Document:

Unassociated Document

    Vital
      Living, Inc.

     

     

    ______________________

     

    2005
      Incentive Compensation Plan

    

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    Vital
      Living, Inc.

     

    2005
      Incentive Compensation
      Plan

     

    1.  Purpose.
      The
      purpose of this 2005 Incentive Compensation
      Plan (the “Plan”)
      is to
      assist Vital Living, Inc., a Nevada corporation (the “Company”)
      and
      its Related Entities in attracting, motivating, retaining and rewarding
      high-quality Employees, officers, Directors and Consultants by enabling such
      persons to acquire or increase a proprietary interest in the Company in order
      to
      strengthen the interests between such persons and the Company’s stockholders,
      and providing such persons with annual and long-term performance incentives
      to
      expend their maximum efforts in the creation of stockholder value. The Plan
      is
      intended to qualify certain compensation awarded under the Plan for tax
      deductibility under Section 162(m) of the Code (as hereafter defined) to
      the extent deemed appropriate by the Committee (or any successor committee)
      of
      the Board.

     

    2.  Definitions.
      For
      purposes of the Plan, the following terms shall be defined as set forth below,
      in addition to such terms defined in Section 1 hereof.

     

    (a)  “Applicable
      Laws”
means
      the requirements relating to the administration of equity compensation plans
      under U.S. state corporate laws, U.S. federal and state securities laws, the
      Code, the rules and regulations of any stock exchange upon which the Common
      Stock is listed and the applicable laws of any foreign country or jurisdiction
      where Awards are granted under the Plan.

     

    (b)  “Award”
means
      any award granted pursuant to the terms of this Plan including, an Option,
      Stock
      Appreciation Right, Restricted Stock, Stock Units, Stock granted as a bonus
      or
      in lieu of another award, Dividend Equivalent, Other Stock-Based Award or
      Performance Award, together with any other right or interest, granted to a
      Participant under the Plan.

     

    (c)  “Beneficiary”
means
      the person, persons, trust or trusts which have been designated by a Participant
      in his or her most recent written beneficiary designation filed with the
      Committee to receive the benefits specified under the Plan upon such
      Participant’s death or to which Awards or other rights are transferred if and to
      the extent permitted under Section 10(b) hereof. If, upon a Participant’s
      death, there is no designated Beneficiary or surviving designated Beneficiary,
      then the term Beneficiary means the person, persons, trust or trusts entitled
      by
      will or the laws of descent and distribution to receive such
      benefits.

     

    (d)  “Board”
means
      the Company’s Board of Directors.

     

    (e)  “Cause”
shall,
      with respect to any Participant, have the equivalent meaning (or the same
      meaning as “cause” or “for cause”) set forth in any employment agreement between
      the Participant and the Company or a Related Entity or, in the absence of any
      such agreement, such term shall mean (i) the failure by the Participant to
      perform his or her duties as assigned by the Company (or a Related Entity)
      in a
      reasonable manner, (ii) any violation or breach by the Participant of his
      or her employment agreement with the Company (or a Related Entity), if any,
      (iii) any violation or breach by the Participant of his or her confidential
      information and invention assignment agreement with the Company (or a Related
      Entity), if any, (iv) any act by the Participant of dishonesty or bad faith
      with respect to the Company (or a Related Entity), (v) any material
      violation or breach by the Participant of the Company’s or a Related
      Entity’s policy for employee conduct, if any, (vi) any act by the
      Participant of dishonesty or bad faith with respect to the Company (or a Related
      Entity), (vii) use of alcohol, drugs or other similar substances affecting
      the Participant’s work performance, or (viii) the commission by the
      Participant of any act, misdemeanor, or crime reflecting unfavorably upon the
      Participant or the Company. The good faith determination by the Committee of
      whether the Participant’s Continuous Service was terminated by the Company for
“Cause” shall be final and binding for all purposes hereunder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (f)  “Change
      in Control”
means
      and shall be deemed to have occurred on the earliest of the following
      dates:

     

    (i)  the
      date
      on which any “person” (as such term is used in Sections 13(d) and 14(d) of
      the Exchange Act) obtains “beneficial ownership” (as defined in Rule 13d-3
      of the Exchange Act) or a pecuniary interest in more than fifty
      percent (50%) of the combined voting power of the Company’s then
      outstanding securities (“Voting Stock”);

     

    (ii)  the
      consummation of a merger, consolidation, reorganization or similar transaction
      other than a transaction: (1) (a) in which substantially all of the holders
      of Company’s Voting Stock hold or receive directly or indirectly fifty
      percent (50%) or more of the voting stock of the resulting entity or a
      parent company thereof, in substantially the same proportions as their ownership
      of the Company immediately prior to the transaction; or (2) in which the
      holders of Company’s capital stock immediately before such transaction will,
      immediately after such transaction, hold as a group on a fully diluted basis
      the
      ability to elect at least a majority of the directors of the surviving
      corporation (or a parent company);

     

    (iii)  there
      is
      consummated a sale, lease, exclusive license or other disposition of all or
      substantially all of the consolidated assets of the Company and its
      Subsidiaries, other than a sale, lease, license or other disposition of all
      or
      substantially all of the consolidated assets of the Company and its Subsidiaries
      to an entity, more than fifty percent (50%) of the combined voting power of
      the voting securities of which are owned by stockholders of the Company in
      substantially the same proportions as their ownership of the Company immediately
      prior to such sale, lease, license or other disposition; or

     

    (iv)  individuals
      who, on the date this Plan is adopted by the Board, are Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
      Directors; provided, however, that if the appointment or election (or nomination
      for election) of any new Director was approved or recommended by a majority
      vote
      of the members of the Incumbent Board then still in office, such new member
      shall, for purposes of this Plan, be considered as a member of the Incumbent
      Board.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    For
      purposes of determining whether a Change in Control has occurred, a transaction
      includes all transactions in a series of related transactions, and terms used
      in
      this definition but not defined are used as defined in the Plan. The term Change
      in Control shall not include a sale of assets, merger or other transaction
      effected exclusively for the purpose of changing the domicile of the
      Company.

     

    Notwithstanding
      the foregoing or any other provision of this Plan, the definition of Change
      in
      Control (or any analogous term) in an individual written agreement between
      the
      Company and the Participant shall supersede the foregoing definition with
      respect to Awards subject to such agreement (it being understood, however,
      that
      if no definition of Change in Control or any analogous term is set forth in
      such
      an individual written agreement, the foregoing definition shall apply to any
      Award).

     

    (g)  “Code”
means
      the Internal Revenue Code of 1986, as amended from time to time, including
      regulations thereunder and successor provisions and regulations
      thereto.

     

    (h)  “Committee”
means
      a
      committee designated by the Board to administer the Plan with respect to at
      least a group of Employees, Directors or Consultants.

     

    (i)  “Consultant”
means
      any person (other than an Employee or a Director, solely with respect to
      rendering services in such person’s capacity as a director) who is engaged by
      the Company or any Related Entity to render consulting or advisory services
      to
      the Company or such Related Entity.

     

    (j)  “Continuous
      Service”
means
      uninterrupted provision of services to the Company as an Employee, a Director,
      or a Consultant. Continuous Service shall not be considered to be interrupted
      in
      the case of (i) any approved leave of absence, (ii) transfers among
      the Company, any Related Entities, or any successor entities, as either an
      Employee, a Director, or a Consultant, or (iii) any change in status as
      long as the individual remains in the service of the Company or a Related Entity
      as either an Employee, a Director, or a Consultant (except as otherwise provided
      in the Option Agreement). An approved leave of absence shall include sick leave,
      military leave, or any other authorized personal leave.

     

    (k)  “Corporate
      Transaction”
means
      the occurrence, in a single transaction or in a series of related transactions,
      of any one or more of the following events:

     

    (i)  a
      sale,
      lease, exclusive license or
      other
      disposition of all or substantially all, as determined by the Board in its
      discretion, of the consolidated assets of the Company and its
      Subsidiaries;

     

    (ii)  a
      sale or
      other disposition of more than twenty percent (20%) of the outstanding
      securities of the Company; or

     

    (iii)  a
      merger,
      consolidation, reorganization or similar transaction, whether or not the Company
      is the surviving corporation.

     

    (l)  “Covered
      Employee”
means
      an Eligible Person who is designated by the Committee as likely to be a “covered
      employee” within the meaning of Section 162(m) of the Code and the
      regulations thereunder. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (m)  “Deferred
      Stock”
means
      a
      right, granted to a Participant pursuant to Section 6(e) hereof, to receive
      Shares, cash or a combination thereof at the end of a specified period of
      time.

     

    (n)  “Director”
means
      a
      member of the Board or the board of directors of any Related
      Entity.

     

    (o)  “Disability”
means
      a
      permanent and total disability (within the meaning of Section 22(e) of the
      Code), as determined by a medical doctor satisfactory to the
      Committee.

     

    (p)  “Dividend
      Equivalent”
means
      a
      right, granted to a Participant under Section 6(g) hereof, to receive cash,
      Stock, other Awards or other property equal in value to dividends paid with
      respect to a specified number of Shares, or other periodic
      payments.

     

    (q)  “Effective
      Date”
means
      the effective date of this Plan, which shall be the date this Plan is adopted
      by
      the Board, subject to the approval of the stockholders of the
      Company.

     

    (r)  “Eligible
      Person”
means
      all Employees (including officers), Directors and Consultants of the Company
      or
      of any Related Entity. The foregoing notwithstanding, only employees of the
      Company, the Parent, or any Subsidiary shall be Eligible Persons for purposes
      of
      receiving any Incentive Stock Options. An Employee on leave of absence may
      be
      considered as still in the employ of the Company or a Related Entity for
      purposes of eligibility for participation in the Plan.

     

    (s)  “Employee”
means
      any person, including an officer or Director, who is an employee of the Company
      or any Related Entity. The Payment of a director’s fee by the Company or a
      Related Entity shall not be sufficient to constitute “employment” by the
      Company.

     

    (t)  “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended from time to time, including
      rules thereunder and successor provisions and rules thereto.

     

    (u)  “Fair
      Market Value”
means
      the fair market value of Stock, Awards or other property as determined by the
      Plan Administrator, or under procedures established by the Plan Administrator.
      Unless otherwise determined by the Plan Administrator, the Fair Market Value
      of
      Stock as of any given date, on which the Stock is publicly traded on a stock
      exchange or market, shall be the closing sale price per share reported on a
      consolidated basis for stock listed on the principal stock exchange or market
      on
      which Stock is traded on the date as of which such value is being determined
      or,
      if there is no sale on that date, then on the last previous day on which a
      sale
      was reported.

     

    (v)  “Good
      Reason”
shall,
      with respect to any Participant, have the equivalent meaning (or the same
      meaning as “good reason” or “for good reason”) set forth in any employment
      agreement between the Participant and the Company or a Related Entity or, in
      the
      absence of any such agreement, such term shall mean (i) the assignment to
      the Participant of any duties inconsistent in any respect with the Participant’s
      position (including status, offices, titles and reporting requirements),
      authority, duties or responsibilities as assigned by the Company (or a Related
      Entity), or any other action by the Company (or a Related Entity) which results
      in a diminution in such position, authority, duties or responsibilities,
      excluding for this purpose an isolated, insubstantial and inadvertent action
      not
      taken in bad faith and which is remedied by the Company (or a Related Entity)
      promptly after receipt of notice thereof given by the Participant; (ii) any
      failure by the Company (or a Related Entity) to comply with its obligations
      to
      the Participant as agreed upon, other than an isolated, insubstantial and
      inadvertent failure not occurring in bad faith and which is remedied by the
      Company (or a Related Entity) promptly after receipt of notice thereof given
      by
      the Participant; (iii) the Company’s (or Related Entity’s) requiring the
      Participant to be based at any office or location more than fifty miles from
      the
      location of employment as of the date of Award, except for travel reasonably
      required in the performance of the Participant’s responsibilities; (iv) any
      purported termination by the Company (or a Related Entity) of the Participant’s
      Continuous Service otherwise than for Cause as defined in Section 2(f), or
      by reason of the Participant’s Disability as defined in Section 2(o), prior
      to the Expiration Date; or (v) any reduction in the Participant’s base
      salary.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (w)  “Incentive
      Stock Option”
means
      any Option intended to be designated as an incentive stock option within the
      meaning of Section 422 of the Code or any successor provision
      thereto.

     

    (x)  “Non-Employee
      Director”
means
      a
      Director of the Company who is not an Employee.

     

    (y)  “Non-Qualified
      Stock Option”
means
      any Option that does not qualify as an Incentive Stock Option or is designated
      as a non-qualified stock option.

     

    (z)  “Option”
means
      a
      right granted to a Participant under Section 6(b) hereof, to purchase Stock
      or other Awards at a specified price during specified time periods.

     

    (aa)  “Other
      Stock-Based Awards”
means
      Awards granted to a Participant pursuant to Section 6(h)
      hereof.

     

    (bb)  “Parent”
means
      any corporation (other than the Company), whether now or hereafter existing,
      in
      an unbroken chain of corporations ending with the Company, if each of the
      corporations in the chain (other than the Company) owns stock possessing fifty
      percent (50%) or more of the combined voting power of all classes of stock
      in
      one of the other corporations in the chain.

     

    (cc)  “Participant”
means
      a
      person who has been granted an Award under the Plan which remains outstanding,
      including a person who is no longer an Eligible Person.

     

    (dd)  “Performance
      Award”
means
      a
      right, granted to an Eligible Person under Section 7 hereof, to receive
      Awards based upon performance criteria specified by the Plan Administrator
      that
      will qualify as “performance-based” awards under Section 162(m) of the
      Code.

     

    (ee)  “Person”
has
      the
      meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and
      used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined
      in Section 12(d) thereof.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (ff)  “Plan
      Administrator”
means
      the Board or any Committee delegated by the Board to administer the
      Plan.

     

    (gg)  “Related
      Entity”
means
      any Parent, Subsidiary and any business, corporation, partnership, limited
      liability company or other entity in which the Company, a Parent or a
      Subsidiary, directly or indirectly, holds a substantial ownership
      interest.

     

    (hh)  “Restricted
      Stock”
means
      Stock granted to a Participant under Section 6(d) hereof, that is subject
      to certain restrictions and to a risk of forfeiture.

     

    (ii)  “Rule 16b-3”
and
      “Rule 16a-1(c)(3)”
means
      Rule 16b-3 and Rule 16a-1(c)(3), as from time to time in effect and
      applicable to the Plan and Participants, promulgated by the Securities and
      Exchange Commission under Section 16 of the Exchange Act.

     

    (jj)  “Shares”
means
      the shares of the Company’s Common Stock, and the shares of such other
      securities as may be substituted (or resubstituted) for Stock pursuant to
      Section 10(c) hereof.

     

    (kk)  “Stock”
means
      the Company’s Common Stock, and such other securities as may be substituted (or
      resubstituted) for the Company’s Common Stock pursuant to Section 10(c)
      hereof.

     

    (ll)  “Stock
      Appreciation Right”
means
      a
      right granted to a Participant pursuant to Section 6(c)
      hereof.

     

    (mm)  “Subsidiary”
means
      any corporation (other than the Company), whether now or hereafter existing,
      in
      an unbroken chain of corporations beginning with the Company, if each of the
      corporations other than the last corporation in the unbroken chain owns stock
      possessing fifty percent (50%) or more of the total combined voting power of
      all
      classes of stock in one of the other corporations in such chain.

     

    3.  Administration.

     

    (a)  Administration
      by Board.
      The
      Board shall administer the Plan unless and until the Board delegates
      administration to a Committee, as provided in Section 3(c).

     

    (b)  Powers
      of Board.
      The
      Board shall have the power, subject to, and within the limitations of, the
      express provisions of the Plan:

     

    (i)  To
      determine from time to time which of the persons eligible under the Plan shall
      be granted Awards; when and how each Award shall be granted; what type or
      combination of types of Award shall be granted; the provisions of each Award
      granted (which need not be identical), including the time or times when a person
      shall be permitted to receive Shares pursuant to an Award; and the number of
      Shares with respect to which an Award shall be granted to each such
      person.

     

    (ii)  To
      construe and interpret the Plan and Awards granted under it, and to establish,
      amend and revoke rules and regulations for its administration. The Board, in
      the
      exercise of this power, may correct any defect, omission or inconsistency in
      the
      Plan or in any Award agreement, in a manner and to the extent it shall deem
      necessary or expedient to make the Plan fully effective.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (iii)  To
      amend
      the Plan or an Award as provided in Section 10(e).

     

    (iv)  To
      terminate or suspend the Plan as provided in Section 10(e).

     

    (v)  Generally,
      to exercise such powers and to perform such acts as the Board deems necessary
      or
      appropriate to promote the best interests of the Company and that are not in
      conflict with the provisions of the Plan.

     

    (c)  Delegation
      to Committee.

     

    (i)  General.
      The
      Board may delegate administration of the Plan to a committee or committees
      of
      one (1) or more persons. To the extent required by Applicable Laws, such
      committee shall be composed (A) of Directors and (B) of the minimum number
      of
      persons required by Applicable Laws. The term “Committee”
shall
      apply to any person or persons to whom such authority has been delegated. If
      administration is delegated to a Committee, the Committee shall have, in
      connection with the administration of the Plan, the powers theretofore possessed
      by the Board, including the power to delegate to a subcommittee any of the
      administrative powers the Committee is authorized to exercise (and references
      in
      this Plan to the Board shall thereafter be to the Committee or subcommittee),
      subject, however, to such resolutions, not inconsistent with the provisions
      of
      the Plan, as may be adopted from time to time by the Board. The Board may
      abolish the Committee at any time and revest in the Board the administration
      of
      the Plan.

     

    (ii)  Section 162(m)
      and Rule 16b-3 Compliance.
      In the
      discretion of the Board, the Committee may consist solely of two or more
“Outside Directors”, in accordance with Section 162(m) of the Code, and/or
      solely of two or more “Non-Employee Directors”, in accordance with
      Rule 16b-3. In addition, the Board or the Committee may delegate to a
      committee of two or more members of the Board the authority to grant Awards
      to
      eligible persons who are either (a) not then Covered Employees and are not
      expected to be Covered Employees at the time of recognition of income resulting
      from such Award, (b) not persons with respect to whom the Company wishes to
      comply with Section 162(m) of the Code, or (c) not then subject to
      Section 16 of the Exchange Act.

     

    (d)  Effect
      of Board’s Decision.
      All
      determinations, interpretations and constructions made by the Board in good
      faith shall not be subject to review by any person and shall be final, binding
      and conclusive on all persons.

     

    (e)  Arbitration.
      Any
      dispute or claim concerning any Award granted (or not granted) pursuant to
      the
      Plan or any disputes or claims relating to or arising out of the Plan shall
      be
      fully, finally and exclusively resolved by binding and confidential arbitration
      conducted pursuant to the rules of Judicial Arbitration and Mediation Services,
      Inc. (“JAMS”) in Phoenix, Arizona. The Company shall pay all arbitration fees.
      In addition to any other relief, the arbitrator may award to the prevailing
      party recovery of its attorneys’ fees and costs. By accepting an Award, the
      Participant and the Company waive their respective rights to have any such
      disputes or claims tried by a judge or jury.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (f)  Limitation
      of Liability.
      The
      Committee and the Board, and each member thereof, shall be entitled to, in
      good
      faith, rely or act upon any report or other information furnished to him or
      her
      by any officer or Employee, the Company’s independent auditors, Consultants or
      any other agents assisting in the administration of the Plan. Members of the
      Committee and the Board, and any officer or Employee acting at the direction
      or
      on behalf of the Plan Administrator, shall not be personally liable for any
      action or determination taken or made in good faith with respect to the Plan,
      and shall, to the extent permitted by law, be fully indemnified and protected
      by
      the Company with respect to any such action or determination.

     

    4.  Stock
      Subject to Plan.

     

    (a)  Limitation
      on Overall Number of Shares Subject to Awards.
      Subject
      to adjustment as provided in Section 11(c) hereof, the total number of
      Shares reserved and available for delivery in connection with Awards under
      the
      Plan shall be equal to the lesser of (i) fifteen percent (15%) of our
      outstanding Shares and (ii) Forty Million (40,000,000) Shares. Any Shares
      delivered under the Plan may consist, in whole or in part, of authorized and
      unissued shares or treasury shares.

     

    (b)  Availability
      of Shares Not Delivered under Awards.

     

    (i)  If
      any
      Shares subject to an Award are forfeited, expire or otherwise terminate without
      issuance of such Shares, or any Award is settled for cash or otherwise does
      not
      result in the issuance of all or a portion of the Shares subject to such Award,
      the Shares shall, to the extent of such forfeiture, expiration, termination,
      cash settlement or non-issuance, again be available for Awards under the Plan,
      subject to Section 4(b)(iv) below.

     

    (ii)  If
      any
      Shares issued pursuant to an Award are forfeited back to or repurchased by
      the
      Company, including, but not limited to, any repurchase or forfeiture caused
      by
      the failure to meet a contingency or condition required for the vesting of
      such
      shares, then the Shares not acquired under such Award shall revert to and again
      become available for issuance under the Plan, subject to Section 4(b)(iv)
      below.

     

    (iii)  In
      the
      event that any Option or other Award granted hereunder is exercised through
      the
      tendering of Shares (either actually or by attestation) or by the withholding
      of
      Shares by the Company, or withholding tax liabilities arising from such Option
      or other Award are satisfied by the tendering of Shares (either actually or
      by
      attestation) or by the withholding of Shares by the Company, then only the
      number of Shares issued net of the Shares tendered or withheld shall be counted
      for purposes of determining
      the maximum number of Shares available for grant under the Plan, subject to
      Section 4(b)(iv) below.

     

    (iv)  Notwithstanding
      anything in this Section 4(b) to the contrary and solely for purposes of
      determining whether Shares are available for the grant of Incentive Stock
      Options, the maximum aggregate number of shares that may be granted under this
      Plan shall be determined without regard to any Shares restored pursuant to
      this
      Section 4(b) that, if taken into account, would cause the Plan, for
      purposes of the grant of Incentive Stock Options, to fail the requirement under
      Section 422 of the Code that the Plan designate a maximum aggregate number
      of shares that may be issued.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (c)  Application
      of Limitations.
      The
      limitation contained in this Section 4 shall apply not only to Awards that
      are settled by the delivery of Shares but also to Awards relating to Shares
      but
      settled only in cash (such as cash-only Stock Appreciation Rights). The Plan
      Administrator may adopt reasonable counting procedures to ensure appropriate
      counting, avoid double counting (as, for example, in the case of tandem or
      substitute awards) and make adjustments if the number of Shares actually
      delivered differs from the number of shares previously counted in connection
      with an Award.

     

    5.  Eligibility;
      Per-Person Award Limitations.
      

     

    (a)  Eligibility.
      Awards
      may be granted under the Plan only to Eligible Persons. 

     

    (a)  Per-Person
      Award Limitations. In each
      fiscal year during any part of which the Plan is in effect, an Eligible Person
      may not be granted an Award under which more than 4,000,000 Shares could be
      received by the Participant, subject to adjustment as provided in
      Section 10(c). In addition, the maximum amount that may be earned as a
      Performance Award (payable in cash) or other Award (payable or settled in cash)
      by any one Participant shall be $4,000,000 for each year of the performance
      period.

     

    6.  Terms
      of Awards.

     

    (a)  General.
      Awards
      may be granted on the terms and conditions set forth in this Section 6. In
      addition, the Plan Administrator may impose on any Award or the exercise
      thereof, at the date of grant or thereafter (subject to Section 11(e)),
      such additional terms and conditions, not inconsistent with the provisions
      of
      the Plan, as the Plan Administrator shall determine, including terms requiring
      forfeiture of Awards in the event of termination of Continuous Service by the
      Participant and terms permitting a Participant to make elections relating to
      his
      or her Award. The Plan Administrator shall retain full power and discretion
      to
      accelerate, waive or modify, at any time, any term or condition of an Award
      that
      is not mandatory under the Plan.

     

    (b)  Options.
      The
      Plan Administrator is authorized to grant Options to Participants on the
      following terms and conditions:

     

    (i)  Option
      Agreement.
      Each
      grant of an Option shall be evidenced by an Option agreement. Such Option
      agreement shall be subject to all applicable terms and conditions of the Plan
      and may be subject to any other terms and conditions which are not inconsistent
      with the Plan and which the Plan Administrator deems appropriate for inclusion
      in an Option agreement. The provisions of the various Option agreements entered
      into under the Plan need not be identical.

     

    (ii)  Number
      of Shares.
      Each
      Option agreement shall specify the number of Shares that are subject to the
      Option and shall provide for the adjustment of such number in accordance with
      Section 11(c) hereof. The Option agreement shall also specify whether the
      Option is an Incentive Stock Option or a Non-Qualified Stock
      Option.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (iii)  Exercise
      Price.

     

    (A)  In
      General.
      Each
      Option agreement shall state the per Share price at which Shares subject to
      the
      Option may be purchased (the “Exercise
      Price”),
      which
      shall be, with respect to Incentive Stock Options, not less than 100% of the
      Fair Market Value of the Stock on the date of grant. In the case of
      Non-Qualified Stock Options, the Exercise Price shall be determined in the
      sole
      discretion of the Plan Administrator; provided, however, that notwithstanding
      any other provision of the Plan, any Non-Qualified Stock Option granted with
      an
      exercise price less than the per Share Fair Market Value on the date of grant
      shall be structured to avoid the imposition of any excise tax under Section
      409A
      of the Code, unless otherwise specifically determined by the Plan
      Administrator.

     

    (B)  Ten
      Percent Stockholder.
      If a
      Participant owns or is deemed to own (by reason of the attribution rules
      applicable under Section 424(d) of the Code) more than ten percent (10%) of
      the combined voting power of all classes of stock of the Company or any Related
      Entity, any Incentive Stock Option granted to such Participant must have an
      Exercise Price per share of at least one hundred ten percent (110%) of the
      Fair
      Market Value of a share of Stock on the date of grant.

     

    (iv)  Time
      and Method of Exercise.
      The
      Plan Administrator shall determine the time or times at which or the
      circumstances under which an Option may be exercised in whole or in part
      (including based on achievement of performance goals and/or future service
      requirements). The Plan Administrator may also determine the time or times
      at
      which Options shall cease to be or become exercisable following termination
      of
      Continuous Service or upon other conditions. The Board or the Committee may
      determine the methods by which such exercise price may be paid or deemed to
      be
      paid (including, in the discretion of the Plan Administrator, a cashless
      exercise procedure), the form of such payment, including, without limitation,
      cash, Stock, other Awards or awards granted under other plans of the Company
      or
      a Related Entity, or other property (including notes or other contractual
      obligations of Participants to make payment on a deferred basis), and the
      methods by or forms in which Stock will be delivered or deemed to be delivered
      to Participants.

     

    (v)  Incentive
      Stock Options.
      The
      terms of any Incentive Stock Option granted under the Plan shall comply in
      all
      respects with the provisions of Section 422 of the Code. Anything in the
      Plan to the contrary notwithstanding, no term of the Plan relating to Incentive
      Stock Options (including any Stock Appreciation Rights in tandem therewith)
      shall be interpreted, amended or altered, nor shall any discretion or authority
      granted under the Plan be exercised, so as to disqualify either the Plan or
      any
      Incentive Stock Option under Section 422 of the Code, unless the
      Participant has consented in writing to the change that will result in such
      disqualification. If and to the extent required to comply with Section 422
      of the Code, Options granted as Incentive Stock Options shall be subject to
      the
      following special terms and conditions:

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (1) the
      Option shall not be exercisable more than ten (10) years after the date such
      Incentive Stock Option is granted; provided, however, that if a Participant
      owns
      or is deemed to own (by reason of the attribution rules of Section 424(d)
      of the Code) more than ten percent (10%) of the combined voting power of all
      classes of stock of the Company or any Parent Corporation and the Incentive
      Stock Option is granted to such Participant, the term of the Incentive Stock
      Option shall be (to the extent required by the Code at the time of the grant)
      for no more than five years from the date of grant; and

     

    (2) If
      the
      aggregate Fair Market Value (determined as of the date the Incentive Stock
      Option is granted) of the Shares with respect to which Incentive Stock Options
      granted under the Plan and all other option plans of the Company, its Parent
      or
      any Subsidiary are exercisable for the first time by a Participant during any
      calendar year exceeds $100,000, then such Participant’s Incentive Stock
      Option(s) or portions thereof that exceed such $100,000 limit shall be treated
      as Non-Qualified Stock Options (in the reverse order in which they were granted,
      so that the last Incentive Stock Option will be the first treated as a
      Non-Qualified Stock Option). This paragraph shall only apply to the extent
      such
      limitation is applicable under the Code.

     

    (vi)  Repurchase
      Rights.
      The
      Committee and the Board shall have the discretion to grant Options that are
      exercisable for unvested shares of Common Stock. Should the Participant’s
      Continuous Service cease while holding such unvested shares, the Company shall
      have the right to repurchase any or all of those unvested shares, at either
      (a) the exercise price paid per share, (b) the Fair Market Value or
      (c) the lower of the exercise price paid per share and the Fair Market
      Value. The terms upon which such repurchase right shall be exercisable
      (including the period and procedure for exercise and the appropriate vesting
      schedule for the purchased shares) shall be established by the Plan
      Administrator and set forth in the document evidencing such repurchase
      right.

     

    (c)  Stock
      Appreciation Rights.
      The
      Plan Administrator is authorized to grant Stock Appreciation Rights to
      Participants on the following terms and conditions, which terms and conditions
      shall be specified in a Stock Appreciation Rights agreement:

     

    (i)  Right
      to Payment.
      A Stock
      Appreciation Right shall confer on the Participant to whom it is granted a
      right
      to receive, upon exercise thereof, the excess of (A) the Fair Market Value
      of one share of stock on the date of exercise over (B) the grant price of
      the Stock Appreciation Right as determined by the Plan
      Administrator.

     

    (ii)  Other
      Terms.
      The
      Plan Administrator shall determine at the date of grant or thereafter, the
      time
      or times at which and the circumstances under which a Stock Appreciation Right
      may be exercised in whole or in part (including based on achievement of
      performance goals and/or future service requirements), the time or times at
      which Stock Appreciation Rights shall cease to be or become exercisable
      following termination of Continuous Service or upon other conditions, the method
      of exercise, method of settlement, form of consideration payable in settlement,
      method by or forms in which Stock will be delivered or deemed to be delivered
      to
      Participants, whether or not a Stock Appreciation Right shall be in tandem
      or in
      combination with any other Award, and any other terms and conditions of any
      Stock Appreciation Right. Stock Appreciation Rights may be either freestanding
      or in tandem with other Awards. Notwithstanding any other provision of the
      Plan,
      unless otherwise exempt from Section 409A of the Code or otherwise specifically
      determined by the Plan Administrator, each Stock Appreciation Right shall be
      structured to avoid the imposition of any excise tax under Section 409A of
      the
      Code.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (d)  Restricted
      Stock.
      The
      Plan Administrator is authorized to grant Restricted Stock to Participants
      on
      the following terms and conditions, which terms and conditions shall be
      specified in a Restricted Stock agreement:

     

    (i)  Grant
      and Restrictions.
      Restricted Stock shall be subject to such restrictions on transferability,
      risk
      of forfeiture and other restrictions, if any, as the Plan Administrator may
      impose, or as otherwise provided in this Plan. The restrictions may lapse
      separately or in combination at such times, under such circumstances (including
      based on achievement of performance goals and/or future service requirements),
      in such installments or otherwise, as the Plan Administrator may determine
      at
      the date of grant or thereafter. Except to the extent restricted under the
      terms
      of the Plan and any Restricted Stock agreement relating to the Restricted Stock,
      a Participant granted Restricted Stock shall have all of the rights of a
      stockholder, including the right to vote the Restricted Stock and the right
      to
      receive dividends thereon (subject to any mandatory reinvestment or other
      requirement imposed by the Plan Administrator). During the restricted period
      applicable to the Restricted Stock, subject to Section 11(b) below, the
      Restricted Stock may not be sold, transferred, pledged, hypothecated, margined
      or otherwise encumbered by the Participant.

     

    (ii)  Forfeiture.
      Except
      as otherwise determined by the Plan Administrator at the time of the grant
      of
      the Restricted Stock, upon termination of a Participant’s Continuous Service
      during the applicable vesting period, the Participant’s Restricted Stock that is
      at that time subject to vesting or other restrictions shall be forfeited and
      reacquired by the Company; provided that the Plan Administrator may provide,
      by
      rule or regulation or in any Award agreement, or may determine in any individual
      case, that vesting or forfeiture conditions relating to Restricted Stock shall
      be waived in whole or in part in the event of terminations resulting from
      specified causes, and the Plan Administrator may in other cases waive in whole
      or in part the forfeiture of Restricted Stock.

     

    (iii)  Certificates
      for Stock.
      Restricted Stock granted under the Plan may be evidenced in such manner, as
      the
      Plan Administrator shall determine. If certificates representing Restricted
      Stock are registered in the name of the Participant, the Plan Administrator
      may
      require that such certificates bear an appropriate legend referring to the
      terms, conditions and restrictions applicable to such Restricted Stock, that
      the
      Company retain physical possession of the certificates, that the certificates
      be
      kept with an escrow agent and that the Participant deliver a stock power to
      the
      Company, endorsed in blank, relating to the Restricted Stock.

     

    (iv)  Dividends
      and Splits.
      As a
      condition to the grant of Restricted Stock, the Plan Administrator may require
      that any cash dividends paid on a Share of Restricted Stock be automatically
      reinvested in additional Shares of Restricted Stock or applied to the purchase
      of additional Awards under the Plan. Unless otherwise determined by the Plan
      Administrator, Shares distributed in connection with a stock split or stock
      dividend, and other property distributed as a dividend, shall be subject to
      restrictions and a risk of forfeiture to the same extent as the Restricted
      Stock
      with respect to which such Shares or other property has been
      distributed.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (e)  Deferred
      Stock.
      The
      Plan Administrator is authorized to grant Deferred Stock to Participants, which
      are rights to receive Shares, cash, or a combination thereof at the end of
      a
      specified time period, subject to the following terms and conditions, which
      terms and conditions shall be specified in a Deferred Stock
      agreement:

     

    (i)  Award
      and Restrictions.
      Satisfaction of a Deferred Stock award shall occur upon expiration of the time
      period specified for such Deferred Stock award by the Plan Administrator (or,
      if
      permitted by the Plan Administrator, as elected by the Participant). In
      addition, Deferred Stock shall be subject to such restrictions (which may
      include a risk of forfeiture) as the Plan Administrator may impose, if any,
      which restrictions may lapse at the expiration of the time period or at earlier
      specified times (including based on achievement of performance goals and/or
      future service requirements), separately or in combination, in installments
      or
      otherwise, as the Plan Administrator may determine. Deferred Stock may be
      satisfied by delivery of Shares, cash equal to the Fair Market Value of the
      specified number of Shares covered by the Deferred Stock, or a combination
      thereof, as determined by the Plan Administrator at the date of grant or
      thereafter. Prior to satisfaction of an Award of Deferred Stock, a of Deferred
      Stock award carries no voting or dividend or other rights associated with Share
      ownership. Notwithstanding any other provision of the Plan, unless otherwise
      exempt from Section 409A of the Code or otherwise specifically determined by
      the
      Plan Administrator, each Deferred Stock award shall be structured to avoid
      the
      imposition of any excise tax under Section 409A of the Code.

     

    (ii)  Forfeiture.
      Except
      as otherwise determined by the Plan Administrator, upon termination of a
      Participant’s Continuous Service during the applicable time period thereof to
      which forfeiture conditions apply (as provided in the Deferred Stock agreement),
      the Participant’s Deferred Stock (other than those Deferred Stock subject to
      deferral at the election of the Participant) shall be forfeited; provided that
      the Plan Administrator may provide, by rule or regulation or in any Deferred
      Stock agreement, or may determine in any individual case, that restrictions
      or
      forfeiture conditions relating to Deferred Stock shall be waived in whole or
      in
      part in the event of terminations resulting from specified causes, and the
      Plan
      Administrator may in other cases waive in whole or in part the forfeiture of
      Deferred Stock.

     

    (iii)  Dividend
      Equivalents.
      Unless
      otherwise determined by the Plan Administrator at date of grant, any Dividend
      Equivalents that are granted with respect to any Deferred Stock award shall
      be
      either (A) paid with respect to such Deferred Stock at the dividend payment
      date in cash or in shares of unrestricted Shares having a Fair Market Value
      equal to the amount of such dividends, or (B) deferred with respect to such
      Deferred Stock and the amount or value thereof automatically deemed reinvested
      in additional Deferred Stock, other Awards or other investment vehicles, as
      the
      Plan Administrator shall determine or permit the Participant to
      elect.

     

    (f)  Bonus
      Stock and Awards in Lieu of Obligations.
      The
      Plan Administrator is authorized to grant Shares as a bonus, or to grant Shares
      or other Awards in lieu of Company obligations to pay cash or deliver other
      property under the Plan or under other plans or compensatory arrangements,
      provided that, in the case of Participants subject to Section 16 of the
      Exchange Act, the amount of such grants remains within the discretion of the
      Committee to the extent necessary to ensure that acquisitions of Shares or
      other
      Awards are exempt from liability under Section 16(b) of the Exchange Act.
      Shares or Awards granted hereunder shall be subject to such other terms as
      shall
      be determined by the Plan Administrator.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (g)  Dividend
      Equivalents.
      The
      Plan Administrator is authorized to grant Dividend Equivalents to a Participant
      entitling the Participant to receive cash, Shares, other Awards, or other
      property equal in value to dividends paid with respect to a specified number
      of
      Shares, or other periodic payments. Dividend Equivalents may be awarded on
      a
      free-standing basis or in connection with another Award. The Plan Administrator
      may provide that Dividend Equivalents shall be paid or distributed when accrued
      or shall be deemed to have been reinvested in additional Stock, Awards, or
      other
      investment vehicles, and subject to such restrictions on transferability and
      risks of forfeiture, as the Plan Administrator may specify. Each Dividend
      Equivalent award shall be memorialized in a Deferred Stock agreement.
      Notwithstanding any other provision of the Plan, unless otherwise exempt from
      Section 409A of the Code or otherwise specifically determined by the Plan
      Administrator, each Dividend Equivalent shall be structured to avoid the
      imposition of any excise tax under Section 409A of the Code.

     

    (h)  Other
      Stock-Based Awards.
      The
      Plan Administrator is authorized, subject to limitations under applicable law,
      to grant to Participants such other Awards that may be denominated or payable
      in, valued in whole or in part by reference to, or otherwise based on, or
      related to, Stock, as deemed by the Plan Administrator to be consistent with
      the
      purposes of the Plan, including, without limitation, convertible or exchangeable
      debt securities, other rights convertible or exchangeable into Stock, purchase
      rights for Stock, Awards with value and payment contingent upon performance
      of
      the Company or any other factors designated by the Plan Administrator, and
      Awards valued by reference to the book value of Stock or the value of securities
      of or the performance of specified Related Entities or business units. The
      Plan
      Administrator shall determine the terms and conditions of such Awards. Stock
      delivered pursuant to an Award in the nature of a purchase right granted under
      this Section 6(h) shall be purchased for such consideration (including
      without limitation loans from the Company or a Related Entity), paid for at
      such
      times, by such methods, and in such forms, including, without limitation, cash,
      Stock, other Awards or other property, as the Plan Administrator shall
      determine. The Plan Administrator shall have the discretion to grant such other
      Awards which are exercisable for unvested shares of Common Stock. Should the
      Participant’s Continuous Service cease while holding such unvested shares, the
      Company shall have the right to repurchase, at a price determined by the
      Administrator at the time of grant, any or all of those unvested shares. The
      terms upon which such repurchase right shall be exercisable (including the
      period and procedure for exercise and the appropriate vesting schedule for
      the
      purchased shares) shall be established by the Plan Administrator and set forth
      in the document evidencing such repurchase right. Cash awards, as an element
      of
      or supplement to any other Award under the Plan, may also be granted pursuant
      to
      this Section 6(h). Notwithstanding any other provision of the Plan, unless
      otherwise exempt from Section 409A of the Code or otherwise specifically
      determined by the Plan Administrator, each Award granted pursuant to this
      Section shall be structured to avoid the imposition of any excise tax under
      Section 409A of the Code.

     

    7.  Tax
      Qualified Performance Awards.

     

    (a) Covered
      Employees.
      The
      Committee, composed in compliance with Section 162(m) of the Code, in its
      discretion, may determine at the time an Award is granted to an Eligible Person
      who is, or is likely to be, as of the end of the tax year in which the Company
      would claim a tax deduction in connection with such Award, a Covered Employee,
      that the provisions of this Section 7 shall be applicable to such Award.

    

    (b) Performance
      Criteria.
      If an
      Award is subject to this Section 7, then the lapsing of restrictions thereon
      and
      the distribution of cash, Shares or other property pursuant thereto, as
      applicable, shall be contingent upon achievement of one or more objective
      performance goals. Performance goals shall be objective and shall otherwise
      meet
      the requirements of Section 162(m) of the Code and regulations thereunder
      including the requirement that the level or levels of performance targeted
      by
      the Committee result in the achievement of performance goals being
“substantially uncertain.” One or more of the following business criteria for
      the Company, on a consolidated basis, and/or for Related Entities, or for
      business or geographical units of the Company and/or a Related Entity (except
      with respect to the total stockholder return and earnings per share criteria),
      shall be used by the Committee in establishing performance goals for such
      Awards: (1) earnings per share; (2) revenues or margins; (3) cash
      flow; (4) operating margin; (5) return on net assets, investment,
      capital, or equity; (6) economic value added; (7) direct contribution;
      (8) net income; pretax earnings; earnings before interest and taxes;
      earnings before interest, taxes, depreciation and amortization; earnings after
      interest expense and before extraordinary or special items; operating income;
      income before interest income or expense, unusual items and income taxes, local,
      state or federal and excluding budgeted and actual bonuses which might be paid
      under any ongoing bonus plans of the Company; (9) working capital;
      (10) management of fixed costs or variable costs; (11) identification
      or consummation of investment opportunities or completion of specified projects
      in accordance with corporate business plans, including strategic mergers,
      acquisitions or divestitures; (12) total stockholder return; and
      (13) debt reduction. Any of the above goals may be determined on an
      absolute or relative basis or as compared to the performance of a published
      or
      special index deemed applicable by the Committee including, but not limited
      to,
      the Standard & Poor’s 500 Stock Index or a group of companies that are
      comparable to the Company. The Committee shall exclude the impact of an event
      or
      occurrence which the Committee determines should appropriately be excluded,
      including without limitation (i) restructurings, discontinued operations,
      extraordinary items, and other unusual or non-recurring charges, (ii) an event
      either not directly related to the operations of the Company or not within
      the
      reasonable control of the Company’s management, or (iii) a change in accounting
      standards required by generally accepted accounting principles.

    

    (c) Performance
      Period; Timing For Establishing Performance Goals.
      Achievement
      of performance goals in respect of such Performance Awards shall be measured
      over a Performance Period no shorter than twelve (12) months and no longer
      than
      five (5) years, as specified by the Committee. Performance goals shall be
      established not later than ninety (90) days after the beginning of any
      Performance Period applicable to such Performance Awards, or at such other
      date
      as may be required or permitted for “performance-based compensation” under
      Section 162(m) of the Code.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    

    (d) Adjustments.
      The
      Committee may, in its discretion, reduce the amount of a settlement otherwise
      to
      be made in connection with Awards subject to this Section 7, but may not
      exercise discretion to increase any such amount payable to a Covered Employee
      in
      respect of an Award subject to this Section 7. The Committee shall specify
      the
      circumstances in which such Awards shall be paid or forfeited in the event
      of
      termination of Continuous Service by the Participant prior to the end of a
      Performance Period or settlement of Awards.

    

    (e) Committee
      Certification.
      No
      Participant shall receive any payment under the Plan unless the Committee has
      certified, by resolution or other appropriate action in writing, that the
      performance criteria and any other material terms previously established by
      the
      Committee or set forth in the Plan, have been satisfied to the extent necessary
      to qualify as "performance based compensation" under Section 162(m) of the
      Code.

    

     

    8.  Automatic
      Director Option Grants.

     

    (a)  Grant
      Amounts.
      Option
      grants shall be made pursuant to Section as follows:

     

    (i)  Initial
      Grant. Each
      individual who is first elected or appointed as a Non-Employee Director at
      any
      time on or after the Effective Date shall automatically be granted, on the
      date
      of such initial election or appointment, a Non-Statutory Option to purchase
      twenty-five thousand (25,000) Shares (the “Initial
      Grant”),
      provided that individual has not previously been in the employ of the
      Corporation or any Parent or Subsidiary.

     

    (ii)  Annual
      Grants.
      On the
      day after our annual stockholder meeting, beginning with the 2005 calendar
      year,
      each Non-Employee Director on such grant date shall receive an automatic option
      grant for twenty-five (25,000) Shares for service on the Board of Directors
      and
      fifteen thousand (15,000) shares for each committee of the Board of Directors
      on
      which the directors serve (the “Annual
      Grant”).

     

    There
      shall be no limit on the number of such Annual Grants any Non-Employee Director
      may receive over his or her period of Continuous Service as a Non-Employee
      Director, and Non-Employee Directors who have previously been in the employ
      of
      the Corporation (or any Parent or Subsidiary) shall be eligible to receive
      one
      or more such Annual Grants over their period of Continuous Service as a
      Non-Employee Director .

    

    (b)  Exercise
      Price.
      The
      exercise price per Share for each Option grant made under this Section 8 shall
      be equal to one hundred percent (100%) of the Fair Market Value per Share on
      the
      grant date.

     

    (c)  Consideration.
      The
      exercise price shall be payable in any form of legal consideration determined
      by
      the Plan Administrator.

     

    (d)  Option
      Term.
      Each
      option grant under this Section shall have a term of ten (10) years measured
      from the option grant date.

     

    (e)  Exercise
      and Vesting of Options.
      

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (i)  Initial
      Grant.
      Each
      Option granted pursuant to Section 8(a)(i) shall vest as follows:

     

    (ii)  Annual
      Grant.
      Each
      Option granted pursuant to Section 8(a)(ii) shall vest as follows: 

     

    Each
      Option shall cease vesting upon the termination of the Participant’s Continuous
      Service.

     

    (f)  Termination
      of Continuous Service.
      If the
      Participant’s Continuous Service terminates, then, with respect to the Initial
      and Annual Grants granted under this Section:

     

    (i)  Except
      as
      otherwise provided in this Section 8(f), upon the termination of the
      Participant’s Continuous Service, the Option shall remain exercisable, to the
      extent vested, for the shorter of (A) six (6) months and (B) the expiration
      of
      the ten year Option term. 

     

    (ii)  In
      the
      event of the Participant’s death or Disability, the Option shall remain
      exercisable, to the extent vested, for the shorter of (A) six (6) months and
      (B)
      the expiration of the ten year Option term. 

     

    (iii)  If
      the
      Participant will be precluded by federal or state securities laws from selling
      the Shares subject to the Option during the period provided for in Sections
      8(f)(i) and (ii) above, then the period for exercising such Option following
      termination of Participant’s Continuous Service shall automatically be extended
      by an additional period of up to three (3) months measured from the date the
      Participant is first free to sell such Shares.

     

    (iv)  Notwithstanding
      the foregoing, in no event shall the option remain exercisable after the
      expiration of the option term and the Option shall, immediately upon the
      termination of Participant’s Continuous Service, terminate and cease to be
      outstanding to the extent the Option is not vested. 

     

    (g)  Other
      Terms.
      With
      respect to the Initial and Annual Grants described in this Section, to the
      extent that terms of such Options are not provided for in this Section, the
      Plan
      Administrator shall provide for such terms in accordance with the terms of
      this
      Plan. 

     

    9.  Certain
      Provisions Applicable to Awards or Sales.

     

    (a)  Stand-Alone,
      Additional, Tandem, and Substitute Awards.
      Awards
      granted under the Plan may, in the discretion of the Plan Administrator, be
      granted either alone or in addition to, in tandem with, or in substitution
      or
      exchange for, any other Award or any award granted under another plan of the
      Company, any Related Entity, or any business entity to be acquired by the
      Company or a Related Entity, or any other right of a Participant to receive
      payment from the Company or any Related Entity. Such additional, tandem, and
      substitute or exchange Awards may be granted at any time. If an Award is granted
      in substitution or exchange for another Award or award, the Plan Administrator
      shall require the surrender of such other Award or award in consideration for
      the grant of the new Award. In addition, Awards may be granted in lieu of cash
      compensation, including in lieu of cash amounts payable under other plans of
      the
      Company or any Related Entity.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (b)  Form
      and Timing of Payment Under Awards; Deferrals.
      Subject
      to the terms of the Plan and any applicable Award agreement, payments to be
      made
      by the Company or a Related Entity upon the exercise of an Option or other
      Award
      or settlement of an Award may be made in such forms as the Plan Administrator
      shall determine, including, without limitation, cash, other Awards or other
      property, and may be made in a single payment or transfer, in installments,
      or
      on a deferred basis. The settlement of any Award may be accelerated, and cash
      paid in lieu of Stock in connection with such settlement, in the discretion
      of
      the Plan Administrator or upon occurrence of one or more specified events (in
      addition to a Change in Control). Installment or deferred payments may be
      required by the Plan Administrator (subject to Section 10(g) of the Plan)
      or permitted at the election of the Participant on terms and conditions
      established by the Plan Administrator. Payments may include, without limitation,
      provisions for the payment or crediting of a reasonable interest rate on
      installment or deferred payments or the grant or crediting of Dividend
      Equivalents or other amounts in respect of installment or deferred payments
      denominated in Stock.

     

    (c)  Exemptions
      from Section 16(b) Liability.
      It is
      the intent of the Company that this Plan comply in all respects with applicable
      provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary
      to ensure that neither the grant of any Awards to nor other transaction by
      a
      Participant who is subject to Section 16 of the Exchange Act is subject to
      liability under Section 16(b) thereof (except for transactions acknowledged
      in writing to be non-exempt by such Participant). Accordingly, if any provision
      of this Plan or any Award agreement does not comply with the requirements of
      Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
      transaction, such provision will be construed or deemed amended to the extent
      necessary to conform to the applicable requirements of Rule 16b-3 or
      Rule 16a-1(c)(3) so that such Participant shall avoid liability under
      Section 16(b).

     

    10.  Change
      in Control; Corporate Transaction

     

    (a)  Change
      in Control

     

    (i)  The
      Plan
      Administrator may, in its discretion, accelerate the vesting, exercisability,
      lapsing
      of restrictions,
      or
      expiration of deferral of any Award, including if we undergo a Change in
      Control.
      In
      addition, the Plan Administrator may provide in an Award agreement that the
      performance goals relating to any Award will be deemed to have been met upon
      the
      occurrence of any Change in Control.

     

    (ii)  In
      addition to the terms of Section 10(a)(i) above, the effect of a “change in
      control,” may be provided (1) in an employment, compensation, or severance
      agreement, if any, between the Company or any Related Entity and the
      Participant, relating to the Participant’s employment, compensation, or
      severance with or from the Company or such Related Entity, or (2) in the
      agreement evidencing the Award.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    (b)  Corporate
      Transactions.
      In the
      event of a Corporate Transaction, any surviving corporation or acquiring
      corporation may either (i) assume, (ii) continue any or all Awards
      outstanding under the Plan or (iii) substitute similar stock awards for
      outstanding Awards (it being understood that similar awards include, but are
      not
      limited to, awards to acquire the same consideration paid to the stockholders
      or
      the Company, as the case may be, pursuant to the Corporate Transaction). In
      the
      event that any surviving corporation or acquiring corporation does not assume
      or
      continue any or all such outstanding Awards or substitute similar stock awards
      for such outstanding Awards, then with respect to Awards that have been not
      assumed, continued or substituted, then such Awards shall terminate if not
      exercised (if applicable) at or prior to such effective time (contingent upon
      the effectiveness of the Corporate Transaction). The Plan Administrator, in
      its
      discretion and without the consent of any Participant, may (but is not obligated
      to) either (i) accelerate the vesting of all Awards (and, if applicable,
      the time at which such Awards may be exercised) in full or as to some percentage
      of the Award to a date prior to the effective time of such Corporate Transaction
      as the Plan Administrator shall determine (contingent upon the effectiveness
      of
      each Corporate Transaction) or (ii) provide for a cash payment in exchange
      for the termination of an Award or any portion thereof where such cash payment
      is equal to the Fair Market Value of the Shares that the Participant would
      receive if the Award were fully vested and exercised (if applicable) as of
      such
      date (less any applicable exercise price). The Plan Administrator, in its sole
      discretion, shall determine whether each Award is assumed, continued,
      substituted or terminated.

     

    With
      respect to Restricted Stock and any other Award granted under the Plan that
      the
      Company has any reacquisition or repurchase rights, the reacquisition or
      repurchase rights for such Awards may be assigned by the Company to the
      successor of the Company (or the successor’s parent company) in connection with
      such Corporate Transaction. In addition, the Plan Administrator, in its
      discretion, may (but is not obligated to) provide that any reacquisition or
      repurchase rights held by the Company with respect to such Awards shall lapse
      in
      whole or in part (contingent upon the effectiveness of the Corporate
      Transaction).

     

    (c)  Dissolution
      or Liquidation.
      In the
      event of a dissolution or liquidation of the Company, then all outstanding
      Awards shall terminate immediately prior to the completion of such dissolution
      or liquidation, and Shares subject to the Company’s repurchase option may be
      repurchased by the Company notwithstanding the fact that the Participant
      Continuous Service has not terminated.

     

    11.  General
      Provisions.

     

    (a)  Compliance
      With Legal and Other Requirements.
      The
      Company may, to the extent deemed necessary or advisable by the Plan
      Administrator, postpone the issuance or delivery of Stock or payment of other
      benefits under any Award until completion of such registration or qualification
      of such Stock or other required action under any federal or state law, rule
      or
      regulation, listing or other required action with respect to any stock exchange
      or automated quotation system upon which the Stock or other Company securities
      are listed or quoted, or compliance with any other obligation of the Company,
      as
      the Plan Administrator, may consider appropriate, and may require any
      Participant to make such representations, furnish such information and comply
      with or be subject to such other conditions as it may consider appropriate
      in
      connection with the issuance or delivery of Stock or payment of other benefits
      in compliance with applicable laws, rules, and regulations, listing
      requirements, or other obligations. The foregoing notwithstanding, in connection
      with a Change in Control, the Company shall take or cause to be taken no action,
      and shall undertake or permit to arise no legal or contractual obligation,
      that
      results or would result in any postponement of the issuance or delivery of
      Stock
      or payment of benefits under any Award or the imposition of any other conditions
      on such issuance, delivery or payment, to the extent that such postponement
      or
      other condition would represent a greater burden on a Participant than existed
      on the 90th day preceding the Change in Control.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    (b)  Limits
      on Transferability; Beneficiaries.

     

    (i)  General.
      Except
      as provided in an Award agreement, a Participant may not assign, sell, transfer,
      or otherwise encumber or subject to any lien any Award or other right or
      interest granted under this Plan, in whole or in part, other than by will or
      by
      operation of the laws of descent and distribution, and such Awards or rights
      that may be exercisable shall be exercised during the lifetime of the
      Participant only by the Participant or his or her guardian or legal
      representative.

     

    (ii)  Permitted
      Transfer of an Award.
      The
      Plan Administrator, in its sole discretion, may permit the transfer of an Award
      (but not an Incentive Stock Option) to one or more Beneficiaries or other
      transferees during the lifetime of the Participant, if and to the extent
      permitted by the Plan Administrator pursuant to the express terms of an Award
      agreement (subject to any terms and conditions which the Plan Administrator
      may
      impose thereon, and further subject to any prohibitions and restrictions on
      such
      transfers pursuant to Rule 16b-3). A Beneficiary, transferee, or other
      person claiming any rights under the Plan from or through any Participant shall
      be subject to all terms and conditions of the Plan and any Award agreement
      applicable to such Participant, except as otherwise determined by the Plan
      Administrator, and to any additional terms and conditions deemed necessary
      or
      appropriate by the Plan Administrator.

     

    (c)  Adjustments.

     

    (i)  Adjustments
      to Awards.
      In the
      event that any dividend or other distribution (whether in the form of cash,
      Stock, or other property), recapitalization, forward or reverse split,
      reorganization, merger, consolidation, spin-off, combination, repurchase, share
      exchange, liquidation, dissolution or other similar corporate transaction or
      event affects the Stock and/or such other securities of the Company or any
      other
      issuer such that a substitution, exchange, or adjustment is determined by the
      Plan Administrator to be appropriate, then the Plan Administrator shall, in
      such
      manner as it may deem equitable, substitute, exchange, or adjust any or all
      of
      (A) the number and kind of Shares which may be delivered in connection with
      Awards granted thereafter, (B) the number and kind of Shares by which
      annual per-person Award limitations are measured under Section 5 hereof,
      (C) the number and kind of Shares subject to or deliverable in respect of
      outstanding Awards, (D) the exercise price, grant price or purchase price
      relating to any Award and/or make provision for payment of cash or other
      property in respect of any outstanding Award, and (E) any other aspect of
      any Award that the Plan Administrator determines to be appropriate.

     

    (ii)  Other
      Adjustments.
      The
      Committee (and the Board if and only to the extent such authority is not
      required to be exercised by the Committee to comply with Section 162(m) of
      the Code) is authorized to make adjustments in the terms and conditions of,
      and
      the criteria included in, Awards (including Performance Awards and performance
      goals and performance goals relating thereto) in recognition of unusual or
      nonrecurring events (including, without limitation, acquisitions and
      dispositions of businesses and assets) affecting the Company, any Related Entity
      or any business unit, or the financial statements of the Company or any Related
      Entity, or in response to changes in applicable laws, regulations, accounting
      principles, tax rates and regulations or business conditions or in view of
      the
      Committee’s assessment of the business strategy of the Company, any Related
      Entity or business unit thereof, performance of comparable organizations,
      economic and business conditions, personal performance of a Participant, and
      any
      other circumstances deemed relevant; provided that no such adjustment shall
      be
      authorized or made if and to the extent that such authority or the making of
      such adjustment would cause Options, Stock Appreciation Rights, Performance
      Awards granted under Section 7 hereof to Participants designated by the
      Committee as Covered Employees and intended to qualify as “performance-based
      compensation” under Section 162(m) of the Code and the regulations thereunder to
      otherwise fail to qualify as “performance-based compensation” under Section
      162(m) of the Code and regulations thereunder.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (d)  Taxes.
      The
      Company and any Related Entity are authorized to withhold from any Award
      granted, any payment relating to an Award under the Plan, including from a
      distribution of Stock, or any payroll or other payment to a Participant, amounts
      of withholding and other taxes due or potentially payable in connection with
      any
      transaction involving an Award, and to take such other action as the Plan
      Administrator may deem advisable to enable the Company and Participants to
      satisfy obligations for the payment of withholding taxes and other tax
      obligations relating to any Award. This authority shall include authority to
      withhold or receive Stock or other property and to make cash payments in respect
      thereof in satisfaction of a Participant’s tax obligations, either on a
      mandatory or elective basis in the discretion of the Committee.

     

    (e)  Changes
      to the Plan and Awards.
      The
      Board may amend, alter, suspend, discontinue or terminate the Plan, or the
      Committee’s authority to grant Awards under the Plan, without the consent of
      stockholders or Participants. Any amendment or alteration to the Plan shall
      be
      subject to the approval of the Company’s stockholders if required under
      Applicable Laws. However, without the consent of an affected Participant, no
      such amendment, alteration, suspension, discontinuance or termination of the
      Plan may materially and adversely affect the rights of such Participant under
      any previously granted and outstanding Award. The Plan Administrator may waive
      any conditions or rights under, or amend, alter, suspend, discontinue or
      terminate any Award theretofore granted and any Award agreement relating
      thereto, except as otherwise provided in the Plan; provided that, without the
      consent of an affected Participant, no such action may materially and adversely
      affect the rights of such Participant under such Award.

     

    (f)  Limitation
      on Rights Conferred Under Plan.
      Neither
      the Plan nor any action taken hereunder shall be construed as (i) giving
      any Eligible Person or Participant the right to continue as an Eligible Person
      or Participant or in the employ of the Company or a Related Entity;
      (ii) interfering in any way with the right of the Company or a Related
      Entity to terminate any Eligible Person’s or Participant’s Continuous Service at
      any time, (iii) giving an Eligible Person or Participant any claim to be
      granted any Award under the Plan or to be treated uniformly with other
      Participants and Employees, or (iv) conferring on a Participant any of the
      rights of a stockholder of the Company unless and until the Participant is
      duly
      issued or transferred Shares in accordance with the terms of an
      Award.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    (g)  Unfunded
      Status of Awards; Creation of Trusts.
      The
      Plan is intended to constitute an “unfunded” plan for incentive and deferred
      compensation. With respect to any payments not yet made to a Participant or
      obligations to deliver Stock pursuant to an Award, nothing contained in the
      Plan
      or any Award shall give any such Participant any rights that are greater than
      those of a general creditor of the Company; provided that the Committee may
      authorize the creation of trusts and deposit therein cash, Stock, other Awards
      or other property, or make other arrangements to meet the Company’s obligations
      under the Plan. Such trusts or other arrangements shall be consistent with
      the
“unfunded” status of the Plan unless the Committee otherwise determines with the
      consent of each affected Participant. The trustee of such trusts may be
      authorized to dispose of trust assets and reinvest the proceeds in alternative
      investments, subject to such terms and conditions as the Plan Administrator
      may
      specify and in accordance with applicable law.

     

    (h)  Nonexclusivity
      of the Plan.
      Neither
      the adoption of the Plan by the Board nor its submission to the stockholders
      of
      the Company for approval shall be construed as creating any limitations on
      the
      power of the Board or a committee thereof to adopt such other incentive
      arrangements as it may deem desirable including incentive arrangements and
      awards which do not qualify under Section 162(m) of the Code.

     

    (i)  Fractional
      Shares.
      No
      fractional Shares shall be issued or delivered pursuant to the Plan or any
      Award. The Plan Administrator shall determine whether cash, other Awards or
      other property shall be issued or paid in lieu of such fractional shares or
      whether such fractional shares or any rights thereto shall be forfeited or
      otherwise eliminated.

     

    (j)  Governing
      Law.
      The
      validity, construction and effect of the Plan, any rules and regulations under
      the Plan, and any Award agreement shall be determined in accordance with the
      laws of the State of Arizona without giving effect to principles of conflicts
      of
      laws, and applicable federal law.

     

    (k)  Plan
      Effective Date and Stockholder Approval; Termination of
      Plan.
      The
      Plan shall become effective on the Effective Date, subject to subsequent
      approval within twelve (12) months of its adoption by the Board by
      stockholders of the Company eligible to vote in the election of directors,
      by a
      vote sufficient to meet the requirements of Applicable Laws, and obligations
      of
      the Company applicable to the Plan. Awards may be granted subject to stockholder
      approval, but may no Shares may be issued in the event stockholder approval
      is
      not obtained. The Plan shall terminate no later than ten (10) years from
      the date of the later of (x) the Effective Date and (y) the date an
      increase in the number of Shares reserved for issuance under the Plan is
      approved by the Board (so long as such increase is also approved by the
      stockholders to the extent required by Applicable Laws).

     

    

    
      
        
        

      

      
        22THIS
      WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
      AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE
      DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES
      ACT
      OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
      COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH
      REGISTRATION.

     

    Date:
      March
      16,
      2005

     

    VITAL
      LIVING, INC.

     

    Warrant
      for the Purchase of Shares of Common Stock

     

    No.
      W-___

     

    For
      value
      received, this Warrant is hereby issued by Vital Living, Inc., a Nevada
      corporation (the "Company"),
      to
      Howard Wernick (the "Holder").
      Subject to the provisions of this Warrant, the Company hereby grants to Holder
      the right to purchase from the Company 300,000 fully paid and non-assessable
      shares of Common Stock, at a price of $0.12 per share (the "Exercise
      Price").

     

    The
      term
      "Common Stock" means the Common Stock, par value $0.001 per share, of the
      Company. The number of shares of Common Stock to be received upon the exercise
      of this Warrant may be adjusted from time to time as hereinafter set forth.
      The
      shares of Common Stock deliverable upon such exercise, and as adjusted from
      time
      to time, are hereinafter referred to as "Warrant
      Stock."
      The
      term "Other
      Securities"
      means
      any other equity or debt securities that may be issued by the Company in
      addition thereto or in substitution for the Warrant Stock.

     

    The
      Holder agrees with the Company that this Warrant is issued, and all the rights
      hereunder shall be held, subject to all of the conditions, limitations, and
      provisions set forth herein.

     

    1.    Exercise
      of Warrant.
      Subject
      to the terms and conditions set forth herein, this Warrant may be exercised
      in
      whole or in part, fifty percent (50%) on the date hereof and fifty percent
      (50%)
      on the first anniversary of the date hereof, pursuant to the procedures provided
      below, at any time on or before the earlier of (i) 5:00 p.m., Mountain Standard
      Time, on March 16, 2009, or (ii) the closing of the sale and issuance of shares
      of equity securities of the Company in a firm commitment underwritten public
      offering, pursuant to an effective registration statement under the Securities
      Act of 1933, as amended (the "Securities
      Act"),
      the
      gross proceeds of which are at least $15,000,000 at a per share price of not
      less than $10.00 (following appropriate adjustment in the event of any stock
      dividends, stock splits, combination, or other similar recapitalization
      affecting such shares) (the "Expiration
      Date")
      or, if
      such day is a day on which banking institutions in New York are authorized
      by
      law to close, then on the next succeeding day that shall not be such a day.
      To
      exercise this Warrant the Holder shall present and surrender this Warrant to
      the
      Company at its principal office, with the Warrant Exercise Form attached hereto
      duly executed by the Holder and accompanied by payment (either (a) in cash
      or by
      check, payable to the order of the Company, (b) by cancellation by the Holder
      of
      indebtedness or other obligations of the Company to the Holder, or (c) by a
      combination of (a) or (b)), of the aggregate Exercise Price for the total
      aggregate number of shares for which this Warrant is exercised. Upon receipt
      by
      the Company of this Warrant, together with the executed Warrant Exercise Form
      and payment of the Exercise Price for the shares to be acquired, in proper
      form
      for exercise, and subject to the Holder's compliance with all requirements
      of
      this Warrant for the exercise hereof, the Holder shall be deemed to be the
      holder of record of the shares of Common Stock (or Other Securities) issuable
      upon such exercise, notwithstanding that the stock transfer books of the Company
      shall then be closed or that certificates representing such shares of Common
      Stock shall not then be actually delivered to the Holder; provided,
      however,
      that no
      exercise of this Warrant shall be effective, and the Company shall have no
      obligation to issue any Common Stock or Other Securities to the Holder upon
      any
      attempted exercise of this Warrant, unless the Holder shall have first delivered
      to the Company, in form and substance reasonably satisfactory to the Company,
      appropriate representations so as to provide the Company reasonable assurances
      that the securities issuable upon exercise may be issued without violation
      of
      the registration requirements of the Securities Act and applicable state
      securities laws, including without limitation representations that the
      exercising Holder is an "accredited investor" as defined in Regulation D under
      the Securities Act and that the Holder is familiar with the Company and its
      business and financial condition and has had an opportunity to ask questions
      and
      receive documents relating thereto to his reasonable satisfaction.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.    Net
      Issue Exercise.
      Notwithstanding any provisions herein to the contrary, if the fair market value
      of one share of Common Stock is greater than the Exercise Price (at the date
      of
      calculation as set forth below), in lieu of exercising this Warrant for cash,
      the Holder may elect to receive shares equal to the value (as determined below)
      of this Warrant (or the portion thereof being canceled) by surrender of this
      Warrant at the principal office of the Company together with the properly
      endorsed Notice of Exercise and notice of such election in which event the
      Company shall issue to the Holder a number of shares of Common Stock computed
      using the following formula:

     

    X
      =
Y
      (A-B)

    A

     

    
      	
              Where

               

            	
              X
                =
                

               

            	
              the
                number of shares of Common Stock to be issued to the Holder

               

            
	 	
              Y
                =
                

               

            	
              the
                number of shares of Common Stock purchasable under the Warrant or,
                if only
                a portion of the Warrant is being exercised, the portion of the Warrant
                being canceled (at the date of such calculation)

               

            
	 	
              A
                =

               

            	
              the
                fair market value of one share of the Company's Common Stock (at
                the date
                of such calculation)

               

            
	 	
              B
                =

               

            	
              Exercise
                Price (as adjusted to the date of such calculation)

               

            

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    3.    Reservation
      of Shares.
      The
      Company will at all times reserve for issuance and delivery upon exercise of
      this Warrant all shares of Common Stock or other shares of capital stock of
      the
      Company (and Other Securities) from time to time receivable upon exercise of
      this Warrant. All such shares (and Other Securities) shall be duly authorized
      and, when issued upon such exercise, shall be validly issued, fully paid, and
      non-assessable and free of all preemptive rights.

     

    4.    Fractional
      Shares.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant, but the Company shall pay the Holder an amount
      equal to the Fair Market Value (as defined below) of such fractional share
      of
      Common Stock in lieu of each fraction of a share otherwise called for upon
      any
      exercise of this Warrant.

     

    5.    Fair
      Market Value.
      For
      purposes of this Warrant, the Fair Market Value of a share of Common Stock
      (or
      Other Security) shall be determined as of any date (the "Value
      Date")
      by the
      Company's Board of Directors in good faith; provided,
      however,
      that
      where there exists a public market for the Company's Common Stock on the Value
      Date, the fair market value per share shall be either:

     

    a)    If
      the
      Common Stock is listed on a national securities exchange or admitted to unlisted
      trading privileges on such exchange or listed for trading on the NASDAQ system,
      the Fair Market Value shall be the last reported sale price of the security
      on
      such exchange or system on the last business day prior to the Value Date or
      if
      no such sale is made on such day, the average of the closing bid and asked
      prices for such day on such exchange or system; or

     

    b)    If
      the
      Common Stock is not so listed or so admitted to unlisted trading privileges,
      the
      Fair Market Value shall be the mean of the last reported bid and asked prices
      reported by the National Quotation Bureau, Inc. on the last business day prior
      to the Value Date.

     

    Notwithstanding
      the foregoing, in the event the Warrant is exercised in connection with the
      Company's initial public offering of Common Stock, the fair market value per
      share shall be the product of (i) the per share offering price to the public
      of
      the Company's initial public offering, and (ii) the number of shares of Common
      Stock or Other Securities issuable upon exercise.

     

    6.    Assignment
      or Loss of Warrant.
      Subject
      to the transfer restrictions herein (including Section
      9),
      upon
      surrender of this Warrant to the Company or at the office of its stock transfer
      agent, if any, with the Assignment Form annexed hereto duly executed and funds
      sufficient to pay any transfer tax, the Company shall, without charge, execute
      and deliver a new Warrant in the name of the assignee named in such instrument
      of assignment and this Warrant shall promptly be canceled. Upon receipt by
      the
      Company of evidence reasonably satisfactory to it of the loss, theft,
      destruction, or mutilation of this Warrant, and of reasonably satisfactory
      indemnification by the Holder, and upon surrender and cancellation of this
      Warrant, if mutilated, the Company shall execute and deliver a replacement
      Warrant of like tenor and date. 

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    7.    Rights
      of the Holder.
      The
      Holder shall not, by virtue hereof, be entitled to any rights of a stockholder
      in the Company, either at law or in equity, and the rights of the Holder are
      limited to those expressed in this Warrant.

     

    8.    Adjustments.

     

    8.1    Conversion
      or Redemption of Common Stock.
      Should
      all of the Company's Common Stock be, or if outstanding would be, at any time
      prior to the expiration of this Warrant or any portion thereof, redeemed or
      converted into shares of the Company's capital stock, then this Warrant shall
      become immediately exercisable for that number of shares of the Company's
      capital stock that would have been received if this Warrant had been exercised
      in full and the capital stock received thereupon had been simultaneously
      converted immediately prior to such event, and the Exercise Price shall
      immediately be adjusted to equal the quotient obtained by dividing (x) the
      aggregate Exercise Price of the maximum number of shares of Common Stock for
      which this Warrant was exercisable immediately prior to such conversion or
      redemption, by (y) the number of shares of capital stock for which this Warrant
      is exercisable immediately after such conversion or redemption. 

     

    8.2    Adjustment
      for Recapitalization.
      If the
      Company shall at any time after the date of this Warrant subdivide its
      outstanding shares of Common Stock (or Other Securities at the time receivable
      upon the exercise of the Warrant) by recapitalization, reclassification, or
      split-up thereof, or if the Company shall declare a stock dividend or distribute
      shares of Common Stock to its stockholders, the number of shares of Common
      Stock
      (or Other Securities) subject to this Warrant immediately prior to such
      subdivision shall be proportionately increased, and if the Company shall at
      any
      time after the date of this Warrant combine the outstanding shares of Common
      Stock by recapitalization, reclassification, or combination thereof, the number
      of shares of Common Stock subject to this Warrant immediately prior to such
      combination shall be proportionately decreased. Any such adjustment and
      adjustment to the Exercise Price pursuant to this Section
      8.2
      shall be
      effective at the close of business on the effective date of such subdivision
      or
      combination or if any adjustment is the result of a stock dividend or
      distribution then the effective date for such adjustment based thereon shall
      be
      the record date therefor.

     

    Whenever
      the number of shares of Common Stock purchasable upon the exercise of this
      Warrant is adjusted, as provided in this Section
      8.2,
      the
      Exercise Price shall be adjusted to the nearest cent by multiplying such
      Exercise Price immediately prior to such adjustment by a fraction (x) the
      numerator of which shall be the number of shares of Common Stock purchasable
      upon the exercise immediately prior to such adjustment, and (y) the denominator
      of which shall be the number of shares of Common Stock so purchasable
      immediately thereafter.

     

    8.3    Adjustment
      for Reorganization, Consolidation, Merger, Etc.
      In case
      of any reorganization of the Company (or any other corporation, the securities
      of which are at the time receivable on the exercise of this Warrant) after
      the
      date of this Warrant or in case after such date the Company (or any such other
      corporation) shall consolidate with or merge into another corporation or convey
      all or substantially all of its assets to another corporation, then, and in
      each
      such case, the Holder of this Warrant upon the exercise thereof as provided
      in
Section
      1
      at any
      time after the consummation of such reorganization, consolidation, merger,
      or
      conveyance, shall be entitled to receive, in lieu of the securities and property
      receivable upon the exercise of this Warrant prior to such consummation, the
      securities or property to which such Holder would have been entitled upon such
      consummation if such Holder had exercised this Warrant immediately prior
      thereto; in each such case, the terms of this Warrant shall be applicable to
      the
      securities or property receivable upon the exercise of this Warrant after such
      consummation. 

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    8.4    Certificate
      as to Adjustments.
      The
      adjustments provided in this Section
      8
      shall be
      interpreted and applied by the Company in such a fashion so as to reasonably
      preserve the applicability and benefits of this Warrant (but not to increase
      or
      diminish the benefits hereunder). In each case of an adjustment in the number
      of
      shares of Common Stock receivable on the exercise of the Warrant, the Company
      at
      its expense will promptly compute such adjustment in accordance with the terms
      of the Warrant and prepare a certificate executed by two executive officers
      of
      the Company setting forth such adjustment and showing in detail the facts upon
      which such adjustment is based. The Company will forthwith mail a copy of each
      such certificate to each Holder. 

     

    8.5    Notices
      of Record Date, Etc.
      In the
      event that:

     

    (a) the
      Company shall declare any dividend or other distribution to the holders of
      Common Stock, or authorizes the granting to Common Stock holders of any right
      to
      subscribe for, purchase or otherwise acquire any shares of stock of any class
      or
      any other securities; or

     

    (b) the
      Company authorizes any capital reorganization of the Company, any
      reclassification of the capital stock of the Company, any consolidation or
      merger of the Company with or into another corporation, or any conveyance of
      all
      or substantially all of the assets of the Company to another corporation or
      entity; or

     

    (c) the
      Company authorizes any voluntary or involuntary dissolution, liquidation, or
      winding up of the Company;

     

    then,
      and
      in each such case, the Company shall mail or cause to be mailed to the holder
      of
      this Warrant at the time outstanding a notice specifying, as the case may be,
      (i) the date on which a record is to be taken for the purpose of such dividend,
      distribution, or right, and stating the amount and character of such dividend,
      distribution, or right, or (ii) the date on which such reorganization,
      reclassification, consolidation, merger, conveyance, dissolution, liquidation,
      or winding up is to take place, and the time, if any is to be fixed, as to
      which
      the holders of record of Common Stock (or such other securities at the time
      receivable upon the exercise of the Warrant) shall be entitled to exchange
      their
      shares of Common Stock (or such Other Securities) for securities or other
      property deliverable upon such reorganization, reclassification, consolidation,
      merger, conveyance, dissolution, liquidation, or winding up. Such notice shall
      be mailed at least 20 days prior to the date therein specified.

     

    8.6    No
      Impairment.
      The
      Company will not, by any 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
      and in
      the taking of all such action as may be necessary or appropriate in order to
      protect the rights of the Holder of this Warrant against
      impairment.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    9.    Transfer
      to Comply with the Securities Act.
      This
      Warrant and any Warrant Stock or Other Securities may not be sold, transferred,
      pledged, hypothecated, or otherwise disposed of except as follows: (a) to a
      person who, in the opinion of counsel to the Company, is a person to whom this
      Warrant or the Warrant Stock or Other Securities may legally be transferred
      without registration and without the delivery of a current prospectus under
      the
      Securities Act with respect thereto and then only against receipt of an
      agreement of such person to comply with the provisions of this Section
      9
      with
      respect to any resale or other disposition of such securities; or (b) to any
      person upon delivery of a prospectus then meeting the requirements of the
      Securities Act relating to such securities and the offering thereof for such
      sale or disposition, and thereafter to all successive assignees. 

     

    10.   Legend.
      Unless
      the shares of Warrant Stock or Other Securities have been registered under
      the
      Securities Act, upon exercise of any of the Warrants and the issuance of any
      of
      the shares of Warrant Stock, all certificates representing shares shall bear
      on
      the face thereof substantially the following legend:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE,
      ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT
      TO
      THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION
      IS
      OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
      EXEMPTION FROM SUCH REGISTRATION.

     

    11.   Notices.
      All
      notices required hereunder shall be in writing and shall be deemed given when
      telegraphed, delivered personally or within two days after mailing when mailed
      by certified or registered mail, return receipt requested, to the Company or
      the
      Holder, as the case may be, for whom such notice is intended, if to the Holder,
      at the address of such party shown on the books of the Company, or if to the
      Company, to Vital Living, Inc., at the address set forth on the signature page
      hereof, Attn: President, or at such other address of which the Company or the
      Holder has been advised by notice hereunder.

     

    12.   Governing
      Law.
      The
      Warrant is issued under and shall for all purposes be governed by and construed
      in accordance with the laws of the State of Arizona, without regard to the
      conflict of laws provisions of such state.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    13.   Jurisdiction;
      Venue.
      The
      parties hereby agree that any dispute which may arise between them arising
      out
      of or in connection with this Warrant shall be adjudicated before a court
      located in Phoenix, Arizona and they hereby submit to the exclusive jurisdiction
      of the courts of the state of Arizona and of the federal courts in the District
      of Arizona with venue in Phoenix, Arizona with respect to any action or legal
      proceeding commenced by any party, and irrevocably waive any objection they
      now
      or hereafter may have respecting the venue of any such action or proceeding
      brought in such a court or respecting the fact that such court is an
      inconvenient forum, relating to or arising out of this Warrant or any acts
      or
      omissions relating to the sale of the securities hereunder, and consent to
      the
      service of process in any such action or legal proceeding by means of registered
      or certified mail, return receipt requested.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf,
      in its corporate name, by its duly authorized officer, all as of the day and
      year first above written.

     

    VITAL
      LIVING, INC.

     

    By:
      /s/ Stuart A. Benson

    Name: Stuart
      A.
      Benson

    Title:
       Chief
      Executive Officer

     

    Address:
      

     

    5080
      North 40th Street

    Suite
      105

    Phoenix,
      Arizona 85018

     

    
      
        
        

      

      
        -8-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]