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DARREN M. MEADE v. DR. SCOTT CONNELLY, M.D. AND MET-RX USA ADJUDICATED CLAIMS

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"The Orange County Register wrote: "The retail experiment, led by Darren M. Meade, worked, during a 24-month stretch, MET-Rx sales through direct mail, as well as retail jumped from less than $1 million to more than $40 million."​

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DARREN M. MEADE v. DR. SCOTT CONNELLY, M.D. AND MET-RX USA ADJUDICATED CLAIMS

  1. 1. _ (949)315-3358 p.1 Feb 211 08'25p Kalros-Meade W 70598 Kairos-Meade (949)315-3356 9.1 -~ 1}; PHILI9 M. SAETA. JUDGE RETIRED i 1800 Pviarengc Avenue 2* South Pasadena. CA 9103:: £626) 799-c225 IN THE MATTER OF THE ARBITRATION OF 5 1 0 t? £.RE1T HEADE , "" J. 1 ELAZNTZFF 12 1,119 1' ARBITRATION JJFARD MET-RIC USA. INC. A3)‘: A. SCOTI‘ COI"N'2LLY. 51.3. D3 I-‘ENDANTE PHILIP M- SAETA, a retired judge of the Superior Court, was apgointed by the parties as arbitrator of their dispute. P; aint; ££ was represented by Robert: A. Chaffir. of the Texas Bar and Mark 3. Eiummer of the Ca}. :fo: :r. :‘. a Bar. aefandants were represantari 323- Samuel Kr-an: of the California Bar. Hearings were held and 3 ev; L:ia:1<: r—: ami argument were receiver} on December 154.8,. 1397 and 22: January 15, 1995. Relief from the requirement to arbitrate was denied by the superior Court and the Court of Appeal. .7 as a rec. --. ;es: by Defendants for a healing for further argument. 2'2/‘l*. ':. =‘. ‘.§B'3 La. -.47 euawm CHAFFIK-4 5:14.35 : ._
  2. 2. (949) 31 5-3358 p.2 Feb 2711 08:25p Kairos-Meade Jul 13 10 103392 Kaircs-Meade (949) 3153353 pg 22x25/1939 14:4? 5231961 CHAFFIH PAGE 92 The: request is denied; the arguments raised by Defezdazts were fullv argued prior to the May 6 letter and have been again ccnsidere: -1 in issuing th-. s award. 1‘ Claim: Plaintiff sought as re-: -over mcnejr damages from Defendants Met-Ex USA, Inc and A. Scczt Ccnnelly, M. D. for the va. lue of Plaintiff's interest in Netizr. Marketglace {. ‘«: a.rl«: e:. * and Metfix USA {Muse}: his ‘guarenteefi bcnus" tnder his conzract with Muse; and interest and attorney Eees. Hie claim saur. de:1 in bath ftaud and breach of contract. The court has no: set aside the e: bitre: icn agreement. Under the contract providing for arbitrazisn. any'account; ng for unéergaid przfits cf Market :9 June L3; 30, 1994 LS to be made by the a: :cun: an: s Haskeli and White and is 1.4% not ccnsiderecl L1e: :e. Plainttff want-ed any claim Ear emotional 1 distress. The parties agreed that n: punitive damages should be 3.55 auear‘-ed : '.-‘I. - There was no claim by Coxznelly or Muse to obtain relief frcm 3-3,? M5355 5'95 Pa‘. -"fients made to him as seler-, * -:1’ severance until the a 1953 Defendants’ brief of may 27, ‘.993 which attempts to add such :1 i? claim. It is too late tr; alter the zheory of the case Defendants relied on and erguefi. 2. The relationship of Ccneelly ta Meade was a fiduciary one " based cm their relative power, the r: r'. tsL: and conftcience Eleincifi “*5 1“ 903E911? Pérsfinally fiespite the corporate structures and their 1=ar= n-arehi-,7 relationship at the start. At all times Ce -. -ally deaie with Meade, ne: ke: , Muse, 3ubs: ;a; : and myusystems as 1: he 1 u.
  3. 3. Feb 2711 08:26p Kairos-Meade (949)315-3358 p.3 Jul 13 10 10:39e Kairos-Meade (949)315-3358 D.3 3325:1999 14:47 52311331 CHAFFIN ~°#GE 93 were the sole owner with the sole power to make the decisions affecting those in business with him. 3. Market: Plaintiff had a 1/3 interest in Market. from the and of October or beginning of November 1993. -Market was originally organized 5.: -.. fo: r.'. ally as a. partnereluig and was converted by cc-. -melly to :1 ccrgoration. While this may have altered the business’ susceptibility to liability to third parties. 1: did not alts: the relationship of the parties- Substance. prev-eile over form. While no atcclt was issued to Meade or Bagatourian, Connel1y’a fiduciary duties ta his partners required him to t". -eat them as 1/3 owners. In fact, cbnnelly arranged for N. ‘-US. ‘-‘A to purchase 3egatcuria. n'e interest in Market but he did eat do so for Meade. Mea-:2e's contributions 1:: the success of Market far overshadowed Bagatcurien‘3. The transfer of Evlari-: et"e business to lV£': .‘ss. was a transfer of a valuable asset — a. going business that was increasing its revenues each rncnth with its eacgectatzoz of future urofits. Ida cnnsifieratit-A: was given to Meade for his 1,13 share in the value of Market. -1. Meade's Muse. contract: Plaintiff's contract cf Iu. .tg*-.15: 1954 was entered into by Connelly and Muse witharut any intenticn of the Defendants to perform it, constituting fraud in the inception. There was no intentian 1:-2 make Meade the Director at? ‘ hi“ 3 guaranteed 33°! “-=5 - by 'n': 'i: ing an uneniorceable contract 5 I h I ( 5 J 25 Sales-Fitness - a matter of primary importance to Meade; or c: paw I g nrovision - again of mejar importance to Meade as the $1-§O, .CI'}D 3
  4. 4. F b271108:2 ' - 9 6p Kalros Meade (949)315-3358 p,4 Jul 13 10 10:4-Oa Kairos-Meade (949)315-3358 p,4 3'2/2511399 14:47’ 5281831 CH! !!-‘FIN PAE “dd 1 bonus was the amour-. : of ir. come Meade felt. he was losing by the k) Ll’? . ..n I-1 ‘J | J I'D I" H H I-’ on -J 0'1 I. ‘ tn _J2.: 9¢. tm$5 T. -6'—' - -< shift: from Market tr: Musa. Thus there were promises made without any inzention cf : _:er: 'o: -ming, they were material, Plaintiff relied on them to his damage. Thus he is entitled to abrogate the musa canzxact and claim his 1/3 irL‘. ‘.erest'. in Market. The parole —: vic'. enc: e bar evidence to show flraud in the inception. There rul. -_ aces not was no waiver of the irausi by Meade even if he did not assert fraud at the time of his termination. there was insuiflcienz evidence 1. L 5 . 1~r. -.; ,sa : ha: Ccnnrzelly premised a 3% or any interest: in Musa ta Meacie and Z-Ieade should not receive damages Ear failure to obtain as: interest in Musa. 6. General Nutrition was 116: being adequately serviced, by Myosystems - indeed, the lat be: having refiused to deal with General Nutrition. Maada pracurad that business. Co: -.ne‘_=1y unilaterally and in violation of his fiduciary duties ‘:0 Meade, cook the account : ’r. -.-m Marketplace and gave '_t to his other er. ‘:: Lt: }', Myosystems. The value -of éales to General Nutrition by Myosystems should be credited to Market for the pumose of comparing : h.e Value of myoayszems to Market. Market was subject to cancellation of its distribution contract by Cdnznelly; Myoy-stems was subject to cancellation of its a. is: ributicn contract by Oonnelly - for breaches of its distribution contract. 1 i ‘T. Damages - . =-Iyosysizetns was bcught out by Substrate fcr &
  5. 5. Feb271108:26 K ' _ P alros Meade (949)315-3358 p,5 J 1131010141 ' _ U a Kairos Meade (949)3T5_3358 P-6 ‘-al"I'Il‘ I AI1 u-£, zb’*. _13: lunar 31.31091. Using the 3.5 ratio, the value of Market would be 1 se ‘2 saunas 1:3 or: that value is Plaintiffs. 3 I= seems fair to compute Market sales for the full year 1994. as that tontinueci as formerly until November 1994 even though 4 business 5 various legal documents were backdnteti to June 3D. - 1994- 5 Interact at 19: per annum tcr fraud on - from January 1, 7 1995 to June 25, 1993 is T. 2; 9 g_ Attorngy Eggs; Plaintiff as the prevailing party is in entitled to reasonable attorney ‘fees. His contract with Mr. Chafifin called for fees of 113 Meade’: recovery. Mr. Chaffiin is not admitted to the bar in California although Mr. Plutnrner is. Mr. Chnffin performed the bulk oi the work for Plaintiii’ - 90%. Work performed in California by Mr. Chaffin can not be recovered by him 15- against: Plaintiff under (1955? 17 Cal-~-Ith 119. Participation in an arbitration for a client is the practice of Law. Agsociatitg local counsel does not get arou: -.6 Business and Professions Code £6125. ; was an action by the attornnyu to collect fees Erorn the client. in our case it is the client attempting to collect his attorney fees from the other sifio. It 21 seems fair to the arbitrator that .1 Defendant ahpuld not have to 22 pay for fun that his opponent does not have to pay. Meade. under 23 gut can avoid so much of his Contact as represents work in :4; California by Chafflin and can avoid under an Sec 61-17 the 25‘: contingency arrangement and pay only the reasonable value of 25 V omtcrney services. Meade is not required to claim unerzforctability 2'7 ‘ but Defendants should not be required to pay that which Meade could Q8 6
  6. 6. Feb 2711 O8:27p Kairos-M d ea 9 (949)315-3358 p_6 Jul131010:41 K ' - a ""'°s Mme (949)315—3353 P, -,~ FHVZ U’ azrzsusss 14:47 szaiuez “"“*“'1“ 1 avoid. 2 Eixnfixgr allows 3 to the extent they can be California client on a California matter. Mr. Chaffin is a highly who could. command $300 per how for e for his work and that of his office racoflrelry at tees pertormed outside -Ealiflornia determined even though performed for a 4 5 experienced attorney 6 litigation. A blended rat cguld reasonably bc $150.00 per hour. He has shown sufficient inanimate: of his time on the case in Texas At: the rate of $250 per hour, his fees by 1392 hours} and 9 California ‘.100 hours). :1 be $123,000 pl-.1‘: -$15,000 for Plummer {at about Cluffin firm}, or $13a. ooo. A 1/3 I an hourly rate won: in’: of the time spent by the recovery fee would amount to $433,669. Applying the common factors to determine a fair fee, and starting at the hourly rate calculation, the $133.00’) should be enhanced by the factors of the eo1nplex1.: 'y or the case. the contingent nature ofthe engagement when entered into. the overall demonstrated ability of chaffin, and the significant result achieved against a. skilled and determined opponent. Reasonable fees are fixed at $276,030. s5n. oco is allocated to Chaffiiws work in California. Reasonable fees for Defendants to pay are $226,000. 9. coats: The parties agreed that the arbitrator's fees would be considered as costs of this proceeding. Plaintiffi : laim3 payments of $12,075. Other coats are considered similarly to Code of civil I-‘rocedure costs. Plaintiff has filed a cost, b5_11 which was he: éhallenged except for the attorney fees. Filing. deposition. Iorvice and copies were 5534.922‘ Total costs exclusive '7
  7. 7. Feb 2711 08:27p Jul 13 10 10:42a E45.‘ $0! 4 ans 1 of attorney Eees are $17.924.22. 2 U1 3: N O 14. 1.5 16 1'. ’ 18 Kairos-Meade (949)315-3358 Kairos—M eade (949)315-3358 van-u r . nv . .o. v-« -r‘1.a. LuuL Coats and attorney fees are s2s3,524.22. : ..w1uzn= plaintiff Danen. Meade shall recover -u *Erom Defendants Ma: -Rx EIEA. Inc. and A. Scott cormelly. M. D. Dated: June 25. 19.98 Arbitratz: -I . Saeta.
  8. 8. Feb 2711 08:28p Kairos-Meade (949)315-3358 p.8 Mernxw (USA, INC. ‘ ‘.001 W. 17th Street, Suite U ‘ Costa Mesa, CA 92627 ° (714) 631-4169- fax (714) 722-1161 August 11, l994 PERSONAL DELIVERY Mr. Darren Meade 1001 W. 17th Street Suite H Costa Mesa, California 92627 Re: Employment Dear Darren: We are pleased to confirm your employment with Met-Rx USA, Inc. , a Nevada corporation (the "Company"), as Director of Sales, Fitness, on the following basis. Compensation We will pay you a gross monthly salary in the amount of Nine Thousand One Hundred Sixty Seven Dollars ($9,167). . Your monthly salary will be paid to you in two equal installments. Naturally, we will deduct from the gross amount paid to you all amounts employers are required to withhold from employee earnings pursuant to federal, state or local law. We will review your salary from time to time not less frequently than once each year and make any adjustments (up or down) the Company deems appropriate to compensate you for your experience, your contributions to the Company, prevailing market conditions and the Company’s financial condition. We do not guarantee that your salary will be increased. Guaranteed Bonus Compensation As you know, the Company is currently in the process of assimilating Met—RX Marketplace, Inc, and is working towards a plan to acquire Myosystems, Inc. It is difficult to project the ultimate components of the combined entities or the structure of the combined entities at this time. Also, Met-Rx Engineered Foods are exploding in popularity and we have marketing and promotion activities underway and in the planning process that will further increase popularity and fuel sales. As a result, it is not productive to develop the specifics of a guaranteed bonus plan at this time. At such time as we gain a better understanding of the combined companies, we will establish a bonus arrangement with you TD. k_ a, "’
  9. 9. Feb 2711 O8:28p Kairos-Meade (949)315-3358 P9 if 19 , . Darren Meade ' " igust 11, 1994 age 4 f. knowingly violate any policy respecting the sale or distribution of any Company products; g. are substantially unable by reason of substance (including without limitation drug or alcohol) abuse or addiction to reasonably and effectively carry out your duties hereunder for an aggregate period of seven days in excess of your accrued and unused vacation time and personal leave time, if any; or h. materially breach any of the promises or obligations set forth in this employment agreement, or you fail or refuse to perform your reasonable or customary duties, or to comply with any lawful Company instruction or policy. Marketplace In connection with the integration of Marketplace into MUSA, and in addition to all compensation otherwise payable to you respecting your employment with us, MUSA will do each of the following. 1. Pay you a consulting fee in an amount equal to one third of the undistributed * "Net Profit" generated by Marketplace for the period commencing January 1, 1994 and ended June 30, 1994. "Net Profit" will be determined by MUSA’s certified public accountant, Jerrold I. Pellizzon. If you disagree with the amount of "Net Profit" calculated by Mr. Pellizzon, such amount will be determined by the Company’s independent certified public accountants, Haskell & White, and the amount so determined will be final and binding on "all parties. If you request Haskell & White to calculate the Net Profit, each of you and MUSA will pay one half of the amount charged by Haskell & White to calculate the amount of Net Profit. 2. Pay you a consulting fee in the amount of Seventy Two Thousand Dollars / ($72,000), payable in installments of Six Thousand Dollars ($6,000) each month commencing ' ‘July, 1994,. and continuing each month thereafter for a period of one year. _ ' {§; ,=e3-r-—)‘~F-h‘x'-'§f- I LL33-K5 £4.81 & . A/ .‘_gJLi; _=/ ‘' 5 "7: ti-‘; :C’~‘3 <3, . i _ , C‘ A '7 '(! c.HM. :. :1:/ '-‘I’z: 'c*7'“ 7", i—, ‘<‘r, ;,’~‘v/ - , t1?‘C{ ‘lbs’- I This letter supersedes all prior arrangements, discussions and agreements you may have with or respecting any of Met-Rx Marketplace, Inc. , a California corporation ("Marketplace"), Club Met—Rx, Inc. , a California corporation ("Club"), Cafe Met-Rx, Inc. , a California corporation ("Cafe"), the Met—Rx Companies or A. Scott Connelly, MD. Except as specifically stated in this letter, you have no interest or claim of any kind in or to Marketplace, Club, Cafe, the Met—Rx Companies, Dr. Connelly or any of their respective - affiliates, agents or employees (collectively, the "Met-Rx Entities"), and you hereby release and discharve each of the Met—Rx Entities from any and all claims, demands and causes of action of any nature arising prior to the date of this Agreement, including without limitation Dim- W
  10. 10. Feb 271108:29p Kairos-Meade . . . (949)315-3358 ‘ Met-Rx Substrate Technology Inc. 1001 W. 17th Street, Suite U ' ‘ . Costa Mesa, California 92627 MEMORANDUM TO: -- Darren Meade FROM: Jerry Pellizzon DATE: 08/1 1/94 RE: Ck. No. 1308 8. 1309 Payroll deductions p.10 The attached check no. 1308 pays your salary for the month of July 1994. The recap of the deductions is as follows: Check 1309 covers the consullting fee. Check no 1309 is broken down as follows: Ck 1 308 Gross payroll $9,157.00 Federal withholding 1,973.14 F. l.C. A. 701.28 State withholding . 554.72 S. D.I. 119.18 Total deductions 3,348.32 Net check $5,818.68 5“ 16,31 Ck 1309 $6,000.00 1,291.46 459.00 363.08 5')’ 78.01 $3,305.45 L’ CC‘ , MSW , ... fl ‘ L [M _ wwmm
  11. 11. Feb 271108:29p Kairos-Meade (949)315-3358 p.11 :2.-um-: :=. x1u. r.7.: -. :1‘-I-‘uea. n.-4»-m : a 4' . ‘ V 1.. y 1? . .. 1309 ' MET - RX SUBSTRATE TECHNOLOGY INC. . 351 HOSPITAL RD. , STE. 413 NEWPORT BEACH. CA 92663 90_3a4B“222 August 11 19 94 1‘ PAY . V E. J 3; 3,808.45 r TO THE ORDER OF Darren Meade O ‘kti¢****1'****1E***‘J: **: '******‘k******** D 0 LL A R S :1 LUDL3 E510 ' . . '“"“". Three thousand eight hundred eight and 45/ 10 Q July consulting f e e lKlFKNN'| OlAl. BANK £665 MACARTHUF COURT NEWPORT BEACH, CALIFORNIA 92650 FOR -:1. 2'2 3331.351: ’$ "" . " u'OCl L 3ClElu' -_~_—_: .—a«. _u~33:' 7 £31 ~ . --; _-. -;. _w, T -_ _"__'. -'sr‘—'n-_ _'" ‘_-
  12. 12. Feb 2711 08:29p Kairos-Meade (949)315-3358 p.12 ’ffi . , . . . -- . _ . , _: r - RX SUBSTRATE TEONOLOGY INC. _ G V 351 HOSPITAL FlD. , STE. <13 ‘ NEVVFOHT BEACH, CA 92663 so-35.43/1222 Au st 11 19 94 ! 75992: 0; Darren Heade 1 $ 5,818.68 Five thousand eight hundred eighteen and 68[10O ***********************5V*********D DL L A R 3 firmhixnmm -: mmmvn-: - -zfimwisfizswmfiwwmenfisatfilea —‘ mclnc ruxnorw. BANK ’ fl ‘ § ~ ' _: :‘. ::: e;; ::: , ' ' FOR ', :Jul M . _ I :1 II'DDL3DElII' -: :.aea33L. aau: Luuhaanaux-UL » V ' 1» ' '- '-' ’-’ '

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