Exhibit 4.7


 


VITAL LIVING, INC.


 


CERTIFICATE OF DESIGNATION OF PREFERENCES,


RIGHTS AND LIMITATIONS


OF


10% SERIES A PREFERRED STOCK


 


The
undersigned, Bradley D. Edson and Stuart Benson, do hereby
certify that:


 


1.                                       They are the
Chief Executive Officer and Secretary, respectively, of Vital Living, Inc., a
Nevada corporation (the “Company”).


 


2.                                       The Company is
authorized to issue 50,000,000 shares of preferred stock.


 


3.                                       The following
resolutions were duly adopted by the Board of Directors:


 


WHEREAS, the Articles of Incorporation of the
Company, as amended, provides for a class of its authorized stock known as
preferred stock, comprised of 50,000,000 shares, $0.001 par value, issuable
from time to time in one or more series;


 


WHEREAS, the Board of Directors of the
Company is authorized to fix the dividend rights, dividend rate, voting rights,
conversion rights, rights and terms of redemption and liquidation preferences
of any wholly unissued series of preferred stock and the number of shares
constituting any series and the designation thereof, of any of them; and


 


WHEREAS, it is the desire of the Board of
Directors of the Company, pursuant to its authority as aforesaid, to fix the
rights, preferences, restrictions and other matters relating to a series of the
preferred stock, which shall consist of up to 10,000,000 shares of the
50,000,000 shares of preferred stock which the corporation has the authority to
issue, as follows:


 


NOW, THEREFORE, BE IT RESOLVED, that the
Board of Directors does hereby provide for the issuance of a series of
preferred stock for cash or exchange of other securities, rights or property
and does hereby fix and determine the rights, preferences, restrictions and
other matters relating to such series of preferred stock as follows:


 


TERMS OF PREFERRED STOCK


 


The rights, preferences, restrictions and
other matters relating to the 10% Series A Preferred Stock are as follows:


 


1.                                       DESIGNATION.  The Preferred Stock is designated as the
Company’s 10% Series A Preferred Stock (the “Preferred Stock”) and is subject
to the terms and conditions of the Stock Purchase Agreement (the “Purchase
Agreement”) of even date herewith between the Company and the Investor.


 


2.                                       DIVIDEND
PROVISIONS.  The holders of the
Preferred Stock will be entitled to a preferred dividend at the rate of 10% per
annum.  Dividends on the Preferred Stock
will be cumulative and shall be paid in additional shares of Preferred Stock at
a price equal to $1.00 per shares and will contain all the rights and
privileges and be subject to all the terms and conditions as set forth
herein.  Dividends shall be paid
semi-annually.


 

















 


3.                                       LIQUIDATION
PREFERENCE.


 


(a)                                  In
the event of any liquidation, dissolution or winding up of this corporation,
either voluntary or involuntary, subject to the rights of series of preferred
stock that may from time to time come into existence, the holders of Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of this corporation to the holders of Common Stock by
reason of their ownership thereof, an amount per share equal to the sum of (i)
$1.00 for each outstanding shares of Preferred Stock (the “Original Series A
Issue Price”) and (ii) an amount equal to 12% of the Original Series A Issue
Price for each 12 months that has passed since the date of issuance of any
Preferred Stock plus any accrued or declared but unpaid dividends on such share
(such amount (of declared but unpaid dividends) being referred to herein as the
“Premium”).  If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of preferred stock that may from time to time come into existence, the entire
assets and funds of the corporation legally available for distribution shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the preferential amount each such holder is otherwise entitled to received.


 


(b)                                 Upon
the completion of the distribution required by subparagraph (a) of this Section
3 and any other distribution that may be required with respect to series of
preferred stock that may from time to time come into existence, the remaining
assets of the corporation available for distribution to stockholders shall be
distributed among the holders of Preferred Stock and Common Stock pro rata
based on the number of shares of Common Stock held by each (assuming conversion
of all such Preferred Stock).


 


(c)                                  (i)                                     For
purposes of this Section 3, a liquidation, dissolution or winding up of this
corporation shall be deemed to be occasioned by, or to include, (A) the
acquisition of the corporation by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation but, excluding any merger effected
exclusively for the purpose of changing the domicile of the corporation); or
(B) a sale of all or substantially all of the assets of the corporation; unless
the corporation’s shareholders of record as constituted immediately prior to
such acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the corporation’s acquisition
or sale or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity.


 


(ii)                                  In any of such
events, if the consideration received by the corporation is other than cash,
its value will be deemed its fair market value.  Any securities shall be valued as follows:


 


(A)                              Securities not
subject to investment letter or other similar restrictions on free
marketability (covered by (B) below):


 


(1)                                  If traded on a
securities exchange or through NASDAQ National Market, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the thirty-day period ending three (3) days prior to the closing;


 


(2)                                  If actively
traded over-the-counter, the value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the thirty-day period
ending three (3) days prior to the closing; and


 


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(3)                                  If there is no
active public market, the value shall be the fair market value thereof, as
mutually determined by the corporation and the holders of at least a majority
of the voting power of all then outstanding shares of Preferred Stock.


 


(B)                                The method of
valuation of securities subject to investment letter or other restrictions on
free marketability (other than restrictions arising solely by virtue of a
shareholder’s status as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above in (A)(1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of at least a majority of the
voting power of all then outstanding shares of such Preferred Stock.


 


(iii)                             In the event the
requirements of this subsection 3(c) are not complied with, this corporation
shall forthwith either:


 


(A)                              cause such
closing to be postponed until such time as the requirements of this Section 3
have been complied with; or


 


(B)                                cancel such
transaction, in which event the rights, preferences and privileges of the
holders of the Preferred Stock shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the date of the first
notice referred to in subsection 3(c)(iv) hereof.


 


(iv)                              The corporation shall
give each holder of record of Preferred Stock written notice of such impending
transaction not later than ten (10) days prior to the shareholders’ meeting
called to approve such transaction, or ten (10) days prior to the closing of
such transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction.  The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 3,
and the corporation shall thereafter give such holders prompt notice of any
material changes.  The transaction shall
in no event take place sooner than twenty (20) days after the corporation has given
the first notice provided for herein or sooner than ten (10) days after the
corporation has given notice of any material changes provided for herein;
provided, however, that such periods may be shortened upon the written consent
of the holders of Preferred Stock that are entitled to such notice rights or
similar notice rights and that represent at least a majority of the voting
power of all then outstanding shares of such Preferred Stock.


 


4.                                       REDEMPTION.


 


(a)                                  This
corporation may following twelve (12) months from the date hereof (the “Redemption
Date”), at the option of the Board of Directors, redeem in whole or in part the
Preferred Stock by paying in cash in exchange for the shares of Preferred Stock
to be redeemed a sum equal to $1.50 per share of Series A Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) plus all declared or accumulated but unpaid dividends on such shares
(the “Redemption Price”).  Any
redemption effected pursuant to his subsection (4)(a) shall be made on a pro
rata basis among the holders of the Preferred Stock in proportion to the number
of shares of Preferred Stock  then held
by them.


 


(b)                                 Subject
to the rights of series of preferred stock which may from time to time come
into existence, at least thirty (30) but no more than sixty (60) days prior to
each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice if given) of the Preferred Stock to be
redeemed at the address last shown on the records of this corporation for such
holder, notifying


 


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such holder of the redemption to be effected,
specifying the number of shares to be redeemed from such holder, the Redemption
Date, the Redemption Price, the place at which payment may be obtained and
calling upon such holder to surrender to this corporation, in the manner and at
the place designated, his, her or its certificate or certificates representing
the shares to be redeemed (the “Redemption Notice”).  Except as provided in subsection (4)(c) on or after the
Redemption Date, each holder of Preferred Stock to be redeemed shall surrender
to this corporation the certificate or certificates representing such shares,
in the manner and at the place designated in the Redemption Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears cancelled. 
In the event loss than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.


 


(c)                                  From
and after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Preferred Stock designated for redemption in the Redemption Notice as holders
of Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this corporation or be deemed to be outstanding for any purpose
whatsoever.  Subject to the rights of
series of preferred stock which may from time to time come into existence, if
the funds of the corporation legally available for redemption of shares of
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon their holdings of Preferred Stock. 
The shares of Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein.  Subject to the rights of series of preferred
stock which may from time to time come into existence, at any time thereafter
when additional funds of the corporation are legally available for the
redemption of shares of Preferred Stock, such funds will immediately be used to
redeem the balance of the shares which the corporation has become obliged to
redeem on any Redemption Date but which it has not redeemed.


 


5.                                       CONVERSION.  The holders of the Preferred Stock shall
have conversion rights as follows (the “Conversion Rights”):


 


(a)                                  Right
to Convert.  Each share of Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
following the first anniversary of the date of issuance of such share and on or
prior to the fifth (5th) day prior to the Redemption Date, if any,
as may have been fixed in any Redemption Notice with respect to the Preferred
Stock, at the office of this corporation or any transfer agent of such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series A Issue Price by the Conversion
Price applicable to such share, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion.  The Conversion Price per share for shares of
Preferred Stock shall be calculated as follows:


 


If the Preferred Stock is
converted between the first anniversary and prior to the fifteenth (15th)
month from the date of issuance, the Conversion Price per share shall be equal
to the Original Series A Issue Price; or


 


If following the fifteenth (15th)
month from the date of issuance of the corporation’s Common Stock is publicly
traded on NASDAQ, Over-the-Counter Bulletin Board or other national stock
exchange, the Conversion Price shall be 60% of the average closing price of the
Common Stock for the 30 days prior to the date of conversion (“Trading
Conversion Price”), however, in no event shall the Conversion Price be less
than the Original Series A Issue Price.


 


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(b)                                 Automatic
Conversion.  Each share of Preferred
Stock shall automatically be converted into shares of Common Stock on the first
day of the eighteenth (18th) month following the original issue date
of the Preferred Stock, at a Conversion Price equal to the greater of the
Trading Conversion Price or the Original Series A Issue Price.


 


(c)                                  Mechanics
of Conversion.  Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefore, duly
endorsed, at the office of this corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued.  This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid.  Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.


 


(d)                                 No
Impairment.  This corporation will
not, by amendment of its Articles of Incorporation or through any
reorganization, recapitalization, 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 this corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of the Preferred Stock
against impairment.


 


(e)                                  Reservation
of Stock Issuable Upon Conversion. 
This corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, in addition to such other remedies as shall be available to
the holder of such Preferred Stock, this corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite shareholder approval of any necessary
amendment to the corporation’s Articles of Incorporation.


 


(f)                                    Notice.  Any notice required by the provisions of
this Section 5 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
this corporation.


 


6.                                       VOTING
RIGHTS.  The holder of each share of
Preferred Stock shall not have any voting rights.


 


7.                                       PROTECTIVE
PROVISIONS.  So long as any shares
of Preferred Stock are outstanding, this corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of Preferred Stock which is entitled, other than solely by law, to vote
with respect


 


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to the matter,
and which Preferred Stock represents at least a majority of the voting power of
the then outstanding  shares of such
Preferred Stock:


 


(a)                                  sell,
convey, or otherwise dispose of or encumber all or substantially all of its
property or business or merge into or consolidate with any other corporation
(other than a wholly-owned subsidiary corporation) or effect any transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the corporation is disposed of;


 


(b)                                 alter
or change the rights, preferences or privileges of the shares of Preferred
Stock so as to affect adversely the shares;


 


(c)                                  increase
or decrease (other than by redemption or conversion) the total number of
authorized shares of preferred stock;


 


(d)                                 authorize
or issue, or obligate itself to issue, any other equity security, including any
other security convertible into or exercisable for any equity security (i)
having a preference over, or being on a parity with, the Preferred Stock with
respect to dividends or upon liquidation, or (ii) having rights similar to any
of the rights of the Preferred Stock; or


 


(e)                                  amend
the corporation’s Articles of Incorporation or by-laws.


 


RESOLVED, FURTHER, that the Chairman, the
chief executive officer, president or any vice president, and the secretary or
any assistant secretary, of the Corporation be and they hereby are authorized
and directed to prepare and file a Certificate of Designation of Preferences,
Rights and Limitations in accordance with the foregoing resolution and the
provisions of Nevada law.


 


IN WITNESS WHEREOF, the undersigned have
executed this Certificate this 7th day of August, 2003.


 


 


	
  /s/ Bradley
  D. Edson

  	
   

  	
  /s/ Stuart
  Benson

  	
   

  
	
  Bradley D.
  Edson, Chief Executive Officer

  	
  Stuart
  Benson, Secretary

  



 


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