement reached by the Holder and the
Company in good faith or, in the event the parties are unable to agree, an
opinion of an independent investment banking firm or firms in accordance with
the following procedure. In the case of any event which gives rise to a
requirement to determine "Fair Value" pursuant to this Agreement, the Company
shall notify the Holders of such event as promptly as practicable, but in any
event within ten (10) calendar days following such event and if the procedures
contemplated herein in connection with determining Fair Value have not been
complied with fully, then any such determination of Fair Value for any purpose
of this Agreement shall be deemed to be preliminary and subject to adjustment
pending full compliance with such procedures.
After the giving of such notice, the Company and the Holders shall
engage in direct good faith discussions to arrive at a mutually agreeable
determination of Fair Value. In the event the Company and the Holder(s) are
unable to arrive at a mutually agreeable determination within ten (10) days of
the notice, the Company and the Holder(s) of the Warrants (if more than one, the
Holders of a majority of the outstanding Warrants) shall retain an accounting
firm of national reputation mutually acceptable to the parties, or, if mutual
agreement is not reached within 15 days of the notice described above, KPMG, LLP
or, if KPMG, LLP is unavailable or unable to accept such engagement,
PricewaterhouseCoopers, LLP. Such firm shall determine the Fair Value of the
security, property, assets, business or entity, as the case may be, in question
and deliver its opinion in writing to the Company and to such Holder(s) within
thirty (30) days of its retention. Each of the Company and the Holders (as a
group) shall submit to such investment banking firm their proposed determination
of Fair Value, and any other supporting documentation reasonably requested by
the investment banking firm. The determination so made shall be conclusive and
binding on the Company and such Holder(s), absent clear and
3
<PAGE>
manifest error. The fees and expenses of such investment banking firm retained
pursuant to this provision shall be borne 50% by the Company and 50% by the
Holders in advance.
"HOLDER" or "HOLDERS" shall mean the Person(s) then registered as
the owners of the Warrants on the books and records of the Company.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or political
subdivision or agency thereof.
"REGISTRABLE SECURITIES" shall have the meaning assigned to it in
SECTION 6.01 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and any successor
provisions thereto.
"SUBSIDIARY" of any Person means (i) a corporation, association or
other business entity of which more than 50% of the total voting power of all
classes of the outstanding voting stock or other indicia of ownership is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof, (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof) and (iii) any other Person not described in clauses (i)
and (ii) above in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, owns 50% ownership and the power, whether by such ownership
interest, pursuant to a written contract or agreement or otherwise, to direct
the policies and management or the financial and other affairs thereof.
"WARRANT SECURITIES" shall mean the shares of Common Stock
purchasable or purchased from time to time under the Warrants, together with all
additional securities receivable or received in payment of Dividends or
distributions on or splits of those securities or receivable or received as a
result of adjustments provided for in ARTICLE V hereof.
II. WARRANTS
Section 2.01 GRANT OF WARRANTS. The Company hereby grants to
Investor, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Warrants to purchase a number of shares of Common
Stock equal to the Exercise Quantity, as may be adjusted from time to time as
set forth herein, which Warrants shall be evidenced in substantially the form
attached as Exhibit A. Investor and any subsequent Holder of the Warrants and of
Warrant Securities shall have the rights and obligations provided for in the
Warrants and in this Agreement.
4
<PAGE>
Section 2.02 EXERCISE OF WARRANTS. Subject to the terms of this
Agreement, the Warrant holder shall have the right, at any time and from time to
time until 5:00 p.m., Pacific Time, on January 24, 2007, to purchase from the
Company up to the number of fully paid and nonassessable shares of Warrant
Securities to which the Warrant holder may at the time be entitled to purchase
pursuant to this Agreement and the Warrant, upon presentation and surrender of
the Warrant to the Company, together with the Exercise Form duly completed and
executed and payment in the aggregate amount equal to the Exercise Price
multiplied by the number of shares of Common Stock being purchased. Payment of
the Exercise Price shall be made by bank or certified check payable to the order
of the Company or wire transfer; PROVIDED, HOWEVER, that the Holder shall have
the right to pay the exercise price by surrender to the Company of a number of
shares of Common Stock with a Fair Value equal to the exercise price. Within
five business days of the Company's receipt of the Warrant, the completed and
signed Exercise Form and the requisite payment, the Company shall issue and
deliver (or cause to be delivered) to the exercising Holder stock certificates
aggregating the number of shares of Warrant Securities purchased. In the event
the Company fails to deliver or cause to be delivered to the Holder such
certificates (without legend or restriction if such Warrant Securities are then,
or are required to be, registered pursuant to the Warrant Agreement) within such
five business day period, the Company shall pay to the Holder an amount equal to
the greater of (i) $250 per calendar day, (ii) the product of (x) the last sale
price on the date the certificates are properly issued and delivered to the
Holder, less the last sale price on the date of the Exercise Form, multiplied by
(y) the number of shares of Warrant Securities purchased as set forth in the
Exercise Form, or (iii) the quotient of (x) the last reported sale price on the
day prior to the date of the Exercise Form, multiplied by the number of shares
of Warrant Securities issuable to such Holder upon such exercise, divided by (y)
200 (the "Delay Damages"), for each day after the fifth business day following
the delivery of the Warrant and such Exercise Form to the Company through and
including the day such certificates (without legend or restriction if such
Warrant Securities are then, or are required bo be, registered pursuant to the
terms of the Warrant Agreement) are delivered to the Holder at the address set
forth in such Exercise Form; provided, however, notwithstanding the foregoing,
no Delay Damages shall accrue or shall be due and payable if the Warrant
Securities have not been registered under the Securities Act, unless either (i)
the Company shall not have registered such Warrant Securities on or prior to
June 24, 2000, or (ii) the Warrant Securities would otherwise be freely
tradeable upon exercise of the Warrant. In the event the Company restricts or
delays the transfer or clearance of such certificates by the Holder (whether by
stop transfer order, unreasonable delay or otherwise), the Company shall pay to
the Holder the Delay Damages for each calendar day of such restriction or delay.
Section 2.03 PARTIAL EXERCISE. In the event of a partial exercise of
the Warrant, the Company shall issue and deliver to the Holder a new Warrant at
the same time such stock certificates are delivered, which new Warrant shall
entitle the Holder to purchase the balance of the Exercise Quantity not
purchased in that partial exercise and shall otherwise be upon the same terms
and provisions as the Warrant.
Section 2.04 MANDATORY EXERCISE. In the event that an Arbitral Award is
issued in favor of the Company pursuant to the arbitration provisions of Section
1.1(d) of that certain Stock
5
<PAGE>
Purchase Agreement by and among the Company and American Equities LLC and
Corporate Financial Enterprises, Inc. of even date herewith, then all
outstanding Warrants issued pursuant to the provisions of this Agreement shall
be deemed to have been immediately exercised in accordance with the provisions
hereof effective the date of such Arbitral Award as if the Holders had exercised
their Warrants on such date and paid the exercise price by surrendering to the
Company that number of shares of Common Stock with a Fair Value equal to the
exercise price. The Holders shall then be entitled to be issued their shares of
Warrant Securities so purchased against presentation and surrender of their
Warrants to the Company. All such Warrants shall be deemed to be of no further
force and effect except as evidence of the Holder's right to receive his Warrant
Securities upon such exercise.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, hereby represents and warrants as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of Utah, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform all its
obligations under the contracts to which it is a party. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, including, without limitation,
California.
(b) The execution and delivery of this Agreement and the Warrants have
been duly and properly authorized by all requisite corporate action of the
Company and its board of directors, and no consent of any other Person is
required as a prerequisite to the validity, enforceability and performance of
this Agreement and the Warrants that has not been obtained. The Company has the
full legal right, power and authority to execute and deliver this Agreement and
the Warrants and to perform its obligations hereunder and thereunder. When
issued and delivered pursuant to this Agreement, the Warrants will have been
duly and validly executed, issued and delivered and will constitute valid and
legally binding obligations of the Company and the Holder thereof will be
entitled to the benefits provided herein and therein.
(c) The Warrant Securities, when issued, sold and delivered in
accordance with the terms hereof, for the consideration expressed herein, shall
be duly and validly issued and outstanding, fully paid and nonassessable, and
will be issued in compliance with all applicable federal and state securities or
blue sky laws.
(d) The Company is not a party to or otherwise subject to any contract
or agreement which restricts or otherwise affects its right or ability to
execute and deliver this Agreement or the Warrants or to perform any obligation
hereunder or thereunder (including, without limitation, issuance of the Warrant
Securities). Neither the execution or delivery of this Agreement or the
6
<PAGE>
Warrants, nor compliance therewith (including, without limitation, issuance of
the Warrant Securities), will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any material lien upon any assets or
properties of the Company under, or require any consent, approval, or other
action by, notice to or filing with any court or governmental agency or division
pursuant to the Articles of Incorporation or Bylaws of the Company, as currently
in effect, any award of any arbitrator, or any agreement, instrument or law to
which the Company is subject or by which it or its assets or properties is
bound.
(e) The Warrants are, and the Warrant Securities will be, issued by
the Company to Investor in a transaction exempt from registration and
qualification under the applicable federal and state securities and blue sky
laws.
IV. COVENANTS
Section 4.01 COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees that, during the term of this Agreement, unless Holders of outstanding
Warrants evidencing a majority of the Warrants agree otherwise in writing,
(a) Each of the Warrant Securities issued and delivered upon the
exercise of the Warrants and payment of the Exercise Price will be duly and
validly authorized and issued, will be fully paid and nonassessable, and will
not be subject to any unpaid tax of the Company or any lien imposed on or
created by the Company, whether respecting their issuance to and purchase by the
Holder of the Warrants or otherwise. The Company will take all such actions as
may be necessary to assure that all such Warrant Securities may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange or quotation system upon which
such Warrant Securities may be listed.
(b) The Company shall reserve and at all times keep available for
issuance an authorized number of shares of Common Stock or Warrant Securities
sufficient to permit the full and immediate exercise of the Warrants.
(c) The Company shall not permit the par value of its Common Stock to
exceed, at any time, the Exercise Price and shall take all such actions as may
be necessary or appropriate to ensure that it does not do so.
(d) As soon as available, and in no event later than three business
days after the dates filed with the Securities and Exchange Commission (the
"Commission") or any other governmental agency or division or other regulatory
authority, if such documents are so filed, the Company shall, upon request,
deliver to any Holder(s) copies of (i) all annual, quarterly and monthly
financial statements made available by the Company to its shareholders, (ii) all
reports, notices and proxy or information statements sent or made available
generally by the Company to its shareholders, and (iii) all regular and periodic
reports and all registration statements,
7
<PAGE>
prospectuses and other information filed by the Company with the Commission,
relevant state authorities or any securities exchange, securities quotation
system or other self-regulatory organization other than publicly available
materials.
(e) The Company agrees that to the extent reasonably necessary to
permit the Holders to sell shares of the Common Stock in accordance with and in
reliance on Rule 144, and for so long as such shares are owned by the Holders
and such shares are not registered for resale under the Securities Act, the
Company will make and keep public information available within the meaning of
Rule 144 at all times from and after the Closing Date, and file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act.
(f) The Company shall cooperate with the Holder(s) in supplying such
information as may be reasonably necessary for the Holder(s) to complete and
file any information or other reporting forms from time to time required by the
Commission, relevant state authorities or any securities exchange, securities
quotation system or other self-regulatory organization, including, without
limitation, information pertaining to or required for the availability of any
exemption from the securities laws for the sale, transfer or other disposition
of the Warrants or any of the Warrant Securities.
Section 4.02 INDEMNIFICATION.
(a) The Company agrees to defend, indemnify and hold harmless, to the
full extent permitted by law, Investor and each other Holder of the Warrants,
this Agreement, or any Warrant Security purchased hereunder, any underwriter(s),
and their respective directors, officers, employees, attorneys and agents, as
well as each other Person (if any) controlling any of the foregoing Persons
within the meaning of Section 15 of the Securities Act, or Section 20 of the
Exchange Act, from and against any and all claims, liabilities, losses and
expenses (including, without limitation, the reasonable disbursements, expenses
and fees of their respective attorneys, accountants and experts) that may be
imposed upon, incurred by, or asserted against any of them, any of their
respective directors, officers, employees, attorneys and agents, or any such
control Person, under the Securities Act, the Exchange Act or any other statute
or at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof), arise out of or are related directly or indirectly
to the breach of any of the representations, warranties and/or covenants of the
Company contained herein and shall reimburse such Persons for any legal or any
other expenses reasonably incurred by such Persons in connection with
investigating or defending any such loss, claim, damage, liability or action.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such indemnified Person, and shall
survive the transfer of such securities by such Person. Promptly after receipt
of notice of the commencement of any action in respect of which indemnity
may be sought against the Company, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel of national
reputation and presence, and who shall be reasonably satisfactory to the party
seeking indemnity hereunder) and the payment of expenses insofar as such action
shall relate to any alleged liability in respect of which indemnity
8
<PAGE>
may be sought against the Company. If the Company assumes the defense of such
action, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that action are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims
may be effected by the Company without the indemnified party's consent (which
shall not be unreasonably withheld) unless (1) there is no finding or
admission of any violation of law, regulation, rule or order or any violation
of the rights of any other person or entity and no effect on any other claims
that may be made against the indemnified party, and (2) the sole relief
provided is monetary damages that are paid in full by Company; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
the Company of the commencement of any action and the Company does not,
within ten days after the indemnified party's notice is given to the Company,
give notice to the indemnified party of its election to assume the defense of
such action, the Company will be bound by any determination made in such
action or any compromise or settlement effected by the indemnified party.
(b) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a claim or action may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, or if an
indemnified party determines that there are defenses available to it that are
either not available to the Company or not being raised by the Company, or if
the indemnified party determines that there is a conflict of interest between
the Company and the indemnified party in the claim or action, the indemnified
party may, by notice to the Company and an opinion of counsel concurring with
such indemnified party's determination, assume the exclusive right to defend,
compromise, or settle such claim or action, and the Company will be bound by any
determination of a claim or action so defended or any compromise or settlement
effected.
Section 4.03 LISTING ON THE SECURITIES EXCHANGE. The Company shall, at
its expense, use its best efforts to list on NASDAQ or any securities exchange
where it lists its Common Stock, and maintain and increase when necessary such
listing of all outstanding Warrant Securities so long as any shares of Common
Stock shall be so listed. The Company shall also use its best efforts to list on
each such securities exchange or NASDAQ, and will maintain such listing of, any
other securities issued by the Company which the Holder(s) shall be entitled to
receive upon the exercise thereof if at the time any securities of the same
class shall be listed on such securities exchange or NASDAQ by the Company.
V. ANTIDILUTION
Section 5.01 NO DILUTION OR IMPAIRMENT: ADJUSTMENTS.
(a) PROHIBITED ACTIONS. So long as any Warrants are outstanding, the
Company will not avoid or seek to avoid the observance or performance of any of
the terms of this Agreement or the Warrants or impair the ability of the
Holder(s) to realize the full intended economic value thereof, but will at all
times in good faith assist in the carrying out of all such terms, and of the
9
<PAGE>
taking of all such action as may be necessary or appropriate, consistent with
the provisions of this Warrant Agreement, in order to protect the rights of the
Holder(s) of the Warrants against dilution or other impairment.
(b) ADJUSTMENT OF EXERCISE PRICE IN THE EVENT OF CERTAIN ISSUANCES OF
COMMON STOCK OR COMMON STOCK EQUIVALENTS. In case the Company shall at any time
issue or sell Common Stock or Common Stock Equivalents (by merger otherwise) for
less than Fair Value as of the date of such issuance or at a price per share
less than the then current Exercise Price of the Warrants (other than (i)
delivery of shares of Common Stock upon exercise of the Warrants or conversion
of the 5% Convertible Preferred Stock, Series A (the "Series A Preferred
Stock"), (ii) any Common Stock Equivalents issued and outstanding on the date
hereof and (iii) up to 2,000,000 employee or other stock awards granted after
January 24, 1999 under the Company's Long Term Stock Incentive Plan, as amended
from time to time), or issue Common Stock or Common Stock Equivalents by way of
a Dividend or other distribution on any stock of the Company (other than the
Series A Preferred Stock) or effect a forward stock split of the outstanding
shares of Common Stock, the Exercise Price then in effect shall be
proportionately decreased (on the date of such issuance, sale or split), so that
the new Exercise Price shall be equal to the product of (x) the former Exercise
Price and (y) the lesser of (i) one or (ii) a fraction, the numerator of which
shall be (1) the number of shares of Common Stock outstanding immediately prior
to such issuance or sale (including shares of Common Stock issuable upon
conversion of any outstanding securities convertible or exchangeable into Common
Stock), plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of shares of Common
Stock or Common Stock Equivalents so issued or sold would purchase at the Fair
Value of such shares, and (y) the denominator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
(including shares of Common Stock issuable upon conversion of any outstanding
securities convertible or exchangeable into Common Stock), plus (2) the number
of such shares of Common Stock so issued or sold. The Exercise Quantity
purchasable upon exercise of the Warrants immediately prior thereto shall be
adjusted so that the new Exercise Quantity shall be equal to the product of (x)
the former Exercise Quantity and (y) the following fraction:
THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
------------------------------------------------------------------
The Exercise Price in effect immediately after such adjustment
(c) COMPANY TO PREVENT DILUTION. In any case at any time or from time
to time conditions arise by reason of action taken by the Company which are not
adequately covered by the provisions of this Article V, and which might
adversely affect the rights of the Holders under any provision of this
Agreement, the Board of Directors of the Company shall make such adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Article V, as is necessary with respect to the Exercise Price
and the Exercise Quantity, so as to preserve, without dilution, the rights of
the Holders. Except as expressly provided herein in connection with a
combination of outstanding Common Stock, no such adjustment shall be made which
shall increase the Exercise Price or decrease the Exercise Quantity.
10
<PAGE>
(d) REORGANIZATION; ASSET SALES; ETC. In case of (i) any capital
reorganization or any reclassification of the capital stock of the Company, (ii)
any consolidation or merger of the Company with or into another Person, (iii)
the disposition or transfer of assets of the Company other than in the ordinary
course of the Company's business, (iv) any Dividend or other distribution to the
holders of capital stock of the Company in the form of any asset, including
without limitation securities of the Company, or (v) the dissolution,
liquidation or winding up of the Company, the Holders shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such transaction or event that appropriate provision shall be made so that such
Holders shall thereafter be entitled to purchase) the kind and amount of shares
of stock and other securities and property receivable in such transaction by a
holder of the number of shares of Common Stock of the Company into which this
Agreement entitled the Holders to purchase immediately prior to such capital
reorganization, reclassification of capital stock, non-surviving combination or
disposition; and in any such case appropriate adjustments shall be made in the
application of the provisions of this Article V with respect to rights and
interests thereafter purchasable upon the exercise of a Warrant. In the event
the Company effects a combination of outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to the
record date for such combination shall be proportionately increased, and the
Exercise Quantity proportionately decreased, effective immediately after the
record date for such combination.
(e) ADJUSTMENT STATEMENT. Whenever the Exercise Price or Exercise
Quantity is adjusted as herein provided, the Company shall, within ten days
following the consummation of the event triggering such adjustment, deliver to
the Holders a statement signed by the President of the Company and by its
Treasurer or Secretary stating the adjusted Exercise Price and Exercise Quantity
for which the Warrants are exercisable, determined as specified herein. The
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued. Irrespective of any adjustments in the Exercise Price or the Exercise
Quantity or the kind of shares purchasable upon the exercise of the Warrants,
the Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement.
(f) PRIOR NOTICE TO THE HOLDERS. If at any time:
(i) The Company shall pay any Dividend payable in Common Stock
or Common Stock Equivalents upon its capital stock or make any distribution to
the holders of its capital stock, in each case other than Series A Preferred
Stock; or
(ii) The Company shall offer for subscription pro rata to the
holders of its capital stock any additional shares of stock of any class or any
other rights; or
(iii) The Company shall effect any capital reorganization or any
reclassification of or change in the outstanding capital stock of the Company
(other than a change in par value, or a change from par value to no par value,
or a change from no par value to
11
<PAGE>
par value, or a change resulting solely from a subdivision of outstanding
shares), or any consolidation or merger, or any sale, transfer or other
disposition of all or substantially all of its property, assets, business and
goodwill as an entirety, or the liquidation, dissolution or winding up of the
Company; or
(iv) The Company shall declare a Dividend upon its capital
stock;
then, in any such event, the Company shall cause at least thirty (30) days'
prior written notice to be mailed to the Holders at the address of each such
Holder shown on the books of the Company. The notice shall also specify the date
on which the books of the Company shall close or a record be taken for such
stock dividend, distribution or subscription rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or Dividend, as the case may
be, shall take place, and the date of participation therein by the holders of
shares of capital stock if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the rights of the Holder.
(g) DISPUTES. If there is any dispute as to the computation of the
Exercise Price or the Exercise Quantity, the Company will retain the independent
certified public accountant, whose fees and expenses shall be shared equally by
the Company and the Holders raising such dispute, which provided the most recent
report on the Company's most recent audited financial statements to conduct an
audit of the computations pursuant to the terms hereof involved in such dispute,
including the financial statements or other information upon which such
computations were based. The determination of such accounting firm shall, in the
absence of manifest error, be conclusive and binding.
VI. TRANSFER OF WARRANTS AND WARRANT SECURITIES
Section 6.01 TRANSFER. Except as set forth in Section 7.02 below, the
Warrants and all rights thereunder are transferable, in whole or in part, on the
books of the Company to be maintained for such purpose, upon surrender of such
Warrant at the office of the Company maintained for such purpose, together with
a written assignment of such Warrant duly executed by the Holder thereof. Upon
such surrender and payment of all applicable transfer taxes, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and the surrendered Warrant shall promptly be canceled. The transferred Warrant,
if properly assigned in compliance herewith, may be exercised by an assignee for
the purchase of shares of Common Stock without having a new Warrant issued. The
Company will not close its stock transfer books against a transfer of the
Warrants or the Warrant Securities or any exercise of the Warrants. Any such
transfer or exercise tendered while such stock transfer books shall be closed
shall be deemed effective immediately prior to such closure.
Subject to Section 7.02 below, the Warrants may be divided or combined
with other Warrants upon presentation at the aforesaid office of the Company,
together with a written notice
12
<PAGE>
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder thereof. Subject to compliance with this Section 7.01, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
The Company shall pay all expenses (other than transfer taxes and
income taxes, if any, of the transferee) and other charges incurred by the
Company in the performance of its obligations in connection with the
preparation, issue and delivery of Warrants under this Section. The Company
agrees to maintain at its aforesaid office books for the registration and
transfer of the Warrants. Notwithstanding any provision to the contrary
contained herein, the Warrants and the Warrant Securities shall be transferable
only in compliance with the provisions of the Securities Act and applicable
state securities laws in respect of the transfer of any Warrant or any Warrant
Securities.
Section 6.02 TRANSFER RESTRICTIONS. Neither the Warrants nor the
Warrant Securities have been registered under the Securities Act or under the
applicable securities laws of any state, or foreign jurisdiction (the Securities
Act and such other securities laws being referred to collectively as the
"Securities Laws"). Neither the Warrants nor the Warrant Securities may be
transferred: (a) if such transfer would constitute a violation of any Securities
Laws or a breach of the conditions to any exemption from registration thereunder
and (b) unless and until one of the following has occurred: (i) registration of
the Warrants or the Warrant Securities, as the case may be, under the Securities
Laws, have become effective, or (ii) the Holder has delivered an opinion of
counsel that such registration is not required.
Each certificate for Warrants or Warrant Securities issued upon
exercise of a Warrant and each certificate issued to a subsequent transferee,
unless at the time of exercise such Warrants or Warrant Securities are
registered under the Securities Act, shall bear a legend substantially in the
following form (and any additional legends required by applicable law) on the
face thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN SECURITIES LAWS
("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION,
IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE
ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY
OF AN EXEMPTION FROM SUCH QUALIFICATION AND REGISTRATION.
13
<PAGE>
Section 6.03 REPLACEMENT OF INSTRUMENTS. Within five business days
following receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any
certificate or instrument evidencing any Warrants or Warrant Securities, and (a)
in the case of loss, theft or destruction, upon receipt by the Company of
indemnity reasonably satisfactory to it (provided that, the Holder's own
agreement of indemnification shall be deemed to be satisfactory), or (b) in the
case of mutilation, upon surrender and cancellation thereof, the Company, at its
expense, will execute, register and deliver, in lieu thereof, a new certificate
or instrument for an equal number of Warrants or Warrant Securities.
VII. MISCELLANEOUS
Section 7.01 TERM. Except as otherwise expressly provided in this
Agreement or the Warrants, this Agreement shall expire on January 24, 2007,
provided that the Company's obligations to honor an exercise of the Warrants
given prior to such expiration or to perform any obligation arising hereunder
continue and survive notwithstanding the expiration of this Agreement.
Section 7.02 NO WAIVER UNDER OTHER AGREEMENTS. The terms and provisions
contained in this Agreement are not intended and shall not be construed to
waive, modify, repeal, stay, diminish or otherwise impair or affect in any
manner whatsoever any right or remedy of the Holder(s) under the Company's
Articles of Incorporation or Bylaws.
Section 7.03 RELIANCE. Each party to this Agreement shall be entitled
to rely upon any notice, consent, certificate, affidavit, statement, paper,
document, writing or other communication reasonably believed by that party to be
genuine and to have been signed, sent or made by the proper Person or Persons.
Section 7.04 NOTICE. All notices and other communications provided for
or permitted hereunder shall be made in writing and be by hand-delivery or
certified mail, return receipt requested, or by telecopy, (a) if to Investor, to
the address set forth on the signature page hereof or such other address given
by Investor to the Company in writing, (b), if to a subsequent Holder of
Warrants or Warrant Securities issued pursuant to the exercise of the Warrants,
at the most current address given by such Holder to the Company in writing; or
(c)if to the Company, as follows:
Omni Nutraceuticals, Inc.
5310 Beethoven Street
Los Angeles, California 90066
Telecopier: (310) 306-4840
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered; four business
days after being deposited
14
<PAGE>
in the mail, postage prepaid, if mailed, when receipt is acknowledged, if
telecopied, or the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
Section 7.05 ENFORCEMENT. The Company acknowledges that the Holders may
proceed to exercise or enforce any right, power, privilege, remedy or interest
that they may have under this Agreement or applicable law without notice, except
as otherwise expressly provided herein, without pursuing, exhausting or
otherwise exercising or enforcing any other right, power, privilege, remedy or
interest that they may have against or in respect of any other party, or any
other Person or thing, and without regard to any act or omission of such party
or any other Person. The Company's obligations hereunder, including, without
limitation the obligation to issue the Warrant Securities upon exercise of the
Warrant, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be due
to, or by reason of, any past, present or future claims which the Company may
have against any Holder, or any assignee, thereof, for any reason whatsoever.
All rights and remedies of the party hereto are cumulative of each other and of
every other right or remedy such party may otherwise have at law or in equity,
and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights or remedies.
Section 7.06 EQUITABLE RELIEF. Each party acknowledges and agrees that
it would be impossible to measure in money the damage in the event of a breach
of any of the terms and provisions of this Agreement by any party hereto, and
that, in the event of any such breach, there may not be an adequate remedy at
law, although the foregoing shall not constitute a waiver of any of the party's
rights, powers, privileges and remedies against or in respect of a breaching
party, any other person or thing under this Agreement or applicable law. It is
therefore agreed that, in addition to all other such rights, powers, privileges
and remedies that it may have, each party shall be entitled, without the
obligation to post bond, to injunctive relief, specific performance or such
other equitable relief as such party may request to exercise or otherwise
enforce any of the terms and provisions of this Agreement and to enjoin or
otherwise restrain any act prohibited thereby, and no party will urge, and each
party hereby waives, any defense that there is an adequate remedy available at
law.
15
<PAGE>
Section 7.07 MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall
not reorganize, or consolidate with, or merge into a partnership, corporation,
or other entity (other than a reorganization, consolidation, or merger, in which
the Company is the surviving entity) or transfer all or substantially all of its
assets to another entity (any one of which shall constitute a "Reorganization"),
unless each Holder, upon the exercise of such Holder's Warrants at any time
after the consummation of such Reorganization, shall be entitled to receive, in
the same manner as specified in this Agreement, the stock or other securities or
property to which such Holder would have been entitled upon such consummation if
such Holder had exercised such Holder's Warrants on or before the record date
for such Reorganization. Any new entity formed upon or existing as a surviving
entity after any such Reorganization shall be deemed the "Company" for purposes
of this Agreement. The terms of this Agreement shall survive the consummation of
any such Reorganization, and the Warrants shall thereafter be applicable to the
shares of stock or other securities or property to which the Holders thereof
would have been entitled upon such consummation if such Holders had exercised
the Warrants on or before the record date for such Reorganization. The Company
shall not effect any Reorganization, unless prior to or simultaneously with the
consummation thereof, the successor or surviving entity after such
Reorganization shall assume, by written instrument, (i) the obligation to
deliver to the Holders such shares of stock, or other securities or property as,
in accordance with the foregoing provisions, the Holders may be entitled to
purchase and (ii) the other obligations of the Company under this Agreement.
Section 7.08 INTERPRETATION; HEADINGS, SEVERABILITY.
(a) The parties acknowledge and agree that since each party and its
counsel have had the opportunity to review and negotiate the terms and
provisions of this Agreement and have contributed to its revision, the normal
rule of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
and its terms and provisions shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
(b) The Section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(c) In the event that any term or provision of this Agreement shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by a governmental authority having jurisdiction and
venue, such determination shall not impair or otherwise affect the validity,
legality or enforceability: (i) by or before that authority of the remaining
terms and provisions of this Agreement, which shall be enforced as if the
superseded, invalid, illegal or otherwise unenforceable term or provision were
modified to the extent required to permit such provision to be not superseded,
invalid, illegal or unenforceable, or (ii) by or before any other authority of
any of the terms and provisions of this Agreement.
(d) If any period of time specified in this Agreement expires on a day
that is not a business day, that period shall be extended to and expire on the
next succeeding business day.
16
<PAGE>
Section 7.09 SURVIVAL OF COVENANTS. Each of the covenants and other
agreements of the parties contained in this Agreement shall be absolute and,
except as otherwise expressly provided, unconditional, shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until the term of this Agreement has expired, and thereafter with respect
to events occurring prior thereto.
Section 7.10 NO REQUIRED EXERCISE. No term or provision of the Warrants
or this Agreement is intended to require, nor shall any such term or provision
be construed as requiring, any Holder of the Warrants to exercise or sell the
Warrants.
Section 7.11 BINDING EFFECT. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns.
Section 7.12 NO WAIVER BY ACTION OR COURSE OF DEALING. No course of
dealing or any delay or failure to exercise any right hereunder on the part of
any party hereto shall operate as a waiver of such right or otherwise prejudice
the rights, powers or remedies of such party.
Section 7.13 WAIVER; MODIFICATION; AMENDMENT. Each and every
modification to and amendment of this Agreement shall be in writing and signed
by the Company and by the Holders of a majority in interest of the Warrants.
Notwithstanding the foregoing, no modification, amendment or waiver of any term
or provision hereof with respect to the Exercise Price, the Exercise Quantity
any of the terms of this Section 8.13 or which purports, or has the effect of,
decreasing the Exercise Quantity or increasing the Exercise Price, shortening
the term of any Warrant or limiting the right or ability of a Holder thereof to
exercise a Warrant shall be enforceable against a Holder unless such Holder
specifically approves, in writing, such modifications, amendment or
modification; provided, however, that the Company may reduce the Exercise Price,
increase the Exercise Quantity or extend the Expiration Period of all
outstanding Warrants without obtaining the consent of any Holder.
Section 7.14 ENTIRE AGREEMENT. This Agreement and the Warrants contain
the entire agreement of the parties with respect to the Warrants and supersede
all other representations, warranties, agreements and understandings, oral or
otherwise, among the parties hereto with respect to the Warrants, except as
otherwise provided herein.
Section 7.15 NO INCONSISTENT AGREEMENTS OR RIGHTS. The Company shall
not enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement.
Section 7.16 TIME OF THE ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
17
<PAGE>
Section 7.17 ATTORNEYS' FEES AND COSTS. Should any party institute any
action, suit or other proceeding arising out of or relating to this Agreement or
the Warrants, the prevailing party shall be entitled to receive from the losing
party reasonable attorneys' fees and costs incurred in connection therewith,
along with all costs of defense, investigation, preparation, experts and
collection.
Section 7.18 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT, THE WARRANTS AND THE WARRANT SECURITIES AND ALL
AMENDMENTS, SUPPLEMENTS, WAIVERS, AND CONSENTS RELATING HERETO OR THERETO SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN THE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES,
AND AGREES AND CONSENTS THAT SERVICES OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER CALIFORNIA OR
FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE COMPANY AND HOLDER EACH HEREBY AGREE TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE SECURITIES OR ANY OTHER AGREEMENTS RELATING TO THE SECURITIES OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, THE WARRANTS, THE WARRANT SECURITIES OR ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING THERETO.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be executed as of the day and year first above written.
THE COMPANY:
Omni Nutraceuticals, Inc.
By: /s/ Louis Mancini
--------------------------------
Louis Mancini
Chief Executive Officer
American Equities, LLC
By: /s/ Reid Breitman
----------------------------
Reid Breitman
President
Corporate Financial Enterprises, Inc.
By: /s/ Regis Possino
----------------------------
Regis Possino
President
19
<PAGE>
Exhibit A
to
Warrant Agreement
INITIAL WARRANT
<PAGE>
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
Certificate No. 1
COMMON STOCK PURCHASE WARRANT
January 24, 2000
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement, dated as of the
date hereof, by and between the Company and Holder.
Omni Nutraceuticals, Inc., a Utah corporation (the "Company") does hereby
certify and agree that, for good and valuable consideration (the existence,
sufficiency and receipt of which are hereby acknowledged by the Company),
AMERICAN EQUITIES, LLC, a California limited liability company, its successor,
and assigns ("Holder"), hereby is entitled to purchase from the Company, during
the term set forth in Section 1 hereof, up to an aggregate amount of 405,000
shares (the "Exercise Quantity") of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock of the Company (the "Common Stock"),
all upon the terms and provisions and subject to adjustment of such Exercise
Quantity provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "Warrant"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be $2.25, as adjusted from time to time
pursuant to the terms of this Warrant and the Warrant Agreement (the "Exercise
Price").
1. TERM OF THE WARRANT. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., Pacific time, on January 24, 2007,
unless sooner exercised as herein provided.
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this
Warrant at any time during the term hereof, in whole or in part, from time to
time (but not for fractional shares), by presentation and surrender of this
Warrant (or a copy hereof) to the Company, together with the annexed Exercise
Form duly completed and executed and payment in the aggregate amount equal
<PAGE>
to the Exercise Price multiplied by the number of shares of Common Stock being
purchased. Payment of the Exercise Price shall be made by personal or business
check payable to the order of the Company; PROVIDED, HOWEVER, that the Holder
shall have the right to pay the exercise price by surrender to the Company of a
number of shares of Common Stock with a Fair Value equal to the exercise price.
Within five business days of the Company's receipt of this Warrant (or a copy
thereof), the completed and signed Exercise Form and the requisite payment (if
any), the Company shall issue and deliver (or cause to be delivered) to the
exercising Holder stock certificates aggregating the number of shares of Warrant
Securities purchased. In the event the Company fails to deliver or cause to be
delivered to the Holder such certificates (without legend or restriction if such
Warrant Securities are then, or are required to be, registered pursuant to the
Warrant Agreement) within such five business day period, the Company shall pay
to the Holder the Delay Damages, for each day after the fifth business day
following the delivery of this Warrant and such Exercise Form to the Company
through and including the day such certificates (without legend or restriction
if such Warrant Securities are then, or are required bo be, registered pursuant
to the terms of the Warrant Agreement) are delivered to the Holder at the
address set forth in such Exercise Form. In the event the Company restricts or
delays the transfer or clearance of such certificates by the Holder (whether by
stop transfer order, unreasonable delay or otherwise), the Company shall pay to
the Holder the Delay Damages for each calendar day of such restriction or delay,
subject to the provisions of the Warrant Agreement. This Warrant may be subject
to mandatory exercise as provided in Section 2.4 of the Warrant Agreement.
(b) In the event the Holder of this Warrant desires that any
or all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant, the
Holder must (i) so request in writing at the time of exercise if the transfer is
not a registered transfer, (ii) provide to the Company evidence reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under applicable Securities Laws, and (iii)
furnish the Company with such information regarding the transferee as the
Company may reasonably request.
(c) Upon the due exercise by the Holder of this Warrant,
whether in whole or in part, the Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have become
the Holder of record of the shares of Common Stock for which this Warrant has
been so exercised, effective immediately prior to the close of business on the
date this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of actual
delivery of certificates representing such shares of Common Stock so issued.
Upon issuance and delivery of such certificates, this Warrant shall be deemed to
be of no further force and effect. Upon a partial exercise of this Warrant, the
Company shall issue and deliver to the Holder a new Warrant at the same time
such stock certificates are delivered, which new Warrant shall entitle the
Holder to purchase the balance of the Exercise Quantity not purchased in that
partial exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
3. SURRENDER OF WARRANT; EXPENSES.
2
<PAGE>
(a) Whether in connection with the exercise, exchange or
registration of transfer or replacement of this Warrant, surrender of this
Warrant (or a copy hereof) shall be made to the Company during normal business
hours on a business day (unless the Company otherwise permits) at the executive
offices of the Company or to such other office or duly authorized representative
of the Company as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer or replacement of
this Warrant, including the costs of preparation, execution and delivery of
warrants and stock certificates, and shall pay all taxes (other than any taxes
measured by the income of any Person other than the Company) and other charges
imposed by law payable in connection with the transfer or replacement of this
Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER; LOSS.
(a) The Company at all times shall maintain at its chief
executive offices an open register for all Warrants, in which the Company shall
record the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable hereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such an
exchange by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with
the provisions of Article VII of the Warrant Agreement, in whole or in part, by
the Holder or any duly authorized representative of such Holder. A transfer may
be registered with the Company by submission to it of this Warrant, together
with the annexed Assignment Form duly completed and executed, and if the
transfer is not a registered transfer, evidence reasonably satisfactory to the
Company that such transfer is in compliance with all applicable Securities Laws.
Within five business days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and deliver to
the transferee a new Warrant representing the portion of the Exercise Quantity
transferred at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant, which the Company will register in the new
Holder's name.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and (a) in the case of loss, theft or destruction,
upon receipt by the Company of indemnity reasonably satisfactory to it (provided
that, the Holder's own agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its
3
<PAGE>
expense, will execute, register and deliver, in lieu thereof, a new certificate
or instrument for (or covering the purchase of) this Warrant.
(e) The Company will not close its books against the transfer
of this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The Company
and the Holder of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall not
entitle its Holder to any rights of a stockholder in the Company (other than as
provided in SECTION 2(c) of this Warrant and the Warrant Agreement).
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized representative and its corporate seal, if any,
to be impressed hereupon and attested to by its Secretary or Assistant
Secretary.
Omni Nutraceuticals, Inc.
By: /s/ Louis Mancini
--------------------------
Louis Mancini
Chief Executive Officer
4
<PAGE>
Omni Nutraceuticals, Inc.
EXERCISE FORM
Omni Nutraceuticals, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of common stock of the Company (the "Warrant Securities"),
and requests that certificates for the Warrant Securities be issued in the name
of:
---------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
---------------------------------------------------------------
---------------------------------------------------------------
and, if said number of shares of Warrant Securities shall not be all the Warrant
Securities purchasable hereunder, that a new Warrant Certificate for the balance
of the Warrant Securities purchasable under the within Warrant Certificate be
registered in the name of the undersigned Holder or his Assignee as below
indicated and delivered to the address stated below.
Dated:
----------------------
Name of Holder
or Assignee: -------------------------
(Please Print)
Address: -------------------------
-------------------------
Signature: -------------------------
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
5
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase shares of common stock represented by the within Warrant
Certificate unto, and requests that a certificate for such Warrant be issued in
the name of:
-------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
-------------------------------------------------------------
-------------------------------------------------------------
(Taxpayer Identification or Social security Number)
The undersigned hereby irrevocably constitutes and appoints _______________
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises and, if said number of shares of common stock
shall not be all of the common stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the common stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Holder and delivered to such Holder's address as then set forth
on the Company's books.
Dated: --------------------------------
-------------- Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
6
<PAGE>
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
Certificate No. 2
COMMON STOCK PURCHASE WARRANT
January 24, 2000
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement, dated as of the
date hereof, by and between the Company and Holder.
Omni Nutraceuticals, Inc., a Utah corporation (the "Company") does hereby
certify and agree that, for good and valuable consideration (the existence,
sufficiency and receipt of which are hereby acknowledged by the Company),
CORPORATE FINANCIAL ENTERPRISES, INC., a Delaware corporation, its successor,
and assigns ("Holder"), hereby is entitled to purchase from the Company, during
the term set forth in Section 1 hereof, up to an aggregate amount of 370,000
shares (the "Exercise Quantity") of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock of the Company (the "Common Stock"),
all upon the terms and provisions and subject to adjustment of such Exercise
Quantity provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "Warrant"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be $2.25, as adjusted from time to time
pursuant to the terms of this Warrant and the Warrant Agreement (the "Exercise
Price").
1. TERM OF THE WARRANT. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., Pacific time, on January 24, 2007,
unless sooner exercised as herein provided.
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this
Warrant at any time during the term hereof, in whole or in part, from time to
time (but not for fractional shares), by presentation and surrender of this
Warrant (or a copy hereof) to the Company, together with the annexed Exercise
Form duly completed and executed and payment in the aggregate amount equal
1
<PAGE>
to the Exercise Price multiplied by the number of shares of Common Stock being
purchased. Payment of the Exercise Price shall be made by personal or business
check payable to the order of the Company; PROVIDED, HOWEVER, the Holder shall
have the right to pay the exercise price by surrender to the Company of a number
of shares of Common Stock with a Fair Value equal to the exercise price. Within
five business days of the Company's receipt of this Warrant (or a copy thereof),
the completed and signed Exercise Form and the requisite payment (if any), the
Company shall issue and deliver (or cause to be delivered) to the exercising
Holder stock certificates aggregating the number of shares of Warrant Securities
purchased. In the event the Company fails to deliver or cause to be delivered to
the Holder such certificates (without legend or restriction if such Warrant
Securities are then, or are required to be, registered pursuant to the Warrant
Agreement) within such five business day period, the Company shall pay to the
Holder the Delay Damages, for each day after the fifth business day following
the delivery of this Warrant and such Exercise Form to the Company through and
including the day such certificates (without legend or restriction if such
Warrant Securities are then, or are required bo be, registered pursuant to the
terms of the Warrant Agreement) are delivered to the Holder at the address set
forth in such Exercise Form. In the event the Company restricts or delays the
transfer or clearance of such certificates by the Holder (whether by stop
transfer order, unreasonable delay or otherwise), the Company shall pay to the
Holder the Delay Damages for each calendar day of such restriction or delay,
subject to the provisions of the Warrant Agreement. This Warrant may be subject
to mandatory exercise as provided in Section 2.4 of the Warrant Agreement.
(b) In the event the Holder of this Warrant desires that any
or all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant, the
Holder must (i) so request in writing at the time of exercise if the transfer is
not a registered transfer, (ii) provide to the Company evidence reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under applicable Securities Laws, and (iii)
furnish the Company with such information regarding the transferee as the
Company may reasonably request.
(c) Upon the due exercise by the Holder of this Warrant,
whether in whole or in part, the Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have become
the Holder of record of the shares of Common Stock for which this Warrant has
been so exercised, effective immediately prior to the close of business on the
date this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of actual
delivery of certificates representing such shares of Common Stock so issued.
Upon issuance and delivery of such certificates, this Warrant shall be deemed to
be of no further force and effect. Upon a partial exercise of this Warrant, the
Company shall issue and deliver to the Holder a new Warrant at the same time
such stock certificates are delivered, which new Warrant shall entitle the
Holder to purchase the balance of the Exercise Quantity not purchased in that
partial exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
3. SURRENDER OF WARRANT; EXPENSES.
2
<PAGE>
(a) Whether in connection with the exercise, exchange or
registration of transfer or replacement of this Warrant, surrender of this
Warrant (or a copy hereof) shall be made to the Company during normal business
hours on a business day (unless the Company otherwise permits) at the executive
offices of the Company or to such other office or duly authorized representative
of the Company as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer or replacement of
this Warrant, including the costs of preparation, execution and delivery of
warrants and stock certificates, and shall pay all taxes (other than any taxes
measured by the income of any Person other than the Company) and other charges
imposed by law payable in connection with the transfer or replacement of this
Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER; LOSS.
(a) The Company at all times shall maintain at its chief
executive offices an open register for all Warrants, in which the Company shall
record the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable hereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such an
exchange by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with
the provisions of Article VII of the Warrant Agreement, in whole or in part, by
the Holder or any duly authorized representative of such Holder. A transfer may
be registered with the Company by submission to it of this Warrant, together
with the annexed Assignment Form duly completed and executed, and if the
transfer is not a registered transfer, evidence reasonably satisfactory to the
Company that such transfer is in compliance with all applicable Securities Laws.
Within five business days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and deliver to
the transferee a new Warrant representing the portion of the Exercise Quantity
transferred at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant, which the Company will register in the new
Holder's name.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and (a) in the case of loss, theft or destruction,
upon receipt by the Company of indemnity reasonably satisfactory to it (provided
that, the Holder's own agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its
3
<PAGE>
expense, will execute, register and deliver, in lieu thereof, a new certificate
or instrument for (or covering the purchase of) this Warrant.
(e) The Company will not close its books against the transfer
of this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The Company
and the Holder of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall not
entitle its Holder to any rights of a stockholder in the Company (other than as
provided in SECTION 2(c) of this Warrant and the Warrant Agreement).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
Omni Nutraceuticals, Inc.
By: /s/ Louis Mancini
-----------------------------
Louis Mancini
Chief Executive Officer
4
<PAGE>
Omni Nutraceuticals, Inc.
EXERCISE FORM
Omni Nutraceuticals, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of common stock of the Company (the "Warrant Securities"),
and requests that certificates for the Warrant Securities be issued in the name
of:
---------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
---------------------------------------------------------------
---------------------------------------------------------------
and, if said number of shares of Warrant Securities shall not be all the Warrant
Securities purchasable hereunder, that a new Warrant Certificate for the balance
of the Warrant Securities purchasable under the within Warrant Certificate be
registered in the name of the undersigned Holder or his Assignee as below
indicated and delivered to the address stated below.
Dated:
-----------------------
Name of Holder
or Assignee: -------------------------
(Please Print)
Address: -------------------------
-------------------------
Signature: -------------------------
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
5
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase shares of common stock represented by the within Warrant
Certificate unto, and requests that a certificate for such Warrant be issued in
the name of:
-------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
-------------------------------------------------------------
-------------------------------------------------------------
(Taxpayer Identification or Social security Number)
The undersigned hereby irrevocably constitutes and appoints _______________
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises and, if said number of shares of common stock
shall not be all of the common stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the common stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Holder and delivered to such Holder's address as then set forth
on the Company's books.
Dated:
-------------------------- -------------------------------
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
6
<PAGE>
EXHIBIT 4.11
WARRANT AGREEMENT
among
HEALTHZONE.COM, INC.
and
AMERICAN EQUITIES, LLC
and
CORPORATE FINANCIAL ENTERPRISES, INC.
Dated as of January 24, 2000
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is dated as of January 24,
2000, and executed by and among HealthZone.com, Inc., a California corporation
(the "Company"), American Equities, LLC, a California limited liability company
("American Equities"), and Corporate Financial Enterprises, Inc. ("CFE," and,
together with American Equities, the "Investor").
WHEREAS, the Company has agreed to grant to Investor or its assigns
common stock purchase warrants in substantially the form attached hereto as
EXHIBIT A hereto (the "WARRANTS") to acquire up to an aggregate of 37,000 shares
of the Company's Common Stock (the "Exercise Quantity"). This Agreement sets
forth certain rights and obligations of the Company and Investor with respect to
the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations, warranties and agreements contained in this
Agreement, the parties hereto agree as follows:
I. DEFINITIONS
Section 1.01 DEFINED TERMS. As used in this agreement, the following
capitalized terms shall have the meanings respectively assigned to them below,
which meanings shall be applicable equally to the singular and plural forms of
the terms so defined.
"COMMON STOCK" shall mean the common stock, par value $0.01, of the
Company.
"COMMON STOCK EQUIVALENTS" shall mean all options, warrants (including,
without limitation, the Warrants), securities of any kind (including, without
limitation, securities convertible into or exchangeable or exercisable for
Common Stock) and other rights (in each case whether now existing or hereafter
issued or arising) to acquire from the Company shares of Common Stock (without
regard to whether such options, warrants, securities and other rights are then
exchangeable, exercisable or convertible in full, in part or at all).
"COMPANY" shall have the meaning set forth in the preamble.
"DIVIDEND" means, as to any Person, any declaration or payment of any
dividend or distribution (other than a dividend of Common Stock) on any shares
of capital stock of such Person.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and any successor
provisions thereto.
2
<PAGE>
"EXERCISE PRICE" shall have the meaning given in each Warrant. The
Exercise Price and the number of shares of Common Stock purchasable pursuant to
the Warrants shall be subject to adjustment from time to time as hereinafter set
forth in Article V hereof.
"EXPIRATION PERIOD" means January 24, 2007.
"EXERCISE QUANTITY" shall mean the number of shares of Common Stock,
determined from time to time, taking into account all shares of Common Stock
theretofore issued upon exercise of the Warrants, required to be issued by the
Company to the holders of the Warrants. Exercise Quantity shall initially have
the meaning given in each Warrant, and may be adjusted from time to time,
pursuant to the provisions of the Warrants and this Agreement.
"FAIR VALUE" as of a particular date shall mean, with respect to the
Common Stock, the closing asked price of the Common Stock as reported on a
national securities exchange or on the NASDAQ SmallCap, National Market System
or OTC Bulletin Board Service (collectively, and as applicable, "NASDAQ") or, if
a last asked quotation is not available for the Common Stock, the last sale
price of the Common Stock as reported by NASDAQ, or if not so reported, as
listed in the National Quotation Bureau, Inc.'s "Pink Sheets." If the Company's
Common Stock is not then listed or traded on any securities exchange or
quotation system, or if such quotations are otherwise unavailable, or with
respect to other appropriate security, property, assets, business or entity,
"Fair Value" shall mean the fair value of any such item as determined by mutual
agreement reached by the Holder and the Company in good faith or, in the event
the parties are unable to agree, an opinion of an independent investment banking
firm or firms in accordance with the following procedure. In the case of any
event which gives rise to a requirement to determine "Fair Value" pursuant to
this Agreement, the Company shall notify the Holders of such event as promptly
as practicable, but in any event within ten (10) calendar days following such
event and if the procedures contemplated herein in connection with determining
Fair Value have not been complied with fully, then any such determination of
Fair Value for any purpose of this Agreement shall be deemed to be preliminary
and subject to adjustment pending full compliance with such procedures.
After the giving of such notice, the Company and the Holders shall engage
in direct good faith discussions to arrive at a mutually agreeable determination
of Fair Value. In the event the Company and the Holder(s) are unable to arrive
at a mutually agreeable determination within ten (10) days of the notice, the
Company and the Holder(s) of the Warrants (if more than one, the Holders of a
majority of the outstanding Warrants) shall retain an accounting firm of
national reputation mutually acceptable to the parties, or, if mutual agreement
is not reached within 15 days of the notice described above, KPMG, LLP or, if
KPMG, LLP is unavailable or unable to accept such engagement,
PricewaterhouseCoopers, LLP. Such firm shall determine the Fair Value of the
security, property, assets, business or entity, as the case may be, in question
and deliver its opinion in writing to the Company and to such Holder(s) within
thirty (30) days of its retention. Each of the Company and the Holders (as a
group) shall submit to such investment banking firm their proposed determination
of Fair Value, and any other supporting documentation reasonably requested by
the investment banking firm. The determination so
3
<PAGE>
made shall be conclusive and binding on the Company and such Holder(s), absent
clear and manifest error. The fees and expenses of such investment banking firm
retained pursuant to this provision shall be borne 50% by the Company and 50% by
the Holders in advance.
"HOLDER" or "HOLDERS" shall mean the Person(s) then registered as the
owners of the Warrants on the books and records of the Company.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, estate,
unincorporated organization, joint venture, court or governmental or political
subdivision or agency thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, and any successor provisions
thereto.
"SUBSIDIARY" of any Person means (i) a corporation, association or other
business entity of which more than 50% of the total voting power of all classes
of the outstanding voting stock or other indicia of ownership is owned, directly
or indirectly, by such Person or by one or more other Subsidiaries of such
Person or by such Person and one or more Subsidiaries thereof, (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof) and (iii) any other Person not described in clauses (i)
and (ii) above in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, owns 50% ownership and the power, whether by such ownership
interest, pursuant to a written contract or agreement or otherwise, to direct
the policies and management or the financial and other affairs thereof.
"WARRANT SECURITIES" shall mean the shares of Common Stock purchasable
or purchased from time to time under the Warrants, together with all additional
securities receivable or received in payment of Dividends or distributions on or
splits of those securities or receivable or received as a result of adjustments
provided for in ARTICLE V hereof.
II. WARRANTS
Section 2.01 GRANT OF WARRANTS. The Company hereby grants to Investor,
for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Warrants to purchase a number of shares of Common Stock
equal to the Exercise Quantity, as may be adjusted from time to time as set
forth herein, which Warrants shall be evidenced in substantially the form
attached as Exhibit A. Investor and any subsequent Holder of the Warrants and of
Warrant Securities shall have the rights and obligations provided for in the
Warrants and in this Agreement.
4
<PAGE>
Section 2.02 EXERCISE OF WARRANTS. Subject to the terms of this
Agreement, the Warrant holder shall have the right, at any time and from time to
time until 5:00 p.m., Pacific Time, on January 24, 2007, to purchase from the
Company up to the number of fully paid and nonassessable shares of Warrant
Securities to which the Warrant holder may at the time be entitled to purchase
pursuant to this Agreement and the Warrant, upon presentation and surrender of
the Warrant to the Company, together with the Exercise Form duly completed and
executed and payment in the aggregate amount equal to the Exercise Price
multiplied by the number of shares of Common Stock being purchased. Payment of
the Exercise Price shall be made by bank or certified check payable to the order
of the Company or wire transfer; PROVIDED, HOWEVER, that the Holder shall have
the right to pay the exercise price by surrender to the Company of a number of
shares of Common Stock with a Fair Value equal to the exercise price. Within
five business days of the Company's receipt of the Warrant, the completed and
signed Exercise Form and the requisite payment, the Company shall issue and
deliver (or cause to be delivered) to the exercising Holder stock certificates
aggregating the number of shares of Warrant Securities purchased. In the event
the Company fails to deliver or cause to be delivered to the Holder such
certificates (without legend or restriction if such Warrant Securities are then,
or are required to be, registered pursuant to the Warrant Agreement) within such
five business day period, the Company shall pay to the Holder an amount equal to
the greater of (i) $250 per calendar day, (ii) the product of (x) the last sale
price on the date the certificates are properly issued and delivered to the
Holder, less the last sale price on the date of the Exercise Form, multiplied by
(y) the number of shares of Warrant Securities purchased as set forth in the
Exercise Form, or (iii) the quotient of (x) the last reported sale price on the
day prior to the date of the Exercise Form, multiplied by the number of shares
of Warrant Securities issuable to such Holder upon such exercise, divided by (y)
200 (the "Delay Damages"), for each day after the fifth business day following
the delivery of the Warrant and such Exercise Form to the Company through and
including the day such certificates (without legend or restriction if such
Warrant Securities are then, or are required to be, registered pursuant to the
terms of the Warrant Agreement) are delivered to the Holder at the address set
forth in such Exercise Form; provided, however, notwithstanding the foregoing,
no Delay Damages shall accrue or shall be due and payable if the Warrant
Securities, upon issuance, would not then be freely transferrable without
registration. In the event the Company restricts or delays the transfer or
clearance of such certificates by the Holder (whether by stop transfer order,
unreasonable delay or otherwise), the Company shall pay to the Holder the Delay
Damages for each calendar day of such restriction or delay.
Section 2.03 PARTIAL EXERCISE. In the event of a partial exercise of the
Warrant, the Company shall issue and deliver to the Holder a new Warrant at the
same time such stock certificates are delivered, which new Warrant shall entitle
the Holder to purchase the balance of the Exercise Quantity not purchased in
that partial exercise and shall otherwise be upon the same terms and provisions
as the Warrant.
5
<PAGE>
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, hereby represents and warrants as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of California, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under the contracts to which it is a party. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) The execution and delivery of this Agreement and the Warrants have
been duly and properly authorized by all requisite corporate action of the
Company and its board of directors, and no consent of any other Person is
required as a prerequisite to the validity, enforceability and performance of
this Agreement and the Warrants that has not been obtained. The Company has the
full legal right, power and authority to execute and deliver this Agreement and
the Warrants and to perform its obligations hereunder and thereunder. When
issued and delivered pursuant to this Agreement, the Warrants will have been
duly and validly executed, issued and delivered and will constitute valid and
legally binding obligations of the Company and the Holder thereof will be
entitled to the benefits provided herein and therein.
(c) The Warrant Securities, when issued, sold and delivered in
accordance with the terms hereof, for the consideration expressed herein, shall
be duly and validly issued and outstanding, fully paid and nonassessable, and
will be issued in compliance with all applicable federal and state securities or
blue sky laws.
(d) The Company is not a party to or otherwise subject to any contract
or agreement which restricts or otherwise affects its right or ability to
execute and deliver this Agreement or the Warrants or to perform any obligation
hereunder or thereunder (including, without limitation, issuance of the Warrant
Securities). Neither the execution or delivery of this Agreement or the
Warrants, nor compliance therewith (including, without limitation, issuance of
the Warrant Securities), will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any material lien upon any assets or
properties of the Company under, or require any consent, approval, or other
action by, notice to or filing with any court or governmental agency or division
pursuant to the Articles of Incorporation or Bylaws of the Company, as currently
in effect, any award of any arbitrator, or any agreement, instrument or law to
which the Company is subject or by which it or its assets or properties is
bound.
(e) The Warrants are, and the Warrant Securities will be, issued by
the Company to Investor in a transaction exempt from registration and
qualification under the applicable federal and state securities and blue sky
laws.
6
<PAGE>
IV. COVENANTS
Section 4.01 COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees that, during the term of this Agreement, unless Holders of outstanding
Warrants evidencing a majority of the Warrants agree otherwise in writing,
(a) Each of the Warrant Securities issued and delivered upon the
exercise of the Warrants and payment of the Exercise Price will be duly and
validly authorized and issued, will be fully paid and nonassessable, and will
not be subject to any unpaid tax of the Company or any lien imposed on or
created by the Company, whether respecting their issuance to and purchase by the
Holder of the Warrants or otherwise. The Company will take all such actions as
may be necessary to assure that all such Warrant Securities may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange or quotation system upon which
such Warrant Securities may be listed.
(b) The Company shall reserve and at all times keep available for
issuance an authorized number of shares of Common Stock or Warrant Securities
sufficient to permit the full and immediate exercise of the Warrants.
(c) The Company shall not permit the par value of its Common Stock to
exceed, at any time, the Exercise Price and shall take all such actions as may
be necessary or appropriate to ensure that it does not do so.
(d) As soon as available, and in no event later than three business
days after the dates filed with the Securities and Exchange Commission (the
"Commission") or any other governmental agency or division or other regulatory
authority, if such documents are so filed, the Company shall, upon request,
deliver to any Holder(s) copies of (i) all annual, quarterly and monthly
financial statements made available by the Company to its shareholders, (ii) all
reports, notices and proxy or information statements sent or made available
generally by the Company to its shareholders, and (iii) all regular and periodic
reports and all registration statements, prospectuses and other information
filed by the Company with the Commission, relevant state authorities or any
securities exchange, securities quotation system or other self-regulatory
organization other than publicly available materials.
(e) The Company agrees that to the extent reasonably necessary to
permit the Holders to sell shares of the Common Stock in accordance with and in
reliance on Rule 144, and for so long as such shares are owned by the Holders
and such shares are not registered for resale under the Securities Act, the
Company will make and keep public information available within the meaning of
Rule 144 at all times from and after the Closing Date, and, if so required to do
so by law, file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act.
(f) The Company shall cooperate with the Holder(s) in supplying such
information as may be reasonably necessary for the Holder(s) to complete and
file any information or other
7
<PAGE>
reporting forms from time to time required by the Commission, relevant state
authorities or any securities exchange, securities quotation system or other
self-regulatory organization, including, without limitation, information
pertaining to or required for the availability of any exemption from the
securities laws for the sale, transfer or other disposition of the Warrants or
any of the Warrant Securities.
Section 4.02 INDEMNIFICATION.
(a) The Company agrees to defend, indemnify and hold harmless, to the
full extent permitted by law, Investor and each other Holder of the Warrants,
this Agreement, or any Warrant Security purchased hereunder, any underwriter(s),
and their respective directors, officers, employees, attorneys and agents, as
well as each other Person (if any) controlling any of the foregoing Persons
within the meaning of Section 15 of the Securities Act, or Section 20 of the
Exchange Act, from and against any and all claims, liabilities, losses and
expenses (including, without limitation, the reasonable disbursements, expenses
and fees of their respective attorneys, accountants and experts) that may be
imposed upon, incurred by, or asserted against any of them, any of their
respective directors, officers, employees, attorneys and agents, or any such
control Person, under the Securities Act, the Exchange Act or any other statute
or at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof), arise out of or are related directly or indirectly
to the breach of any of the representations, warranties and/or covenants of the
Company contained herein and shall reimburse such Persons for any legal or any
other expenses reasonably incurred by such Persons in connection with
investigating or defending any such loss, claim, damage, liability or action.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such indemnified Person, and shall
survive the transfer of such securities by such Person. Promptly after receipt
of notice of the commencement of any action in respect of which indemnity may be
sought against the Company, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel of national
reputation and presence, and who shall be reasonably satisfactory to the party
seeking indemnity hereunder) and the payment of expenses insofar as such action
shall relate to any alleged liability in respect of which indemnity may be
sought against the Company. If the Company assumes the defense of such action,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that action are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the Company without the indemnified party's consent (which shall not be
unreasonably withheld) unless (1) there is no finding or admission of any
violation of law, regulation, rule or order or any violation of the rights of
any other person or entity and no effect on any other claims that may be made
against the indemnified party, and (2) the sole relief provided is monetary
damages that are paid in full by Company; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to the Company of the
commencement of any action and the Company does not, within ten days after the
indemnified party's notice is given to the Company, give notice to the
indemnified party of its election to assume the defense of such action, the
Company will be bound by any determination made in such action or any compromise
or settlement effected by the indemnified party.
8
<PAGE>
(b) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a claim or action may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, or if an
indemnified party determines that there are defenses available to it that are
either not available to the Company or not being raised by the Company, or if
the indemnified party determines that there is a conflict of interest between
the Company and the indemnified party in the claim or action, the indemnified
party may, by notice to the Company and an opinion of counsel concurring with
such indemnified party's determination, assume the exclusive right to defend,
compromise, or settle such claim or action, and the Company will be bound by any
determination of a claim or action so defended or any compromise or settlement
effected.
Section 4.03 LISTING ON THE SECURITIES EXCHANGE. Promptly after an
initial public offering of the Company's Common Stock, the Company shall, at its
expense, use its best efforts to list on NASDAQ or any securities exchange where
it lists its Common Stock, and maintain and increase when necessary such listing
of all outstanding Warrant Securities so long as any shares of Common Stock
shall be so listed. The Company shall also use its best efforts to list on each
such securities exchange or NASDAQ, and will maintain such listing of, any other
securities issued by the Company which the Holder(s) shall be entitled to
receive upon the exercise thereof if at the time any securities of the same
class shall be listed on such securities exchange or NASDAQ by the Company.
Nothing contained herein shall obligate the Company to file any registration
statement with respect to the Company's Common Stock.
V. ANTIDILUTION
Section 5.01 NO DILUTION OR IMPAIRMENT: ADJUSTMENTS.
(a) PROHIBITED ACTIONS. So long as any Warrants are outstanding, the
Company will not avoid or seek to avoid the observance or performance of any of
the terms of this Agreement or the Warrants or impair the ability of the
Holder(s) to realize the full intended economic value thereof, but will at all
times in good faith assist in the carrying out of all such terms, and of the
taking of all such action as may be necessary or appropriate, consistent with
the provisions of this Warrant Agreement, in order to protect the rights of the
Holder(s) of the Warrants against dilution or other impairment.
(b) ADJUSTMENT OF EXERCISE PRICE IN THE EVENT OF CERTAIN ISSUANCES OF
COMMON STOCK OR COMMON STOCK EQUIVALENTS. In case the Company shall at any time
issue or sell Common Stock or Common Stock Equivalents (by merger otherwise) for
less than Fair Value as of the date of such issuance or at a price per share
less than the then current Exercise Price of the Warrants (other than (i)
delivery of shares of Common Stock upon exercise of the Warrants), (ii) any
Common Stock Equivalents issued and outstanding on the date hereof and (iii) up
to 400,000 employee or other stock awards), or issue Common Stock or Common
Stock Equivalents by way of a Dividend or other distribution on any stock of the
Company (other than the Series A Preferred Stock) or effect a forward stock
split of the outstanding shares of Common
9
<PAGE>
Stock, the Exercise Price then in effect shall be proportionately decreased (on
the date of such issuance, sale or split), so that the new Exercise Price shall
be equal to the product of (x) the former Exercise Price and (y) the lesser of
(i) one or (ii) a fraction, the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
(including shares of Common Stock issuable upon conversion of any outstanding
securities convertible or exchangeable into Common Stock), plus (2) the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of shares of Common Stock or Common Stock
Equivalents so issued or sold would purchase at the Fair Value of such shares,
and (y) the denominator of which shall be (1) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale (including shares
of Common Stock issuable upon conversion of any outstanding securities
convertible or exchangeable into Common Stock), plus (2) the number of such
shares of Common Stock so issued or sold. The Exercise Quantity purchasable upon
exercise of the Warrants immediately prior thereto shall be adjusted so that the
new Exercise Quantity shall be equal to the product of (x) the former Exercise
Quantity and (y) the following fraction:
THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT
-----------------------------------------------------------------
The Exercise Price in effect immediately after such adjustment
(c) COMPANY TO PREVENT DILUTION. In any case at any time or from time
to time conditions arise by reason of action taken by the Company which are not
adequately covered by the provisions of this Article V, and which might
adversely affect the rights of the Holders under any provision of this
Agreement, the Board of Directors of the Company shall make such adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Article V, as is necessary with respect to the Exercise Price
and the Exercise Quantity, so as to preserve, without dilution, the rights of
the Holders. Except as expressly provided herein in connection with a
combination of outstanding Common Stock, no such adjustment shall be made which
shall increase the Exercise Price or decrease the Exercise Quantity.
(d) REORGANIZATION; ASSET SALES; ETC. In case of (i) any capital
reorganization or any reclassification of the capital stock of the Company, (ii)
any consolidation or merger of the Company with or into another Person, (iii)
the disposition or transfer of assets of the Company other than in the ordinary
course of the Company's business, (iv) any Dividend or other distribution to the
holders of capital stock of the Company in the form of any asset, including
without limitation securities of the Company, or (v) the dissolution,
liquidation or winding up of the Company, the Holders shall thereafter be
entitled to purchase (and it shall be a condition to the consummation of any
such transaction or event that appropriate provision shall be made so that such
Holders shall thereafter be entitled to purchase) the kind and amount of shares
of stock and other securities and property receivable in such transaction by a
holder of the number of shares of Common Stock of the Company into which this
Agreement entitled the Holders to purchase immediately prior to such capital
reorganization, reclassification of capital stock, non-surviving combination or
disposition; and in any such case appropriate adjustments shall be made in the
application of the provisions of this Article V with respect to rights and
interests thereafter purchasable upon the exercise of a Warrant. In the event
the Company effects a
10
<PAGE>
combination of outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to the record date for
such combination shall be proportionately increased, and the Exercise Quantity
proportionately decreased, effective immediately after the record date for such
combination.
(e) ADJUSTMENT STATEMENT. Whenever the Exercise Price or Exercise
Quantity is adjusted as herein provided, the Company shall, within ten days
following the consummation of the event triggering such adjustment, deliver to
the Holders a statement signed by the President of the Company and by its
Treasurer or Secretary stating the adjusted Exercise Price and Exercise Quantity
for which the Warrants are exercisable, determined as specified herein. The
statement shall show in detail the facts requiring such adjustment, including a
statement of the consideration received by the Company for any additional stock
issued. Irrespective of any adjustments in the Exercise Price or the Exercise
Quantity or the kind of shares purchasable upon the exercise of the Warrants,
the Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement.
(f) PRIOR NOTICE TO THE HOLDERS. If at any time:
(i) The Company shall pay any Dividend payable in Common Stock
or Common Stock Equivalents upon its capital stock or make any distribution to
the holders of its capital stock, in each case other than Series A Preferred
Stock; or
(ii) The Company shall offer for subscription pro rata to the
holders of its capital stock any additional shares of stock of any class or any
other rights; or
(iii) The Company shall effect any capital reorganization or any
reclassification of or change in the outstanding capital stock of the Company
(other than a change in par value, or a change from par value to no par value,
or a change from no par value to par value, or a change resulting solely from a
subdivision of outstanding shares), or any consolidation or merger, or any sale,
transfer or other disposition of all or substantially all of its property,
assets, business and goodwill as an entirety, or the liquidation, dissolution or
winding up of the Company; or
(iv) The Company shall declare a Dividend upon its capital
stock;
then, in any such event, the Company shall cause at least thirty (30) days'
prior written notice to be mailed to the Holders at the address of each such
Holder shown on the books of the Company. The notice shall also specify the date
on which the books of the Company shall close or a record be taken for such
stock dividend, distribution or subscription rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or Dividend, as the case may
be, shall take place, and the date of participation therein by the holders of
shares of capital stock if any such date is to be fixed, and
11
<PAGE>
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action on the rights of the Holder.
(g) DISPUTES. If there is any dispute as to the computation of the
Exercise Price or the Exercise Quantity, the Company will retain the independent
certified public accountant, whose fees and expenses shall be shared equally by
the Company and the Holders raising such dispute, which provided the most recent
report on the Company's most recent audited financial statements to conduct an
audit of the computations pursuant to the terms hereof involved in such dispute,
including the financial statements or other information upon which such
computations were based. The determination of such accounting firm shall, in the
absence of manifest error, be conclusive and binding.
VI. TRANSFER OF WARRANTS AND WARRANT SECURITIES
Section 6.01 TRANSFER. Except as set forth in Section 7.02 below, the
Warrants and all rights thereunder are transferable, in whole or in part, on the
books of the Company to be maintained for such purpose, upon surrender of such
Warrant at the office of the Company maintained for such purpose, together with
a written assignment of such Warrant duly executed by the Holder thereof. Upon
such surrender and payment of all applicable transfer taxes, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in such instrument of assignment,
and the surrendered Warrant shall promptly be canceled. The transferred Warrant,
if properly assigned in compliance herewith, may be exercised by an assignee for
the purchase of shares of Common Stock without having a new Warrant issued. The
Company will not close its stock transfer books against a transfer of the
Warrants or the Warrant Securities or any exercise of the Warrants. Any such
transfer or exercise tendered while such stock transfer books shall be closed
shall be deemed effective immediately prior to such closure.
Subject to Section 7.02 below, the Warrants may be divided or combined
with other Warrants upon presentation at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder thereof. Subject to
compliance with this Section 7.01, as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
The Company shall pay all expenses (other than transfer taxes and income
taxes, if any, of the transferee) and other charges incurred by the Company in
the performance of its obligations in connection with the preparation, issue and
delivery of Warrants under this Section. The Company agrees to maintain at its
aforesaid office books for the registration and transfer of the Warrants.
Notwithstanding any provision to the contrary contained herein, the Warrants and
the Warrant Securities shall be transferable only in compliance with the
provisions of the Securities Act and applicable state securities laws in respect
of the transfer of any Warrant or any Warrant Securities.
12
<PAGE>
Section 6.02 TRANSFER RESTRICTIONS. Neither the Warrants nor the Warrant
Securities have been registered under the Securities Act or under the securities
laws of any state (the Securities Act and such other securities laws being
referred to collectively as the "Securities Laws"). Neither the Warrants nor the
Warrant Securities may be transferred: (a) if such transfer would constitute a
violation of any Securities Laws or a breach of the conditions to any exemption
from registration thereunder and (b) unless and until one of the following has
occurred: (i) registration of the Warrants or the Warrant Securities, as the
case may be, under the Securities Laws, have become effective, (ii) the Holder
has delivered an opinion of counsel that such registration is not required, or
(iii) such transfer would be permitted under Rule 144 of the Securities Act.
Each certificate for Warrants or Warrant Securities issued upon exercise
of a Warrant and each certificate issued to a subsequent transferee, unless at
the time of exercise such Warrants or Warrant Securities are registered under
the Securities Act, shall bear a legend substantially in the following form (and
any additional legends required by applicable law) on the face thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN SECURITIES LAWS
("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION,
IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE
ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY
OF AN EXEMPTION FROM SUCH QUALIFICATION AND REGISTRATION.
Section 6.03 REPLACEMENT OF INSTRUMENTS. Within five business days
following receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any
certificate or instrument evidencing any Warrants or Warrant Securities, and (a)
in the case of loss, theft or destruction, upon receipt by the Company of
indemnity reasonably satisfactory to it (provided that, the Holder's own
agreement of indemnification shall be deemed to be satisfactory), or (b) in the
case of mutilation, upon surrender and cancellation thereof, the Company, at its
expense, will execute, register and deliver, in lieu thereof, a new certificate
or instrument for an equal number of Warrants or Warrant Securities.
VII. MISCELLANEOUS
Section 7.01 TERM. Except as otherwise expressly provided in this
Agreement or the Warrants, this Agreement shall expire on January 24, 2007,
provided that the Company's obligations to honor an exercise of the Warrants
given prior to such expiration or to perform any
13
<PAGE>
obligation arising hereunder continue and survive notwithstanding the expiration
of this Agreement.
Section 7.02 NO WAIVER UNDER OTHER AGREEMENTS. The terms and provisions
contained in this Agreement are not intended and shall not be construed to
waive, modify, repeal, stay, diminish or otherwise impair or affect in any
manner whatsoever any right or remedy of the Holder(s) under the Company's
Articles of Incorporation or Bylaws.
Section 7.03 RELIANCE. Each party to this Agreement shall be entitled to
rely upon any notice, consent, certificate, affidavit, statement, paper,
document, writing or other communication reasonably believed by that party to be
genuine and to have been signed, sent or made by the proper Person or Persons.
Section 7.04 NOTICE. All notices and other communications provided for or
permitted hereunder shall be made in writing and be by hand-delivery or
certified mail, return receipt requested, or by telecopy, (a) if to Investor, to
the address set forth on the signature page hereof or such other address given
by Investor to the Company in writing, (b), if to a subsequent Holder of
Warrants or Warrant Securities issued pursuant to the exercise of the Warrants,
at the most current address given by such Holder to the Company in writing; or
(c)if to the Company, as follows:
HealthZone.com, Inc.
5310 Beethoven Street
Los Angeles, California 90066
Telecopier: (310) 306-4840
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; four business days
after being deposited in the mail, postage prepaid, if mailed, when receipt is
acknowledged, if telecopied, or the next business day, if timely delivered to an
air courier guaranteeing overnight delivery.
Section 7.05 ENFORCEMENT. The Company acknowledges that the Holders may
proceed to exercise or enforce any right, power, privilege, remedy or interest
that they may have under this Agreement or applicable law without notice, except
as otherwise expressly provided herein, without pursuing, exhausting or
otherwise exercising or enforcing any other right, power, privilege, remedy or
interest that they may have against or in respect of any other party, or any
other Person or thing, and without regard to any act or omission of such party
or any other Person. The Company's obligations hereunder, including, without
limitation the obligation to issue the Warrant Securities upon exercise of the
Warrant, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be due
to, or by reason of, any past, present or future claims which the Company may
have against any Holder, or any assignee, thereof, for any reason whatsoever.
All rights and remedies of the party hereto are cumulative of each other and of
every other right or remedy such
14
<PAGE>
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
Section 7.06 EQUITABLE RELIEF. Each party acknowledges and agrees that it
would be impossible to measure in money the damage in the event of a breach of
any of the terms and provisions of this Agreement by any party hereto, and that,
in the event of any such breach, there may not be an adequate remedy at law,
although the foregoing shall not constitute a waiver of any of the party's
rights, powers, privileges and remedies against or in respect of a breaching
party, any other person or thing under this Agreement or applicable law. It is
therefore agreed that, in addition to all other such rights, powers, privileges
and remedies that it may have, each party shall be entitled, without the
obligation to post bond, to injunctive relief, specific performance or such
other equitable relief as such party may request to exercise or otherwise
enforce any of the terms and provisions of this Agreement and to enjoin or
otherwise restrain any act prohibited thereby, and no party will urge, and each
party hereby waives, any defense that there is an adequate remedy available at
law.
Section 7.07 MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall
not reorganize, or consolidate with, or merge into a partnership, corporation,
or other entity (other than a reorganization, consolidation, or merger, in which
the Company is the surviving entity) or transfer all or substantially all of its
assets to another entity (any one of which shall constitute a "Reorganization"),
unless each Holder, upon the exercise of such Holder's Warrants at any time
after the consummation of such Reorganization, shall be entitled to receive, in
the same manner as specified in this Agreement, the stock or other securities or
property to which such Holder would have been entitled upon such consummation if
such Holder had exercised such Holder's Warrants on or before the record date
for such Reorganization. Any new entity formed upon or existing as a surviving
entity after any such Reorganization shall be deemed the "Company" for purposes
of this Agreement. The terms of this Agreement shall survive the consummation of
any such Reorganization, and the Warrants shall thereafter be applicable to the
shares of stock or other securities or property to which the Holders thereof
would have been entitled upon such consummation if such Holders had exercised
the Warrants on or before the record date for such Reorganization. The Company
shall not effect any Reorganization, unless prior to or simultaneously with the
consummation thereof, the successor or surviving entity after such
Reorganization shall assume, by written instrument, (i) the obligation to
deliver to the Holders such shares of stock, or other securities or property as,
in accordance with the foregoing provisions, the Holders may be entitled to
purchase and (ii) the other obligations of the Company under this Agreement.
Section 7.08 INTERPRETATION; HEADINGS, SEVERABILITY.
(a) The parties acknowledge and agree that since each party and its
counsel have had the opportunity to review and negotiate the terms and
provisions of this Agreement and have contributed to its revision, the normal
rule of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
and its terms and provisions shall be construed fairly as to all parties hereto
and not in favor of or
15
<PAGE>
against any party, regardless of which party was generally responsible for the
preparation of this Agreement.
(b) The Section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(c) In the event that any term or provision of this Agreement shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by a governmental authority having jurisdiction and
venue, such determination shall not impair or otherwise affect the validity,
legality or enforceability: (i) by or before that authority of the remaining
terms and provisions of this Agreement, which shall be enforced as if the
superseded, invalid, illegal or otherwise unenforceable term or provision were
modified to the extent required to permit such provision to be not superseded,
invalid, illegal or unenforceable, or (ii) by or before any other authority of
any of the terms and provisions of this Agreement.
(d) If any period of time specified in this Agreement expires on a day
that is not a business day, that period shall be extended to and expire on the
next succeeding business day.
Section 7.09 SURVIVAL OF COVENANTS. Each of the covenants and other
agreements of the parties contained in this Agreement shall be absolute and,
except as otherwise expressly provided, unconditional, shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until the term of this Agreement has expired, and thereafter with respect
to events occurring prior thereto.
Section 7.10 NO REQUIRED EXERCISE. No term or provision of the Warrants
or this Agreement is intended to require, nor shall any such term or provision
be construed as requiring, any Holder of the Warrants to exercise or sell the
Warrants.
Section 7.11 BINDING EFFECT. This Agreement shall be binding upon and
enforceable against the parties hereto and their respective successors and
permitted assigns.
Section 7.12 NO WAIVER BY ACTION OR COURSE OF DEALING. No course of
dealing or any delay or failure to exercise any right hereunder on the part of
any party hereto shall operate as a waiver of such right or otherwise prejudice
the rights, powers or remedies of such party.
Section 7.13 WAIVER; MODIFICATION; AMENDMENT. Each and every modification
to and amendment of this Agreement shall be in writing and signed by the Company
and by the Holders of a majority in interest of the Warrants. Notwithstanding
the foregoing, no modification, amendment or waiver of any term or provision
hereof with respect to the Exercise Price, the Exercise Quantity any of the
terms of this Section 8.13 or which purports, or has the effect of, decreasing
the Exercise Quantity or increasing the Exercise Price, shortening the term of
any Warrant or limiting the right or ability of a Holder thereof to exercise a
Warrant shall be enforceable against a Holder unless such Holder specifically
approves, in writing, such modifications, amendment or modification; provided,
however, that the Company may reduce
16
<PAGE>
the Exercise Price, increase the Exercise Quantity or extend the Expiration
Period of all outstanding Warrants without obtaining the consent of any Holder.
Section 7.14 ENTIRE AGREEMENT. This Agreement and the Warrants contain
the entire agreement of the parties with respect to the Warrants and supersede
all other representations, warranties, agreements and understandings, oral or
otherwise, among the parties hereto with respect to the Warrants, except as
otherwise provided herein.
Section 7.15 NO INCONSISTENT AGREEMENTS OR RIGHTS. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement.
Section 7.16 TIME OF THE ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
Section 7.17 ATTORNEYS' FEES AND COSTS. Should any party institute any
action, suit or other proceeding arising out of or relating to this Agreement or
the Warrants, the prevailing party shall be entitled to receive from the losing
party reasonable attorneys' fees and costs incurred in connection therewith,
along with all costs of defense, investigation, preparation, experts and
collection.
Section 7.18 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT, THE WARRANTS AND THE WARRANT SECURITIES AND ALL
AMENDMENTS, SUPPLEMENTS, WAIVERS, AND CONSENTS RELATING HERETO OR THERETO SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN THE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES,
AND AGREES AND CONSENTS THAT SERVICES OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDINGS RELATING HERETO BY ANY MEANS ALLOWED UNDER CALIFORNIA OR
FEDERAL LAW. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE COMPANY AND HOLDER EACH HEREBY AGREE TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE SECURITIES OR ANY OTHER AGREEMENTS RELATING TO THE SECURITIES OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY
17
<PAGE>
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, THE WARRANTS, THE WARRANT SECURITIES OR ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING THERETO.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed as of the day and year first above written.
THE COMPANY:
HealthZone.com, Inc.
By: /s/ Klee Irwin
--------------------------
Klee Irwin
Chief Executive Officer
American Equities, LLC
By: /s/ Reid Breitman
---------------------------
Reid Breitman
President
Corporate Financial Enterprises, Inc.
By: /s/ Regis Possino
---------------------------
Regis Possino
President
19
<PAGE>
Exhibit A
to
Warrant Agreement
INITIAL WARRANT
<PAGE>
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
Certificate No. 1
COMMON STOCK PURCHASE WARRANT
January 24, 2000
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement, dated as of the
date hereof, by and between the Company and Holder.
HealthZone.com, Inc., a California corporation (the "Company") does hereby
certify and agree that, for good and valuable consideration (the existence,
sufficiency and receipt of which are hereby acknowledged by the Company),
AMERICAN EQUITIES, LLC, a California limited liability company, its successor,
and assigns ("Holder"), hereby is entitled to purchase from the Company, during
the term set forth in Section 1 hereof, up to an aggregate amount of 22,200
shares (the "Exercise Quantity") of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock of the Company (the "Common Stock"),
all upon the terms and provisions and subject to adjustment of such Exercise
Quantity provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "Warrant"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be the lesser of (i) $1.00, or (ii) seventy
percent (70%) of the lowest price per share of Common Stock or other capital
stock (as if converted into Common Stock) subsequent to the date hereof, as
adjusted from time to time pursuant to the terms of this Warrant and the Warrant
Agreement (the "Exercise Price").
1. TERM OF THE WARRANT. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., Pacific time, on January 24, 2007,
unless sooner exercised as herein provided.
<PAGE>
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this Warrant
at any time during the term hereof, in whole or in part, from time to time (but
not for fractional shares), by presentation and surrender of this Warrant (or a
copy hereof) to the Company, together with the annexed Exercise Form duly
completed and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being purchased.
Payment of the Exercise Price shall be made by personal or business check
payable to the order of the Company; PROVIDED, HOWEVER, that the Holder shall
have the right to pay the exercise price by surrender to the Company of a number
of shares of Common Stock with a Fair Value equal to the exercise price. Within
five business days of the Company's receipt of this Warrant (or a copy thereof),
the completed and signed Exercise Form and the requisite payment (if any), the
Company shall issue and deliver (or cause to be delivered) to the exercising
Holder stock certificates aggregating the number of shares of Warrant Securities
purchased. In the event the Company fails to deliver or cause to be delivered to
the Holder such certificates (without legend or restriction if such Warrant
Securities are then, or are required to be, registered pursuant to the Warrant
Agreement) within such five business day period, the Company shall pay to the
Holder the Delay Damages, for each day after the fifth business day following
the delivery of this Warrant and such Exercise Form to the Company through and
including the day such certificates (without legend or restriction if such
Warrant Securities are then, or are required to be, registered pursuant to the
terms of the Warrant Agreement) are delivered to the Holder at the address set
forth in such Exercise Form. In the event the Company restricts or delays the
transfer or clearance of such certificates by the Holder (whether by stop
transfer order, unreasonable delay or otherwise), the Company shall pay to the
Holder the Delay Damages for each calendar day of such restriction or delay,
subject to the provisions of the Warrant Agreement.
(b) In the event the Holder of this Warrant desires that any or
all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant, the
Holder must (i) so request in writing at the time of exercise if the transfer is
not a registered transfer, (ii) provide to the Company evidence reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under applicable Securities Laws, and (iii)
furnish the Company with such information regarding the transferee as the
Company may reasonably request.
(c) Upon the due exercise by the Holder of this Warrant,
whether in whole or in part, the Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have become
the Holder of record of the shares of Common Stock for which this Warrant has
been so exercised, effective immediately prior to the close of business on the
date this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of actual
delivery of certificates representing such shares of Common Stock so issued.
Upon issuance and delivery of such certificates, this Warrant shall be deemed to
be of no further force and effect. Upon a partial exercise of this Warrant, the
Company shall issue and deliver to the Holder a new Warrant at the same time
such stock certificates are delivered, which new Warrant shall entitle the
Holder to
2
<PAGE>
purchase the balance of the Exercise Quantity not purchased in that
partial exercise and shall otherwise be upon the same terms and provisions as
this Warrant.
3. SURRENDER OF WARRANT; EXPENSES.
(a) Whether in connection with the exercise, exchange or
registration of transfer or replacement of this Warrant, surrender of this
Warrant (or a copy hereof) shall be made to the Company during normal business
hours on a business day (unless the Company otherwise permits) at the executive
offices of the Company or to such other office or duly authorized representative
of the Company as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer or replacement of
this Warrant, including the costs of preparation, execution and delivery of
warrants and stock certificates, and shall pay all taxes (other than any taxes
measured by the income of any Person other than the Company) and other charges
imposed by law payable in connection with the transfer or replacement of this
Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER; LOSS.
(a) The Company at all times shall maintain at its chief
executive offices an open register for all Warrants, in which the Company shall
record the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable hereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such an
exchange by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with the
provisions of Article VII of the Warrant Agreement, in whole or in part, by the
Holder or any duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant, together with
the annexed Assignment Form duly completed and executed, and if the transfer is
not a registered transfer, evidence reasonably satisfactory to the Company that
such transfer is in compliance with all applicable Securities Laws. Within five
business days after the Company's receipt of this Warrant and the Assignment
Form so completed and executed, the Company will issue and deliver to the
transferee a new Warrant representing the portion of the Exercise Quantity
transferred at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant, which the Company will register in the new
Holder's name.
3
<PAGE>
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and (a) in the case of loss, theft or destruction,
upon receipt by the Company of indemnity reasonably satisfactory to it (provided
that, the Holder's own agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its expense, will execute, register and deliver, in
lieu thereof, a new certificate or instrument for (or covering the purchase of)
this Warrant.
(e) The Company will not close its books against the transfer
of this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The Company
and the Holder of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall not
entitle its Holder to any rights of a stockholder in the Company (other than as
provided in SECTION 2(c) of this Warrant and the Warrant Agreement).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
HealthZone.com, Inc.
By: /s/ Klee Irwin
------------------------
Klee Irwin
Chief Executive Officer
4
<PAGE>
HealthZone.com, Inc.
EXERCISE FORM
HealthZone.com, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, __________ shares of common stock of the Company (the "Warrant
Securities"), and requests that certificates for the Warrant Securities be
issued in the name of:
---------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
---------------------------------------------------------------
---------------------------------------------------------------
and, if said number of shares of Warrant Securities shall not be all the Warrant
Securities purchasable hereunder, that a new Warrant Certificate for the balance
of the Warrant Securities purchasable under the within Warrant Certificate be
registered in the name of the undersigned Holder or his Assignee as below
indicated and delivered to the address stated below.
Dated:_________________
Name of Holder
or Assignee: _________________________
(Please Print)
Address: _________________________
_________________________
Signature: _________________________
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
5
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase shares of common stock represented by the within Warrant
Certificate unto, and requests that a certificate for such Warrant be issued in
the name of:
---------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
---------------------------------------------------------------
---------------------------------------------------------------
(Taxpayer Identification or Social security Number)
The undersigned hereby irrevocably constitutes and appoints _______________
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises and, if said number of shares of common stock
shall not be all of the common stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the common stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Holder and delivered to such Holder's address as then set forth
on the Company's books.
Dated:_______________ ______________________________
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
6
<PAGE>
THIS WARRANT AND THE WARRANT SECURITIES TO BE RECEIVED UPON EXERCISE OF THIS
WARRANT (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER APPLICABLE STATE OR FOREIGN
SECURITIES LAWS ("SECURITIES LAWS"). THE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT AND
QUALIFICATION OR REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR (2) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL AS TO THE AVAILABILITY OF AN EXEMPTION
FROM SUCH QUALIFICATION AND REGISTRATION.
Certificate No. 2
COMMON STOCK PURCHASE WARRANT
January 24, 2000
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement, dated as of the
date hereof, by and between the Company and Holder.
HealthZone.com, Inc., a California corporation (the "Company") does hereby
certify and agree that, for good and valuable consideration (the existence,
sufficiency and receipt of which are hereby acknowledged by the Company),
CORPORATE FINANCIAL ENTERPRISES, INC., a Delaware corporation, its successor,
and assigns ("Holder"), hereby is entitled to purchase from the Company, during
the term set forth in Section 1 hereof, up to an aggregate amount of 14,800
shares (the "Exercise Quantity") of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock of the Company (the "Common Stock"),
all upon the terms and provisions and subject to adjustment of such Exercise
Quantity provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "Warrant"). The exercise price per share of Common Stock for which
this Warrant is exercisable shall be the lesser of (i) $1.00, or (ii) seventy
percent (70%) of the lowest price per share of Common Stock or other capital
stock (as if converted into Common Stock) subsequent to the date hereof, as
adjusted from time to time pursuant to the terms of this Warrant and the Warrant
Agreement (the "Exercise Price").
1. TERM OF THE WARRANT. The term of this Warrant commences as of the
date hereof, and shall expire at 5:00 P.M., Pacific time, on January 24, 2007,
unless sooner exercised as herein provided.
1
<PAGE>
2. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder of this Warrant
at any time during the term hereof, in whole or in part, from time to time (but
not for fractional shares), by presentation and surrender of this Warrant (or a
copy hereof) to the Company, together with the annexed Exercise Form duly
completed and executed and payment in the aggregate amount equal to the Exercise
Price multiplied by the number of shares of Common Stock being purchased.
Payment of the Exercise Price shall be made by personal or business check
payable to the order of the Company; PROVIDED, HOWEVER, the Holder shall have
the right to pay the exercise price by surrender to the Company of a number of
shares of Common Stock with a Fair Value equal to the exercise price. Within
five business days of the Company's receipt of this Warrant (or a copy thereof),
the completed and signed Exercise Form and the requisite payment (if any), the
Company shall issue and deliver (or cause to be delivered) to the exercising
Holder stock certificates aggregating the number of shares of Warrant Securities
purchased. In the event the Company fails to deliver or cause to be delivered to
the Holder such certificates (without legend or restriction if such Warrant
Securities are then, or are required to be, registered pursuant to the Warrant
Agreement) within such five business day period, the Company shall pay to the
Holder the Delay Damages, for each day after the fifth business day following
the delivery of this Warrant and such Exercise Form to the Company through and
including the day such certificates (without legend or restriction if such
Warrant Securities are then, or are required to be, registered pursuant to the
terms of the Warrant Agreement) are delivered to the Holder at the address set
forth in such Exercise Form. In the event the Company restricts or delays the
transfer or clearance of such certificates by the Holder (whether by stop
transfer order, unreasonable delay or otherwise), the Company shall pay to the
Holder the Delay Damages for each calendar day of such restriction or delay,
subject to the provisions of the Warrant Agreement. This Warrant may be subject
to mandatory exercise as provided in Section 2.4 of the Warrant Agreement.
(b) In the event the Holder of this Warrant desires that any or
all of the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this Warrant, the
Holder must (i) so request in writing at the time of exercise if the transfer is
not a registered transfer, (ii) provide to the Company evidence reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under applicable Securities Laws, and (iii)
furnish the Company with such information regarding the transferee as the
Company may reasonably request.
(c) Upon the due exercise by the Holder of this Warrant,
whether in whole or in part, the Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to have become
the Holder of record of the shares of Common Stock for which this Warrant has
been so exercised, effective immediately prior to the close of business on the
date this Warrant, the completed and signed Exercise Form and the requisite
payment were duly delivered to the Company, irrespective of the date of actual
delivery of certificates representing such shares of Common Stock so issued.
Upon issuance and delivery of such certificates, this Warrant shall be deemed to
be of no further force and effect. Upon a partial exercise of this Warrant, the
Company shall issue and deliver to the Holder a new Warrant at the
2
<PAGE>
same time such stock certificates are delivered, which new Warrant shall entitle
the Holder to purchase the balance of the Exercise Quantity not purchased in
that partial exercise and shall otherwise be upon the same terms and provisions
as this Warrant.
3. SURRENDER OF WARRANT; EXPENSES.
(a) Whether in connection with the exercise, exchange or
registration of transfer or replacement of this Warrant, surrender of this
Warrant (or a copy hereof) shall be made to the Company during normal business
hours on a business day (unless the Company otherwise permits) at the executive
offices of the Company or to such other office or duly authorized representative
of the Company as from time to time may be designated by the Company by written
notice given to the Holder of this Warrant.
(b) The Company shall pay all costs and expenses incurred in
connection with the exercise, registering, exchange, transfer or replacement of
this Warrant, including the costs of preparation, execution and delivery of
warrants and stock certificates, and shall pay all taxes (other than any taxes
measured by the income of any Person other than the Company) and other charges
imposed by law payable in connection with the transfer or replacement of this
Warrant.
4. WARRANT REGISTER; EXCHANGE; TRANSFER; LOSS.
(a) The Company at all times shall maintain at its chief
executive offices an open register for all Warrants, in which the Company shall
record the name and address of each Person to whom a Warrant has been issued or
transferred, the number of shares of Common Stock or other securities
purchasable hereunder and the corresponding purchase prices.
(b) This Warrant may be exchanged for two or more warrants
entitling the identical Holder hereof to purchase the same aggregate Exercise
Quantity at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant. The identical Holder may request such an
exchange by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and allocation of the
Exercise Quantity purchasable under the existing Warrant.
(c) This Warrant may be transferred only in accordance with the
provisions of Article VII of the Warrant Agreement, in whole or in part, by the
Holder or any duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant, together with
the annexed Assignment Form duly completed and executed, and if the transfer is
not a registered transfer, evidence reasonably satisfactory to the Company that
such transfer is in compliance with all applicable Securities Laws. Within five
business days after the Company's receipt of this Warrant and the Assignment
Form so completed and executed, the Company will issue and deliver to the
transferee a new Warrant representing the portion of the Exercise Quantity
transferred at the same Exercise Price per share and otherwise having the same
terms and provisions as this Warrant, which the Company will register in the new
Holder's name.
3
<PAGE>
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and (a) in the case of loss, theft or destruction,
upon receipt by the Company of indemnity reasonably satisfactory to it (provided
that, the Holder's own agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company, at its expense, will execute, register and deliver, in
lieu thereof, a new certificate or instrument for (or covering the purchase of)
this Warrant.
(e) The Company will not close its books against the transfer
of this Warrant or any of the Warrant Securities in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Common Stock acquirable upon exercise of this Warrant is at all
times equal or less than the Exercise Price then in effect.
5. RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE HOLDER. The Company
and the Holder of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant shall not
entitle its Holder to any rights of a stockholder in the Company (other than as
provided in SECTION 2(c) of this Warrant and the Warrant Agreement).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
HealthZone.com, Inc.
By: /s/ Klee Irwin
------------------------
Klee Irwin
Chief Executive Officer
4
<PAGE>
HealthZone.com, Inc.
EXERCISE FORM
HealthZone.com, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, ____________ shares of common stock of the Company (the "Warrant
Securities"), and requests that certificates for the Warrant Securities be
issued in the name of:
---------------------------------------------------------------
(Please print or Type Name, Address and Social Security Number)
---------------------------------------------------------------
---------------------------------------------------------------
and, if said number of shares of Warrant Securities shall not be all the Warrant
Securities purchasable hereunder, that a new Warrant Certificate for the balance
of the Warrant Securities purchasable under the within Warrant Certificate be
registered in the name of the undersigned Holder or his Assignee as below
indicated and delivered to the address stated below.
Dated:_________________
Name of Holder
or Assignee: _________________________
(Please Print)
Address: _________________________
_________________________
Signature: _________________________
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, unless these Warrants have been assigned.
5
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrants)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
the right to purchase shares of common stock represented by the within Warrant
Certificate unto, and requests that a certificate for such Warrant be issued in
the name of:
---------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
---------------------------------------------------------------
---------------------------------------------------------------
(Taxpayer Identification or Social security Number)
The undersigned hereby irrevocably constitutes and appoints _______________
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises and, if said number of shares of common stock
shall not be all of the common stock purchasable under the within Warrant
Certificate, that a new Warrant Certificate for the balance of the common stock
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Holder and delivered to such Holder's address as then set forth
on the Company's books.
Dated:_______________ ______________________________
Signature of Registered Holder
Note: The above signature must correspond with the name as it appears upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.
6
<PAGE>
EXHIBIT 10.17
AMENDMENT NO. 1
TO
SETTLEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO THE SETTLEMENT AGREEMENT (this
"Amendment") is entered into as of January 24, 2000 between Omni Nutraceuticals,
Inc., a Utah corporation (the "Company") and Klee Irwin, an individual residing
at 7825 Veragua Drive, Playa del Rey, California 90292 ("Irwin").
W I T N E S S E T H :
WHEREAS, the Company and Irwin have entered into that certain
Settlement Agreement dated October 8, 1999 (the "Agreement"); and
WHEREAS, the Company has entered into a Stock Purchase
Agreement with American Equities LLC ("AE") and Corporate Financial Enterprises,
Inc. ("CFE" and together with AE, the "Investors") of even date herewith (the
"Stock Purchase Agreement"); and
WHEREAS, in order to induce the Investors to enter into the
Stock Purchase Agreement, the Company and Irwin have been required to make
certain amendments to the Agreement, and the Company and Irwin are willing to do
so on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confirmed, the parties hereto hereby agree as follows:
1. DEFINITIONS. Terms defined in the Agreement which are used herein
shall have the same meanings as set forth in the Agreement for such terms unless
otherwise defined
herein.
2. AMENDMENTS TO AGREEMENTS. Upon the occurrence of the Effective
Time (as defined in Section 3) the Agreement is hereby amended by:
(A) Adding the following to Section 3(a) of the Agreement at the
end of such Section:
"Notwithstanding anything in the foregoing to the contrary
provided, the Spin-Off shall be subject to the terms and
conditions of the Stock Purchase Agreement and the provisions of
the Company's 5% Convertible Preferred Stock, Series A."
<PAGE>
(B) The Tax Allocation and Indemnification Agreement by and
between the Company, Irwin and HealthZone.com ("HealthZone") is hereby
terminated and of no further force and effect.
(C) The following language is hereby added to Section 3(c):
"Notwithstanding anything in the foregoing to the contrary,
any capital to be provided to HealthZone by Irwin, the Investors
or any other party, shall be provided in accordance with and
subject to the terms of the Stock Purchase Agreement and except
to the extent provided therein, any and all agreements, covenants
or obligations between Omni and HealthZone (other than advances
by Omni to HealthZone up to a maximum of $75,000), including
those under any tax sharing and indemnification agreement, any
restriction, guarantee or warranty of HealthZone made to, in
favor of, or otherwise benefitting Omni or any of its officers,
directors or affiliates (other than for any indemnification
obligations of HealthZone's directors and officers as provided in
HealthZone's Articles of Incorporation, By-Laws or the provisions
of California law which shall continue as provided in the
Agreement) are hereby terminated in accordance with and subject
to the Stock Purchase Agreement. The provisions of the foregoing
Section relating to the composition of the HealthZone Board of
Directors and all restrictions on Irwin's rights to manage or
operate HealthZone, including, without limitation, the provisions
of Exhibit B, or his right to vote his HealthZone shares of
Capital Stock are hereby terminated in accordance with and
subject to the Stock Purchase Agreement; provided, however,
nothing in the foregoing shall otherwise affect or limit Irwin's
remaining obligations under the Agreement."
(D) Notwithstanding the provisions of Section 3(d), Irwin agrees
to deposit the Spin-Off Guarantee Shares with the Escrow Agent upon receipt of a
resolution adopted by the Omni Board of Directors requesting such deposit.
(E) Section 3(d)(i) of the Agreement is hereby deleted.
(F) Section 3(d)(ii) of the Agreement is hereby amended to
permit the exercise by the Company of its Put Option in whole or in part at any
time or from time to time after the date of this Agreement.
2
<PAGE>
(G) Section 3(d)(iii) of the Agreement is hereby amended to make
Irwin's exercise of his Call Option subject to the receipt of the prior written
consent of the Investors.
(H) The Put and Call Options are also subject to that certain
Option Agreement dated of even date herewith by and between the Company and
Irwin.
(I) The provisions of Section 4(b) are hereby amended to delete
therefrom any obligation of Irwin to consult with the Chairman of the Board or
Chief Executive Officer of the Company concerning any matter relating to
HealthZone.
3. CONDITIONS OF EFFECTIVENESS. The amendments herein shall
become effective (the "Effective Time") on the date hereof.
4. REFERENCE OF THE EFFECT ON THE AGREEMENT.
(a) Upon the Effective Time, (i) each reference in the Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like import
shall mean and be a reference to the Agreement as amended hereby, and (ii) each
reference to the Agreement in all other related documents shall mean and be a
reference to the Agreement, as amended hereby.
(b) Except as specifically amended above, the Agreement, and all
other related documents, shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as an amendment to any
provision of the Agreement nor a waiver of any of any right, power or remedy of
any party hereto, nor constitute a waiver of, or consent to any departure from,
any provision of the Agreement or any other related document.
5. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the internal laws (as opposed to conflicts of law provisions)
of the State of California.
6. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only an shall not constitute a part of this
Amendment for any other purpose.
3
<PAGE>
7. COUNTERPARTS, ETC. This Amendment may be executed by one or more
of the parties to this Amendment on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. Delivery of a duly executed counterpart copy of this Amendment
may be made by telecopy.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
day and year first above written.
OMNI NUTRACEUTICALS, INC. KLEE IRWIN
By: /s/ Louis Mancini /s/ Klee Irwin
----------------------------- -----------------------
Louis Mancini Klee Irwin
Chief Executive Officer
The undersigned, Margareth Irwin, hereby Consents to and agrees to be
bound by the foregoing.
/s/ Margareth Irwin
------------------------
Margareth Irwin
4
<PAGE>
EXHIBIT 10.18
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of January
24, 2000, by and between Omni Nutraceuticals, Inc., a Utah corporation and its
subsidiaries or affiliates (the "Company"), and Corporate Financial Enterprises,
a Delaware corporation ("Consultant").
WHEREAS, the Company desires to acquire or merge with other businesses,
enter into investment banking relationships and enhance shareholder value
through the sale or restructuring of its business, recapitalizations,
reorganizations and placement of common stock, preferred stock, and/or debt
instruments (the "Company Objectives");
WHEREAS, the Company recognizes that the Consultant can contribute to
finding, analyzing, structuring, negotiating and financing business sales and/or
acquisitions, joint ventures, alliances and other desirable projects, which
contribution is of great value to the Company and its shareholders;
WHEREAS, the Company believes it to be important both to the future
prosperity of the Company Objectives and to the Company's general interest to
retain Consultant as an exclusive consultant to the Company and have Consultant
available to the Company for consulting services in the manner and subject to
the terms, covenants, and conditions set forth herein;
WHEREAS, in order to accomplish the foregoing, the Company and Consultant
desire to enter into this Agreement, effective as of January 24, 2000, to
provide certain services as set forth herein.
NOW THEREFORE, in view of the foregoing and in consideration of the
premises and mutual representations, warranties, covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. RETENTION. The Company hereby retains the Consultant on a non-exclusive
basis during the Consulting Period (as defined in Section 2 below), and
Consultant hereby agrees to be so retained by the Company, all subject to
the terms and provisions of this Agreement.
2. CONSULTING PERIOD. The Consulting Period shall commence on January 24,
2000 and terminate no earlier than January 24, 2001, upon at least 90 days
prior written notice. After January 24, 2001, either party may terminate
this Agreement by giving 30 days written notice of termination to the other
party.
3. DUTIES OF CONSULTANT. During the Consulting Period, the Consultant
shall use its reasonable and best efforts to perform those actions and
responsibilities necessary to (i) identify, analyze, structure and/or
negotiate business sales and/or acquisitions, including
1
<PAGE>
without limitation, merger agreements, stock purchase agreements, and any
agreements relating to financing and/or the placement of debt or equity
securities of the Company, (ii) assist the Company in its corporate
strategies, (iii) assist the Company in the implementation of its business
plan, in each case as requested by the Company (the "Services"). The
Company shall provide all necessary financing required in order to purchase
businesses approved by the Company, including cash or freely tradable or
restricted securities. Such securities may include freely tradable Common
Stock, restricted Common Stock, preferred stock in the Company, debt,
convertible debt or any other security. Consultant shall render such
Services diligently, in compliance with all applicable laws and to the best
of its ability.
4. OTHER ACTIVITIES OF CONSULTANT. The Company recognizes that Consultant
shall perform only those services that are reasonably required to
accomplish the goals and objectives set forth herein, and that Consultant
shall provide services to other businesses and entities other than the
Company. Consultant shall be free to directly or indirectly own, manage,
operate, join, purchase, organize or take preparatory steps for the
organization of, build, control, finance, acquire, lease or invest or
participate in the ownership, management, operation, control or financing
of, or be connected as an officer, director, employee, partner, principal,
manager, agent, representative, associate, consultant, investor, advisor or
otherwise with (collectively, be "Affiliated" with), any business or
enterprise, or permit its name or any part thereof to be used in connection
with any business or enterprise, engaged in any business, including but not
limited to, any business that is the same as, substantially similar to or
otherwise competitive with, adverse to, affiliated with, or otherwise
related to the Company. Consultant may be Affiliated with any entity which
may provide services to the Company. The Company hereby waives any conflict
of interest that may arise from a relationship between Consultant and any
entity which Consultant is Affiliated with provided that Consultant inform
the Company of any material conflicts known to Consultant. This Agreement
may not be assigned by Consultant, without the prior written consent of the
Company; provided, however, Consultant's right to receive compensation
hereunder may be assigned by Consultant.
5. COMPENSATION. In consideration for Consultant entering into this Agreement,
the Company shall compensate Consultant as follows:
a. MONTHLY FEES AND BENEFITS:
i. Retainer. The Company shall pay to Consultant a non-refundable
monthly retainer of $5,000.
ii. Expenses. The Company shall pay all such expenses reasonably
incurred during the Consulting Period by the Consultant for
business purposes which are related to or in furtherance of the
goals and objectives identified by the Company and/or the
provision of the Services (collectively,
2
<PAGE>
"Company Purposes"), including, without limitation, expenses
incurred with respect to the Consultant's travel (including
business class travel for flights of less than two hours and
first class travel for flights of two hours or more), meals and
entertainment and other customary and reasonable expenses for
Company Purposes. The Company shall pay authorized expenses
directly, or, upon submission of bills, receipts and/or vouchers
by the Consultant, by direct reimbursement to the Consultant.
Consultant shall obtain the prior approval of the Company for any
expenses in excess of $1,000, individually or in the aggregate.
b. FEES FOR ACQUISITION OPPORTUNITIES. The Company shall pay to the
Consultant a fee equal to ten percent (10%) of the total aggregate
consideration paid for any acquisition or sale by the Company of any
business, corporation or division (a "Target"), including, but not
limited to, acquisitions by stock purchase agreement, merger
agreement, plan of reorganization or asset purchase agreement, which
fee shall be due upon closing of the transaction. For purposes hereof,
the total aggregate consideration paid shall include all cash and
stock paid to the seller or sellers of a Target upon closing of the
transaction in addition to any contingent payments to the seller or
sellers, including without limitation, earnouts, as if all performance
targets are met, as well as any debts or liabilities assumed by the
Company, including without limitation any debts for which the Company
issues a guarantee. In addition, Consultant shall also be entitled to
a financing fee equal to ten percent (10%) of any private or public
placement of debt or equity securities of the Company, including
without limitation, promissory notes, debentures, convertible debt,
common stock or preferred stock, or any other securities owned by the
Company, including without limitation securities of other
corporations. Notwithstanding the foregoing, no fees shall be payable
to Consultant unless either (i) Consultant introduces to the Company a
party involved in any of the above described transactions (i.e. a
purchaser, seller, lender or investor), or (ii) Consultant, at the
request of the Company, provides advisory or other consulting services
in connection with the transaction.
c. THIRD PARTY COMMISSIONS. Consultant and/or its Affiliates shall be
entitled to share in any fees or commissions payable by third parties
on any transaction contemplated herein, including, but not limited to,
any fees payable to Consultant by a third party lender, financing
partner, or other party, or a seller of a corporation or business,
including, without limitation, investment banking fees or commissions,
business brokerage fees or commissions, finders fees, or any other fee
payable by a third party to Consultant for any reason including the
identification of the Company as a potential purchaser or seller of
such corporation or business (a "Transaction Commission"). The Company
hereby waives any conflict of interest that may arise due to any
transaction wherein Consultant receives such a Transaction Commission,
including, but not limited to, any conflict of interest which may
arise as a result of the dual representation by
3
<PAGE>
Consultant of the seller or purchaser of a corporation or business on
the one hand, and the Company on the other.
d. FEES PAID IN COMMON STOCK. The Company, at its option, may pay fees
due under paragraph (b) of this Section 5 in cash, or by issuance of
Restricted Common Stock or freely tradeable, registered Common Stock.
(Restricted Common Stock shall be issued at a rate equal to the lesser
of (i) twenty percent (20%) of the Bid Price on the day prior to the
closing date of a transaction which entitles the Consultant to receive
such fees, or (ii) $2.50. Freely tradeable, registered Common Stock,
pursuant to an effective and current registration statement, shall be
issued at the rate equal to the lesser of (i) ten percent (10%) of the
Bid Price on the day prior to the closing date of a transaction which
entitles the Consultant to receive such fees, or $4.00.) All fees
payable hereunder shall be paid within seven business days following
the date upon which Consultant submits a written statement setting
forth the amounts due and payable to Consultant.
6. TERMINATION. Subject to the cure provisions contained herein, the
Company may terminate the Consulting Period upon written notice for Cause
at any time. Cause shall mean that during the Consulting Period, the
Consultant (i) materially breached the terms of this Agreement or (ii)
engaged in gross negligence or willful or illegal misconduct that is
materially injurious to the Company, and, after written notice of such
breach or conduct, Consultant has failed to cure such breach or cease such
conduct within not less than 30 days. Any termination pursuant to this
section shall be communicated by written Notice of Intended Termination.
For purposes of this Agreement, a "Notice of Intended Termination" shall
mean a notice which shall clearly state the specific termination provision
in this Agreement relied upon and shall set forth in reasonable and
specific detail the facts and circumstances claimed to provide a basis for
termination of the Consulting Period. No Notice of Intended Termination
shall be valid unless it is signed by at least a majority of the entire
board of directors of the Company (the "Board"), not counting any designee
elected by Consultant or any of its affiliates.
a. Not less than 15 days after receipt of the Notice of Intended
Termination, Consultant shall have the opportunity to a full, complete
and fair hearing in the presence of the entire Board. Not less than 10
days prior to the hearing, the Board shall present to Consultant its
reasons for the termination, including the specific actions,
inactions, omissions or other facts relied upon by the Board in making
its determination that Consultant has materially breached this
Agreement or engaged in gross negligence or willful or illegal
misconduct and that the Company has the right to terminate this
Agreement for Cause. Consultant shall have the right to rebut any
evidence or allegations of wrongdoing at the hearing and shall have
the right to be represented by counsel of Consultant's choice at such
hearing. After such hearing, should the Board determine that this
Agreement may properly be
4
<PAGE>
terminated for Cause, it shall issue a written Final Notice of
Termination to Consultant, signed by at least a majority of the
members of the Board (not counting any designee elected by Consultant
or any of its affiliates), setting forth in detail the specific facts,
conclusions and findings of the Board in determining that Cause exists
for the termination of this Agreement. The Final Notice of Termination
shall contain an effective termination date, which effective
termination date shall be no less than thirty (30) days from the date
of the Final Notice of Termination.
7. NOTICE. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or
sent by certified mail, return receipt requested, postage and fees prepaid,
or by national overnight delivery prepaid service to the parties at their
addresses set forth below. Any party hereto may at any time and from time
to time hereafter change the address to which notice shall be sent
hereunder by notice to the other party given under this paragraph. The date
of the giving of any notice sent by mail shall be the day two days after
the posting of the mail, except that notice of an address change shall be
deemed given when received. The addresses of the parties are as follows:
TO CONSULTANT:
CORPORATE FINANCIAL ENTERPRISES
2224 Main Street
Santa Monica, California 90405
Attn: President
Telephone: (310) 452-1005
Facsimile: (310) 581-6806
TO THE COMPANY:
Omni Nutraceuticals, Inc.
5310 Beethoven Street
Los Angeles, California 90066
Telecopier:(310) 306-4840
Attention: Chief Executive Officer
8. WAIVER. No course of dealing nor any delay on the part of either party in
exercising any rights hereunder will operate as a waiver of any rights of
such party. No waiver of any default or breach of this Agreement or
application of any term, covenant or provision hereof shall be deemed a
continuing waiver or a waiver of any other breach or default or the waiver
of any other application of any term, covenant or provision.
5
<PAGE>
9. DEFINITION OF "REASONABLE AND BEST EFFORTS." Reasonable and best efforts
shall not include the payment of any non-reimbursable out-of-pocket costs
or other payments by Consultant. Consultant shall not guarantee, make any
representation concerning (which representation would survive the closing
of any escrow or other transaction) or warrant (i) the condition,
performance, value, or profitability of any business purchased, sold by, or
otherwise considered for purchase by the Company; (ii) the validity or
authorization of any capital stock purchased, sold by, or otherwise
considered for purchase by the Company; (iii) the market value of any
capital stock, business or assets purchased, sold by, or otherwise
considered for purchase by the Company; (iv) the ability to finance,
refinance or otherwise mortgage or encumber any business or corporation
purchased, sold by, or otherwise considered for purchase by the Company; or
(vi) that Consultant will find or present any business or corporation which
the Company will consider, approve or ultimately purchase or be able to
purchase; or (7) the covenants, representations or warranties of any party
to any stock purchase, asset purchase, merger or other agreement entered
into by the Company with any third party.
10. SUCCESSORS; BINDING AGREEMENTS. Prior to the effectiveness of any
succession (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company, the Company will require the successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had
occurred. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets which
executes and delivers the Agreement provided for in this Section 10 or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
11. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument. Any signature by facsimile
shall be valid and binding as if an original signature were delivered.
12. CAPTIONS. The caption headings in this Agreement are for convenience of
reference only and are not intended and shall not be construed as having
any substantive effect.
13. GOVERNING LAW. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the state of California applicable to
agreements entered into and to be performed entirely therein. Any suit,
action or proceeding with respect to this Agreement shall be brought
exclusively in the state courts of the state of California or in the
federal courts of the United States which are located in Los Angeles,
California. The parties hereto hereby agree to submit to the jurisdiction
and venue of such courts for the purposes hereof. Each party agrees that,
to the extent permitted by law, the losing party in a suit, action or
proceeding in connection herewith shall pay the prevailing party its
reasonable attorneys' fees incurred in connection therewith.
6
<PAGE>
14. ENTIRE AGREEMENT/MODIFICATIONS. This Agreement constitutes the entire
agreement between the parties and supersedes all prior understandings and
agreements, whether oral or written, regarding Consultant's retention by
the Company; provided, however, that all fees previously earned and/or paid
to Consultant under prior agreements shall be deemed earned, and shall be
in addition to any fees payable hereunder. This Agreement shall not be
altered or modified except in writing, duly executed by the parties hereto.
15. WARRANTY. The Company and Consultant each hereby warrant and agree
that each is free to enter into this Agreement, that the parties signing
below are duly authorized and directed to execute this Agreement, and that
this Agreement is a valid, binding and enforceable against the parties
hereto.
16. SEVERABILITY. If any term, covenant or provision, or any part thereof, is
found by any court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, the same shall not affect the remainder of
such term, covenant or provision, any other terms, covenants or provisions
or any subsequent application of such term, covenant or provision which
shall be given the maximum effect possible without regard to the invalid,
illegal or unenforceable term, covenant or provision, or portion thereof.
In lieu of any such invalid, illegal or unenforceable provision, the
parties hereto intend that there shall be added as part of this Agreement a
term, covenant or provision as similar in terms to such invalid, illegal or
unenforceable term, covenant of provision, or part thereof, as may be
possible and be valid, legal and enforceable.
17. CONFIDENTIALITY. Consultant hereby agrees, and agrees to cause its
officers, directors, shareholders and affiliates ("Consultant's
Representatives") to treat all information received by Consultant or
Consultant's Representatives concerning the Company or its business,
financial condition, prospects and affairs, or Company Objectives, or other
confidential information it may receive in the course of performing
Services (unless already in the public domain through no breach of any duty
owed the Company) as confidential proprietary information and it will not
use, and shall cause all Consultant's Representatives not to use such
information except in connection with the performance of Services
hereunder. In the event this Agreement is Terminated, all such information
shall be returned to the Company.
7
<PAGE>
IN WITNESS HEREOF, the parties hereto have duly executed and delivered this
Agreement as of the day and year first above written.
CORPORATE FINANCIAL OMNI NUTRACEUTICALS, INC.
ENTERPRISES, INC.
By: /s/ Regis Possino By: /s/ Louis Mancini
-------------------------- -----------------------------
Regis Possino Louis Mancini
President President
8
<PAGE>
EXHIBIT 10.19
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of January
24, 2000, by and between Omni Nutraceuticals, Inc., a Utah corporation and its
subsidiaries or affiliates (the "Company"), and Monfort Investissments, a
Gibraltar corporation ("Consultant").
WHEREAS, the Company desires to list its securities on various European
exchanges, and generate a presence in the European markets (the "Company
Objectives");
WHEREAS, the Company recognizes that the Consultant can contribute to
achieving the Company Objectives;
WHEREAS, the Company believes it to be important both to the future
prosperity of the Company Objectives and to the Company's general interest to
retain Consultant as a non-exclusive consultant to the Company and have
Consultant available to the Company for consulting services in the manner and
subject to the terms, covenants, and conditions set forth herein;
WHEREAS, in order to accomplish the foregoing, the Company and Consultant
desire to enter into this Agreement, effective as of January 24, 2000, to
provide certain services as set forth herein.
NOW THEREFORE, in view of the foregoing and in consideration of the
premises and mutual representations, warranties, covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. RETENTION. The Company hereby retains the Consultant on a non-exclusive
basis during the Consulting Period (as defined in Section 2 below), and
Consultant hereby agrees to be so retained by the Company, all subject to
the terms and provisions of this Agreement.
2. CONSULTING PERIOD. The Consulting Period shall commence on January 24,
2000 and terminate no earlier than January 24, 2001, upon at least
90 days' prior written notice. After January 24, 2001, either party may
terminate this Agreement by giving 30 days' written notice of termination
to the other party.
3. DUTIES OF CONSULTANT. During the Consulting Period, the Consultant
shall use its reasonable and best efforts to perform those actions and
responsibilities necessary to achieve the Company Objectives (the
"Services"). Consultant shall render such Services diligently, in
compliance with all applicable laws and to the best of its ability.
4. OTHER ACTIVITIES OF CONSULTANT. The Company recognizes that
Consultant shall perform only those services that are reasonably required
to accomplish the goals and objectives set forth herein, and that
Consultant shall provide services to other businesses and entities
<PAGE>
other than the Company. Consultant shall be free to directly or indirectly
own, manage, operate, join, purchase, organize or take preparatory steps
for the organization of, build, control, finance, acquire, lease or invest
or participate in the ownership, management, operation, control or
financing of, or be connected as an officer, director, employee, partner,
principal, manager, agent, representative, associate, consultant, investor,
advisor or otherwise with (collectively, be "Affiliated" with), any
business or enterprise, or permit its name or any part thereof to be used
in connection with any business or enterprise, engaged in any business,
including but not limited to, any business that is the same as,
substantially similar to or otherwise competitive with, adverse to,
affiliated with, or otherwise related to the Company. Consultant may be
Affiliated with any entity which may provide services to the Company. The
Company hereby waives any conflict of interest that may arise from a
relationship between Consultant and any entity which Consultant is
Affiliated with provided that Consultant inform the Company of any material
conflicts known to Consultant. This Agreement may not be assigned by
Consultant, without the prior written consent of the Company; provided,
however, Consultant's right to receive compensation hereunder may be
assigned by Consultant.
5. COMPENSATION. In consideration for Consultant entering into this Agreement,
the Company shall compensate Consultant as follows:
a. FEES AND BENEFITS:
i. Retainer. The Company shall pay to Consultant a non-refundable
fee equal to 560,000 shares of restricted common stock which
shall be registered on the next registration statement filed by
the Company.
ii. Expenses. The Company shall pay all such expenses reasonably
incurred during the Consulting Period by the Consultant for
business purposes which are related to or in furtherance of the
goals and objectives identified by the Company and/or the
provision of the Services (collectively, "Company Purposes"),
including, without limitation, expenses incurred with respect to
the Consultant's travel (including business class travel for
flights of less than two hours and first class travel for flights
of two hours or more), meals and entertainment and other
customary and reasonable expenses for Company Purposes. The
Company shall pay authorized expenses directly, or, upon
submission of bills, receipts and/or vouchers by the Consultant,
by direct reimbursement to the Consultant. Consultant shall
obtain the prior approval of the Company for any expenses in
excess of $1,000, individually or in the aggregate.
b. THIRD PARTY COMMISSIONS. Consultant and/or its Affiliates shall be
entitled to share in any fees or commissions payable by third parties
on any transaction contemplated herein, including, but not limited to,
any fees payable to Consultant
2
<PAGE>
by a third party lender, financing partner, or other party, or a
seller of a corporation or business, including, without limitation,
investment banking fees or commissions, business brokerage fees or
commissions, finders fees, or any other fee payable by a third party
to Consultant for any reason including the identification of the
Company as a potential purchaser or seller of such corporation or
business (a "Transaction Commission"). The Company hereby waives any
conflict of interest that may arise due to any transaction wherein
Consultant receives such a Transaction Commission, including, but not
limited to, any conflict of interest which may arise as a result of
the dual representation by Consultant of the seller or purchaser of a
corporation or business on the one hand, and the Company on the other.
6. TERMINATION. The Company can terminate this Agreement at any time with
30 days written notice; provided, however, that the Company shall remain
liable for all fees paid under Section 5, and any unpaid reimbursement
obligation pursuant to Section 5.
7. NOTICE. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or
sent by certified mail, return receipt requested, postage and fees prepaid,
or by national overnight delivery prepaid service to the parties at their
addresses set forth below. Any party hereto may at any time and from time
to time hereafter change the address to which notice shall be sent
hereunder by notice to the other party given under this paragraph. The date
of the giving of any notice sent by mail shall be the day two days after
the posting of the mail, except that notice of an address change shall be
deemed given when received. The addresses of the parties are as follows:
TO CONSULTANT:
MONFORT INVESTISSEMENTS LIMITED
Avenue Louise 200
Post Office Box 112
Brussels 1050 Belgium
Attn: President
TO THE COMPANY:
Omni Nutraceuticals, Inc.
5310 Beethoven Street
Los Angeles, California 90066
Telecopier:(310) 306-4840
Attention: Chief Executive Officer
8. WAIVER. No course of dealing nor any delay on the part of either party in
exercising any rights hereunder will operate as a waiver of any rights of
such party. No waiver of any default or breach of this Agreement or
application of any term, covenant or provision
3
<PAGE>
hereof shall be deemed a continuing waiver or a waiver of any other breach
or default or the waiver of any other application of any term, covenant or
provision.
9. DEFINITION OF "REASONABLE AND BEST EFFORTS." Reasonable and best efforts
shall not include the payment of any non-reimbursable out-of-pocket costs
or other payments by Consultant. Consultant shall not guarantee, make any
representation concerning (which representation would survive the closing
of any escrow or other transaction) or warrant (i) the condition,
performance, value, or profitability of any business purchased, sold by, or
otherwise considered for purchase by the Company; (ii) the validity or
authorization of any capital stock purchased, sold by, or otherwise
considered for purchase by the Company; (iii) the market value of any
capital stock, business or assets purchased, sold by, or otherwise
considered for purchase by the Company; (iv) the ability to finance,
refinance or otherwise mortgage or encumber any business or corporation
purchased, sold by, or otherwise considered for purchase by the Company; or
(vi) that Consultant will find or present any business or corporation which
the Company will consider, approve or ultimately purchase or be able to
purchase; or (7) the covenants, representations or warranties of any party
to any stock purchase, asset purchase, merger or other agreement entered
into by the Company with any third party.
10. SUCCESSORS; BINDING AGREEMENTS. Prior to the effectiveness of any
succession (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company, the Company will require the successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had
occurred. As used in this Agreement, "Company" shall mean the Company as
defined above and any successor to its business and/or assets which
executes and delivers the Agreement provided for in this Section 10 or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law or otherwise.
11. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument. Any signature by facsimile
shall be valid and binding as if an original signature were delivered.
12. CAPTIONS. The caption headings in this Agreement are for convenience of
reference only and are not intended and shall not be construed as having
any substantive effect.
13. GOVERNING LAW. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the state of California applicable to
agreements entered into and to be performed entirely therein. Any suit,
action or proceeding with respect to this Agreement shall be brought
exclusively in the state courts of the state of California or in the
federal courts of the United States which are located in Los Angeles,
California. The parties hereto hereby agree to submit to the jurisdiction
and venue of such courts for the
4
<PAGE>
purposes hereof. Each party agrees that, to the extent permitted by law,
the losing party in a suit, action or proceeding in connection herewith
shall pay the prevailing party its reasonable attorneys' fees incurred in
connection therewith.
14. ENTIRE AGREEMENT/MODIFICATIONS. This Agreement constitutes the entire
agreement between the parties and supersedes all prior understandings and
agreements, whether oral or written, regarding Consultant's retention by
the Company; provided, however, that all fees previously earned and/or paid
to Consultant under prior agreements shall be deemed earned, and shall be
in addition to any fees payable hereunder. This Agreement shall not be
altered or modified except in writing, duly executed by the parties hereto.
15. WARRANTY. The Company and Consultant each hereby warrant and agree that
each is free to enter into this Agreement, that the parties signing below
are duly authorized and directed to execute this Agreement, and that this
Agreement is a valid, binding and enforceable against the parties hereto.
16. SEVERABILITY. If any term, covenant or provision, or any part
thereof, is found by any court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, the same shall not affect the
remainder of such term, covenant or provision, any other terms, covenants
or provisions or any subsequent application of such term, covenant or
provision which shall be given the maximum effect possible without regard
to the invalid, illegal or unenforceable term, covenant or provision, or
portion thereof. In lieu of any such invalid, illegal or unenforceable
provision, the parties hereto intend that there shall be added as part of
this Agreement a term, covenant or provision as similar in terms to such
invalid, illegal or unenforceable term, covenant of provision, or part
thereof, as may be possible and be valid, legal and enforceable.
17. CONFIDENTIALITY. Consultant hereby agrees, and agrees to cause its
officers, directors, shareholders and affiliates ("Consultant's
Representatives") to treat all information received by Consultant or
Consultant's Representatives concerning the Company or its business,
financial condition, prospects and affairs, or Company Objectives, or other
confidential information it may receive in the course of performing
Services (unless already in the public domain through no breach of any duty
owed the Company) as confidential proprietary information and it will not
use, and shall cause all Consultant's Representatives not to use such
information except in connection with the performance of Services
hereunder. In the event this Agreement is Terminated, all such information
shall be returned to the Company.
5
<PAGE>
IN WITNESS HEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
MONFORT INVESTISSEMENTS LIMITED OMNI NUTRACEUTICALS, INC.
By: /s/ Raoul Berthamieu By: /s/ Louis Mancini
--------------------------- ----------------------
Name: Raoul Berthamieu Louis Mancini
President President
6
<PAGE>
EXHIBIT 10.20
LOCK-UP AGREEMENT
January 24, 2000
Corporate Financial Enterprises, Inc.
American Equities, LLC
2224 Main Street
Los Angeles, CA 90405
RE: Omni Nutraceuticals, Inc. (the "Company")
Ladies and Gentlemen:
For good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned hereby agrees, for a period (the "Lock-up Period")
commencing on the date hereof and ending July 24, 2000, we hereby agree not to
sell, loan, pledge, assign, transfer, encumber, distribute, grant or otherwise
dispose of, directly or indirectly, or offer, contract or otherwise agree to do
any of the foregoing, any rights with respect to (a) any shares of the common
stock (the "Common Stock"), of the Company, (b) any options or warrants to
purchase any shares of Common Stock or any securities convertible into, or
exchangeable for, shares of Common Stock, or (c) any securities convertible into
or exchangeable for shares of Common Stock (collectively, the "Securities"), in
each case now owned or hereafter acquired directly or indirectly by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition during the Lock-up Period (collectively a
"Disposition"), otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agree to be bound by this Lock-up Agreement, (ii) with
the prior written consent of Corporate Financial Enterprises, Inc. (the
"Representative"), (iii) in a private placement pursuant to which the
transferred securities contain a restrictive legend preventing the sale of such
securities for one year following such sale, or (iv) sales after 90 days from
the date hereof to American Equities, LLC or Corporate Financial Enterprises,
Inc. (the "Investors") at a price equal to 85% of the average of the three
lowest closing bid prices reported for the Company's common stock during the 30
trading days prior to the date of such sale, of up to 50% of the number of
shares of common stock which would otherwise be permitted to be sold pursuant to
Rule 144 by an affiliate of the Company (provided, however, that if Investors
elect not to purchase such shares, we shall be permitted to sell such shares
without restriction). The foregoing restriction is expressly agreed to preclude
the undersigned holder of the Securities from engaging during the Lock-up Period
in any hedging or other transaction which is designed to, or reasonably expected
to lead to or result in a Disposition of the Securities, even if such Securities
would be disposed of by someone other than the undersigned.
Very truly yours,
/s/ Klee Irwin /s/ R. Lindsay Duncan
- --------------------------- ---------------------------
Klee Irwin R. Lindsay Duncan
<PAGE>
EXHIBIT 10.21
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of , 2000 by and between Omni
Nutraceuticals, Inc., a Utah corporation (the "Corporation"), and Reid Breitman
("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a Director of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") and/or Articles of Incorporation (the "Articles") providing for the
indemnification of the directors, officers, employees and other agents of the
Corporation, including persons serving at the request of the Corporation in such
capacities with other corporations or enterprises, as authorized by the Utah
Corporations Code, as amended (the "Code");
WHEREAS, the Articles, Bylaws and/or the Code, by their non-exclusive
nature, permit contracts between the Corporation and its agents, officers,
employees and other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to serve and continue to serve as a
Director of the Corporation, the Corporation has determined and agreed to enter
into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's service and continued service
as after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
shareholders of the Corporation, as a Director of the Corporation or as a
director, officer or other fiduciary of an affiliate of the Corporation
(including any employee benefit plan of the Corporation) faithfully and to the
best of his ability so long as he is duly elected and qualified in accordance
with the provisions of the Bylaws or other applicable charter documents of the
Corporation or such affiliate; PROVIDED, HOWEVER, that Agent may at any time and
for any reason resign from such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
<PAGE>
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of the
Corporation, or is or was serving or at any time serves at the request of the
Corporation as a director, officer, employee or other agent of another
corporation, partnership joint venture, trust, employee benefit plan or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 or 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Sections 16(b) of the Securities Exchange Act of
1934 and amendments thereto (the "Exchange Act"), or any violation of Section 10
of the Exchange Act or Rule 10b-5 thereunder or any federal, state or foreign
statutory laws or regulations prescribing insider trading or similar provisions
of any federal, state or local statutory or foreign law; or
(b) if such indemnification is not lawful, and in such case,
only to the extent such indemnification is not lawful.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein. The Company shall maintain usual and customary
officers' and directors' insurance coverage of at least $5,000,000, covering all
periods during which Agent is a director of the Company.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim
2
<PAGE>
in respect thereof is to be made against the Corporation under this Agreement,
notify the Corporation of the commencement thereof; but the omission so to
notify the Corporation will not relieve it from any liability which it may have
to Agent otherwise than under this Agreement, or under this Agreement, except to
the extent the Corporation is directly prejudiced by such failure to so notify
the Corporation. With respect to any such action, suit or proceeding:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding, but the
fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of Agent unless
(i) the employment of counsel by Agent has been authorized by the Corporation,
(ii) Agent shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Agent in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel
reasonably satisfactory to Agent to assume the defense of such action, in each
of which cases the fees and expenses of Agent's separate counsel shall be at the
expense of the Corporation. The Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for in
clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent, or any non-monetary obligation, without Agent's written
consent, which may be given or withheld in Agent's sole discretion.
7. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Corporation's Articles of
Incorporation or the Code.
8. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, (ii) no disposition of such claim is made within
thirty (30) days of request therefor, or (iii) the
3
<PAGE>
Corporation should fail to comply with the provisions of Section 7 hereof.
Agent, in such enforcement action, if successful in whole or in part, shall be
entitled to be paid also the expense of prosecuting his claim. It shall be a
defense to any action for which a claim for indemnification is made under
Section 2 or 3 hereof (other than an action brought to enforce a claim for
expenses pursuant to Section 7 hereof, provided that the required undertaking
has been tendered to the Corporation) that Agent is not entitled to
indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the circumstances,
nor an actual determination by the Corporation (including its Board of Directors
or its stockholders) that such indemnification is improper shall be a defense to
the action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.
9. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Articles of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
10. SURVIVAL OF RIGHTS.
(a) The rights of Agent under this Agreement shall continue after
Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise until any claims which
may be brought against Agent for which indemnification may be sought hereunder
shall be barred by any applicable statute of limitations and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
11. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
12. JURISDICTION AND VENUE.
4
<PAGE>
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself or himself and its or his property, to the
non-exclusive jurisdiction of any California court or federal court of the
United States of America sitting in the State of California, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in any
such California court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Should any party
institute any action, suit or other proceeding arising out of or relating to
this Agreement, the prevailing party shall be entitled to receive from the
losing party reasonable attorneys' fees and costs incurred in connection
therewith, along with all costs of defense, investigation, preparation, experts
and collection.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it or he may legally and effectively do so, any
objection that it or he may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement in any
of the courts referred to in Section 13(a). Each of the parties hereto
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) The parties further agree that the mailing by certified or
registered mail, return receipt requested, of any process required by any such
court shall constitute valid and lawful service of process against them, without
the necessity for service by any other means provided by law.
13. WAIVER OF JURY TRIAL
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
14. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which
5
<PAGE>
together shall constitute but one and the same Agreement. Only one such
counterpart need be produced to evidence the existence of this Agreement.
16. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
17. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid, if to Agent, to its most recent address as set forth in the Company's
records, and if to the Company, to its principal executive offices, or to such
other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
Omni Nutraceuitcals, Inc.
By: /s/ Louis Mancini
-----------------------------------
Louis Mancini
Chief Executive Officer
AGENT
REID BREITMAN
/s/ Reid Breitman
-----------------------------------
Reid Breitman
6
