Exhibit 4.8
SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
OF INNOPET BRANDS CORP.
THIS SUBSCRIPTION AGREEMENT AND INVESTMENT
REPRESENTATION (the "Agreement") is made and entered into as of this 18th day of
December 1997, by and between INNOPET BRANDS CORP., a Delaware corporation
("Seller"), with offices at One East Broward Boulevard, Suite 1100, Ft.
Xxxxxxxxxx, Xxxxxxx 00000 and EXPLORER PARTNERS LLC, a Delaware Limited
Liability Company ("Buyer"), with offices at 000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000, providing for the purchase and sale of 10,000 shares
(the "Shares") of 8% Series B Cumulative Convertible Preferred Stock of Seller,
par value $100 per share (the "Series B Preferred Stock"), convertible into
shares of the common stock, par value $.01 per share (the "Common Stock"), of
Seller. Seller and Buyer (collectively, the "Parties") hereby represent and
agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Buyer hereby subscribes for a total of 10,000
Shares of Series B Preferred Stock (the Shares") in exchange
for $1 million (the "Purchase Price"). Each Share of Series B
Preferred Stock shall be convertible into shares of Common
Stock in accordance with the terms set forth in the
Certificate of Designation attached as Exhibit A to this
Agreement. The Shares shall be freely convertible from the
date of issuance for a period of three (3) years thereafter.
On the third (3rd) anniversary of issuance, the Shares shall
automatically convert into that number of shares of Common
Stock which is equal to eighty percent (80%) of the average
closing bid price for a share of Common Stock as reported by
the Nasdaq Small-Cap System for the five (5) trading days
preceding such date; provided, however, that in no event shall
the Conversion Price exceed $6.00 per share of Common Stock.
(ii) The Series B Preferred Stock shall pay a
quarterly dividend equal to eight percent (8%) per annum,
subject to adjustment as set forth in the Certificate of
Designation. The dividend shall be payable, at Seller's sole
option, either in cash or by the issuance of additional shares
of Common Stock. The number of shares to be issued as a
dividend shall be determined based on the average closing bid
price for a share of Common Stock as reported by the Nasdaq
SmallCap System for the five (5) trading days preceding the
record date for the declaration of the dividend.
(iii) Buyer shall pay the aforesaid principal amount
as the purchase price for the Shares subscribed for by it by
wire transfer of immediately available, federal funds in
United States dollars against counter-delivery of the Shares
by Seller. The closings of the purchase and sale of the Shares
(the "Closing") shall take place as follows (subject to
acceleration upon written consent of both parties):
(a) A Closing of $500,000 in exchange
for 5,000 Shares (the "First
Tranche") shall occur on or before
December 18, 1997 (the "First
Tranche Closing Date"); and
(b) A Closing of $500,000 in exchange
for 5,000 Shares (the "Second
Tranche") shall occur on or before
December 31, 1997.
(iv) Buyer and Seller may accelerate the dates of
Closing and modify the terms of each Closing upon the mutual
written consent of both parties.
(v) Buyer and Seller agree that Buyer has an option
to purchase up to 30,000 additional Shares in exchange for $3
million, if the Seller consents to such purchase. Seller
agrees that if it wishes to sell any or all of such 30,000
additional Shares, it will grant Buyer a 5 day right of first
refusal to purchase such Shares.
2. BUYER'S REPRESENTATIONS AND COVENANTS.
Buyer represents, warrants and covenants to Seller as
follows:
(i) This Agreement has been duly authorized, validly
executed and delivered on behalf of Buyer and is a valid and
binding agreement of Buyer enforceable in accordance with its
terms, subject to general principles of equity and of
bankruptcy or other laws affecting the enforcement of
creditors' rights;
(ii) Buyer is purchasing the Shares (sometimes
referred to herein as the "Securities") for its own account
for investment purposes only and not with a view towards
distribution. Buyer understands and agrees that it must bear
the economic risks of its investment for an indefinite period
of time. Buyer has received and carefully reviewed copies of
the Public Documents (as defined in Section 3). Buyer
understands that the offer and sale of the Securities are
being made only by means of this Agreement. No representations
or warranties have been made to Buyer by Seller, the officers
or directors of Seller, or any agent, employee or affiliate of
any of them, except as specifically set forth herein or as set
forth in documents referenced herein. Buyer is aware that the
purchase of the Securities involves a high degree of risk and
that it may sustain, and has the financial ability to sustain,
the loss of its entire investment. Buyer has had the
opportunity to ask questions of, and receive answers
satisfactory to it from Seller or its representatives,
regarding Seller. Buyer understands that no federal or state
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governmental authority has made any finding or determination
relating to the fairness of an investment in the Securities
and that no federal or state governmental authority has
recommended or endorsed, or will recommend or endorse, the
investment herein. Buyer, in making the decision to purchase
the Securities subscribed for, has relied upon independent
investigation made by it and has not relied on any information
or representations made by third parties. Buyer has
significant assets and upon consummation of the purchase of
the Securities will continue to have significant assets
exclusive of the Securities. Buyer has not been organized for
the sole purpose of acquiring the Securities;
(iii) Buyer is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act");
(iv) Buyer understands that the Securities are being
offered and sold to it in reliance on specific provisions of
federal and state securities laws and that Seller is relying
upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings of
Buyer set forth herein in order to determine the applicability
of such provisions;
(v) For as long as Buyer or any affiliate thereof is
a holder of securities of Seller, neither Buyer nor any
affiliate shall offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any Common Stock
(any of the foregoing, a "Short-Sale") that Buyer or any
affiliate does not own as of such date; provided, however,
that no such restriction shall apply to any Shares issued upon
the conversion of any Series B Preferred Stock;
(vi) Neither Buyer nor any affiliate has committed a
Short-Sale of any security of Seller during the 30 days prior
to the date hereof;
(vii) Buyer is capable of evaluating the risks and
merits of this investment by virtue of its experience as an
investor and its knowledge, experience, and sophistication in
financial and business matters;
(viii) Buyer shall execute the Registration Rights
Agreement in the form attached hereto as Exhibit C;
(ix) Buyer has not employed any investment banker,
broker or finder or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement; and
(x) Buyer understands that neither the Shares nor the
shares of Common Stock issuable upon conversion have been
registered under the Securities Act and therefore it cannot
dispose of any or all of the Shares or Common Stock unless and
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until such Shares or Common Stock, as the case may be, are
subsequently registered under the Securities Act or exemptions
from such registration are available. Buyer acknowledges that
a legend substantially as follows will be placed on the
certificates representing the Shares and/or Common Stock:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED
SECURITIES WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH SUCH ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF
THESE SECURITIES WILL NOT TRANSFER SUCH SECURITIES
EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE
ISSUER THAT THE REGISTRATION PROVISIONS OF SUCH ACT
HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS
NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE
ANY APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
3. SELLER'S REPRESENTATIONS AND COVENANTS.
Seller represents, warrants and covenants to Buyer as
follows:
(i) Seller has been duly incorporated and is validly
existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own,
lease and operate its properties and to conduct its business
as currently conducted, and is duly registered and qualified
to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or
qualification, except where the failure to register or qualify
is not reasonably anticipated to have a material adverse
effect on the condition (financial or otherwise), business,
properties, net worth or results of operations of Seller;
(ii) Seller has registered shares of its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), is in full compliance with
all reporting requirements of the Exchange Act, and the Common
Stock is quoted on the Nasdaq SmallCap System (trading symbol
INBC);
(iii) Seller has furnished Buyer with (a) copies of
Seller's Confidential Private Placement Memorandum dated
November 1, 1997, which contained, among other items, its most
recent Annual Report on Form 10-KSB (the "Form 10-KSB") filed
with the Securities and Exchange Commission (the "Commission")
and its Form 10-QSB for the quarterly period ended June 30,
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1997 (the "June Form 10-QSB"), and (b) a copy of its Form
10-QSB for the quarterly period ended September 30, 1997
(collectively with the Form 10-KSB and the June Form 10-QSB,
the "Public Documents"). The Public Documents at the time of
their filing did not include any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading;
(iv) At the Closing, the Shares shall be duly
authorized and validly issued and when issued and delivered,
each of them shall be enforceable in accordance with their
terms (subject to general principles of equity and bankruptcy,
fraudulent conveyance, preference and other laws affecting
creditors' rights generally). The shares of Common Stock, when
issued and delivered upon conversion of the Series B Preferred
Stock, will be duly and validly authorized and issued, fully
paid and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer imposed by
applicable securities laws and/or this Agreement, and will not
subject the holders thereof to personal liability by reason of
being such holders;
(v) Seller has granted Buyer registration rights
pursuant to the terms and conditions of the Registration
Rights Agreement annexed hereto as Exhibit B which Seller
agrees to execute at Closing.
(vi) Seller agrees to execute the Escrow Agreement
attached hereto as Exhibit C.
(vii) Seller hereby grants to Buyer a security
interest in its registered trademark InnoPet Veterinarian
Formula filed with the U.S. Patent and Trademark Office, and
agrees to execute and deliver such further documents and
instruments and take such further actions as Buyer shall
reasonably request for the purpose of obtaining or preserving
such security interest, such security interest to be
enforceable in the event that Seller: (a) shall be adjudicated
insolvent or bankrupt; (b) shall seek dissolution or
reorganization or the appointment of a receiver, trustee,
custodian or liquidator for it or a substantial portion of its
property, assets or business or to effect a plan or other
arrangement with its creditors; (c) shall file a voluntary
petition under any bankruptcy, insolvency or similar law; or
(d) shall become the subject of an involuntary proceeding or
petition for its dissolution, reorganization, or the
appointment of a receiver, trustee, custodian or liquidator
and any such proceeding or petition shall not be dismissed
within ninety (90) days after commencement or filing, as the
case may be, or any order for relief shall be entered in any
such proceeding.
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(viii) This Agreement has been duly authorized,
validly executed and delivered on behalf of Seller and is a
valid and binding agreement of Seller enforceable in
accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally, and Seller has
full power and authority to execute and deliver this Agreement
and the other agreements and documents contemplated hereby and
to perform its obligations hereunder and thereunder;
(ix) The execution and delivery of this Agreement,
the issuance of the Shares and the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock and
the consummation of the transactions contemplated by this
Agreement by Seller, will not conflict with or result in a
breach of or a default under any of the terms or provisions
of, Seller's certificate of incorporation or By-laws, or of
any material provision of any indenture, mortgage, deed of
trust or other material agreement or instrument to which
Seller is a party or by which it or any of its properties or
assets is bound, any material provision of any law, statute,
rule, regulation, or any existing applicable decree, judgment
or order by any court, federal or state regulatory body,
administrative agency, or other governmental body having
jurisdiction over Seller, or any of its properties or assets
or will result in the creation or imposition of any material
lien, charge or encumbrance upon any property or assets of
Seller or any of its subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of their
property or any of them is subject;
(x) No authorization, approval, filing with or
consent of any governmental body is required for the issuance
and sale of the Shares;
(xi) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or
foreign, now pending against or affecting Seller, or any of
its properties, which would reasonably be anticipated to
result in any material adverse change in the condition
(financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of Seller;
(xii) Seller has not employed any investment banker,
broker or finder or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement, except that
Xxxxxxx and Company Securities, Inc. is entitled to receive a
fee consisting of an amount in cash equal to five percent (5%)
of the aggregate principal dollar value of the Shares at each
Closing;
(xiii) Subsequent to the dates as of which
information is given in the Public Documents, except as
contemplated herein, Seller has not incurred any material
liabilities or material obligations, direct or contingent, or
entered into any material transactions not in the ordinary
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course of business, and there has not been any change in its
capitalization or any material adverse change in its condition
(financially or other), net worth, results of operations or
prospectus;
(xiv) Seller has conducted, is conducting and will
conduct its business so as to comply in all material respects
with all applicable statutes and regulations, and Seller is
not charged with and, to the knowledge of Seller, is not under
investigation with respect to any violation of any statutes or
regulations nor is it the subject of any pending or threatened
adverse proceedings by any regulatory authority having
jurisdiction over its business or operations except as
disclosed in the Public Documents;
(xv) Except as set forth in the Public Documents,
Seller has good and marketable title to all properties and
assets described therein as owned by it, free and clear of all
liens, charges, encumbrances, or restrictions;
(xvi) Seller has filed all necessary federal and
state income and franchise tax returns and has paid all taxes
shown as due thereon;
(xvii) Seller has no knowledge of any tax deficiency
that might be asserted against it that might materially and
adversely affect its business or properties;
(xviii) Seller maintains insurance of the types and
in amounts generally deemed adequate for its business and
consistent with insurance coverage maintained by similar
companies and businesses, including, but not limited to,
insurance covering all real and personal property owned or
leased by Seller against theft, damage, destruction, acts of
vandalism, products liability and all other risks customarily
insured against, all of which insurance is in full force and
effect;
(xix) No labor disturbance by the employees of Seller
exists or is imminent that could reasonably be expected to
have a material adverse affect on the conduct of the business,
operations, financial condition or income of Seller;
(xx) To the best of the knowledge of Seller's
management, neither Seller nor any employee or agent of Seller
has made any payment of funds of Seller or received or
retained any funds in violation of law;
(xxi) Subject in part to the truth and accuracy of
Buyer's representations set forth in this Agreement, and the
representations and covenants of Seller made in this Agreement
being true, the offer, sale and issuance of the Shares are
exempt from registration requirements of the 1933 Act, and
neither Seller nor any authorized agent acting on its behalf
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will take any action hereafter that will cause the loss of
such exemption;
(xxii) Seller has sufficient title and ownership of
all trademarks, service marks, trade names, copyrights,
patents, trade secrets and other proprietary rights necessary
for its business as now conducted and as proposed to be
conducted as described in the Public Documents without any
conflict with or infringement of the rights of others. Except
as set forth in the Public Documents, there are no material
outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is Seller bound by or party to
any material options, licenses or agreements of any kind with
respect to the trademarks, service marks, trade names,
copyrights, patents, trade secrets, licenses and other
proprietary rights of any other person or entity. Seller is
not aware that any of its executive officers is obligated
under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to
any judgment, decree or order of any court or administrative
agency that would interfere with the use of his or her best
efforts to promote the interest of Seller or that would
conflict with Seller's business as proposed to be conducted;
and
(xxiii) Except for agreements explicitly contemplated
hereby or set forth in the Public Documents, there are no
other agreements between Seller and any of its officers,
directors, affiliates or any affiliate thereof.
4. INDEMNIFICATION BY BUYER.
Buyer hereby agrees to indemnify and hold harmless
Seller and its officers, directors, shareholders, employees, agents and
attorneys against any and all losses, claims, damages, liabilities and expenses
incurred by each such person in connection with defending or investigating any
such claims or liabilities, whether or not resulting in any liability to such
person, to which any such indemnified party may become subject under the
Securities Act, or under any other statute, at common law or otherwise, insofar
as such losses, claims, demands, liabilities and expenses arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact made by Buyer, (ii) any omission or alleged omission of a material fact
with respect to Buyer or (iii) any breach of any representation, warranty or
agreement made by Buyer in this Agreement.
5. DELIVERIES AT CLOSINGS.
(i) Buyer shall deliver to Seller, at each Closing,
payment of the appropriate Purchase Price and, in addition, at
the Closing of the First Tranche, Buyer shall execute and
deliver the Registration Rights Agreement and Escrow
Agreement.
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(ii) Seller shall deliver to Buyer at each Closing
the appropriate number of Shares in one (1) or more
certificates for the Series B Preferred Stock in such name or
names and denominations as may be designated by Buyer,
accompanied by appropriate stock powers and, in addition, at
the Closing of the First Tranche, Seller shall execute and
deliver the Registration Rights Agreement and Escrow
Agreement.
(iii) At the Closing of the First Tranche, Buyer
shall have received an opinion addressed to Buyer, from Camhy
Xxxxxxxxx & Xxxxx LLP, stating the following:
(a) Seller has been duly incorporated and is
validly existing and in good standing under the laws
of the State of Delaware, with full corporate power
and authority to own, lease and operate its
properties and to conduct its business as currently
conducted;
(b) The Shares shall be duly authorized and
validly issued and when issued and delivered, each of
them shall be enforceable in accordance with their
terms (subject to general principles of equity and
bankruptcy, fraudulent conveyance, preference and
other laws affecting creditors' rights generally).
The shares of Common Stock, when issued and delivered
upon conversion of the Series B Preferred Stock, will
be duly and validly authorized and issued, fully paid
and nonassessable, free from all encumbrances and
restrictions other than restrictions on transfer
imposed by applicable securities laws and/or this
Agreement, and will not subject the holders thereof
to personal liability by reason of being such
holders;
(c) The Agreement has been duly authorized,
validly executed and delivered on behalf of Seller
and is a valid and binding agreement of Seller
enforceable in accordance with its terms, subject to
general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors'
rights generally, and Seller has full power and
authority to execute and deliver the Agreement and
the other agreements and documents contemplated
hereby and to perform its obligations thereunder; and
(d) The execution and delivery of the
Agreement, the issuance of the Shares and the shares
of Common Stock issuable upon conversion of the
Series B Preferred Stock and the consummation of the
transactions contemplated by this Agreement by
Seller, will not conflict with or result in a breach
of or a default under any of the terms or provisions
of, Seller's certificate of incorporation or By-laws.
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6. MISCELLANEOUS.
(i) This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
Delaware without giving effect to the rules governing the
conflicts of laws.
(ii) This Agreement may be executed by facsimile
signature and in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same instrument.
(iii) Each of the parties agrees to pay its own
expenses incident to this Agreement and the performance of its
obligations hereunder, including, but not limited to, the fees
and expenses of each such party's legal counsel.
(iv) All notices and other communications provided
for or permitted hereunder shall be made in writing by hand
delivery, express overnight courier, registered first class
mail, overnight courier, or telecopier, initially to the
address set forth below, and thereafter at such other address,
notice of which is given in accordance with the provisions of
this Section 6.
if to Seller:
InnoPet Brands Corp.
Xxx Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: CEO
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy (which shall not constitute notice) to:
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. XxXxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
if to Buyer:
Explorer Partners LLC
000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally
delivered; three (3) business days after being deposited in
the mail, postage prepaid, if mailed; the next business day
after being deposited with an overnight courier, if deposited
with a nationally recognized, overnight courier service; when
receipt is acknowledged, if telecopied.
(v) This Agreement together with the Exhibits hereto
constitutes the entire agreement of the parties with respect
to the subject matter hereof and supersedes all prior oral or
written proposals or agreements relating thereto. This
Agreement may not be amended or any provision hereof waived in
whole or in part, except by a written amendment signed by both
of the parties.
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IN WITNESS WHEREOF, this Agreement was duly executed on the
date first written above.
INNOPET BRANDS CORP.
By:______________________________________
Name: Xxxx Xxxx
Title: Chief Executive Officer
EXPLORER PARTNERS LLC
By:______________________________________
Name: Xxxxxx X. Xxxx
Title:
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