EXHIBIT 4.1
INVESTOR SUBSCRIPTION AGREEMENT
OF INNOPET BRANDS CORP.
THIS INVESTOR SUBSCRIPTION AGREEMENT (the "Agreement") is made
and entered into as of this 28th day of April, 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 Entrepreneurial
Investors, Ltd., a Bahamas company ("Buyer"), with offices at Xxxxxxxx Xxxxxxxx,
0xx Xxxxx, Xxxx Xxxx Xxxxx, X.X. Xxx 00000, Freeport, Bahamas, providing for the
purchase and sale of 625,000 shares (the "Shares") of Series A 4% Cumulative
Convertible Preferred Stock of Seller (the "Series A 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 625,000 Shares of
Series A Preferred Stock in exchange for $2.5 million in cash
(the "Purchase Price"). Each share of Series A Preferred Stock
shall be convertible into one share of Common Stock in
accordance with the terms set forth in the Certificate of
Designation attached as Exhibit A to this Agreement.
(ii) The Series A Preferred Stock shall pay a
quarterly dividend equal to 4% per annum. The dividend shall
be payable 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
Market for the 20 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 closing of the purchase and sale of the Shares
(the "Closing") shall take place on or about April 28, 1997,
at 10:00 a.m. at the offices of Seller's counsel, Camhy
Xxxxxxxxx & Xxxxx LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000.
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 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 Shares
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 Shares
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's
management regarding Seller. Buyer understands that no federal
or state governmental authority has made any finding or
determination relating to the fairness of an investment in the
Shares 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 Shares 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 Shares will continue to have significant assets exclusive
of the Shares. Buyer has not been organized for the sole
purpose of acquiring the Shares;
(iii) Buyer (a) is not a citizen or resident of the
United States of America, (b) is not an entity organized under
any laws of any state of the United States of America, and (c)
does not have offices in the United States of America;
(iv) 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");
(v) Buyer understands that the Shares 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;
(vi) Buyer agrees that for a period of two (2) years
from the date of Closing it shall not 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
does not own as of such date; provided, however, that no such
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restriction shall apply to any Shares upon the conversion of
any Series A Preferred Stock;
(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 agrees that with respect to one-half of
the Shares purchased, including the shares of Common Stock
issuable upon conversion thereof, it shall not transfer such
securities for six (6) months from the date of Closing. Buyer
also agrees that with respect to the remaining one-half of the
Shares purchased, including the shares of Common Stock
issuable upon conversion thereof, it shall not transfer such
securities for one (1) year from the date of Closing;
(ix) Buyer shall execute the Registration Rights
Agreement in the form attached hereto as Exhibit B.
(x) 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
(xi) 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
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.
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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 Market (trading symbol
INBC);
(iii) Seller has furnished Buyer with copies of
Seller's Prospectus dated December 5, 1996, its most recent
Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "Commission") and all Forms 10-Q and
8-K filed thereafter, if any (collectively, 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 A 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) The Company has granted the Buyer one demand and
certain incidental registration rights ("Piggy-Back
Registration Rights") pursuant to the terms and conditions of
the Registration Rights Agreement annexed hereto as Exhibit B
which the Company agrees to execute at Closing. The Buyer has
one
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demand registration right beginning ninety (90) days after the
date of Closing and Piggy-Back Registration Rights beginning
immediately upon Closing.
(vi) 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;
(vii) The execution and delivery of this Agreement,
the issuance of the Shares and the shares of Common Stock
issuable upon conversion of the Series A 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;
(viii) No authorization, approval, filing with or
consent of any governmental body is required for the issuance
and sale of the Shares;
(ix) 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; and
(x) 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 Seller
has retained, directly or indirectly, Equity Services, Ltd.
and Capital Solutions, Inc. Equity Services, Ltd. is entitled
to receive a fee consisting of an amount equal to ten percent
(10%) of the aggregate principal amount of the
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Shares, reimbursement of expenses and warrants. Capital
Solutions, Inc. is entitled to receive a fee in an amount
equal to two percent (2%) of the aggregate principal amount of
the Shares.
(xi) 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 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;
(xii) 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;
(xiii) 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;
(xiv) Seller has filed all necessary federal and
state income and franchise tax returns and has paid all taxes
shown as due thereon;
(xv) Seller has no knowledge of any tax deficiency
that might be asserted against it that might materially and
adversely affect its business or properties;
(xvi) 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;
(xvii) 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 the
Seller;
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(xviii) To the best of the knowledge of Seller's
management, neither the 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;
(xix) 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
will take any action hereafter that will cause the loss of
such exemption;
(xx) 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
(xxi) 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.
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5. DELIVERIES AT CLOSING.
(i) At Closing Buyer shall (a) deliver payment of the
Purchase Price; and (b) execute and deliver the Registration
Rights Agreement.
(ii) At Closing Seller shall deliver to Buyer: (a)
certificates for the Series A Preferred Stock in the name of
the Buyer and (b) execute and deliver the Registration Rights
Agreement.
(iii) At Closing, Buyer shall have received an
opinion addressed to Equity Services, Ltd. and the 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 A 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 A Preferred Stock and the consummation of the
transactions contemplated by this Agreement by
Seller, will not conflict with or result
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in a breach of or a default under any of the terms or
provisions of, Seller's certificate of incorporation
or By-laws.
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 telecopied, 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
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if to Buyer:
Entrepreneurial Investors, Ltd.
Xxxxxxxx Xxxxxxxx, 0xx Xxxxx
Xxxx Xxxx Xxxxx
X.X. Xxx 00000
Freeport, Bahamas
Attn: Xx. Xxxxxx X. Xxxxxx, Director
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Xxxxx, P.C.
0000 Xx. Xxxx Xxxxx
000 X. Xx. Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attn: I. Xxxxx Xxxxxxxx, 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: /s/ Xxxx Xxxx
-------------------------------
Name: Xxxx Xxxx
Title: Chief Executive Officer
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
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