Document:

Exhibit
10.33

 

AMENDMENT

 

FIRST AMENDMENT (this “Amendment”),
effective as of November 13, 2003, to the Exchange Agreement (the “Exchange
Agreement”), dated as of November 13, 2003, by and between DFG Holdings,
Inc., a Delaware corporation (the “Company”), GS Mezzanine Partners,
L.P., a limited partnership organized under the laws of Delaware (“GS Mezzanine”),
GS Mezzanine Partners Offshore, L.P., an exempted limited partnership organized
under the laws of the Cayman Islands (“GS Mezzanine Offshore”), Stone
Street Fund 1998, L.P., a limited partnership organized under the laws of
Delaware (“Stone Street”), Bridge Street Fund 1998, L.P., a limited
partnership organized under the laws of Delaware (“Bridge Street”, and
collectively with Stone Street, GS Mezzanine and GS Mezzanine Offshore,
the “GSMP Purchasers”), Ares Leveraged Investment Fund, L.P., a limited
partnership organized under the laws of Delaware (“Ares I”) and Ares
Leveraged Investment Fund II, L.P., a limited partnership organized under the
laws of Delaware (“Ares II” and, collectively with Ares I, “Ares”
and, collectively with the GSMP Purchasers, the “Purchasers”).  Capitalized terms used herein and not
defined herein shall have the respective meanings ascribed to such terms in the
Exchange Agreement.

 

RECITALS

 

WHEREAS, pursuant to the
Exchange Agreement, the Company sold $49,351,422.48 in aggregate principal
amount of 13.95% Senior Subordinated Notes Due 2012 (the “Notes”) to the
Purchasers,

 

WHEREAS, pursuant to Section
9.17 of the Exchange Agreement, the Purchasers constituting the Required
Holders requested that the Company enter into an Indenture (as hereinafter
defined) with an indenture trustee under which replacement notes (the “Replacement
Notes”) in aggregate principal amount of $49,351,422 will be issued to the
Purchasers in exchange for the Notes and certain covenants and agreements of
the Company under the Exchange Agreement will be substituted for with covenants
and agreements to be set forth under the Indenture,

 

WHEREAS, concurrently
herewith, the Company is entering into an Indenture (the “Indenture”)
with U.S. Bank National Association, as Trustee (the “Trustee”) in the
form of Exhibit A hereto,

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereto agree as follows:

 

1.                                       Definitions.  Section 1 of the Exchange Agreement
is hereby amended as follows:

 

(a)                                  The
first sentence of Section 1.1 is hereby deleted and replaced with the
following:

 

“Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Indenture.  In addition, the following
terms shall have the meanings specified herein unless the context otherwise
requires.”

 

(b)                                 All
defined terms used in the Sections of the Exchange Agreement that are being
deleted pursuant to Section 2 of this Amendment are hereby deleted in
their entirety unless such defined terms are used elsewhere in the Exchange
Agreement and the Indenture does not contain

 

 

definitions for such terms.  In
the event that the Indenture contains a definition for any term used in the
Exchange Agreement, the definition set forth in the Exchange Agreement is
replaced in its entirety by the definition set forth in the Indenture.

 

(c)                                  The
following definitions hereby replace the existing definitions of such terms set
forth in Section 1.1 of the Exchange Agreement:

 

“Company Financial
Statements” means the financial statements of the Company filed with the
Commission pursuant to its obligations under Section 5.03 of the Indenture.

 

“Special Interest”
means Liquidated Damages, as defined in the Indenture.

 

“Required Holders”
means Purchasers who hold more than 50% of the aggregate principal amount of
the outstanding Notes.

 

2.                                       Other
Amendments to the Exchange Agreement.

 

(a)                                  Section
6 (“Covenants to Provide Information”) is hereby deleted in its entirety
and a new Section 6.1 is hereby substituted in place thereof as follows:

 

“Section 6.1.                             Covenant
to Provide Information.  So long as
the Purchasers hold any Notes, the Company covenants and agrees with each
Purchaser that at least ten (10) days prior thereto, it will deliver to each
Purchaser a written notice of any proposed extension, renewal, refinancing or
modification of any Indebtedness exceeding $250,000 of the Company or any of
its Subsidiaries.”

 

(b)                                 Section
7 (“Other Affirmative Covenants”) of the Exchange Agreement, except Sections
7.3(c), 7.3 (d) and 7.8, is hereby deleted in their entirety.

 

(c)                                  Section
8 (“Negative Covenants”) of the Exchange Agreement is hereby deleted in its
entirety and a new Section 8.1 is hereby substituted in place thereof as
follows:

 

“8.1.                                         Amendment
of Indenture.  The Company shall not
amend or waive the provisions of Sections 3.02, 3.08 and 5.17 of the Indenture,
or any of the definitions used in such Sections, without the prior written
consent of Ares, so long as Ares owns any Notes.”

 

(d)                                 Sections
9.13 (“DTC Agreement”), 9.14 (“Portal”) and 9.17 (Exchange
Right), Section 10 (“The Notes”), Section 11 (“Events of
Default”) and Section 12 (“Redemption”) of the Exchange Agreement are
hereby deleted in their entirety.

 

(e)                                  Section
15.4 of the Exchange Agreement is hereby replaced in its entirety with the
following:

 

“Section 15.4.                     Amendments,
Waiver and Consents.  This Agreement
may be amended and the observance of any term hereof may be waived (either
retroactively or prospectively) with (and only with) the written consent of the
Company and the Required Holders; provided however, that no such amendment
or waiver may, without the prior written consent of the Holder of each Note and
Exchange

 

2

 

Note then outstanding and affected thereby (a) subject any Holder to
any additional obligation or (b) amend or waive the provisions of Section 7.8
or any of the definitions used in such Section.  No amendment or waiver of this Agreement will extend to or affect
any obligation, covenant or agreement not expressly amended or waived or
thereby impair any right consequent thereon. 
As used herein, the term “Agreement” and references thereto shall mean
this Agreement as it may from time to time be amended or supplemented.”

 

(f)                                    Exhibit
A of the Exchange Agreement is hereby replaced with Sections 2.02
and 2.03 of the Indenture. 
Without limiting the generality of the foregoing, each Purchaser
acknowledges and agrees that the percentage used in calculating the Adjusted
Actual Payment has been changed from 14.87%  to 14.44%.

 

(g)                                 Schedule
A to the Exchange Agreement is replaced in its entirety with Schedule A
attached hereto.

 

3.                                       Indenture.  Concurrently herewith, the Company shall
enter into the Indenture.

 

4.                                       Exchange
of the Notes.  Concurrently
herewith, the Company will issue and cause to be authenticated, in accordance
with the terms of the Indenture, Replacement Notes in the form set forth in Sections 2.02
and 2.03 of the Indenture.  The
Replacement Notes shall be issued, in exchange for the Notes surrendered by the
Purchasers, in principal amounts equal to the respective principal amounts of
the Notes so surrendered by each Purchaser. 
To receive Replacement Notes, each Purchaser shall surrender all of its
Notes.  The Replacement Notes will be
issued in the form of one or more Global Notes (as defined in the Indenture)
authenticated by the Trustee as of November 13, 2003 and registered in the name
of the Depository Trust Company, as the Depositary (“DTC”), or its
nominee, and deposited with the Trustee, as custodian for DTC, for credit by
DTC to the respective accounts of the beneficial owners of the Replacement Notes
represented thereby.  From and after the
date of surrender, the Notes shall cease to bear interest and shall cease to be
outstanding for any purpose.

 

5.                                       Conditions
to Effectiveness.  This Amendment
shall become effective upon (a) the due authorization, execution and delivery
of the Indenture by the parties thereto, (b) the surrender by the Purchasers of
all of their Notes, (c) the execution and delivery by the Company of the
Replacement Notes to the Trustee, the authentication of the Replacement Notes
by the Trustee and the delivery of the Replacement Notes to DTC pursuant to Section
4 hereof, (d) the compliance by the Company with its obligations pursuant
to Sections 9.13 and 9.14 of the Exchange Agreement with
respect to the Replacement Notes and (e) the receipt by the Trustee and each
Purchaser of opinions in form and substance satisfactory to each Purchaser,
dated the date hereof, from Irell & Manella LLP, counsel to the Company, as
to the Indenture, the Replacement Notes and this Amendment, and such other
matters as the Trustee or the Purchasers may reasonably request.

 

6.                                       Exchange
Agreement Remains in Effect; Indenture Controls.

 

(a)                                  Except
as expressly amended herein or as provided in clause (b) of this Section 6,
the Exchange Agreement shall continue to be, and shall remain, in full force
and effect.  This Amendment shall not be
deemed to be a waiver of, or consent to, or a modification or amendment of, any
other term or condition of the Exchange Agreement or to prejudice any other
right or rights which the Holders

 

3

 

may now have or may have in the future under or in connection with the
Exchange Agreement or any of the instruments or agreements referred to therein,
as the same may be amended from time to time. 
The representations of the Purchasers set forth in Section 5 of
the Exchange Agreement shall apply mutatis mutandi to this Amendment, as though
fully set forth herein with respect to the Replacement Notes.

 

(b)                                 In
the event of any conflict between the provisions of the Exchange Agreement and
the provisions of the Indenture, the provisions of the Indenture shall control
and shall be deemed to have superseded and replaced the conflicting provisions
of the Exchange Agreement.

 

7.                                       Counterparts.  This Amendment may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument.  It shall not be necessary in making proof of
this Amendment to produce or account for more than one such counterpart.  Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.

 

8.                                       Acknowledgement.  Reference is hereby made to (a) that certain
Note SU-3, dated November 13, 2003, made by the Company in favor of Stone
Street in the original principal amount of US$1,061,174.28 (the “Stone Note”)
and (b) that certain Note SU-4, dated November 13, 2003, made by the Company in
favor of Bridge Street in the original principal amount of US$320,131.38 (the “Bridge
Note,” and together with the Stone Note, the “3-4 Notes”) each
issued under the Exchange Agreement. 
Stone Street acknowledges that the Stone Note was exchanged for a
Replacement Note in the aggregate principal amount of US$1,061,174 and Bridge
Street acknowledges that the Bridge Note was exchanged for a Replacement Note
in the aggregate principal amount of US$320,131, in each case as of November
13, 2003 pursuant to this Amendment. 
Accordingly, each of Stone Street and Bridge Street, being the owner and
holder of its respective 3-4 Note, by execution of this Amendment, hereby
acknowledges full satisfaction of all amounts owing under such 3-4 Note and
hereby cancels the same.  The original
of such 3-4 Note not being available, Stone Street and Bridge Street each
hereby agrees to indemnify and hold the Company harmless from and against any
claim that the amounts evidenced by the Stone Note or the Bridge Note, as the
case may be, have not been satisfied. 
Each of Stone Street and Bridge Street represents that it has not sold,
assigned, pledged, transferred, negotiated, deposited under any agreement, or
hypothecated its respective 3-4 Note or any interest therein, or signed any
power of attorney or other authorization respecting the same which is now
outstanding and in force or otherwise deposed of the same, and no person, firm,
corporation, or other entity has or has asserted any right, title, claim,
equity or interest in, to, or respecting the same.  Each of Stone Street and Bridge Street further agrees to return
its 3-4 Notes to the Trustee no later than December 23, 2003.

 

9.                                       GOVERNING
LAW.  THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW
YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

 

527679

 

4

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed, as of the day
and year first above written.

 

	
   

  	
  DFG HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald F. Gayhardt

  	
   

  
	
   

  	
   

  	
  Name: Donald F.
  Gayhardt

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GS MEZZANINE PARTNERS,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:  GS Mezzanine Advisors, L.L.C., its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Katherine B.
  Enquist

  	
   

  
	
   

  	
   

  	
  Name: Katherine B.
  Enquist

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GS MEZZANINE PARTNERS
  OFFSHORE, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  GS Mezzanine Advisors, L.L.C., its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Katherine B.
  Enquist

  	
   

  
	
   

  	
   

  	
  Name: Katherine B.
  Enquist

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STONE STREET FUND 1998,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:  Stone Street 1998, L.L.C., its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Katherine B.
  Enquist

  	
   

  
	
   

  	
   

  	
  Name: Katherine B.
  Enquist

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  BRIDGE STREET FUND
  1998, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  Stone Street 1998, L.L.C., its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Katherine B.
  Enquist

  	
   

  
	
   

  	
   

  	
  Name: Katherine B.
  Enquist

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARES LEVERAGED
  INVESTMENT FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  ARES Management, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  ARES Operating Member, LLC, its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Serota

  	
   

  
	
   

  	
   

  	
  Name: Jeff Serota

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARES LEVERAGED
  INVESTMENT FUND II, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  ARES Management II, L.P.

  
	
   

  	
   

  
	
   

  	
  By:  ARES Operating Member II, LLC, its general
  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Serota

  	
   

  
	
   

  	
   

  	
  Name: Jeff Serota

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

SCHEDULE A

 

INFORMATION
RELATING TO PURCHASERS

 

	
  Name and Address of Purchaser

  	
   

  	
  Principal
  Amount at

  Maturity of the Existing

  Holdings Notes to

  be Surrendered

  	
   

  	
  Principal

  Amount of the

  Notes to

  be Received

  	
   

  	
  Financing

  Payment

  	
   

  	
  Redemption
  of

  Existing Holdings

  Notes pursuant to

  Section 3.6(1)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS MEZZANINE PARTNERS, L.P.

  85 Broad Street

  New York, New York 10004

  Telecopy: (212) 902-3000

  Attention:  Ben Adler

  	
   

  	
  $

  	
  30,294,400.03

  	
   

  	
  $

  	
  24,788,508

  	
   

  	
  $

  	
  743,655.22

  	
   

  	
  $

  	
  5,023,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GS MEZZANINE PARTNERS OFFSHORE, L.P.

  c/o GS Mezzanine Partners L.P.

  85 Broad Street

  New York, New York 10004

  Telecopy: (212) 902-3000

  Attention:  Ben Adler

  	
   

  	
  $

  	
  16,267,631.07

  	
   

  	
  $

  	
  13,311,325

  	
   

  	
  $

  	
  399,339.75

  	
   

  	
  $

  	
  2,697,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STONE STREET FUND 1998, L.P.

  85 Broad Street

  New York, New York 10004

  Telecopy: (212) 902-3000

  Attention:  Ben Adler

  	
   

  	
  $

  	
  1,296,846.01

  	
   

  	
  $

  	
  1,061,174

  	
   

  	
  $

  	
  31,835.23

  	
   

  	
  $

  	
  215,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BRIDGE STREET FUND 1998, L.P.

  85 Broad Street

  New York, New York 10004

  Telecopy: (212) 902-3000

  Attention:  Ben Adler

  	
   

  	
  $

  	
  391,369.81

  	
   

  	
  $

  	
  320,131

  	
   

  	
  $

  	
  9,603.94

  	
   

  	
  $

  	
  65,000.00

  	
   

  

 

 

(1)                                  Shows
50% of the aggregate amount of redemption. 
The other 50% are shown in the Company Senior Note Exchange Agreement as
applied to the Existing Holdings Notes exchanged for the Company Senior Notes.

 

7

 

	
  ARES LEVERAGED INVESTMENT FUND, L.P.

  1999 Avenue of the Stars, Suite 1900

  Los Angeles, California 90067

  Telecopy: (310) 201-4170

  Attention:  Jeff Serota

  	
   

  	
  $

  	
  6,031,280.87

  	
   

  	
  $

  	
  4,935,142

  	
   

  	
  $

  	
  148,054.26

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARES LEVERAGED INVESTMENT FUND II, L.P.

  1999 Avenue of the Stars, Suite 1900,

  Los Angeles, California 90067

  Telecopy: (310) 201-4170

  Attention:  Jeff Serota

  	
   

  	
  $

  	
  6,031,280.86

  	
   

  	
  $

  	
  4,935,142

  	
   

  	
  $

  	
  148,054.26

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  60,312,808.65

  	
   

  	
  $

  	
  49,351,422

  	
   

  	
  $

  	
  1,480,542.67

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  

 

 

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Exhibit 4.1  

THE
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOT WITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT. 

 
 

VITAL LIVING, INC.    
    
    WARRANT TO PURCHASE COMMON STOCK    
    

	 	 	Number of Shares:	 	 
	 	 	 	 	

Date
of Issuance: As of December 21, 2003 

Vital
Living, Inc. (the "Company"), a corporation organized and existing under the laws of the State of Nevada, hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which
is hereby acknowledged,                        , the registered holder hereof, or his permitted assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after twelve (12) months from the date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein)
                        (            ) fully paid and nonassessable
shares of Common Stock (as defined herein) of the Company (the "Warrant Shares") at the Warrant Exercise Price as defined in
Section 1(a)(xii) below. 

        Section 1.        

        (a)    Definitions.    The following words and terms as used in this Warrant shall have the following meanings: 

          (i)  "Business
Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of Las Vegas are authorized or required by law to remain
closed. 

         (ii)  "Closing
Bid Price" means the closing bid price of Common Stock as quoted on the Principal Market (as reported by Bloomberg Financial Markets ("Bloomberg") through its
"Volume at Price" function). 

        (iii)  "Closing
Date" has the meaning given it in the Stock Purchase Agreement. 

        (iv)  "Common
Stock" means (1) the Company's common stock, $0.001 par value per share, and (ii) any capital stock into which such Common Sock shall have been
changed or any capital stock resulting from a reclassification of such Common Stock. 

         (v)  "Expiration
Date" means the date two (2) years from the Issuance Date or, if such date falls on a Saturday, Sunday or other day on which banks are required or
authorized to be closed in The City of Las Vegas or the State of Nevada or on which trading does not take place on the Principal Exchange or automated quotation system on which the Common Stock is
traded (a "Holiday"), the next date that is not a Holiday. 

        (vi)  "Issuance
Date" means the date of this Warrant. 

       (vii)  "Person"
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or
any department or agency thereof. 

 

      (viii)  "Principal
Market" means the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, whichever is at the time
the principal trading exchange or market for such security, or the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg or, if no
bid or sale information is reported for such security by Bloomberg on the electronic bulletin board, then the "pink sheets" distributed by the National Quotation Bureau, Inc. 

        (ix)  "Securities
Act" means the Securities Act of 1933, as amended. 

         (x)  "Stock
Purchase Agreement" means the Stock Purchase Agreement, dated                        , between the Company and the Investors named
therein for the purchase of 10%
Series A Preferred Stock by the Holder. 

        (xi)  "Warrant"
means this Warrant and all Warrants issued in exchange, transfer or replacement thereof. 

       (xii)  "Warrant
Exercise Price" shall be $2.00 per share. 

      (xiii)  "Warrant
Registration Rights Agreement" means the Warrant Registration Rights Agreement dated,                        , between the Company
and the Investors named therein
with respect to the registration rights pertaining to the Common Stock issuable upon exercise of this Warrant. 

      (xiv)  "Warrant
Shares" means the shares of Common Stock issuable at any time upon exercise of this Warrant. 

        (b)    Other Definitional Provisions.    

          (i)  Except
as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company's successors and (B) to any
applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time. 

         (ii)  When
used in this Warrant, the words "herein," "hereof," and "hereunder" and words of similar import, shall refer to this Warrant as a whole and not to any provision of
this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified. 

        (iii)  Whenever
the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. 

        Section 2.    Exercise of Warrant.    

        (a)   Subject
to the terms and conditions hereof, this Warrant may be exercised by the holder hereof then registered on the books of the Company, pro rata as hereinafter
provided, at any time on any Business Day on or after the opening of business on Such Business Day, commencing with the first day of the thirteenth (13th) month after the Issuance Date, and prior to
11:59 P.M. Eastern Time on the Expiration Date, by (i) delivery of a written notice, in the form of the subscription notice attached as Exhibit A hereto (the "Exercise Notice"),
of such holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant
Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied by the number of Warrant Shares (at the applicable Warrant Exercise Price) as to which this Warrant is being exercised
(plus any applicable issue fees or transfer taxes) (the "Aggregate Exercise Price") in cash or wire transfer of immediately available funds and (iii) the surrender of this Warrant (or, an
indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) to a common carrier for overnight delivery to the Company as soon as practicable following such
date. In the event of any exercise of the rights represented by this Warrant in 

2

 

compliance
with this Section 2(a), the Company shall on the second Business Day following the date of receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) and the receipt of the representations of the holder specified in Section 6 hereof, if
requested by the Company (the "Exercise Delivery Documents"), and if the Common Stock is DTC eligible, credit such aggregate number of shares of Common Stock to which the holder shall be entitled to
the holder's or its designee's balance account with The Depository Trust Company; provided, that if the holder who submitted the Exercise Notice has requested physical delivery of any or all of the
Warrant Shares, or, if the Common Stock is not DTC eligible, then the Company shall, on or before the second Business Day following receipt of the Exercise Delivery Documents, issue and surrender to a
common carrier for overnight delivery to the address specified in the Exercise Notice, a certificate, registered in the name of the holder, for the number of shares of Common Stock to which the holder
shall be entitled pursuant to such request. Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in clause (ii) above the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised. 

        (b)   Unless
the rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, as soon as practicable and in no event later than
five (5) Business Days after any exercise and at its own expense, issue a new Warrant identical in all respects to this Warrant exercised except it shall represent rights to purchase the number
of Warrant Shares purchasable immediately prior to such exercise under this Warrant exercised, less the number of Warrant Shares with respect to which such Warrant is exercised. 

        (c)   If
the Company or its transfer agent shall fail for any reason or for no reason to issue to the holder within ten (10) Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of Warrant Shares to which the holder is entitled or to credit the holder's balance account with The Depository Trust Company for such number of
Warrant Shares to which the holder is entitled upon the holder's exercise of this W arrant, the Company shall, in addition to any other remedies under this Warrant or otherwise available to such
holder, pay as additional damages in cash to such holder on each day the issuance of such certificate for Warrant Shares is not timely effected an amount equal to 0.5% of the product of (A) the
sum of the number of Warrant Shares not issued to the holder on a timely basis and to which the holder is entitled, and (B) the Closing Bid Price of the Common Stock for the trading day
immediately preceding the last possible date which the Company could have issued such Common Stock to the holder without violating this Section 2. 

        (d)   If
within ten (10) Business Days after the Company's receipt of the Exercise Delivery Documents, the Company fails to deliver a new Warrant to the holder for the
number of Warrant Shares to which such holder is entitled pursuant to Section 2(b) hereof, then, in addition to any other available remedies under this Warrant, or otherwise available to such
holder, the Company shall pay as additional damages in cash to such holder on each day after such tenth (10th) Business Day that such delivery of such new Warrant is not timely effected in an amount
equal to 0.25% of the product of (A) the number of Warrant Shares represented by the portion of this Warrant which is not being exercised and (B) the Closing Bid Price of the Common
Stock for the trading day immediately preceding the last possible date which the Company could have issued such Warrant to the holder without violating this Section 2. 

        Section 3.    Covenants as to Common Stock.    The Company hereby covenants and agrees
as follows: 

        (a)   This
Warrant is, and any Warrants issued in substitution for or replacement of this Warrant will upon issuance be, duly authorized and validly issued. 

3

 

        (b)   All
Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof. 

        (c)   During
the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved at least 100% of the
number of shares of Common Stock needed to provide for the exercise of the rights then represented by this Warrant and the par value of said shares will at all times be less than or equal to the
applicable Warrant Exercise Price. 

        (d)   Within
sixty (60) days following the first anniversary of the Issuance Date, the Company shall file a registration statement with the Securities and
Exchange Commission to secure the listing of the Warrant Shares on the Principal Market in accordance with the terms and conditions regarding the registration rights of holders of Warrants set forth
in the Warrant Registration Rights Agreement and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Warrant Shares from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation
system. 

        (e)   The
Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all, times in good faith
assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise
privilege of the holder of this Warrant impairment, consistent with the tenor and purpose of this Warrant. The Company will not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Warrant Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. 

        (f)    This
Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. 

        Section 4.    Taxes.    The Company shall pay any and all taxes, except any applicable
withholding, which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. 

        Section 5.    Warrant Holder Not Deemed a Stockholder.    Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor
shall anything contained in this Warrant be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of his Warrant of the Warrant Shares which he or she is then entitled to receive upon the due exercise of this Warrant. In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company will provide the holder of this Warrant with copies of the same
notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders. 

4

 

        Section 6.    Representations of Holder.    The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public
sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act; provided, however,
that by making the representations herein, the holder does not agree to hold this Warrant or any of the Warrant Shares for any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The holder of this Warrant further represents, by
acceptance hereof, that, as of this date, such holder is an "accredited investor" as such tem is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor"). Upon exercise of this Warrant the holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company,
that the Warrant Shares so purchased are being acquired solely for the holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale
and that such holder is an Accredited Investor. If such holder cannot make such representations because they would be factually incorrect, it shall be a condition to such holder's exercise of this
Warrant that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall
not violate any United States or state securities laws. 

        Section 7.    Ownership and Transfer.    The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee. The Company may treat the person in whose name any Warrant is registered on the
register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any transfers made in accordance with the terms of this Warrant. 

        Section 8.    Adjustment of Warrant Exercise Price and Number of Shares.    The Warrant
Exercise Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time as follows: 

        (a)    Adjustment of Warrant Exercise Price upon Subdivision or Combination of Common Stock.    If the Company at any
time after the date of issuance of this Warrant subdivides (by any stock split, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of
shares, any Warrant Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, any Warrant Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of
Warrant Shares issuable upon exercise of this Warrant will be proportionately decreased. Any adjustment under this Section 8(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective. 

        (b)    Distribution of Assets.    If the Company shall make any distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a spin
off, reclassification, corporate rearrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case: 

          (i)  any
Warrant Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to
receive the 

5

 

Distribution
shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the
Company's Board of Directors) applicable to one share of Common Stock, and (B) the denominator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such
record date; and 

         (ii)  either
(A) the number of Warrant Shares obtainable upon exercise this Warrant shall be increased to a number of shares equal to the number of shares of Common
Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding clause (i), or (B) in the event that the Distribution is of common stock of a company whose common stock is traded on a national
securities exchange or a national automated quotation system, then the holder of this Warrant shall receive an additional warrant to purchase Common Stock, the term: of which shall be identical to
those of this Warrant, except that such warrant shall be exercisable into the amount of the assets that would have been payable to the holder of this Warrant pursuant to the Distribution had the
holder exercised this Warrant immediately prior to such
record date and with an exercise price equal to the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding
clause (i). 

        (c)    Certain Events.    If any event occurs of the type contemplated by the provisions of this Section 8 but
not expressly provided for by such provisions, then the Company's Board of Directors will make an appropriate adjustment in the Warrant Exercise Price and the number of shares of Common Stock
obtainable upon exercise of this Warrant so as to protect the rights of the holders of the Warrants; provided, that no such adjustment pursuant to this Section 8(c) will increase the Warrant
Exercise Price or decrease the number of shares of Common Stock obtainable as otherwise determined pursuant to this Section 8. 

        (d)    Notices.    

          (i)  Immediately
upon any adjustment of the Warrant Exercise Price, the Company will give written notice thereof to the holder of this Warrant, setting forth in reasonable
detail, and certifying, the calculation of such adjustment. 

         (ii)  The
Company will give written notice to the holder of this Warrant at least ten (10) days prior to the date on which the Company closes its books or takes a
record (A) with respect to any distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined below), dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice
being provided to such holder. 

        (iii)  The
Company will also give written notice to the holder of this Warrant at least ten (10) days prior to the date on which any dissolution or liquidation will
take place, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder. 

        Section 9.    Lost, Stolen, Mutilated or Destroyed Warrant.    If this Warrant is lost,
stolen, mutilated or destroyed, the Company shall promptly, on receipt of an indemnification undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of like denomination
and tenor as this Warrant so lost, stolen, mutilated or destroyed. 

        Section 10.    Notice.    Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have 

6

 

been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of receipt is received by the sending party transmission is
mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be: 

If
to the Company: 

Vital
Living, Inc.

5080 N. 40th Street, Suite 105

Phoenix, Arizona 85018

Attention: President 

With
a copy to: 

David
Alan Miller

Graubard Miller

600 Third Avenue

New York, New York 10016 

        If
to a holder of this Warrant, to it at the address and facsimile number set forth in the Stock Purchase Agreement, with copies to such holder's representatives as set forth in such
Stock Purchase Agreement, or at such other address and facsimile as shall be delivered to the Company upon the issuance or transfer of this Warrant. 

        Each
party shall provide five days' prior written notice to the other party of any change in address or facsimile number. Written confirmation of receipt (A) given by the
recipient of such notice, consent, facsimile, waiver or other communication, or (B) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively. 

        Section 11.    Date.    The date of this Warrant is as of December 21, 2003.
This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date. 

        Section 12.    Amendment and Waiver.    Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the
written consent of the holders of Warrants representing at least two-thirds of the Warrant Shares issuable upon exercise of the Warrants then outstanding; provided that, except for
Section 8(d), no such action may increase the Warrant Exercise Price or decrease the number of shares or class of stock obtainable upon exercise of any Warrant without the written content of
the holder of such Warrant. 

        Section 13.    Descriptive Headings; Governing Law.    The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The corporate laws of the State of Nevada shall govern all issues
concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the
internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada, or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Nevada. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

7

 

        IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed as of this        day
of                        , 2003. 

	 	 	VITAL LIVING, INC.
	

 	
 	

By:	

 
	 	 	 	
 Stuart A. Benson, Chief Executive Officer

8

 
EXHIBIT A TO WARRANT  

 Exercise Form  

(To
be executed by the registered owner to purchase 

Common
Stock pursuant to the Warrant) 

	To:	 	VITAL LIVING, INC.

5080 N. 40th Street

Suite 105

Phoenix, Arizona 85018

The
undersigned hereby: (1) irrevocably subscribed for                        shares of your Common Stock pursuant to this
Warrant, and encloses payment of $                        therefor,
(2) requests that a certificate for the shares be issued in the name of the undersigned and delivered to the undersigned at the address below; and (3) if such number of shares is not all
of the shares purchasable hereunder, that a new Warrant of like tenor for the balance of the remaining shares purchasable hereunder be issued in the name of the undersigned and delivered to the
undersigned at the address below. 

	Date:          

(Cannot be earlier than December 21, 2004 [12 months from original date of issuance])
	

    
	

 (Please sign exactly as name appears on Warrant)

	

Address:	

 
	 	

	

 	

	

    	

 
	Taxpayer ID No.	 
	 	

9

 
EXHIBIT B TO WARRANT  

 FORM OF WARRANT POWER  

FOR
VALUE RECEIVED, the undersigned does hereby assign and transfer to Federal Identification No.                        , a warrant
to purchase                        shares of the capital stock of Vital
Living, Inc., a Nevada corporation, represented by warrant certificate no.            ; standing in the name of the undersigned on the books of said corporation. The undersigned does
hereby
irrevocably constitute and appoint                        , attorney to transfer the warrants of said corporation, with full power
of substitution in the premises. 

Dated:                        ,
20        

	 	 	

	

 	
 	

By:	

 
	 	 	 	

	

 	
 	

Its:	

 
	 	 	 	

10

QuickLinks

VITAL LIVING, INC. WARRANT TO PURCHASE COMMON STOCK

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