<PAGE>
As filed with the Securities and Exchange Commission on September 30, 1997
Registration No. _________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INNOPET BRANDS CORP.
(Exact name of Registrant as specified in its charter)
Delaware 65-0639984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
(954) 453-2400
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------
Marc Duke
Chief Executive Officer
1 East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
(954) 453-2400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
Daniel I. DeWolf, Esq.
Douglas N. Bernstein, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
(212) 977-6600
------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. |_|
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of each class of securities Amount to be offering price aggregate offering Amount of
to be registered registered (1) Per Share (1) price (1) registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 1,322,456 $4.625 $6,162,609 $1,867.46
shares
- ------------------------------------------------------------------------------------------------------------------------------------
Redeemable Warrants 225,000 $1.25 $281,250 $85.23
warrants
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying the 225,000 $6.00 $1,350,000 $409.10
Redeemable Warrants shares
- ------------------------------------------------------------------------------------------------------------------------------------
Total ........................................................................... $7,793,859 $2,361.79
====================================================================================================================================
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee pursuant
to Rule 457(c) on the basis of the average of the high and low bid prices
per share of the Common Stock and Redeemable Warrants of InnoPet Brands
Corp. reported on the NASDAQ Small-Cap System on September 25, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
2
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted, prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to completion dated September 30, 1997
INNOPET BRANDS CORP.
1,322,456 Shares of Common Stock and 225,000 Redeemable Warrants
------------------------
This Prospectus relates to 1,322,456 shares (collectively, the
"Shares") of common stock, par value $.01 per share (the "Common Stock") and
225,000 redeemable warrants (the "Redeemable Warrants," collectively with the
Common Stock hereinafter sometimes referred to as the "Securities") of InnoPet
Brands Corp., a Delaware corporation (the "Company" or the "Registrant"), which
may be offered, from time to time, by one or all of the selling shareholders
named herein (collectively, the "Selling Shareholders). The Company will receive
no part of the proceeds of such sales, although the Company will receive
proceeds upon the exercise of the Redeemable Warrants. The Company has agreed to
pay all costs and expenses incurred in connection with the registration of the
Securities offered hereby, except that the Selling Shareholders shall be
responsible for all selling commissions, transfer taxes, fees of counsel to the
Selling Shareholders and related charges in connection with the offer and sale
of the Securities. See "Plan of Distribution."
The Common Stock and Redeemable Warrants of the Company are traded on
the NASDAQ Small-Cap System ("NASDAQ-SMC") under the symbols "INBC" and "INBCW",
respectively. On September 25, 1997 the closing bid price of the Company's
Common Stock and Redeemable Warrants on the NASDAQ-SMC was $4.625 and $1.25,
respectively. The Selling Shareholders may sell all or a portion of the
Securities offered hereby in private transactions or in the over-the-counter
market at prices related to the prevailing prices of the Common Stock and
Redeemable Warrants on the NASDAQ-SMC at the time of sale. The Selling
Shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any broker-dealers that participate
in the distribution may, under certain circumstances, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by such broker-dealers and any
profits realized on their resale of Securities may be deemed to be underwriting
discounts and commissions under the Securities Act. The Company and the Selling
Shareholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify the Selling Shareholders, with respect to the
registration of the Securities, against certain liabilities, including certain
liabilities under the Securities Act. To the extent required, the specified
number of Securities to be sold, the names of the Selling Shareholders, the
public offering price, the names of any such broker-dealers, and any applicable
commissions or discounts with respect to any particular offer will be set forth
in a supplement to this Prospectus. Each of the Selling Shareholders reserves
the right to accept or reject, in whole or in part, any proposed purchase of the
Securities. See "Plan of Distribution." Any securities covered by this
Prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING AT PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
______________________, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission" or "SEC"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied, at the prescribed rates, at the public reference
facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at the Northeast Regional Office of the Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and at
the Midwest Regional Office of the Commission located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission. The
address of the Commission's Web Site is http://www.sec.gov.
The Company has filed with the Commission, in Washington, D.C., a
Registration Statement on Form SB-2 (together with all amendments thereto, the
"Registration Statement"), under the Securities Act, with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Securities offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any contract or other document are not necessarily complete and, in
each instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
deemed to be qualified in its entirety by such reference. The Registration
Statement, including all exhibits and schedules thereto, may be inspected,
without charge, at the principal office of the Commission, at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at the Midwest
Regional Office of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and at the Northeast Regional
Office of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon the payment of the prescribed fees therefor.
This Prospectus contains certain forward-looking statements or
statements which may be deemed or construed to be forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1996 with
respect to the financial condition and business of the Company. The words
"estimate," "plan," "intend," "expect" and similar expressions are intended to
identify forward-looking statements. These forward-looking statements involve,
and are subject to, known and unknown risks (including the ones set forth
below), uncertainties and other factors which could cause the Company's actual
results, performance (financial or operating) or achievements to differ from the
future results, performance (financial or operating) or achievements expressed
or implied by such forward-looking statements. Investors are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
-2-
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
and related notes thereto appearing elsewhere in this Prospectus. Each
prospective investor is urged to read this Prospectus in its entirety.
THE COMPANY
The Company produces, markets and sells premium dog food through
supermarkets and grocery stores under the name InnoPet Veterinarian Formula(TM)
Dog Food ("Veterinarian Formula"). In June 1996, the Company commenced sales of
its beef formula dog food to supermarkets in the Greater Metropolitan New York
area. As of September 1, 1997, the Company has sold product in the following
markets: the Greater Metropolitan New York area; the New England area;
Philadelphia, Pennsylvania and other areas of Pennsylvania; the Baltimore,
Maryland and Washington, D.C. area; Virginia; North Carolina; South Carolina;
Georgia; Alabama; and Florida.
The Company's objective is to become a national provider of premium pet
foods through supermarket and grocery store retail outlets. The Company intends
to achieve its objective by: (i) providing to supermarkets a brand of
competitively-priced premium pet food to enable supermarkets to recapture a
share of the premium pet food market that they have lost to specialty pet
stores; (ii) expanding distribution to supermarkets and grocery stores
throughout the United States; (iii) increasing consumer awareness and market
penetration throughout the Company's market areas; and (iv) packaging its
products in unique single serving-sized inner-bags which are designed to
increase convenience of feeding, regulate portions, reduce product deterioration
and prevent contamination.
In June 1997, the Company began expansion of its line of dog foods with
the introduction of lamb and rice with barley formula in its existing markets.
At the same time, the Company also entered into long-term agreements with the
North Shore Animal League and Pet Savers Foundation, whereby Veterinarian
Formula will be exclusively fed to in-house dogs and recommended to adopters by
both of these not-for-profit humane organizations which place animals through
thousands of shelters each year. In addition, adopters will be provided with
product samples, literature and coupons, and will be able to purchase the
products in retail stores of some participating adoption centers.
The Company is in the process of implementing its overall marketing
strategy which commenced in February 1997. The Company's strategy is to provide
premium pet food products that are good for the pet and easy to use for the
owner. Programs include: radio and newspaper advertising; free-standing inserts;
in-store couponing; shopping cart signage and floorminders; trial size displays;
store feature ads and circulars; direct mail sampling programs to targeted
consumers, veterinarians and breeders; newspaper sample pouches; and extensive
in-store demonstrations with sampling. In addition, the Company participates in,
and supports with sampling, local pet-related events (e.g., pet walkathons, pet
shows, etc.) within its market areas, both independently and in conjunction with
local supermarkets.
-3-
<PAGE>
THE OFFERING
Securities Offered by Selling
Security Holders.............. 1,332,456 shares of Common Stock(1).
225,000 Redeemable Warrants.
Risk Factors..................... The purchase of the Securities offered
hereby involves a high degree of risk.
Prospective investors should review
carefully and consider the information set
forth under "Risk Factors."
- ------------
(1) Includes: (i)625,000 shares of Common Stock being registered on behalf
of an investor in a $2.5 million private placement financing (which the
Company completed on April 29, 1997 (the "Private Placement")) which
underlie 625,000 shares of Series A 4% Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock") which are convertible at any
time, at the option of the investor, into 625,000 shares of Common
Stock; (ii) 21,622 shares of Common Stock which will be issued to the
Private Placement investor as a dividend on the Series A Preferred
Stock, which pays a quarterly dividend of 4% per annum (represents the
aggregate dividend for a period of one year from the date of issuance);
(iii) 62,500 shares of Common Stock underlying an option for 62,500
shares of Series A Preferred Stock granted to the placement agent in
the Private Placement; (iv) 225,000 shares of Common Stock underlying
Redeemable Warrants being registered on behalf of the same investor in
a $1.5 million dollar loan (which the Company completed on July 9,
1997, (the "Loan") the Loan matures on January 15, 1998) pursuant to
which the Company issued 225,000 Redeemable Warrants to such creditor;
(v) 600,000 shares of Common Stock being registered on behalf the Loan
creditor which are being held in escrow as collateral for the Loan (the
Loan may be converted, at the option of the creditor, into Common
Stock with a conversion price of $4.50 per share); and (vi) 23,334
shares of Common Stock to be issued to the Loan creditor as interest on
the Loan through its January 15, 1998 maturity date (the Company shall
pay interest at a rate of 14% per annum and may, at its option, pay the
interest in Common Stock valued at $4.50 per share.)
-4-
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from and
should be read in conjunction with the financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Inception Inception
(January 11, Six Months (January 11,
1996) to Ended 1996) to
December 31, June 30, June 30,
1996 1997 1996
----------- ---------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Net sales................................................ $ 1,859,936 $1,106,812 $153,061
Net loss................................................. (6,518,304) (5,025,858) (2,125,157)
Net loss per common share................................ (3.11) (1.13) (1.13)
Weighted average number of
common shares outstanding................................ 2,094,000 4,465,661 1,878,378
</TABLE>
As of
December 31, As of
1996 June 30, 1997
---------- --------
(Unaudited)
Balance Sheet Data:
Working capital............................ $4,113,187 $824,459
Total assets............................... 7,566,713 5,313,357
Total liabilities.......................... 3,023,689 3,818,178
Stockholders' equity....................... 4,533,024 1,495,179
-5-
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition
to the other information contained in this Prospectus before purchasing the
Securities offered hereby. Because any investment in the Securities involves a
high degree of risk, only investors who can accommodate such risks, including a
complete loss of their investment, should purchase the Securities. Each
prospective investor should carefully consider, in addition to the other
information contained in this Prospectus, the following information in
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain forward-looking statements or statements which
may be deemed or construed to be forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1996 with respect to the
financial condition and business of the Company. The words "estimate," "plan,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve, and are
subject to, known and unknown risks (including the ones set forth below),
uncertainties and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Limited Revenues and Operating History; Going Concern Qualification.
The Company was incorporated on January 11, 1996 to acquire certain pet food
formulas. As of the date of this Prospectus, the Company has generated limited
revenues. Accordingly, the Company has limited operating history upon which an
evaluation of its prospects can be made. The report of the Company's independent
auditors for the period from inception to December 31, 1996, contains an
explanatory paragraph raising the independent auditor's substantial doubt about
the Company's ability to continue as a going concern because the Company has
been in its development stage, has incurred a net loss and reflects a deficit
accumulated during this period of $6,518,304. The Company expects to continue to
incur losses at least through fiscal year 1997. The Company's ability to achieve
a profitable level of operations will depend in large part on the market
acceptance of its products. There can be no assurance that the Company will
achieve profitable operations. See the Company's Financial Statements and
related notes thereto appearing elsewhere in this Prospectus, "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Need for Future Capital; Uncertainty of Additional Funding. In order to
accomplish its business objectives, the Company requires additional financing.
The Company is actively seeking such financing and if it is unable to obtain it
the Company will be required to alter its business objectives. Such additional
financing, if any, may be either debt, equity or a combination of debt and
equity. An equity financing could result in dilution in the Company's net
tangible book value per share of Common Stock. There can be no assurance that
the Company will be able to secure additional debt or equity financing or that
such financing will be available on favorable terms. The failure by the Company
to obtain additional capital would have a material adverse effect on the
Company. See "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Highly Competitive Nature of the Pet Food Business. The pet food
business is highly competitive. Virtually all of the manufacturers, distributors
and marketers of pet food have substantially greater financial, research and
development, marketing and manufacturing resources than the Company. Competitors
in the premium pet food market include, among others: Colgate-Palmolive Co.
(Hills' Science Diet), Iams Co. and Ralston Purina Co. Brand loyalty to existing
products may prevent the Company from achieving its sales objectives.
Additionally, the long-standing relationships maintained by existing premium pet
food manufacturers with veterinarians and pet breeders may prevent the Company
from obtaining professional recommendations for its products. In addition, the
Company competes with current supermarket high-priced dog foods, which are not
considered premium when compared to Veterinarian Formula, and to the premium dog
foods offered in the specialty pet stores. Although the dominant existing
premium pet food brands are not currently available in supermarkets, there can
be no assurance that this situation will continue. In addition, no barriers to
entry exist with respect to such brands. The entrance into the supermarket
distribution channel of an existing or new premium pet food by any of the
Company's competitors could have a material adverse effect on the Company.
See "Business -- Competition."
-6-
<PAGE>
Ability of the Company to Control the Costs of Raw Materials,
Manufacturing and Packaging. The Company's financial results will depend to a
large extent on the cost of raw materials, manufacturing and packaging and the
ability of the Company to pass along increases in these costs to the
supermarkets and grocery stores. Except as described below, the Company has no
other agreements to purchase raw materials. Fluctuations in prices of food
stocks have historically resulted from a number of factors, including changes in
United States government farm support programs, changes in international
agricultural and trading policies and weather conditions during growing and
harvesting seasons. Fluctuations in paper prices have historically resulted from
changes in supply and demand, general economic conditions and other factors.
Although the Company is unaware of any currently pending price increases, future
price increases in raw materials or packaging could have a material adverse
effect on the Company. See "Business -- Manufacturing and Distribution."
Dependence on Third-Party Suppliers; Manufacturers and Food Brokers.
The Company has been and will continue to be dependent on third parties for the
supply, manufacture, packaging and sale of its pet foods. Currently, the Company
relies on two manufacturers and two packagers. The Company obtains beef for its
products pursuant to an agreement with Monfort, Inc. ("Monfort") a subsidiary of
ConAgra, Inc. ("ConAgra") that terminates in 1999, unless terminated earlier by
either party on 60 days notice. Any failure by Monfort to fulfill its
obligations under the agreement, or the failure by the Company to secure an
alternative source of beef at comparable prices upon the termination of the
Monfort agreement, whether at its expiration date or earlier, would have a
material adverse effect on the Company. In addition, to the extent the Company
requires other meats, (e.g., lamb or liver), to produce its products, it may
have difficulty acquiring sufficient amounts on a timely basis, and at
acceptable prices, to satisfy production schedules. The Company does not
maintain supply agreements with any other third party suppliers, but instead
purchases products pursuant to purchase orders in the ordinary course of
business. The Company will be substantially dependent on the ability of its
manufacturers and suppliers to, among other things, meet the Company's
performance and quality specifications. Failure by the Company's manufacturers
and suppliers to comply with these and other requirements could have a material
adverse effect on the Company. Furthermore, there can be no assurance that the
Company's manufacturers and suppliers will dedicate sufficient production
capacity to meet the Company's scheduled delivery requirements or that the
Company's suppliers or manufacturers will have sufficient production capacity to
satisfy the Company's requirements during any period of sustained demand. Their
failure to supply, or delay in supplying, the Company with products could have a
material adverse effect on the Company. See "Business -- Manufacturing and
Distribution."
In addition, the Company's ability to obtain authorizations to sell its
products in supermarkets and grocery stores depends upon the efforts and skill
of brokers retained by the Company. Although the Company believes it will be
able to locate and retain qualified brokers throughout the United States on
acceptable terms, there can be no assurance that the Company will be able to do
so. The failure to obtain authorizations or to locate and retain qualified
brokers could have a material adverse effect on the Company. See "Business --
Marketing and Sales."
The Company's Ability to Manage Growth Effectively. The Company's
planned growth will result in increased responsibility for both existing and new
management personnel. Effective growth management will depend upon the Company's
ability to integrate new personnel, to improve its operational, management and
financial systems and controls, to train, motivate and manage its employees, and
to increase its sources of raw materials, product manufacturing and packaging.
If the Company is unable to manage growth effectively, the Company's business,
results of operations and financial condition would be materially and adversely
affected. In addition, there can be no assurance that any growth will occur or
that growth will produce profits for the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and "Business --
Marketing and Sales."
Dependence on Key Personnel; Potential Conflicts of Interests. The
success of the Company will be largely dependent on the personal efforts of Marc
Duke, its Chairman and Chief Executive Officer. Although the Company has entered
into an employment agreement with Mr. Duke which expires in 2000, the loss of
his services or certain other key management or scientific personnel could have
a material adverse effect on the Company. The success of the Company is also
dependent upon its ability to hire and retain qualified personnel. There can be
no assurance that the Company will be able to hire or retain such necessary
personnel. Mr. Duke is also a director and executive officer of InnoPet Inc.
("IPI") and its subsidiaries. IPI is the former parent company of the Company
and is its largest shareholder. Although his employment agreement requires him
to devote substantially his full time and attention to the Company, there can be
no assurance that Mr.
-7-
<PAGE>
Duke's other responsibilities will not have a material adverse effect on the
Company. In addition, Mr. Duke may have a conflict of interest with respect to
business opportunities presented to him. There can be no assurance that such
opportunities will first be offered to the Company. See "Management" and
"Certain Transactions."
Government Regulation. The manufacturing, labelling and marketing of
the Company's products are subject to regulation by federal agencies, including
the United States Department of Agriculture, and by various state and local
authorities. It is the responsibility of the Company's manufacturers to obtain
and maintain the manufacturing approvals. The Company's labels must be
registered in each state that the products are sold to consumers. If the Company
fails to register its labels or satisfy relevant labelling regulations, it may
be subject to fines or prohibited from selling its products until such
regulations are satisfied. Any failure to comply with applicable regulatory
requirements could have a material adverse effect on the Company. See "Business
- -- Government Regulation."
Dependence Upon Proprietary Formulations; Intellectual Property Claims.
The Company's success depends in part upon its ability to protect its
proprietary formulations and trademarks. The Company relies on a combination of
copyright, trademark and trade secret laws, nondisclosure and other contractual
agreements with employees and third parties, and technical measures to protect
its proprietary formulations and trademarks. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate to
protect misappropriation of such rights or that third parties will not
independently develop equivalent or superior formulations. The Company has no
patents, and existing trade secret and copyrights laws provide only limited
protection. The Company may be subject to or may initiate interference
proceedings in the United States Patent and Trademark Office, which can demand
significant financial and management resources. Although the Company believes
that its products and formulations do not infringe upon the proprietary rights
of others, there can be no assurance that third parties will not assert
infringement claims against the Company in the future. Litigation, which could
result in substantial cost to and diversion of effort by the Company, may be
necessary to enforce intellectual property rights of the Company or to defend
the Company against claimed infringement of the rights of others. The failure to
obtain necessary licenses or other rights or litigation arising out of
infringement claims could have a material adverse effect on the Company. See
"Business -- Intellectual Property."
Control by Principal Stockholders. Mr. Duke, through his position at
IPI, and by proxies granted to him, has voting power over 1,877,421 shares of
Common Stock (42.0% of such shares). Accordingly, he may be able to control the
election of all of the Company's directors and otherwise may control most
matters requiring approval by the stockholders of the Company, including
approval of significant corporate transactions. See "Principal Stockholders."
Absence of Dividends on Common Stock. The Company has not paid any cash
dividends on its Common Stock and does not expect to do so in the foreseeable
future. The Company pays a quarterly dividend of 4% per annum on its Series A
Preferred Stock. See "Dividend Policy."
Possible Adverse Effects of Authorization of Preferred Stock. The
Company's Certificate of Incorporation provides that up to 5,000,000 shares of
Preferred Stock may be issued by the Company from time to time in one or more
series. As of September 1, 1997, 625,000 shares of Series A Preferred Stock have
been issued and are outstanding and options to purchase an additional 62,500
shares of Series A Preferred Stock have been granted. The Board of Directors is
authorized to determine the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of Preferred Stock and to
fix the number of shares of any series of Preferred Stock and the designation of
any such series, without any vote or action by the Company's stockholders. The
Board of Directors may authorize and issue Preferred Stock with voting or
conversion right that could adversely affect the voting power or other rights of
the holders of Common Stock. In addition, the potential issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company, may discourage bids for the Common Stock at a premium
over the market price of the Common Stock and may adversely affect the market
price of the Common Stock. See "Description of the Company's Securities --
Preferred Stock."
Possible Delisting from NASDAQ-SMC; Disclosure Relating to Low Priced
Stocks. The Company's Common Stock and Redeemable Warrants are quoted on the
NASDAQ-SMC, however, there can be no assurance that a trading market will be
maintained. On August 22, 1997 the Securities and Exchange Commission (the
"SEC") approved more stringent maintenance criteria for continued quotation of
securities
-8-
<PAGE>
on the NASDAQ-SMC. The maintenance quantitative criteria for the NASDAQ-SMC
include: (i) a minimum of $2,000,000 in net tangible assets or a market
capitalization of at least $35,000,000 or a minimum of $500,000 of net income in
two of the last three years; (ii) a minimum public float of 500,000 shares with
a market value equal to $1,000,000; (iii) at least two market makers; and (iv) a
minimum bid price of $1.00 per share of common stock. If the Company were
removed from the NASDAQ-SMC, trading, if any, in the Common Stock or the
Redeemable Warrants would thereafter have to be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
the NASD's OTC Electronic Bulletin Board. As a result, an investor would find it
more difficult to dispose of, and to obtain accurate quotations as to the value
of, such securities.
In addition, if the Common Stock is delisted from trading on the
NASDAQ-SMC and the trading price of the Common Stock is less than $5.00 per
share, trading in the Common Stock would also be subject to the requirements of
Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Under such rule, broker/dealers who recommend such
low-priced securities to persons other than established customers and accredited
investors must satisfy special sales practice requirements, including a
requirement that they make an individualized written suitability determination
for the purchaser and receive the purchaser's consent prior to the transaction.
The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also
requires additional disclosure in connection with any trades involving a stock
defined as a penny stock (generally, according to recent regulations adopted by
the SEC, any equity security not traded on an exchange or quoted on NASDAQ-SMC
that has a market price of less than $5.00 per share, subject to certain
exceptions), including the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Such requirements could severely limit the market liquidity of the
Securities and the ability of purchasers to sell their Securities in the
secondary market. There can be no assurance that the Securities will not be
delisted or treated as a penny stock.
-9-
<PAGE>
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
January 11, 1996. On May 15, 1996 the Company amended its Certificate of
Incorporation to change its name to InnoPet Brands Corp.. The Company maintains
its principal business operations at One East Broward Boulevard, Suite 1100,
Fort Lauderdale, Florida 33301. The Company's telephone number is (954)
453-2400. The Company's Web Site is http://www.innopet.com.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock or Redeemable Warrants offered hereby. The Company,
however, may receive an aggregate of approximately $1,350,000 in the event of
the exercise of all of the 225,000 Redeemable Warrants registered hereby
(assuming an exercise price of $6.00 per share of Common Stock).
PRICE RANGE OF COMMON STOCK
AND REDEEMABLE WARRANTS
The Common Stock and Redeemable Warrants are quoted on the NASDAQ-SMC
under the symbols "INBC" and "INBCW", respectively. The following table sets
forth for the fiscal periods indicated (beginning with the date of the Company's
initial public offering) the high and low bid price information for the Common
Stock and Redeemable Warrants:
<TABLE>
<CAPTION>
Common Stock Redeemable Warrants
-------------------------- ---------------------------
High Bid Low Bid High Bid Low Bid
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Year Ending December 31, 1997
First Quarter $6.125 $4.000 $2.375 $1.375
Second Quarter $5.875 $4.250 $2.250 $1.125
Third Quarter (through August 31, 1997)
$6.125 $4.625 $2.125 $1.437
Year Ended December 31, 1996
December 5, 1996 through year end $6.000 $4.000 $2.375 $1.375
</TABLE>
On September 25, 1997, the closing bid price for the Company's Common
Stock and Redeemable Warrants were $4.625 and $1.25, respectively. As of
September 1, 1997 there were in excess of holders of record of the Company's
Common Stock and Redeemable Warrants.
There is no public trading market for the Company's Preferred Stock.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common
Stock. It presently intends to retain earnings for use in its business and does
not anticipate paying cash dividends in the foreseeable future. The payment of
future cash dividends by the Company on its Common Stock will be at the
discretion of the Board of Directors and will depend on its earnings, financial
condition, cash flows, capital requirements and other considerations as the
Board of Directors may consider relevant with respect to the payment of
dividends. The Company's Series A Preferred Stock pays a dividend equal to 4%
per annum. The dividend is payable by the issuance of shares of Common Stock.
The number of shares to be issued as a dividend is determined based on the
average closing bid price for a share of Common Stock as reported by the
NASDAQ-SMC for the 20 trading days preceding the record date for the declaration
of the dividend.
-10-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997. This table should be reviewed in conjunction with the Company's
financial statements and related notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of
June 30, 1997
Actual
(Unaudited)
<S> <C>
Notes payable to IPI ......................................... $600,000
Stockholder's equity:
Preferred Stock 4% convertible, $.01 par value;
authorized 5,000,000 shares; issued and outstanding
625,000 shares; stated at liquidation value................ 2,500,000
Common Stock, $.01 par value; authorized 25,000,000
shares; issued and outstanding 4,465,443................... 44,658
Additional paid-in capital................................... 12,712,380
Deficit accumulated during the development stage............. (11,544,162)
Notes and interest receivable on sale of common stock........ (2,216,243)
Treasury stock at cost...................................... (1,454)
------------
Total stockholders' equity................................... 1,495,179
------------
Total capitalization........................................... $2,095,179
============
</TABLE>
-11-
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data for the period ended December 31, 1996 are
derived from the Company's financial statements audited by Rachlin Cohen &
Holtz, independent certified public accountants. The results for the period
which ended June 30, 1997 are not necessarily indicative of results that may be
expected for any other interim period or for the full year. The selected
financial data should be read in conjunction with, and are qualified by
reference to, the Company's Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
Inception Inception
(January 11, Six Months (January 11,
1996) to Ended 1996) to
December 31, June 30, June 30,
1996 1997 1996
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue............................................................ $ 1,859,936 $1,106,812 $153,061
Cost of sales...................................................... 1,634,474 762,162 132,776
----------- ----------- -----------
Gross profit....................................................... 225,462 344,650 20,285
Sales, general and administrative expenses:
Sales expense.................................................... 513,000 329,016 235,000
Slotting......................................................... 1,094,845 670,646 44,000
Marketing........................................................ 1,396,282 2,200,292 332,130
Product development.............................................. 584,976 244,190 399,542
General and administrative....................................... 1,782,795 1,929,689 915,929
----------- ----------- -----------
Operating loss..................................................... (5,146,436) (5,029,183) (1,906,316)
Interest, financing and other costs and expenses................... (1,371,868) 3,325 (218,841)
----------- ----------- -----------
Net loss........................................................... $(6,518,304) $(5,025,858) $(2,125,157)
Net loss per common share.......................................... $(3.11) $(1.13) $(1.13)
======== ======== ========
Common shares outstanding.......................................... 2,094,000 4,465,661 1,878,378
========= =========
</TABLE>
As of As of
December June 30,
31, 1996 1997
----------- -----------
(Unaudited)
Balance Sheet Data:
Working capital................................... $4,113,187 $824,459
Total assets...................................... 7,566,713 5,313,357
Long term debt, note payable to IPI
net of current portion............................ 800,000 600,000
Total liabilities................................. 3,023,689 3,818,178
Stockholders' equity.............................. 4,533,024 1,495,179
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
Overview
The Company produces, markets and sells premium dog food through
supermarket and grocery stores under the name of Veterinarian Formula Dog Food.
The Company was created on January 11, 1996 to acquire the KenVet Nutritional
Care Line of dog and cat foods (the "KenVet Line") from a subsidiary of ConAgra.
Since 1988, supermarkets' share of pet food sales in the United States
has fallen from 85% to 56%, mainly due to increased sales of premium pet foods
through specialty pet stores. Until the introduction of Veterinarian Formula,
premium pet foods, which represent approximately 20% of the total pet food
market, were not available in supermarkets. The Company believes that the
availability of a full line of premium pet foods at supermarkets will allow
supermarkets to stop the erosion of their market share and perhaps allow them to
recapture market share. See "Industry Background".
The Company has focused its sales and marketing efforts on the eastern
United States. As of September 1, 1997 the Company has sold product in the
following markets: the Greater Metropolitan New York area; the New England area;
Philadelphia, Pennsylvania and other areas of Pennsylvania; the Baltimore,
Maryland and Washington, D.C. areas; Virginia; North Carolina; South Carolina;
Georgia; Alabama; and Florida.
The Company's objective is to become a national provider of premium pet
foods through supermarket and grocery store outlets. The Company intends to
achieve its objective by: (i) providing supermarkets a brand of
competitively-priced premium pet food to enable supermarkets to recapture a
share of the premium pet food market that they have lost to specialty pet
stores; (ii) expanding distribution to supermarkets and grocery stores
throughout the United States; (iii) increasing consumer awareness and market
penetration throughout the Company's market areas; and (iv) packaging its
products in unique single serving-sized inner-bags which are designed to
increase convenience of feeding, regulate portions, reduce product deterioration
and prevent contamination. The Company's strategy is to provide premium pet food
products that are good for the pet and easy to use for the owner.
-13-
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, selected
financial data for the Company as a percentage of net sales:
<TABLE>
<CAPTION>
Inception Inception
(January 11, Six Months (January 11,
1996) to Ended 1996) to
December 31, June 30, June 30,
1996 1997 1996
------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Statement of Operations Data: % % %
Revenue............................................................ 100.0 100.0 100.0
Cost of sales...................................................... 87.9 68.9 86.7
------- ------- -------
Gross profit....................................................... 12.1 31.1 13.3
Sales, general and administrative expenses:
Sales expense.................................................... 27.6 29.7 153.5
Slotting......................................................... 58.9 60.6 28.7
Marketing........................................................ 75.1 198.8 217.0
Product development.............................................. 31.5 22.1 261.0
General and administrative....................................... 95.9 174.3 598.4
------- ------- -------
Operating loss..................................................... (276.7) (454.4) (1,245.5)
Interest, financing and other costs and expenses................... (73.8) 0.3 (143.0)
-------- ------- --------
Net Loss........................................................... (350.5) (454.1) (1,388.4)
======== ======== =========
</TABLE>
-14-
<PAGE>
Six months ended June 30, 1997 compared to the period from inception (January
11, 1996) through June 30, 1996.
Revenues. Revenues increased $953,751 or 623% to $1,106,812 during the
year to date period ended June 30, 1997 from $153,061 during the period from
inception through June 30, 1996.
Cost and Expenses. Cost of goods sold increased $629,386 or 474% to
$762,162 during the year to date period ended June 30, 1997 from $132,776 during
the period from inception through June 30, 1996. Cost of goods sold for the year
to date period ended June 30, 1997 were 69% of sales, providing a gross margin
of 31% for the period, an improvement of 18 percentage points over the period
from inception through June 30,1996. The improved margin was the result of
increased volume during the year to date period ended June 30, 1997 over the
period from inception through June 30, 1996.
Sales Expenses. Sales expenses increased $94,016 or 40% to $329,016
during the year to date period ended June 30, 1997 from $235,000 during the
period from inception through June 30, 1996. Sales expenses for the year to date
period ended June 30, 1997 totaled 30% of sales. These costs consist of broker
commissions (5% of sales), and the Company's in-house sales force.
Slotting Allowances. Slotting allowances increased $626,646 to $670,646
during the year to date period ended June 30, 1997 from $44,000 during the
period from inception through June 30, 1996, reflecting expanding distribution.
Slotting fees are fees charged manufacturers by retailers in order to facilitate
the introduction of new products. The fees represent charges for warehouse space
(slots) to be used to store a manufacturer's products, charges for retail shelf
space and related shelf sets to make room for the products and reimbursement of
retailer expenses (entering new items into their computer systems and in some
cases marketing support provided by the retailer). The practice by retailers of
charging slotting fees is a standard industry practice. The Company expects to
continue to incur slotting fees as it expands its geographic territory and as
new products are introduced.
Marketing Expenses. Marketing expenses increased $1,868,162 or 562% to
$2,200,292 during the year to date period ended June 30, 1997 from $332,130
during the period from inception through June 30, 1996. Marketing expenses for
the year to date period ended June 30, 1997 reflected initial implementation of
the Company's marketing program, and included items such as advertising
(approximately $332,000), directed sampling programs via direct mail and
delivery with newspapers (approximately $425,000), and in store demonstrations
(approximately $691,000).
Product Development Expenses. Product development expenses decreased
$155,352 or 39% to $244,190 during the year to date period ended June 30, 1997
from $399,542 during the period from inception through June 30,1996. The expense
level for the year to date period ended June 30, 1997 reflects expenses
associated with the ongoing management of manufacturers and co-packers, and
ongoing research and development. During the period from inception through June
30, 1996, much of the product development costs were costs associated with
testing of newly acquired formulations (e.g., palatability and bioavailability),
expenses associated with locating manufacturers and certifying their facilities
and processes.
General and Administrative Expenses. General and administrative
expenses increased $1,013,760 or 111% to $1,929,689 during the year to date
period ended June 30, 1997 from $915,929 during the period from inception
through June 30, 1996. The increase resulted from increased logistics costs
(approximately $420,000); increased legal, accounting and professional fees
(approximately $209,000) associated with strategic planning, SEC compliance and
other matters; increased rent (approximately $38,000); increased amortization
costs; and increases in general office expenses.
Interest Income Net of Interest Expense and Financing Costs. Interest
income net of interest expense and financing costs increased $222,166 to $3,325
during the year to date period ended June 30, 1997 from a net expense of
$218,841 during the period from inception through June 30, 1996. The expense
during the prior year period reflected amortization of financing costs
associated with the start up of the business. These costs were fully amortized
during 1996 and are non-reoccurring.
Net Loss. Net loss increased $2,900,701 or 136% to $5,025,858 during
the year to date period ended June 30, 1997 from $2,125,157 during the period
from inception through June 30, 1996. The increase was due primarily to initial
expenditures associated with the implementation of the Company's marketing
plans,
-15-
<PAGE>
combined with slotting fees. The Company expects to continue to incur losses at
least through fiscal year 1997. The Company's ability to achieve a profitable
level of operations will depend in large part on the market acceptance of its
products, and the Company's ability to obtain additional financing. There can be
no assurance that the Company will achieve profitable operations.
Period from inception (January 11, 1996) through December 31, 1996
Revenues. Revenues for the period were $1,859,936. Cost of sales
totaled $1,634,474 resulting in a gross margin of $225,462 or 12.1% of revenues.
The narrow margin resulted primarily from warehousing and transportation
expenses associated with the initial shipments of the Company's products.
Costs and Expenses. Costs and expenses for the period totaled
$5,371,898. These costs and expenses are detailed below.
Sales Expenses. Sales expenses for the period were $535,000 or 28% of
sales. These costs consist of brokerage commissions (5% of sales), and the
Company's in-house sales force.
Slotting Allowances. Slotting allowances for the period were
$1,094,845. Slotting fees are fees charged manufacturers by retailers in order
to facilitate the introduction of new products. The fees represent charges for
warehouse space (slots) to be used to store a manufacturer's products; charges
for retail shelf space and related shelf sets to make room for the products; and
reimbursement of retailer expenses (entering new items into their computer
systems and, in some cases, marketing support provided by the retailer). The
practice by retailers of charging slotting fees is a standard industry practice.
The Company expects to continue to incur slotting fees as it expands its
geographic territory and as new products are introduced.
Marketing Expenses. Marketing expenses for the period were $1,396,282,
reflecting costs to develop packaging and initial advertising costs.
Product Development Expenses. Product development expenses, including
personnel and related costs, were $584,976. This primarily reflects testing of
formulations (e.g. palatability and bioavailability), expenses associated with
locating manufacturers and suppliers and of certifying their facilities and
processes. Product development expenses will continue to be expended to manage
manufacturers and co-packers and to facilitate extension of the Company's
product lines and new product introductions. It is not anticipated that the
level of expenditure in these areas will increase substantially with the
anticipated product introduction and line extension included in the current
business plan.
General and Administrative Expenses. General and administrative
expenses were $1,782,795 which were primarily composed of costs associated with
the development and implementation of the overall business strategy, marketing
and financial plans. Costs included personnel expenses of approximately
$889,000, amortization of formulae acquisition costs and the ConAgra non-compete
agreement of approximately $120,000 and other expenses.
Interest and Financing Costs. Interest and financing costs totaled
$1,371,868 consisting of amortization of deferred financing costs and original
issue discount relating to the August 1996 private placement (approximately
$674,000); interest expense (approximately $159,000); other financing costs
(approximately $349,000, consisting primarily of amortization of deferred
financing costs); and costs in connection with other financings (approximately
$161,000, representing certain professional fees which were incurred in
connection with other financing).
Net Loss. The Company reported a net loss of $(6,518,304) or $(3.11)
per common share for the period from inception (January 11, 1996) to December
31,1996. The loss is primarily the result of limited sales generated for that
period as compared to costs and expenses incurred pertaining primarily to
developmental activities of the Company to date.
Income Taxes
Net operating losses generated in fiscal 1996 will be carried forward
and utilized to offset future income tax expense. The Company has a net
operating loss carry-forward of approximately $6,500,000 for federal income tax
purposes at December 31, 1996. This net operating loss carry-forward will expire
in the
-16-
<PAGE>
year 2011. The Company's ability to utilize its net operating loss
carry-forwards will be subject to annual limitations in future periods pursuant
to the "change in ownership rules" under Section 382 of the Internal Revenue
Code of 1986, as amended. The Company estimates that an annual limitation of
approximately $990,000 will apply to the net operating loss carry-forward. The
Company's utilization of its tax benefit carry-forward may be further restricted
in the event of subsequent changes in ownership.
Liquidity and Capital Resources
Capital for the development of the Company has been provided by IPI,
the former parent company of the Company, an initial public offering of units, a
private placement of preferred stock and a short term loan.
The capital provided to the Company by IPI consisted of $2,360,538 in
the form of costs and expenses ($1,462,315), funds used to purchase the
Veterinarian Formula formulations ($699,794) and financing costs ($198,429).
Additionally, on June 5, 1996 IPI provided the Company $1,000,000 in financing
in exchange for a five-year note from the Company. Through December 31, 1996,
IPI also provided $724,394 in working capital for inventories and costs and
expenses, which were recorded as accounts payable to IPI
The Company completed its initial public offering on December 5, 1996,
and the overallotment on December 10, 1996, which in aggregate consisted of
2,587,500 units, realizing approximately $8,441,000 in net proceeds. Each unit
included one share of Common Stock and one Redeemable Warrant exercisable at
$6.00 per share. The Company repaid $2,000,000 of private placement financing
from the proceeds of the initial public offering.
On April 29, 1997, the Company completed a $2,500,000 private placement
(the "Private Placement"). The shares were purchased by Entrepreneurial
Investors, Ltd., a Bahamian company ("EIL"). The Private Placement consisted of
the sale of 625,000 shares of Series A 4% Cumulative Convertible Preferred
Stock, par value $.01 per share, at $4.00 per share. The Company realized net
proceeds from the Private Placement of $1,987,913.
On July 9, 1997, the Company borrowed $1,500,000 from EIL. The note has
a stated interest rate of 14%, matures on January 15, 1998 and is collateralized
with 600,000 shares of Common Stock. The principal amount of the note may be
converted into Common Stock at $4.50 per share. Additionally, in connection with
the loan, the Company issued 225,000 Redeemable Warrants to purchase shares of
Common Stock at $6.00 per share. The Redeemable Warrants are subject to the same
terms and conditions as the warrants publicly traded.
Working Capital. At June 30, 1997, the Company had working capital of
$824,459, compared to working capital of $4,113,187 at December 31,1996. The
change in working capital was primarily due to the loss incurred during the year
to date period ended June 30, 1997, partially offset by the net proceeds of the
Private Placement.
Cash Flow. Net cash used in operating activities was $3,486,320 and
$5,401,505 for the period from inception (January 11, 1996) through December
31,1996 and for the year to date period ended June 30, 1997, respectively.
During 1996, the net cash used in operating activities was the result of
operating losses, increases in accounts receivable, inventories and other
assets, partially offset by costs and expenses paid on behalf of the Company by
IPI and by increases in trade accounts payable, accounts payable to IPI and
other liabilities. During the year to date period ending June 30,1997, net cash
used in operating activities was the result of operating losses, increases in
accounts receivable and inventories, partially offset by increases in accounts
payable.
Net cash used in investing activities was $84,540 and $368,737 for the
period from inception (January 11, 1996) through December 31, 1996 and for the
year to date period ended June 30, 1997, respectively. These expenditures
reflected capital expenditures including meat handling equipment to be used by
one of the Company's manufacturers, plates for printing the bags used for the
Company's finished product and office equipment.
Net cash provided by financing activities was $8,185,172 and $1,788,014
for the period from inception (January 11, 1996) through December 31, 1996 and
for the year to date period ended June 30, 1997,
-17-
<PAGE>
respectively. During 1996, the net cash provided by financing activities
resulted from the proceeds of long-term financing from IPI, net of costs and
expenses paid on behalf of the Company by IPI; the proceeds from a bridge
financing, net of deferred financing costs; and the proceeds from the Company's
initial public offering, net of repayment of the bridge financing and net of
offering costs. During the year to date period ended June 30, 1997, net cash
provided by financing activities resulted from the proceeds of the April 29,
1997 Private Placement, net of costs of the April 29, 1997 Private Placement and
net of a principal repayment to IPI on the five-year note.
In order to achieve its business objectives, the Company is seeking
additional financing which may consist of debt, equity or a combination thereof.
If the Company is unable to obtain additional financing, the Company will be
required to modify its current business objectives. There can be no assurance
that the Company will be able to obtain such additional financing. The failure
by the Company to obtain additional capital would have a material and adverse
effect on the business of the Company.
During June 1996, the Company entered into a five-year facilities
agreement with IPI which provides for a pass-through of rent costs and
reimbursement to IPI for funds expended for equipment, furniture and fixtures.
Under the terms of the agreement, the Company is obligated for approximately
$349,000 in payments over the next 12 months and approximately $1,369,000 over
the remaining life of the agreement. The Company is obligated to pay
approximately $679,000 in annual salaries to management. The Company has no
material commitments for capital expenditures over the next 12 months.
-18-
<PAGE>
BUSINESS
The Company
The Company produces, markets and sells premium dog food through
supermarkets and grocery stores under the name InnoPet Veterinarian Formula(TM).
In June 1996, the Company commenced sales of its beef formula dog food to
supermarkets in the Greater Metropolitan New York area. As of September 1, 1997
the Company has sold product in the following markets: the Greater Metropolitan
New York area; the New England area; Philadelphia, Pennsylvania and other areas
of Pennsylvania; the Baltimore, Maryland and Washington, D.C. areas; Virginia;
North Carolina; South Carolina; Georgia; Alabama; and Florida.
The Company's objective is to become a national provider of premium pet
foods through supermarket and grocery store retail outlets. The Company intends
to achieve its objective by: (i) providing supermarkets a brand of
competitively-priced premium pet food to enable supermarkets to recapture a
share of the premium pet food market that they have lost to specialty pet
stores; (ii) expanding distribution to supermarkets and grocery stores in the
throughout the United States; (iii) increasing consumer awareness and market
penetration throughout the Company's market areas; and (iv) packaging its
products in unique single serving-sized inner-bags which are designed to
increase convenience of feeding, regulate portions, reduce product deterioration
and prevent contamination.
In June 1997, the Company began expansion of its line of dog foods with
the introduction of lamb and rice with barley formula in its existing markets.
At the same time, the Company also entered into long-term agreements with the
North Shore Animal League and the Pet Savers Foundation, whereby InnoPet
Veterinarian Foods will be exclusively fed to in-house dogs and recommended to
adopters by both of these not-for-profit humane organizations which adopt out
animals through thousands of shelters each year. In addition, adopters will be
provided with product samples, literature and coupons, and will be able to
purchase the products in retail stores of some participating adoption centers.
The Company is in the process of implementing its overall marketing
strategy, which commenced in February 1997. The Company's strategy is to provide
premium pet food products that are good for the pet and easy for the owner.
Programs include: radio and newspaper advertising; free-standing inserts;
in-store couponing, shopping cart signage and floorminders; trial size displays;
store feature ads and circulars; direct mail sampling programs to targeted
consumers, veterinarians and breeders; newspaper sample pouches; and extensive
in-store demonstrations with sampling. In addition, the Company participates in,
and supports with sampling, local pet-related events (e.g., pet walkathons, pet
shows, etc.) within its market area, both independently and in conjunction with
local supermarkets.
Industry Background
In 1996, approximately 53 million United States households, or over
one-half of all United States households, owned at least one pet; over half of
these pet-owning households owned more than one pet.1 Retail sales of pet food
in the United States in 1996 were approximately $9.4 billion (an increase of 3%
over 1995), of which approximately 20% was premium pet food.(1) Projected growth
for 1997 is 7.4% to a $10.1 billion level.(1) From 1991 through 1996, sales of
premium pet food have increased at a compound annual growth rate of
approximately 18%, compared to a compound annual growth rate of less than 3% for
total pet food sales. The Company believes sales of premium pet food have
increased in recent years primarily due to heightened concern for animal welfare
and nutrition. Premium pet food is generally characterized by quality
ingredients, such as pure meat, higher nutritional value, increased
digestibility, increased nutrient absorption and higher pricing. The Company
believes that its product qualifies as premium because of, among other things,
its use of pure beef as the primary source of protein, corn gluten instead of
corn meal, and rice instead of other grains.
Historically, the pet food industry was dominated by relatively low
priced, grain-based or animal byproduct-based nationally branded products sold
through supermarkets. In the early 1980's, supermarkets sold
- --------
1 This information is derived from The Maxwell Consumer Report, Wheat First
Butcher Singer (June 25, 1997, May 30, 1996 and May 24, 1996); J. Palmer,
Well, Aren't You the Cat's Meow, Barron's, April 1, 1996 at p.29; and
Packaged Facts for the Pet Food Market (February 1997 and February 1996); The
Information Catalogue, Marketing Intelligence Studies, Find/SVP Worldwide
Consulting Research and Advisory Services (1997 and 1996, respectively).
-19-
<PAGE>
in excess of 90% of all pet foods.2 From 1988 to 1996, however, the percentage
of pet food sales made through supermarkets and grocery stores decreased from
approximately 85% to 56%, mainly due to increased sales of premium pet foods
through specialty pet stores.2 The decline is expected to continue to 53% in
1997. These premium pet foods are currently not available to supermarkets and
grocery stores. Between 1989 and 1996, sales of pet foods through outlets other
than the supermarket/grocery store segment have risen approximately 71%.2
The Company believes supermarkets and grocery stores have been unable
to reverse their loss of pet food market share because of their inability to
obtain a full line of premium pet foods. The Company believes that manufacturers
of premium pet foods have not supplied supermarkets and grocery stores in order
to preserve their primary distribution channel, the specialty pet store. Market
research commissioned by the Company, and conducted by Bruskin Goldring
Research, indicates that approximately one-half of households in the United
States with one or more dogs would be likely to try a line of premium dog food
if it were available in supermarkets.
Products
In January 1996, the Company acquired from a subsidiary of ConAgra the
formulas for 51 stock keeping units ("SKUs") of premium dog and cat foods
grouped in 14 basic formulations, including both dry and canned foods. The
formulas were developed by ConAgra under the name KenVet Nutritional Care to be
prescribed and sold only through veterinarians. Some of these formulations have
been used to create the Company's initial products. Further, the Company
repackaged and repositioned the product for sales in the supermarkets. The
Company's current products are based on 100% beef protein. The Company believes
its use of pure beef protein, corn gluten instead of corn meal, and rice instead
of other grains makes its product premium as compared to other pet food
currently sold in supermarkets and grocery stores. Independent laboratory tests
commissioned by the Company indicated that its dog food products meet or exceed
other national premium food products in digestibility and are comparable in
palatability. These tests determine the percentage of protein, fat and energy
used by the dog as compared to the contents of the food prior to ingestion. The
high degree of nutrient absorption of the Company's products, known as
"bioavailability," promotes less body fat by decreasing the dog's ingestion of
nonuseable calories and increases the per dollar value of the food by reducing
the volume of food required to deliver the appropriate nutrient level.
Existing Products. The Company currently offers 12 SKUs of dry dog food
for puppies, adults and seniors to meet the nutritional requirements of pets at
each stage of their lives, in three outer and three inner bag sizes. The 3.75,
8.125 and 15-pound outer bag sizes provide approximately one week's food supply
for small, medium and large dogs, respectively. Both beef and lamb and rice with
barley products are available for adult dogs and beef product is available for
puppies and seniors. The outer bag sizes are designed to promote weekly
purchases during the consumer's normal food buying trip to the supermarket or
grocery store.
Future Products. During the next 12 months, the Company anticipates
introducing additional products, including puppy and senior lamb and rice with
barley formulas, four life stage SKUs for cats and special needs SKUs for dogs
and cats. The Company's planned special needs products will be formulated to
meet specific dietary needs, such as obesity and allergies, and in response to
the dictates of the consumer, such as lamb and rice formulations.
Packaging. Unlike conventional bulk packaging in large bags, the
Company uses inner-seal packs inside larger bags. This packaging system is
comparable in cost to traditional dry food bulk packaging since the Company's
outer-bag does not require an oxidation or fat transfer barrier. Products for
different sized animals are packaged in different sized inner-seal bags. The
inner-seal bags contain a single suggested serving for the animal's size. The
inner-seal bags help prevent oxidation of protein, fat, vitamins and minerals in
the pet food, a process that begins immediately upon exposure to air and lowers
the nutritional value of bulk-packed dry foods. Additionally, contamination of
product due to insects, vermin and other sources can be substantially reduced
because the packaging for a single portion need not be opened until the pet's
feeding time. The inner-seal packaging helps maintain the appeal of the product
to the pet, thus helping to reduce waste and cost to the owner. The Company's
inner-seal packaging also promotes portion control feeding recommended by
veterinarians to prevent obesity, a leading ailment among dogs and cats. The
inner-seal bags are easily transported which allow owners traveling with pets or
leaving pets in kennels to more easily feed their pets. Each inner-seal bag is
also labeled for resale, which the Company believes increases the potential
__________________
2 See footnote 1 on previous page.
-20-
<PAGE>
number of retail outlets for the Company's products by allowing single serving
sales in supermarkets and smaller stores.
Marketing and Sales
The Company's marketing strategy is designed to respond to both the
supermarket's need to stem the loss of pet food customers to specialty pet
stores and the consumers' desire for the convenience of purchasing a premium pet
food in the supermarket. The Company currently sells its products primarily
through supermarkets and grocery stores. The Company believes its products are
nutritionally superior to currently available branded products sold through
supermarkets and specialty pet stores' premium products.
Market research commissioned by the Company indicates that
approximately one-half of United States homeowners with a dog would be willing
to try a product defined as the Company's premium dog food formulations if it
was available in supermarkets. Fewer than 3% of the respondents who would not
try such a product expressed doubts that supermarkets would offer a premium dog
food. A similar small percentage responded that price would be a barrier to
trying such a product.
The Company generates brand awareness of its products through
integrated marketing communications programs. The Company plans to use in-store
promotions, such as floor minders, trial size displays, in-store sampling,
instantly redeemable coupons and point of purchase displays. The Company also
uses free standing inserts in newspapers and mails product samples, literature
and coupons to demographically targeted consumers, veterinarians and breeders.
The Company plans to participate in pet-related events, such as dog walks and
pet welfare fundraisers, as well as general events such as tennis tournaments
and veterinarian conferences.
The Company's suggested retail prices for its products are
approximately 15% below comparable specialty pet store prices for premium brands
and are significantly higher than the highest priced branded products sold
through the supermarkets, thereby providing supermarkets with a higher profit
margin with the Company's products than with other pet food products.
In March 1996, the Company began contacting supermarkets in the Greater
Metropolitan New York area which, eventually, resulted in authorization from a
majority of the supermarket and grocery store chains in this territory. In June
1996, shipments of the Company's dog food began. As of September 1, 1997, the
Company has sold product in the following markets: the Greater Metropolitan New
York area; the New England area; Philadelphia, Pennsylvania and other areas of
Pennsylvania; the Baltimore, Maryland and Washington, D.C. area; Virginia; North
Carolina; South Carolina; Georgia; Alabama; and Florida.
In order to make sales to supermarkets and wholesalers, who function as
distribution organizations for supermarkets and other grocery stores, the
Company, using brokers and field sales managers, must first obtain authorization
for its pet foods. Generally, authorizations are made by the supermarket's
corporate buying office or buying committee. An authorization from a supermarket
or similar organization is the acceptance of the Company's pet foods for sale in
the supermarket's stores. Obtaining an authorization involves the presentation
of the Company's products, and the negotiation of product set-up or slotting
fees, minimum order quantities, initial scope and duration of product shelf
space allocation, and marketing program participation. The Company works closely
with its independent food brokers in obtaining authorizations.
Once an authorization has been obtained, the Company's brokers,
overseen by its field sales managers, coordinate initial orders with the
supermarket's pet products category buyer. The Company engages its food brokers,
all of whom are paid on a commission basis, on an exclusive basis with respect
to premium pet food.
The Company's ability to obtain authorizations to sell its products in
supermarkets and grocery stores depends upon the efforts and skills of brokers
retained by the Company. Although the Company believes it will be able to locate
and retain qualified brokers throughout the United States on acceptable terms,
there can be no assurance that the Company will be able to do so. The failure to
obtain authorizations or to locate and retain qualified brokers could have a
material adverse effect on the Company.
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<PAGE>
Manufacturing and Distribution
The manufacture of the Company's dog food begins with the purchase of
the raw materials which are then processed into kibble. The kibble is then
transported in bulk to companies which package the kibble for retail sale. The
packaged food is then distributed to supermarkets.
The Company outsources the manufacturing, packaging and transporting of
its products. The Company does not maintain supply agreements with any third
party suppliers, but instead purchases products pursuant to purchase orders in
the ordinary course of business. The Company will be substantially dependent on
the ability of its manufacturers and suppliers to, among other things, meet the
Company's performance and quality specifications. Failure by the Company's
manufacturers and suppliers to comply with these and other requirements could
have a material adverse effect on the Company. Furthermore, there can be no
assurance that the Company's manufacturers and suppliers will dedicate
sufficient production capacity to meet the Company's scheduled delivery
requirements or that the Company's suppliers or manufacturers will have
sufficient production capacity to satisfy the Company's requirements during any
period of sustained demand. Their failure to supply, or delay in supplying, the
Company with products could have a material adverse effect on the Company. The
Company believes that its suppliers' manufacturing capacity will be adequate for
the Company's needs for the foreseeable future. The inability of the Company's
current suppliers to fulfill the Company's production requirements, or the
Company's failure to obtain alternative production supply relationships, would
have a material adverse effect on the Company.
The Company's sub-contracted manufacturers are responsible for the
emulsification of the meat and the purchase and preparation of the other raw
materials that make up the Company's pet food. The principal raw material
required for the Company's products is beef. The Company obtains beef for its
products pursuant to an agreement with Monfort, a subsidiary of ConAgra, that
terminates in 1999, unless terminated earlier by either party on 60 days notice.
This agreement provides for the delivery of up to 15 million pounds of beef per
year at a fixed price. The fixed price is comparable to current beef prices.
Accordingly, if beef prices fall, the Company will be able to terminate the
agreement. Conversely, if beef prices increase, Monfort will be able to
terminate the agreement. In addition, any failure by Monfort to fulfill its
obligations under the agreement, or the failure by the Company to secure an
alternative source of beef at comparable prices upon the termination of the
Monfort agreement, whether at its expiration date or earlier, would have a
material adverse effect on the Company.
The Company owns no warehouses, trucks or other distribution facilities
or equipment. The Company distributes its products directly to supermarket
distribution centers and distribution centers operated by grocery store
wholesalers. The Company may lease space in public warehouses from time to time.
All transport and distribution of the Company's products will be done through
common carriers or fleets operated by the Company's customers.
Competition
The pet food business is highly competitive. Virtually all of the
manufacturers, distributors and marketers of pet food have substantially greater
financial, research and development, marketing and manufacturing resources than
the Company does. Competitors in the premium pet food market include, among
others, Colgate- Palmolive Co. (Hills' Science Diet), Iams Co. and Ralston
Purina Co. Brand loyalty to existing products may prevent the Company from
achieving its sales objectives. Additionally, the long-standing relationships
maintained by existing premium pet food manufacturers with veterinarians and pet
breeders may prevent the Company from obtaining professional recommendations for
its products. It is expected that the advertisements of North Shore Animal
League and the Pet Savers Foundation will partially offset this concern. In
addition, the Company competes with current supermarket high-priced dog foods
which are not considered premium when compared to Veterinarian Formula and to
the premium dog foods offered in the specialty pet stores.
Although the dominant existing premium pet foods are not currently
available in supermarkets and grocery stores, there can be no assurance that
this will continue. In addition, no barriers to entry exist with respect to such
brands. The entrance into the supermarket and grocery store distribution channel
of an existing or new premium pet food by any of the Company's competitors could
have a material adverse effect on the Company.
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<PAGE>
As compared to its competition, the Company believes that its products
offer the following advantages: (i) a premium pet food available in
supermarkets, (ii) a superior packaging system, (iii) a supermarket and grocery
store distribution network, and (iv) competitive pricing with other premium
products. There can be no assurance, however, that these perceived advantages
will enable the Company to compete successfully.
Intellectual Property
InnoPet is a registered trademark of the Company. The Company has filed
applications for trademarks covering InnoPet Brands and InnoPet Veterinarian
Formula.
Government Regulation
The Company's products must be produced in USDA approved facilities. It
is the responsibility of the Company's manufacturers to obtain and maintain such
approvals. In addition, the Company's products are subject to federal and state
labelling regulations and must be registered in each state that the products are
sold to consumers. If the Company fails to register its labels or satisfy
relevant labelling regulations, it may be subject to fines or prohibited from
selling its products until such regulations are satisfied. The Company believes
it is in material compliance with such regulations.
Insurance
The Company has obtained product liability insurance and excess
liability insurance which provide aggregate coverage of $1,000,000 and
$2,000,000, respectively.
Employees
As of September 1, 1997, the Company employed 35 people, one of whom is
employed on a part time basis. This includes ten persons engaged in sales, eight
in marketing, four in manufacturing/research and development, and 13 in
administration/accounting and support. Management believes its labor relations
are satisfactory.
Litigation
The Company is currently not a party to any material legal proceedings.
Properties
The Company currently leases from IPI under a facilities agreement its
corporate office located at 1 East Broward Boulevard, Suite 1100, Fort
Lauderdale, Florida 33301, where the Company occupies approximately 11,900
square feet of office space. The monthly rent is approximately $22,650. The
facilities agreement with respect to the offices expires April 30, 2001. See
"Certain Transactions." The Company believes it has adequate space to conduct
its operations.
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<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
Company's Directors and Executive Officers:
Company Position
Name Age and Offices Held
- ------------------ --- -----------------------------------------------------
Marc Duke 50 Chairman of the Board and Chief Executive Officer
John Bieber 53 Vice President of Marketing and Director
Albert A. Masters 66 Vice President of Sales and Director
Linda Duke 50 Vice President of Operations
Robin Hunter 40 Vice President, Chief Financial Officer and Secretary
Dana Vaughn 43 Vice President of Animal Sciences
Curtis Granet 46 Director
Richard P. Greene 40 Director
Marc Duke is the Chairman of the Board of Directors and Chief Executive
Officer of the Company and has held such positions since January 1996. He is
also the Chairman of the Board of Directors and Chief Executive Officer of IPI
and its subsidiaries, and has held such positions since September 1995. From
1993 to 1995, he was President of The Original Pet Drink Company, a subsidiary
of IPI. From 1990 to 1992, he was President of Madison South International, Inc.
("Madison"), a national and international marketing consulting company.
John Bieber is the Vice President of Marketing of the Company and has
held such position since January 1997. From 1990 to 1996 Mr. Bieber was an
independent marketing consultant. From April 1989 to January 1990, he was
President and Chief Operating Officer of the MD&A Group, Inc. ("MD&A"), an
advertising and marketing consulting firm. From 1987 to 1989, Mr. Bieber was
Vice President and Director of Account Services with MD&A. From 1976 to 1986,
Mr. Bieber was Vice President/Account Supervisor with BBDO Advertising Inc.
Albert A. Masters is the Vice President of Sales of the Company and has
held such position since June 1996. From September 1995 to May 1996, Mr. Masters
was the Vice President of Sales of IPI. From 1991 to 1995, he was a Vice
President of Sales for Professional Laboratory Systems.
Linda Duke is Vice President of Operations and has held such position
since June 1996. From September 1995 to May 1996, she was the Director of
Operations for IPI. From 1993 to 1995, she was the Director of Operations for
The Original Pet Drink Company. From 1990 to 1992 she was Vice President of
Operations of Madison. Linda Duke is married to Marc Duke.
Robin Hunter is Vice President, Chief Financial Officer and Secretary
and has held such positions since January 1996. From October 1995 to May 1996,
Mr. Hunter was the Vice President and Chief Financial Officer of IPI. From 1988
to 1995, Mr. Hunter was employed by Petri Baking Products, Inc. where he was
first the Controller from 1988 to 1993, and was then promoted to Director of
Finance from 1993 to 1995.
Dana Vaughn is Vice President of Animal Sciences and has held such
position since June 1996. From December 1995 to May 1996, he was the Vice
President and Managing Director of the Animal Sciences Division of IPI. From
1985 to 1995, Dr. Vaughn was the Director of the Laboratory of Nutritional &
Medicinal Biochemistry at the College of Veterinary Medicine of Auburn
University. Dr. Vaughn is also a member of the Board of Directors of IPI.
Curtis Granet is a partner in the certified public accounting firm of
Levine & Granet, C.P.A. in the State of New York, and has held such position
since 1981.
Richard P. Greene is an attorney engaged in the practice of corporate
and securities law in the State of Florida and has maintained his own practice
since 1988. He is the Secretary of IPI.
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<PAGE>
Director Compensation
Non-employee directors receive a fee of $250 for each meeting of the
Board attended and a fee of $125 for each meeting of any committee of the Board
attended and reimbursement of their actual expenses. In addition, pursuant to
the Company's Stock Option Plan, each non-employee director will be granted
options to purchase 2,500 shares of Common Stock per annum at an exercise price
equal to the fair market value of the underlying common stock on the date of
grant which shall be the last trading date in November of each year. These
option grants will begin in November 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth certain information (since inception,
January 11, 1996) with respect to the compensation earned by the Company's Chief
Executive officer and each of the other executive officers whose salary and
bonus compensation for the fiscal year ended December 31, 1996 exceeded
$100,000.
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
------------ -------------------
Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- --------------------------------- ---- ------------ ----------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Marc Duke, 1996 $115,410 -0- $7,000(1) -0- -0-
Chief Executive Officer
</TABLE>
- -------------
(1) Represents car allowance payments to Mr. Duke.
Employment Contracts and Termination of Employment
and Change-In-Control Arrangements
The following is a description of the employment contracts between the
Company and its executive officers. In June 1997, the Company and each executive
officer agreed to reduce immediately each executive's salary. As of September 1,
1997 this reduction in base salary was still in place.
The Company has entered into an employment agreement with Mr. Marc
Duke, Chief Executive Officer, which expires on May 31, 2000. Mr. Duke currently
receives a base salary of $200,000. Under the terms of the agreement, Mr. Duke
is eligible to receive a bonus of up to 25% of his base salary at the discretion
of the Board of Directors and a performance bonus to be determined each year by
the Board of Directors. If the agreement is terminated by the Company without
cause, he is entitled to receive three times his average annual salary over the
course of the previous five years (or for whatever lesser period he has been
employed.) Such payment shall be paid half on the date of termination and the
balance six months thereafter. In the event there is a change-in-control of the
Company, and Mr. Duke is terminated, he is entitled to receive a payment equal
to three times his average annual salary and bonus over the course of the
previous five years (or for whatever lesser period he has been employed.) Such
payment shall be paid half on the date of the change-in-control and the other
half six months thereafter. The agreement also contains certain restrictions on
competition.
The Company entered into an employment agreement with Mr. John Bieber,
Vice President of Marketing, as of January 6, 1997, which expires on December
31, 1999. The agreement will automatically renew for one (1) additional year
unless terminated by the Company or Mr. Bieber. Mr. Bieber currently receives a
base salary of $100,000. Under the terms of the agreement, Mr. Bieber is
eligible to receive a merit bonus at the discretion of the Board of Directors.
The agreement provides that if Mr. Bieber is terminated without cause, he is
entitled to receive a severance payment equal to six months of his annual salary
-25-
<PAGE>
payable over the six months following his termination. As part of the agreement,
Mr. Bieber has been granted options to purchase 25,000 shares of Common Stock of
the Company. The options vest over three years beginning on December 31, 1997.
The agreement also contains certain restrictions on competition.
The Company has entered into an employment agreement with Ms. Linda
Duke, Vice President of Operations. The agreement expires on May 31, 1999 and
contains an automatic renewal for one (1) additional year unless terminated by
the Company or Ms. Duke. Ms. Duke currently receives a base salary of $65,000.
Under the terms of the agreement, Ms. Duke is eligible to receive a merit bonus
at the discretion of the Board of Directors. The agreement provides that if Ms.
Duke is terminated without cause, she is entitled to receive a severance payment
equal to six months of her annual salary payable over the six months following
her termination. The agreement also contains certain restrictions on
competition.
The Company has entered into an employment agreement with Mr. Robin
Hunter, Vice President and Chief Financial Officer. The agreement expires on May
31, 1999 and contains an automatic renewal for one (1) additional year unless
terminated by the Company or Mr. Hunter. Mr. Hunter currently receives a base
salary of $85,000. Under the terms of the agreement, Mr. Hunter is eligible to
receive a merit bonus at the discretion of the Board of Directors. The agreement
provides that if Mr. Hunter is terminated without cause, he is entitled to
receive a severance payment equal to six months of his annual salary payable
over the six months following his termination. The agreement also contains
certain restrictions on competition.
The Company has entered into an employment agreement with Mr. Albert
Masters, Vice President of Sales. The agreement expires on May 31, 1999 and
contains an automatic renewal for one (1) additional year unless terminated by
the Company or Mr. Masters. Mr. Masters currently receives a base salary of
$104,000. Under the terms of the agreement, Mr. Masters is eligible to receive a
merit bonus at the discretion of the Board of Directors. The agreement provides
that if Mr. Masters is terminated without cause, he is entitled to receive a
severance payment equal to six months of his annual salary payable over the six
months following his termination. The agreement also contains certain
restrictions on competition.
The Company has entered into an employment agreement with Dr. Dana
Vaughn, Vice President of Research and Development. The agreement expires on May
31, 1999 and contains an automatic renewal for one (1) additional year unless
terminated by the Company or Dr. Vaughn. Dr. Vaughn currently receives a base
salary of $125,000. Under the terms of the agreement, Dr. Vaughn is eligible to
receive a merit bonus at the discretion of the Board of Directors. The agreement
provides that if Dr. Vaughn is terminated without cause, he is entitled to
receive a severance payment equal to six months of his annual salary payable
over the six months following his termination. The agreement also contains
certain restrictions on competition.
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<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's certificate of incorporation and by-laws provide that the
Company shall indemnify all directors and officers of the Company to the fullest
extent permitted by the Delaware General Corporation Law. Under such provisions,
any director or officer, who in his capacity as such is made or threatened to be
made, party to any suit or proceeding, shall be indemnified if it is determined
that such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and persons controlling the Company pursuant to
the foregoing provision, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
The Company has acquired directors' and officers' liability insurance
providing aggregate coverage of $5,000,000.
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<PAGE>
STOCK OPTION PLAN
A total of 400,000 shares of Common Stock are reserved for issuance
under the Stock Option Plan, of which 65,000 have been granted as of September
1, 1997. The plan provides for the award of options, which may either be
incentive stock options ("ISOs") within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code") or non-qualified options
("NQOs") which are not subject to special tax treatment under the Code. The
Stock Option Plan is administered by the Board or a committee appointed by the
Board (the "Administrator"). Officers, directors, and employees of, and
consultants to, the Company or any parent or subsidiary corporation selected by
the Administrator are eligible to receive options under the plan. Subject to
certain restrictions, the Administrator is authorized to designate the number of
shares to be covered by each award, the terms of the award, the dates on which
and the rates at which options or other awards may be exercised, the method of
payment and other terms.
The exercise price for ISOs cannot be less than the fair market value
of the stock subject to the option on the grant date (110% of such fair market
value in the case of ISOs granted to a stockholder who owns more than 10% of the
Company's Common Stock). The exercise price of a NQO shall be fixed by the
Administrator at whatever price the Administrator may determine in good faith.
Unless the Administrator determines otherwise, options generally have a 10- year
term (or five years in the case of ISOs granted to a participant owning more
than 10% of the total voting power of the Company's capital stock). Unless the
Administrator provides otherwise, options terminate upon the termination of a
participant's employment, except that the participant may exercise an option to
the extent it was exercisable on the date of termination for a period of time
after termination.
Generally, awards must be exercised by cash payment to the Company of
the exercise price. However, the Administrator may allow a participant to pay
all or a portion of the exercise price by means of a promissory note, stock or
other lawful consideration. The Stock Option Plan also allows the Administrator
to provide for withholding and employment taxes payable by a participant to the
Company upon exercise of the award. Additionally, the Company may make cash
grants or loans to participants relating to the participant's withholding and
employment tax obligations and the income tax liability incurred by a
participant upon exercise of an award.
In the event of any change in the outstanding shares of Common Stock by
reason of any reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash dividend,
property dividend or similar change in the corporate structure, the aggregate
number of shares of Common Stock underlying any outstanding options may be
equitably adjusted by the Administrator in its sole discretion.
The Administrator may, at any time, modify, amend or terminate the plan
as is necessary to maintain compliance with applicable statutes, rules or
regulations; provided, however, that the Administrator may condition the
effectiveness of any such amendment on the receipt of stockholder approval as
may be required by applicable statute, rule or regulation. In addition, this
Stock Option Plan may be terminated by the Board of Directors as it shall
determine in its sole discretion, in the absence of stockholder approval;
provided, however, that any such termination will not adversely alter or impair
any option awarded under the Stock Option Plan prior to such termination without
the consent of the holder thereof.
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<PAGE>
CERTAIN TRANSACTIONS
Capital for the development of the Company has been provided by IPI.
From January 1996 through August 31, 1996, IPI made capital contributions of
$2,221,348 in the form of costs and expenses ($1,323,125), funds used to
purchase the KenVet formulations and inventories ($699,794), and financing costs
($198,429). In return, IPI received 1,182,432 shares of Common Stock.
Additionally, on June 1, 1996, the Company sold 43,497 shares of Common Stock to
IPI in exchange for $139,190.
The Company also issued a note, dated June 5, 1996, to IPI in the
amount of $1,000,000 which bears interest at one percent above the prime rate
(on September 1, 1997 the prime rate was 8.5%). The note has a term of five
years. Interest is payable quarterly and principal is payable annually. Through
December 31, 1996, IPI also provided $724,394 in working capital for
inventories, costs and expenses, which were recorded as accounts payable by the
Company. As of June 30, 1997, the balance payable for IPI was $810,129
reflecting the above working capital advances plus balances due under the
facilities agreement.
On June 1, 1996, the Company sold a total of 652,449 shares of Common
Stock to Messrs. Duke, Vaughn, Masters and Hunter, Ms. Duke and to 12 other
employees of the Company at that time, in exchange for three-year notes to the
Company bearing interest at 5.75% annually, in the aggregate principal amount of
$2,087,839. The notes are secured by the shares owned by the employees.
The Company has entered into a facilities agreement pursuant to which
it has agreed to lease its offices, furnishings and equipment from IPI until
April 30, 2001. The Company shall pay an annual amount of approximately $349,000
to IPI for the lease of the offices, furnishings and equipment which represents
a direct pass through of the rent expenses and reimbursement for the costs of
equipment, furniture and fixtures.
Richard Greene is a Director of the Company. The Company has paid Mr.
Greene approximately $96,446 for various legal other and services which he has
provided to the Company.
Mr. Duke is the Chief Executive Officer, Chairman of the Board of
Directors and a significant shareholder in IPI as well as an officer of the
three other subsidiaries of IPI. While it is expected that Mr. Duke will
continue to hold these positions in the immediate future, during the term of his
employment agreement, Mr. Duke will devote substantially all of his time and
efforts to the management and development of the Company. See "Risk Factors --
Dependence on Key Personnel; Conflict of Interests." Dr. Vaughn is a Director of
IPI. During the term of his employment agreement, Dr. Vaughn will devote all of
his time and efforts to the management and development of the Company.
All completed, on-going and future transactions between the Company and
its officers, directors, principal stockholders or other affiliates have been
and will be on terms no less favorable to the Company then could be obtained
from unaffiliated third parties on an arm's-length basis, and will be approved
by a majority of the Company's independent and disinterested directors.
-29-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 1, 1997 (i) by each
person who is known by the Company to beneficially own more than 5% of the
Company's Common Stock, (ii) by each of the Company's directors, (iii) by each
officer named under "Management -- Executive Compensation -- Summary
Compensation Table" and (iv) by all officers and directors as a group. Except as
indicated in the footnotes to this table, the persons named in the table have
sole voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. The table assumes that
4,464,921 shares of Common Stock are outstanding.
Name and Address of Number of Shares
Beneficial Owner(1) Beneficially Owned(2) Percentage(2)
- ------------------- --------------------- -------------
Marc Duke 1,877,421(3) 42.0%
Dana Vaughn 86,993 1.9%
John Bieber 5,000(4) *
Albert A. Masters 43,497 *
Robin Hunter 43,497 *
Linda Duke 34,797 *
Richard Greene 0 *
Curtis Granet 0 *
InnoPet Inc. 1,255,929 25.2%
One East Broward Boulevard
Fort Lauderdale, Florida 33301
Entrepreneurial Investors, Ltd. 1,183,333(5) 25.2%
Citibank Building
East Mall Drive
Freeport, Bahamas
Joseph Stevens & Company, L.P. 450,000(6) 9.2%
33 Maiden Lane
New York, New York
Daniel R. Lee 250,000(7) 5.3%
All Officers and Directors
as a Group (8 persons) 1,882,421 42.1%
- --------------------
* Less than one percent (1%).
(1) Unless otherwise indicated, all addresses are c/o InnoPet Brands Corp., One
East Broward Boulevard, Suite 1100, Fort Lauderdale, Florida 33301.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act and unless otherwise indicated, represents shares
for which the beneficial owner has sole voting and investment power. The
percentage of class is calculated in accordance with Rule 13d-3.
(3) This number includes 233,926 shares of Common Stock owned by management and
current and former employees of the Company (including 34,797 shares owned
by Linda Duke, Mr. Duke's wife) of which Mr. Duke has been granted a proxy
to vote the shares.
-30-
<PAGE>
This number also includes 1,225,929 shares of Common Stock owned by IPI as
to which Mr. Duke disclaims beneficial ownership. Mr. Duke is the record
owner of 417,566 shares of Common Stock.
(4) This number includes 5,000 shares of Common Stock that may be acquired,
commencing December 31, 1997, upon the exercise of an option.
(5) This number includes (i) 625,000 shares of Common Stock underlying 625,000
shares of Series A Preferred Stock which are convertible at any time into
625,000 shares of Common Stock; (ii) 225,000 shares of Common Stock
underlying 225,000 Redeemable Warrants; and (iii) 333,333 shares of Common
Stock which are currently in escrow as collateral for the Loan (the Loan
may be converted, at EIL's option, into Common Stock with a conversion
price of $4.50 per share).
(6) This number consists of 225,000 shares of Common Stock which may be
acquired, commencing December 5, 1997, upon the exercise of warrants to
purchase 225,000 units, each unit consists of one share of Common Stock and
one warrant to purchase one share of Common Stock for $8.70 per share.
(7) This number includes 250,000 shares of Common Stock that may be acquired
upon the exercise of presently exercisable Redeemable Warrants.
-31-
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock and
Redeemable Warrants covered by this Prospectus with respect to each Selling
Shareholder, and the amount and percentage ownership of each Selling Shareholder
after the offering of the Securities offered hereby, assuming all of the
Securities covered by this Prospectus are sold by the Selling Shareholders.
Except as otherwise indicated by footnote below, none of the Selling
Shareholders has had any position, office or other material relationship with
the Company within the past three years, other than as a result of the ownership
of the Securities or other securities of the Company.
<TABLE>
<CAPTION>
Name and Address of
Selling Shareholder Common Stock Redeemable Warrants
------------------- ------------------------------------- --------------------------------------
Number Owned Number Owned
Prior to and Percent of Prior to and Percent of
Registered in Class After Registered in Class After
the Offering the Offering(1) the Offering the Offering(1)
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Entrepreneurial Investors, Ltd. 1,269,956(2) 0 225,000 0
Citibank Building
East Mall Drive
Freeport, Bahamas
Equity Services, Ltd. 62,500(3) 0 0 0
Frederick Street Steps
P.O. Box N-4805
Nassau, Bahamas
</TABLE>
- --------------------------
(1) Assumes no purchase by any Selling Securityholder of any Common Stock or
Redeemable Warrants in the Offering.
(2) This number includes (i) 625,000 shares of Common Stock underlying 625,000
shares of Series A Preferred Stock which are convertible at any time into
625,000 shares of Common Stock; (ii) 21,622 shares of Common Stock which
will be issued quarterly as a dividend on the Series A Preferred Stock
(represents the aggregate dividend for a period of one year from the date
of issuance); (iii) 225,000 shares of Common Stock underlying 225,000
Redeemable Warrants; (iv) 600,000 shares of Common Stock which are
currently in escrow as collateral for the Loan (the Loan may be converted,
at EIL's option, into Common Stock with a conversion price of $4.50 per
share); and (v) 23,334 shares of Common Stock to be issued as interest on
the Loan through its January 15, 1998 maturity date, the Company shall pay
interest at a rate of 14% per annum and may, at its option, pay the
interest in Common Stock valued at $4.50 per share.
(3) This number includes 62,500 shares of Common Stock underlying an option to
purchase 62,500 shares of Series A Preferred Stock (the 62,500 shares of
Series A Preferred Stock may be converted at any time, at the option of the
holder thereof, into 62,500 shares of Common Stock).
-32-
<PAGE>
PLAN OF DISTRIBUTION
The sale of all or a portion of the Securities by the Selling
Shareholders may be effected, from time to time, in private transactions or in
the over-the-counter market at prices related to the prevailing prices of the
Securities on the NASDAQ-SMC at the time of the sale, or at negotiated prices.
The Selling Shareholders may effect such transactions by selling to or through
one or more broker-dealers, and such broker-dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any broker-dealers that participate
in the distribution of the Securities may, under certain circumstances, be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by such broker-dealers and any profits realized on the
resale of Securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act. The Company and the Selling Shareholders
may agree to indemnify such broker-dealers against certain liabilities,
including liabilities under the Securities Act. In addition, the Company has
agreed to indemnify the Selling Shareholders, with respect to the Securities
offered hereby, against certain liabilities, including certain liabilities under
the Securities Act.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any such broker-dealers,
(b) the number of Securities involved, (c) the price at which such Securities
are to be sold, (d) the commissions paid or discounts or concessions allowed to
such broker-dealers, where applicable, (e) that such broker-dealers did not
conduct any investigation to verify the information set out in this Prospectus,
as supplemented, and (f) other facts material to the transaction.
Each Selling Shareholder may be subject to applicable provisions of the
Exchange Act and the rules and regulations promulgated thereunder, including,
without limitation, Regulation M, which provisions may limit the timing of
purchases and sales of any of the Company's securities by the Selling
Shareholders.
There is no assurance that any of the Selling Shareholders will sell
any of the Securities.
The Company has agreed to pay all costs and expenses incurred in
connection with the registration of the Securities offered hereby, except that
the Selling Shareholders shall be responsible for all selling commissions,
transfer taxes and related charges in connection with the offer and sale of such
Securities and the fees of the Selling Shareholders' counsel.
The Company has agreed to keep the Registration Statement relating to
the offering and sale, by the Selling Shareholders, of the Securities,
continuously effective until the earlier of sale of all the securities or 12
months.
-33-
<PAGE>
DESCRIPTION OF THE COMPANY'S SECURITIES
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock.
Common Stock
The Company's authorized common stock consists of 25,000,000 shares of
Common Stock. As of September 1, 1997, there were issued and outstanding
4,464,921 shares of Common Stock of the Company. Additionally, options to
purchase 65,000 shares of Common Stock have been granted. The holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of shareholders. Subject to preferences that may be
applicable to outstanding shares of Preferred Stock, the holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the
Company's Board of Directors out of funds legally available therefor. Holders of
Common Stock have no preemptive, subscription or redemption rights, and there
are no conversion or similar rights with respect to such shares. The outstanding
shares of Common Stock are fully paid and nonassessable.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of
undesignated Preferred Stock. The Board of Directors has the authority to issue
the undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock, as well as to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the shareholders. As of September 1, 1997, there were
issued and outstanding 625,000 shares of Series A 4% Cumulative Preferred Stock
(the "Series A Preferred Stock"). Each share of Series A Preferred Stock is
convertible at any time, at the option of the holder thereof, into one share of
Common Stock. The Series A Preferred Stock pays a 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-SMC for the 20 trading days preceding the record date for
the declaration of the dividend. Additionally, as of September 1, 1997 options
have been granted to purchase up to 62,500 shares of Series A Preferred Stock.
The option has a term of five (5) years commencing on April 29, 1998. The Board
of Directors, without shareholder approval, may issue additional Preferred Stock
with voting and conversion rights which could materially adversely affect the
voting power of the holders of Common Stock. The issuance of additional
Preferred Stock could also decrease the amount of earnings and assets available
for distribution to holders of Common Stock. In addition, the issuance of
additional Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. See "Risk Factors -- Possible
Adverse Effects of Authorized Preferred Stock."
Redeemable Warrants
Each Redeemable Warrant entitles the registered holder thereof to
purchase one share of Common Stock at a price of $6.00 per share, subject to
adjustment, commencing immediately. As of September 1, 1997, 3,587,500
Redeemable Warrants were issued and outstanding. The Redeemable Warrants expire
on December 5, 2001. The Redeemable Warrants will be subject to redemption,
subject to the prior written consent of the underwriter of the Company's initial
public offering, at a price of $.05 per Redeemable Warrant commencing
immediately on 30 days' written notice provided the average closing bid price of
the Common Stock as reported by NASDAQ-SMC (or the last sale price if listed on
a national securities exchange), equals or exceeds 150% of the warrant exercise
price per share for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. The holder of a Redeemable Warrant will lose his right to purchase
if such right is not exercised prior to redemption by the Company on the date
for redemption specified in the Company's notice of redemption or any later date
specified in a subsequent notice. Notice of redemption by the Company shall be
given by first class mail to the holders of the Redeemable Warrants at their
addresses set forth in the Company's records.
The exercise price of the Redeemable Warrants and the number and kind
of shares of Common Stock or other securities and property to be obtained upon
exercise of the Redeemable Warrants are subject to adjustment in certain
-34-
<PAGE>
circumstances including a stock split of, or stock dividend on, or a
subdivision, combination or recapitalization of, the Common Stock. Additionally,
an adjustment would be made upon the sale of all or substantially all of the
assets of the Company so as to enable Redeemable Warrant holders to purchase the
kind and number of shares of stock or other securities or property (including
cash) receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon exercise of such Redeemable
Warrant. No adjustment for previously paid cash dividends, if any, will be made
upon exercise of the Redeemable Warrants.
The Redeemable Warrants do not confer upon the holder any voting or any
other rights of a stockholder of the Company. Upon notice to the Redeemable
Warrant holders, the Company has the right to reduce the exercise price or
extend the expiration date of the Redeemable Warrants.
Transfer Agent, Warrant Agent and Registrar
The Company's Transfer Agent, Warrant Agent and Registrar is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, NY 10004.
-35-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of September 1, 1997, the Company has 4,464,921 shares of Common
Stock and 3,587,500 Redeemable Warrants outstanding. Of these securities,
2,587,500 shares of Common Stock and 2,587,500 Redeemable Warrants are currently
freely tradeable in the public market. All of the 1,332,456 shares of Common
Stock and 225,000 Redeemable Warrants included in this Offering will be freely
tradeable without restriction or further registration under the Securities Act
unless held by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act. In addition, 1,000,000 Redeemable Warrants and
1,000,000 shares of Common Stock underlying such warrants, were registered in
the Company's December 5, 1996 initial public offering but cannot be sold
without the consent of the underwriter thereof as described below. The remaining
1,877,421 shares may be deemed "restricted securities," and may not be sold
except in compliance with Rule 144 under the Securities Act. Rule 144, in
essence, provides that a person holding restricted securities for a period of
one year may publicly sell in brokerage transactions at an amount equal to one
percent of the Company's outstanding Common Stock every three months or, if
greater, a percentage of the shares publicly traded during a designated period.
Of such 1,877,421 shares, 1,225,929 are currently eligible for sale under Rule
144. The remaining 651,492 shares were purchased by employees by notes and at
this time it is not possible to state when such shares will be eligible for sale
under Rule 144 other than the earliest they might be eligible for sale under
Rule 144 is September, 1998 is the notes were to be satisfied in September,
1997.
Each of the Company's officers, directors, stockholders and holders of
warrants at the time of the Company's initial public offering (December 5, 1996)
agreed that for a period of 18 months from December 5, 1996, they will not sell
any of the Company's securities without the consent of the underwriter of the
initial public offering.
The foregoing is a summary of all material terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which are filed as exhibits to the Registration
Statement. See "Additional Information."
-36-
<PAGE>
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for
the Company by Camhy Karlinsky & Stein LLP, New York, New York. One partner in
the firm has options to purchase 8,000 shares of Common Stock and one partner
may be deemed to have beneficial ownership (although such beneficial ownership
is disclaimed) of options to purchase 32,000 shares of Common Stock.
EXPERTS
The financial statements as of December 31, 1997, included in this
Prospectus and in the Registration Statement, have been included herein in
reliance upon the report of Rachlin Cohen & Holtz, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the Commission's principal offices at
450 Fifth Street, N.W., Washington, D.C. 20549; at its New York Regional Office,
7 World Trade Center, New York, New York 10048; and at its Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and copies of such material can be obtained from the Commission's
Public Reference Section at prescribed rates.
The Company has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act with respect to the
Securities offered by this Prospectus. This Prospectus, filed as part of such
Registration Statement, does not contain all of the information set forth in, or
annexed as exhibits to, the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement including the exhibits
filed therewith. The Registration Statement may be inspected and copies may be
obtained from the Public Reference Section at the Commission's principal office,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and the New
York Regional Office, 7 World Trade Center, New York, New York 10048, upon
payment of the fees prescribed by the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and where the contact or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by such reference to the applicable document filed with the
Commission.
-37-
<PAGE>
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's certificate of incorporation and by-laws provide that the
Company shall indemnify all directors and officers of the Company to the fullest
extent permitted by the Delaware General Corporation Law. Under such provisions,
any director or officer, who in his capacity as such is made or threatened to be
made, party to any suit or proceeding, shall be indemnified if it is determined
that such director or officer acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. The
Company has acquired directors' and officers' liability insurance providing
aggregate coverage of $5,000,000.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
-38-
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Balance Sheet F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 to F-24
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
InnoPet Brands Corp.
We have audited the accompanying balance sheet of InnoPet Brands Corp. as of
December 31, 1996, and the related statements of operations, stockholders'
equity, and cash flows from inception (January 11, 1996) to December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of InnoPet Brands Corp. as of
December 31, 1996, and the results of its operations and its cash flows from
inception (January 11, 1996) to December 31, 1996 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully discussed in Note 2 to
the financial statements, the Company is in the development stage and has
incurred a net loss and reflects an accumulated deficit as of and for the period
ended December 31, 1996. This condition raises substantial doubt as to the
ability of the Company to continue as a going concern. Management's plans with
regard to this matter are also described in Note 2 to the financial statements.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
RACHLIN COHEN & HOLTZ
Fort Lauderdale, Florida
February 28, 1997
F-2
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,614,312 $ 632,084
Accounts receivable 219,011 389,661
Inventories 1,058,108 2,700,061
Prepaid expenses and other current assets 445,445 320,831
------------ ------------
Total current assets 6,336,876 4,042,637
------------ ------------
Property and Equipment 105,978 416,948
------------ ------------
Intangible Assets:
Deferred slotting fees, net of accumulated amortization
of $1,094,845 in 1996 and $1,7675,491 in 1997 496,367 153,578
Product formulae acquisition costs, net of accumulated
amortization of $26,574 in 1996 and $40,217 in 1997 251,413 237,770
Non-compete agreement, net of accumulated amortization
of $93,435 in 1996 and $144,399 in 1997 212,351 161,387
------------ ------------
960,131 552,735
------------ ------------
Other Assets 153,728 301,037
------------ ------------
Total assets $ 7,556,713 $ 5,313,357
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
InnoPet, Inc. $ 724,394 $ 810,129
Slotting fees 539,095 421,717
Trade 760,200 1,786,332
Current portion of long-term debt due to InnoPet Inc. 200,000 200,000
------------ ------------
------------ ------------
Total current liabilities 2,223,689 3,218,178
------------ ------------
Long-Term Debt:
Note payable to InnoPet Inc., net of current portion 800,000 600,000
------------ ------------
Commitments and Other Matters -- --
Stockholders' Equity:
Preferred stock, 4% convertible $.01 par value; authorized
5,000,000 shares; issued and outstanding none in-1996
2,500,0005,000 shares in 1997; stated at liquidation value -- 2,500,000
Common stock, $.01 par value; authorized 25,000,000
shares; issued 4,465,878 shares in 1996 and 4,465,443 in 1997 44,658 44,658
Additional paid-in capital 13,164,859 12,712,380
Deficit accumulated during the development stage (6,518,304) (11,544,162)
Notes and interest receivable on sale of common stock (2,158,189) (2,216,243)
Treasury stock, at cost -- (1,454)
------------ ------------
4,533,024 1,495,179
------------ ------------
Total liabilities and stockholders' equity $ 7,556,713 $ 5,313,357
============ ============
</TABLE>
See notes to financial stataments.
F-3
<PAGE>
INNOPET BRANDS CORP.~(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Inception Inception Six
(January 11, (January 11, Months
1996) to 1996) to Ended Cumulative
December 31, June 30, June 30, from
1996 1996 1997 Inception
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 1,859,936 $ 153,061 $ 1,106,812 $ 2,966,748
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of sales 1,634,474 132,776 762,162 2,396,636
Marketing and distribution 3,004,127 567,130 2,529,308 5,533,435
Product development 584,976 399,542 244,190 829,166
General and administrative 1,782,795 915,929 1,929,689 3,712,484
Slotting allowances -- 44,000 670,646 670,646
------------ ------------ ------------ ------------
7,006,372 2,059,377 6,135,995 13,142,367
------------ ------------ ------------ ------------
Loss before Other Expenses (5,146,436) (1,906,316) (5,029,183) (10,175,619)
------------ ------------ ------------ ------------
Other Income (Expenses):
Interest income 21,570 -- 55,407 76,977
Interest expense, including amortization
of discount of $250,000 (408,901) (218,841) (45,870) (454,771)
Financing costs, including amortization
of $424,329 (773,772) -- -- (773,772)
Costs in connection with unsuccessful
financing (161,289) -- -- (161,289)
Other expenses (49,476) -- (6,212) (55,688)
------------ ------------ ------------ ------------
(1,371,868) (218,841) 3,325 (1,368,543)
------------ ------------ ------------ ------------
Net Loss $ (6,518,304) $ (2,125,157) $ (5,025,858) $(11,544,162)
============ ============ ============ ============
Net Loss per Common Share $ (3.11) $ (1.13) $ (1.13)
============ ============ ============
</TABLE>
See notes to financial stataments.
F-4
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ------------
Liquidation
Shares Value Shares Amount
------ ----- ------ ------
<S> <C> <C> <C> <C>
Inception (January 11, 1996) to December 31, 1996: -- $ -- 1,182,432 $ 11,824
Sale of common stock ($3.20 per share):
InnoPet Inc. -- -- 43,497 435
Officers and employees, in exchange for notes receivable -- -- 652,449 6,524
Interest accrued on notes receivable on sale of common stock -- -- -- --
Estimated fair value of warrants issued in connection with
private placement financing -- -- -- --
Sale of units (common stock and warrants) in Initial Public
Offering ($4.00 per unit), net of related costs -- -- 2,587,500 25,875
Sale of warrants to underwriter -- -- -- --
Net loss -- -- -- --
------- ---------- --------- ----------
Balance, December 31, 1996 -- -- 4,465,878 44,658
Six Months Ended June 30, 1997 (Unaudited):
Sale of preferred stock 625,000 2,500,000 -- --
Preferred stock warrants -- -- -- --
Acquisition of treasury stock -- -- (435) --
Interest accrued on notes receivable on sale of common stock -- -- -- --
Net loss -- -- -- --
------- ---------- --------- ----------
Balance, June 30, 1997 (Unaudited) 625,000 $2,500,000 4,465,443 $ 44,658
======= ========== ========= ==========
</TABLE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
Notes and
Deficit Interest
Accumulated Receivable
Additional During the on Sale of
Paid-In Development Common
Capital Stage Stock
------- ----- -----
<S> <C> <C> <C>
Inception (January 11, 1996) to December 31, 1996: $ 2,209,524 $ -- $ --
Sale of common stock ($3.20 per share):
InnoPet Inc. 138,755 -- --
Officers and employees, in exchange for notes receivable 2,081,315 -- (2,087,839)
Interest accrued on notes receivable on sale of common stock 70,350 -- (70,350)
Estimated fair value of warrants issued in connection with
private placement financing 250,020 -- --
Sale of units (common stock and warrants) in Initial Public
Offering ($4.00 per unit), net of related costs 8,414,872 -- --
Sale of warrants to underwriter 23 -- --
Net loss -- (6,518,304) --
------------ ------------ ------------
Balance, December 31, 1996 13,164,859 (6,518,304) (2,158,189)
Six Months Ended June 30, 1997 (Unaudited):
Sale of preferred stock (512,087) -- --
Preferred stock warrants 100 -- --
Acquisition of treasury stock -- -- 1,454
Interest accrued on notes receivable on sale of common stock 59,508 -- (59,508)
Net loss -- (5,025,858) --
------------ ------------ ------------
Balance, June 30, 1997 (Unaudited) $ 12,712,380 $(11,544,162) $ (2,216,243)
============ ============ ============
</TABLE>
<PAGE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
Treasury
Stock Total
----- -----
<S> <C> <C>
Inception (January 11, 1996) to December 31, 1996: $ -- $ 2,221,348
Sale of common stock ($3.20 per share):
InnoPet Inc. -- 139,190
Officers and employees, in exchange for notes receivable -- --
Interest accrued on notes receivable on sale of common stock -- --
Estimated fair value of warrants issued in connection with
private placement financing -- 250,020
Sale of units (common stock and warrants) in Initial Public
Offering ($4.00 per unit), net of related costs -- 8,440,747
Sale of warrants to underwriter -- 23
Net loss -- (6,518,304)
------------ ------------
Balance, December 31, 1996 -- 4,533,024
Six Months Ended June 30, 1997 (Unaudited):
Sale of preferred stock -- 1,987,913
Preferred stock warrants -- 100
Acquisition of treasury stock (1,454) --
Interest accrued on notes receivable on sale of common stock -- --
Net loss -- (5,025,858)
------------ ------------
Balance, June 30, 1997 (Unaudited) $ (1,454) $ 1,495,179
============ ============
</TABLE>
See notes to financial stataments.
F-5
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Inception Inception Six
(January 11, (January 11, Months
1996) to 1996) to Ended Cumulative
December 31, June 30, June 30, from
1996 1996 1997 Inception
------------- ------------ ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (6,518,304) $ (2,125,157) $ (5,025,858) $(11,544,162)
Adjustments to reconcile net loss to net cash used in operating
activities:
Costs and expenses paid on behalf of Company by InnoPet, Inc. 1,580,327 1,301,026 -- 1,580,327
Depreciation 27,354 31,278 57,736 85,090
Amortization:
Slotting fees 1,094,845 44,000 670,646 1,765,491
Financing costs 872,759 -- -- 872,759
Other 120,009 55,115 64,607 184,616
Interest paid from proceeds of public offering 61,944 -- (445,235) (383,291)
Offsets against accounts receivable for slotting fees (881,117) -- -- (881,117)
Changes in operating assets and liabilities:
Increase in:
Accounts receivable (219,011) (114,657) (170,661) (389,672)
Inventories (554,077) (229,398) (1,641,961) (2,196,038)
Prepaid expenses and other current assets (951,010) -- 124,569 (826,441)
Deposits and other assets (143,728) -- (147,337) (291,065)
Accounts payable, trade 760,200 190,959 1,026,185 1,786,385
Accounts payable, slotting fees 539,095 -- 75 539,170
Accounts payable, InnoPet Inc. 724,394 846,824 85,729 810,123
------------ ------------ ------------ ------------
Net cash used in operating activities (3,486,320) (10) (5,401,505) (8,887,825)
------------ ------------ ------------ ------------
Cash Flows from Investing Activities:
Acquisition of property and equipment (84,540) -- (368,737) (453,277)
------------ ------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from Initial Public Offering 6,851,487 -- -- 6,851,487
Proceeds of long-term financing from InnoPet Inc., net 202,014 202,014 -- 202,014
Proceeds from private placement financing 1,672,236 -- -- 1,672,236
Offering costs (472,641) -- (200,000) (672,641)
Deferred financing costs (67,924) -- 1,988,014 1,920,090
------------ ------------ ------------ ------------
Net cash provided by financing activities 8,185,172 202,014 1,788,014 9,973,186
------------ ------------ ------------ ------------
Net Increase in Cash and Cash Equivalents 4,614,312 202,004 (3,982,228) 632,084
Cash and Cash Equivalents, Beginning -- -- 4,614,312 4,614,312
------------ ------------ ------------ ------------
Cash and Cash Equivalents, Ending $ 4,614,312 $ 202,004 $ 632,084 $ 5,246,396
============ ============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Non-cash investing and financing activities:
Expenditures for various assets paid on behalf of Company
by InnoPet Inc.
Product formulae, non-compete agreement and inventory $ 1,072,772 $ 958,366 $ -- $ 1,072,772
============ ============ ============ ============
Deferred financing costs $ 227,071 $ 227,071 $ -- $ 227,071
============ ============ ============ ============
Deferred slotting fees $ 291,957 $ 291,957 $ -- $ 291,957
============ ============ ============ ============
Property and equipment and other assets $ 195,732 $ 179,979 $ -- $ 195,732
============ ============ ============ ============
Deferred financing costs paid from proceeds of
private placement financing $ 327,764 $ -- $ -- $ 327,764
============ ============ ============ ============
Offering costs paid from proceeds of Initial Public Offering $ 1,436,611 $ -- $ -- $ 1,436,611
============ ============ ============ ============
Notes payable paid from the proceeds of Initial Public Offering $ 2,000,000 $ -- $ -- $ 2,000,000
============ ============ ============ ============
</TABLE>
See notes to financial stataments.
F-6
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
InnoPet Brands Corp. (the "Company") was incorporated as InnoPet
Products Corp. under the laws of the state of Delaware on January
11, 1996.
On May 15, 1996, the Company amended its Certificate of
Incorporation to change its name to InnoPet Brands Corp., and to
increase the Company's authorized common stock to consist of
25,000,000 shares of common stock, with a par value of $.01 per
share, and 5,000,000 shares of undesignated preferred stock. The
Board of Directors has the authority to issue the undesignated
preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions of designated preferred
stock.
After having amended the Certificate of Incorporation, the Company
issued shares of common stock to InnoPet Inc. in consideration for
the capital contributions made by InnoPet Inc. (see Note 6),
resulting in a total of 1,182,432 shares of common stock being
issued and outstanding.
On June 1, 1996, the Company sold 652,449 shares of common stock to
officers and employees and 43,497 shares of common stock to InnoPet
Inc. (see Note 6).
On December 10, 1996, the Company completed the Initial Public
Offering of its securities. The offering resulted in the issuance
of 2,250,000 units, each unit consisting of one share of common
stock and one redeemable warrant. Shortly thereafter, an additional
337,500 units were sold upon the exercise of an over-allotment
option by the underwriter resulting in an aggregate of 2,587,500
units sold at a price of $4.00 per unit. Subsequent to the initial
public offering, the Company ceased being a subsidiary of InnoPet
Inc.
In April, 1997 the Company sold 625,000 shares of Series A 4%
Cumulative Convertible Preferred Stock. These shares are
convertible into common stock, have a .01 per share par value and
sold at a price of $4.00 per share (unaudited).
In addition, the Company agreed to sell to the placement agent, for
an aggregate price of $100, a five (5) year option to purchase up
to Sixty Two Thousand Five Hundred (62,500) shares of the Series A
Preferred Stock at a price equal to 165% of the private placement
offering price per share of the Series A Preferred Stock
exercisable for a period of five (5) years commencing one (1) year
after the completion of the private placement (unaudited)..
Business
The Company produces, markets and sells premium dog food through
supermarkets and grocery stores under the name InnoPet Veterinarian
Formula Dog Food.
F-7
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Information
The financial statements as of and for the periods ended June 30,
1996 and 1997 are unaudited. However, all adjustments which are, in
the opinion of management, necessary for a fair presentation of
financial position, results of operation and cash flows have been
included. For purposes of interim financial reporting, the Company
uses the standard cost method in determining the estimate of the
lower of cost or market for inventory valuation. The results of the
interim period are not necessarily indicative of the results for
the full year.
Use of Estimates
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amount of assets
and liabilities as of the date of the balance sheet and operations
for the periods. Material estimates as to which it is reasonably
possible that a change in the estimate could occur in the near term
relate to the determination of the estimated net realizable value
of certain elements of inventories, the estimated amortization
period of certain intangible assets and the estimated liability for
coupon redemptions. Although these estimates are based on
management's knowledge of current events and actions it may
undertake in the future, they may ultimately differ from actual
results.
Period of Operations
As described above, the Company was incorporated on January 11,
1996. However, for financial reporting purposes, the accompanying
financial statements include all of the costs and expenses paid or
incurred by InnoPet Inc. on behalf of the Company, which have been
recorded as capital contributions by InnoPet Inc. (see Note 6).
Revenue Recognition
The Company recognizes revenue from product sales when products are
shipped to customers. The Company does not grant return privileges
to customers, but does recognize credits for damaged goods when
such claims are appropriately filed by customers.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, money
market funds at broker/dealers and accounts receivable.
The Company maintains its cash which consists primarily of demand
deposits with one financial institution. From time to time, such
balances exceed the federally insured limits. These balances are
maintained with a high quality institution, thereby limiting the
risk.
F-8
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentrations of Credit Risk
The Company maintains cash equivalents with one financial
institution. From time to time, these balances exceed applicable
insurance limits. Management believes that this risk is limited by
maintaining the funds with a high quality financial institution.
The Company sells products to grocery chain stores and supermarkets
and extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral.
Exposure to losses on receivables is expected to vary by customer
due to the financial condition of each customer. The Company
monitors exposure to credit losses and maintains allowances for
anticipated losses considered necessary under the circumstances. As
of December 31, 1996 and June 30, 1997 (unaudited), no allowance
for losses was considered necessary.
Cash Equivalents
The Company classifies all highly liquid investments with original
maturities of three months or less as cash equivalents. Such
investments are comprised of money market funds maintained with a
financial institution.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method, and market by
estimated net realizable value.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
betterments and additions are charged to the asset accounts, while
replacements, maintenance and repairs which do not extend the lives
of the respective assets are charged to expense currently.
Depreciation is computed using the straight-line method at rates
based generally on the estimated useful lives of the assets. The
estimated useful lives of the furniture, fixtures and equipment
range generally from 1 to 10 years.
Product Formulae Acquisition Costs
Product formulae acquisition costs represent the cost of acquiring
the formulae to the pet food products that the Company produces and
sells (see Note 3), together with the incremental costs incurred
(primarily professional fees) that were directly related to the
acquisition of the formulae. These costs are being amortized over
an estimated useful life of 10 years. Amortization during the
period totaled $26,574.
F-9
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Product Formulae Acquisition Costs
The Company evaluates the recoverability of the product formulae
acquisition costs on a regular periodic basis, based upon the
projected future amount of profits reasonably expected to be
generated from sales of such products. Any diminution in value of
such costs will be charged to expense when determined.
Deferred Slotting Fees
Slotting fees are fees charged manufacturers by retailers in order
to facilitate the introduction of new products. The fees represent
charges for warehouse space (slots) to be used to store a
manufacturer's products, charges for retail shelf space and related
shelf sets to make room for the products and reimbursement of
retailer expenses (entering new items into their computer systems
and in some cases marketing support provided by the retailer). The
practice by retailers of charging slotting fees is a standard
industry practice.
Deferred Slotting Fees
Many retailers, rather than remitting payment for amounts due for
the purchase of product to the Company and receiving payment of
slotting fees from the Company, choose to offset slotting fees
against amounts due for product and pay only the balance. During
the periods ended December 31, 1996 and June 30, 1997 (unaudited),
$881,000 and $445,000, respectively, of accounts receivable were
settled by offsetting slotting fees due to the retailer.
It is the expectation of the Company that all slots acquired will
be available for the Company's products indefinitely. At a minimum,
however, retailers allow new products six to twelve months to
demonstrate that they can contribute to profitability. Retailers
will continue to carry products which are profitable; products
which do not provide an adequate return may be discontinued. The
Company has created a formal policy with regard to slotting,
whereby the Company requires that retailers confirm that the
product will be carried for a minimum of six months. Slots will be
made available to the Company for a period of time ranging from six
months to indefinitely. Slotting fees are recorded by the Company
upon acceptance by the retailer of the first shipment of the
Company's product.
The benefits to be derived from slotting fees extend for a period
of time estimated to range from six months to indefinitely. The
period of benefit begins when the retailer receives its first
delivery of product. Accordingly, the Company capitalizes these
costs, and amortizes them over a period of six months, beginning
when the retailer accepts delivery of the first shipment of
product.
F-10
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimated Liability for Coupon Redemptions
The Company utilizes promotional coupons as a component of its
marketing strategy. The financial statements include an accrual for
the estimated liability for coupons which are circulated, but not
redeemed as of the balance sheet date. This estimated liability is
net of an estimate of the percentage of coupons which the Company
believes will not be redeemed based upon industry practice and the
Company's limited experience to date. As of December 31, 1996 and
June 30, 1997 (unaudited), the estimated liability for promotional
coupon redemptions was approximately $10,000 and $6,400,
respectively.
Offering Costs
Costs incurred in connection with the initial public offering of
securities and the subsequent private placement of convertible
preferred stock, consisting of professional fees directly
associated with the sale of those securities, have been charged to
additional paid in capital in December 1996 and April 1997,
respectively.
Certain other professional fees which were incurred in connection
with other financings, but only indirectly associated with the
offering, aggregated $161,289, and have been charged to expense
during the period from inception (January 11, 1996) to December 31,
1996.
Financing Costs
Financing costs represent the costs incurred by InnoPet Inc. to
raise certain debt financing, the proceeds of which were used for
the developmental activities of the Company. Those costs incurred
relating to debt obligations of InnoPet Inc. have been assigned to
the Company and recorded as a capital contribution by InnoPet Inc..
These costs were amortized over the term of the related debt (six
to twelve months) and at December 31, 1996 were fully amortized.
In addition, the Company has incurred costs in connection with the
private placement financing which was consummated in August 1996.
These costs were amortized over the outstanding four-month term of
the private placement financing debt, as measured by the date of
repayment of this debt from the proceeds of the initial public
offering in December, 1996 (see Note 9).
Non-Compete Agreement
The allocated costs attributable to the non-compete agreement,
included as part of the Asset Purchase Agreement (Note 3), have
been deferred and are being amortized over the three-year term of
the covenant.
F-11
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising Costs
Advertising costs, included in marketing and distribution costs,
are charged to expense as incurred. Advertising costs incurred for
the period ended December 31, 1996 were not material, and for the
six months ended June 30, 1997 amounted to approximately $332,000
(unaudited).
Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," which is effective for
the accompanying financial statements of the Company. SFAS 123
requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to
apply Accounting Principles Board Opinion No. 25 (APB 25), which
recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company accounts for its stock-based
compensation awards to employees under the provisions of APB 25,
and will disclose the required pro forma effect on net income and
earnings per share at such time as a material number of options are
granted.
Net Loss Per Common Share
Net loss per common share has been computed based on the weighted
average number of shares of common stock outstanding during the
period. In addition, all the common shares sold during the period
prior to the initial public offering have been treated as
outstanding during the entire period in contemplation of the
initial public offering (see Note 9), pursuant to the Securities
and Exchange Commission Staff Accounting Bulletins. Fully diluted
earnings per share, assuming exercising of the options and warrants
granted is not presented as the effect of conversion is
anti-dilutive. The number of shares used in the computation was
2,094,000 shares.
NOTE 2. BASIS OF PRESENTATION
As described above, the Company was incorporated on January 11, 1996,
and, since that time, together with InnoPet Inc., has been primarily
involved in organizational activities, developing a strategic plan for
the marketing and distribution of its pet food products, and raising
capital. Planned operations, as described above, have commenced, but
revenue therefrom generated to date is not considered significant in
relation to the Company's strategic plan. Accordingly, the Company is
considered to be in the development stage, and the accompanying
financial statements represent those of a development stage enterprise.
F-12
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 2. BASIS OF PRESENTATION
The accompanying financial statements have been presented in accordance
with generally accepted accounting principles, which assume the
continuity of the Company as a going concern. However, as discussed
above, the Company is in the development stage and, therefore has
generated little revenue to date. As reflected in the accompanying
financial statements, the Company has incurred a net loss and reflects
a deficit accumulated during the development stage of $6,518,304 as of
and for the period ended December 31, 1996. This condition raises
substantial doubt as to the ability of the Company to continue as a
going concern.
Management's plans with regard to this matter encompass the following
actions:
December 31, 1996
Business Plan
The Company has adopted, and is in the process of
implementing, a business plan intended to define the
Company's strategy for growth. In June 1996, the Company
commenced sales of its dog food to supermarkets located in
the Greater Metropolitan New York area. As of December 31,
1996, the Company is selling product into the following
markets: the Greater Metropolitan New York area, the
Philadelphia, Pennsylvania area and other areas in
Pennsylvania; the Baltimore, Maryland/Washington, DC area;
North Carolina; Georgia; and the Tampa Bay, Florida and
South Florida areas. During the next twelve months, the
Company anticipates that it will begin implementation of its
national distribution.
During 1997, the Company expects to expand its line of dog
foods with the introduction of lamb and rice products. The
Company also plans to introduce a line of dry cat foods by
the end of the fourth quarter of 1997.
The Company plans to expand its marketing programs in 1997
to include such programs as: radio and newspaper
advertising, in-store coupons, floor walker displays, direct
sampling programs (including newspaper pouch samples) and
in-store demonstrations. Additionally, the Company plans to
participate in several cause-related programs to increase
consumer awareness of the Company and its products.
Equity Infusion by Means of Public Offering
The Company raised certain working capital, in August 1996
by means of private placement financing (see Note 8) and
December 1996 by means of an initial public offering of its
securities (see Note 9).
F-13
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 2. BASIS OF PRESENTATION
June 30, 1997 (Unaudited)
Business Plan
The Company has adopted, and is in the process of
implementing, a business plan intended to define the Company's
strategy for growth. In June 1996, the Company commenced sales
of its been formula dog food to supermarkets in the Greater
Metropolitan New York area. As of June 30, 1997, the Company
is selling product in the following markets: the Greater
Metropolitan New York area; Philadelphia and other areas of
Pennsylvania; the Baltimore/Washington, DC area; Virginia;
North Carolina; South Carolina; Georgia; Alabama and Florida.
As of August 8, 1997, the Company has increased its
distribution in existing markets through initial deliveries to
the Stop & Shop, Price Chopper, Winn Dixie/Atlanta Division,
and BiLo chains. During the next twelve months, the Company
anticipates it will continue implementation of its national
distribution rollout.
Beginning in June 1997, the Company began expansion of its
line of dog foods with the introduction of Lamb and Rice with
Barley formula in its existing markets. The Company also plans
to introduce a line of dry cat foods within the next twelve
months.
The Company is in the process of implementing its overall
marketing strategy. Programs include: radio and newspaper
advertising; free-standing inserts; in-store couponing,
shopping cart signage and floorminders; trial size displays;
store feature ads and circulars; direct mail sampling programs
to targeted consumers, veterinarians and breeders; newspaper
sample pouches; and extensive in-store demonstrations with
sampling.
In June 1997, the Company entered into long-term agreements
with North Shore Animal League and the Pet Savers Foundation,
whereby InnoPet Veterinarian Formula pet foods will be
exclusively fed to in-house animals and recommend to adopters
by both of these not-for-profit humane organizations which
adopt out more than one million animals per year. In addition,
adopters will be provided with product samples, literature and
coupons, and will be able to purchase the products exclusively
in retail stores of participating adoption centers.
In connection with the above partnerships, the Company is
currently participating in a cross-promotion program with
Warner Home Video that includes a consumer cash rebate and
donation to the Pet Savers Foundation for the combined
purchase of InnoPet products and the "Shiloh" home video
cassette.
F-14
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 2. BASIS OF PRESENTATION
Equity Infusion
The Company raised certain working capital in April 1997 by
means of a private placement of convertible preferred stock
(Note 1).
Additional Financing
On July 9, 1997, the Company borrowed $1,500,000 from
Entrepreneurial Investors, Ltd., a Bahamian Company. The note
has a stated interest rate of 14%, matures on January 15, 1998
and is collateralized with 600,000 shares of the Company's
Common Stock. The principal amount of the Note may be
converted into Common Stock of the Company at $4.50 per share.
Additionally, in connection with the loan, the loan agreement
provides that the Company shall issue 225,000 Warrants to
purchase shares of the Company's Common Stock at $6.00 per
share. These warrants are subject to the same terms and
conditions as the warrants currently publicly traded.
In order to achieve its financial plan, the Company is seeking
additional financing, which may consist of debt, equity or a
combination thereof. If the Company is unable to obtain
additional financing, the Company will be required to modify
its current business plan. There can be no assurance that the
Company will be able to obtain such additional financing.
The eventual outcome of the success of management's plans cannot be
ascertained with any degree of certainty. The accompanying financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 3. ACQUISITION OF PRODUCT FORMULAE AND INVENTORY AND NON-COMPETE AGREEMENT
In accordance with the terms of an Asset Purchase Agreement dated
January 16, 1996 among the Company, InnoPet Inc. and a subsidiary of
ConAgra, Inc., on the Initial Closing Date, as defined (January 16,
1996), the Company acquired all of the right, title and interest in and
to the formulae which were used in connection with the pet food
business that had been known as KenVet Nutritional Care. On the Final
Closing Date, as defined (on or before February 15, 1996), the Company
acquired all of the right, title and interest in and to certain other
assets, as defined, comprised primarily of the current inventory
existing as of the Final Closing Date. The Company did not assume any
liabilities, obligations or commitments relating to the business. In
addition, in order to induce the Company to purchase the assets
pursuant to the agreement, ConAgra agreed that for a three year period
following the Initial Closing Date, it will not manufacture or sell
certain nutritional finished pet food products. Additionally, the
Company agreed to purchase and ConAgra agreed to supply certain
products at stipulated prices for the next three years, subject to
cancellation by either party without penalty upon sixty days notice.
F-15
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 3. ACQUISITION OF PRODUCT FORMULAE AND INVENTORY AND NON-COMPETE AGREEMENT
The purchase price for the assets, as finally negotiated, was a total
of $641,021. Of this total amount, $250,000 was paid on the Initial
Closing Date in exchange for the formulae, and the balance of $391,021
was to be paid on the Final Closing Date in exchange for the remaining
assets. The $250,000 was paid by InnoPet Inc. on the Initial Closing
Date, and has been recorded as a capital contribution by InnoPet Inc..
The $391,021 was paid by InnoPet Inc. in April and May 1996 and has
been reflected as a capital contribution by InnoPet Inc. in the
accompanying financial statements.
The Company has allocated the various rights and resources inherent in
the agreement as follows: $250,000 as product formulae acquisition
costs, based on the negotiated amount contained in the agreement;
$116,021 as inventory, based upon management's estimate of the
liquidation value of the inventory; and $275,000 as a non-compete
agreement, based upon management's evaluation of the estimated economic
benefit expected to be derived from this right. The Company believes
that the allocation made to the tangible and intangible assets set
forth above is a reasonable measurement of the rights and resources
inherent in the agreement.
In connection with the acquisition of the formulae, non-compete
agreement and inventory pursuant to the Asset Purchase Agreement, it
was intended by the Company that the substance of the transaction was
to acquire the formulae to the pet food products in order to gain
entrance into this line of business and augment InnoPet Inc.'s pet food
business.
However, in order to effect the acquisition of the formulae, it was
necessary to purchase the inventory as part of the acquisition
transaction. The Company considered the purchase of the inventory as
incidental to the acquisition of the formulae, and utilized the raw
material portion of the inventory in the production of the Company's
pet food products when possible, recouped its investment in the
remainder of the inventory wherever possible and disposed of the
portion which was neither useable or salable prior to December 31,
1996. Additionally, the Company's business plan for the pet food
business contemplates operation of this business in a manner
significantly different from that employed by ConAgra, including such
attributes as trade name, market distribution system, employee base,
physical facilities, production techniques and sales force.
NOTE 4. INVENTORIES
December 31, June 30,
1996 1997
---- ----
(Unaudited)
Raw materials $ 193,162 $500,471
Work in process 122,762 580,734
Finished product 742,184 1,618,856
---------- ---------
$1,058,108 $2,700,061
========== ==========
F-16
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 5. PROPERTY AND EQUIPMENT
December 31, June 30,
1996 1997
---- ----
(Unaudited)
Die plates $ 53,879 $ 74,898
Computer equipment and software 45,805 364,322
Furniture and fixtures 27,049 53,671
Leasehold improvements 6,599 9,146
-------- --------
133,332 502,037
Less accumulated depreciation 27,354 85,089
-------- --------
$105,978 $416,948
======= =======
NOTE 6. RELATED PARTY TRANSACTIONS
Transactions with InnoPet Inc.
As discussed above, the Company was incorporated on January 11,
1996 as a wholly-owned subsidiary of InnoPet Inc. During the period
inception through approximately June 30, 1996, substantially all of
the Company's costs and expenses, and the acquisition of the
Company's assets, were paid or incurred on behalf of the Company by
InnoPet Inc. Such amounts have been accounted for as capital
contributions by the InnoPet Inc. to the Company, and are analyzed
as follows:
<TABLE>
<S> <C>
Costs and expenses charged to operations $1,323,125
Initial purchase price for the acquisition of product formulae,
covenant not to compete and inventory, including $58,773 of
directly associated costs 699,794
Deferred financing costs 198,429
----------
$2,221,348
==========
</TABLE>
F-17
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 6. RELATED PARTY TRANSACTIONS
Transactions with InnoPet Inc.
The costs and expenses expended on behalf of the Company by InnoPet
Inc. were determined based upon an analysis of those costs directly
associated with or reasonably allocated to the Company's
operational activities related to the premium pet food business.
Personnel costs were allocated based upon estimates of the actual
time devoted by individual employees to the Company's activities on
a monthly basis. General and administrative expenses were allocated
based on the overall average percentage derived from the personnel
allocation described above on a monthly basis. Marketing and
distribution and product development costs were primarily allocated
on a direct basis. In the opinion of management, the method used to
allocate costs to the Company was considered to be fair and
reasonable under the circumstances.
See Note 10 regarding a facilities agreement with InnoPet Inc.
Debt Financing by InnoPet Inc.
On June 5, 1996, InnoPet Inc. provided debt financing to the
Company in the amount of $1,000,000. The note is a five-year
unsecured note, providing for annual principal payments of $200,000
and interest at 1% over prime (9.25% at 12/31/96) payable quarterly
commencing September 1, 1996, and contains no prepayment penalty.
Interest for the period ended December 31, 1996 of $52,966 was
accrued, and charged to expense.
Accounts Payable, InnoPet Inc.
In addition to the debt financing described above, InnoPet Inc. has
also provided working capital financing to the Company on open
account. Such funds were used primarily for inventories, operating
costs and expenses, and deferred offering costs and financing
costs. These working capital advances, which have a balance of
$724,394 at December 31, 1996, are due on demand, are non-interest
bearing, and are presented in the accompanying financial statements
as accounts payable, InnoPet Inc.
Sale of Common Stock to Officers and Employees and InnoPet Inc.
On June 1, 1996, the Company sold an aggregate of 652,449 shares of
common stock to certain officers and employees of the Company,
including the chairman of the board and chief executive officer,
for a total amount of $2,087,839, and 43,497 shares to InnoPet Inc.
for $139,190 ($3.20 per share). The officers and employees
purchased their shares by means of three-year notes which bear
interest at 5.75% annually. The notes are of full recourse to the
officers and employees during the first two years of the term of
the notes, and are secured by the shares owned by the officers and
employees. The purchase price of the shares purchased by InnoPet
Inc. was applied against the then outstanding balance due to
InnoPet Inc. arising from costs and expenses expended on behalf of
the Company by InnoPet Inc.
F-18
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 7. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. SFAS No. 109 is an asset and liability approach for computing
deferred income taxes.
The provision for income taxes has been computed on a separate return
basis. The Company does not plan to file a consolidated income tax
return with InnoPet Inc. The successful completion of the initial
public offering (see Note 9) and the sale of common stock to certain
officers and employees of the Company (see Note 6), had the effect of
disqualifying the Company as a member of the consolidated group with
InnoPet Inc.
As of December 31, 1996, on a separate return basis, the Company had a
net operating loss carryforward for Federal income tax reporting
purposes amounting to approximately $6,500,000, which expires in 2011.
The Company presently has no significant temporary differences between
financial reporting and income tax reporting. The components of the
deferred tax asset as of December 31, 1996 were as follows:
Benefit of net operating loss carryforwards $2,400,000
Less valuation allowance 2,400,000
---------
Net deferred tax asset $ -
=========
As of December 31, 1996, sufficient uncertainty exists regarding the
realizability of these operating loss carryforwards and, accordingly, a
valuation allowance of $2,400,000, which related to the net operating
losses, has been established.
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three
year period will place an annual limitation on the corporation's
ability to utilize its existing tax benefit carryforwards. Such a
change in ownership occurred in 1996, based upon the sale of common
stock to certain officers and employees of the Company in June 1996
(see Note 6), and the successful completion of the Company's initial
public offering prior to December 31, 1996 (the end of the Company's
current taxable year). As a result, based upon the amount of the
taxable loss incurred to December 31, 1996, the Company estimates that
an annual limitation of approximately $990,000 will apply to the net
operating loss carryforward existing as of that date. The Company's
utilization of its tax benefit carryforwards may be further restricted
in the event of subsequent changes in the ownership of the Company.
F-19
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 8. PRIVATE PLACEMENT FINANCING
In August 1996, the Company completed certain private placement
financing involving a total of $2,000,000 of promissory notes and
1,000,000 common stock purchase warrants (private placement warrants).
Related costs amounted to approximately $424,000 resulting in net
proceeds to the Company of approximately $1,576,000. The promissory
notes bear interest at 10% per annum. Principal and accrued interest
are payable upon the earlier of the closing of the sale of securities
or other financing yielding gross proceeds of $4,000,000 to the
Company, or twelve months from date of issue. The terms of the note
contain, among other things, certain restrictions on the payment of
dividends by the Company or incurring any liability for borrowed money,
except in the ordinary course of business. Each private placement
redeemable warrant entitled the holder to purchase one share of common
stock at a price equal to 150% of the initial public offering price per
unit, subject to adjustment, during the 36-month period commencing one
year from the date the warrants are issued. Upon consummation of the
initial public offering, each private placement warrant was
automatically converted into a redeemable warrant having terms
identical to that of the redeemable warrants underlying the units of
the initial public offering (see Note 9).
The fair value of these warrants was estimated to be $250,000 ($.25 per
warrant) based, among other things, upon a financial analysis of the
term of the warrants. This amount has been reflected in the
accompanying financial statements as a discount on the notes payable,
with a corresponding credit to additional paid-in capital, and was
amortized over the term of the notes (four months).
In connection with the private placement financing, the Company issued
to the placement agent 200,000 placement agent warrants to purchase
200,000 shares of common stock at an exercise price of $2 per share.
These placement agent warrants were canceled upon the consummation of
the initial public offering.
Simultaneously with the closing of the initial public offering, these
notes, together with accrued interest, were paid in full from the
proceeds. The total amount paid, aggregated $2,061,944, which included
$61,944 of accrued interest.
NOTE 9. INITIAL PUBLIC OFFERING
In December 1996, the Company raised additional capital through an
initial public offering of its securities. The public offering
consisted of 2,250,000 units, each unit consisting of one share of
common stock and one redeemable warrant. Each redeemable warrant
entitles the holder to purchase one share of common stock at 150% of
the initial public offering price per unit, subject to adjustment. In
addition, there was an over-allotment option which was exercised by the
underwriter resulting in a total of 2,587,500 units being sold. Gross
proceeds totaled $10,350,000 and offering expenses aggregated
$1,909,253, resulting in net proceeds of $8,440,747.
F-20
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 9. INITIAL PUBLIC OFFERING
In addition, the underwriter purchased warrants to purchase from the
Company 225,000 units for nominal consideration, which may be exercised
anytime in the four year period commencing at the beginning of the
second year following issuance, at an exercise price of 165% of the
initial public offering price.
At the time the initial public offering was completed, the Company
ceased being a subsidiary of InnoPet Inc. inasmuch as InnoPet Inc.'s
ownership of the Company's common stock amounted to only approximately
27.5% following the completion of the public offering.
Subsequent to the initial public offering the following warrants are
outstanding:
<TABLE>
<CAPTION>
Description Exercise Quantity
----------- Price --------
-----
<S> <C> <C>
Private placement warrants converted - redeemable for one common share $6.00 1,000,000
Initial public offering warrants - redeemable for one common share 6.00 2,587,500
Underwriter warrants - redeemable for one unit, comprised of one
common share and one warrant 6.60 225,000
Warrants resulting from exercise of underwriter warrants - redeemable
for one common share 225,000
---------
Total 4,037,500
=========
</TABLE>
NOTE 10. COMMITMENTS AND OTHER MATTERS
Employment Agreements
The Company entered into an employment agreement with the chief
executive officer dated as of June 1, 1996 which expires on May 31,
2000. The agreement provides, among other things, for an annual
salary of $200,000 to December 31, 1997 and $250,000 thereafter; a
discretionary bonus up to 25% of the annual salary to be determined
by the board of directors; and a performance bonus to be determined
by the compensation committee of the board of directors, based upon
the net earnings of the Company in any given year. The agreement
also provides for life insurance, auto and office expense
reimbursements and a stock option plan. If this agreement is
terminated by the Company without cause, the officer will be
entitled to a severance payment equal to three times his average
annual salary, as defined.
The Company has also entered into employment agreements with
several other members of management, which terminate May 31, 1999,
contain a one-year renewal option, and provide for aggregate annual
salaries of approximately $570,000.
F-21
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 10. COMMITMENTS AND OTHER MATTERS
Incentive Stock Plan
The Company has reserved a total of 400,000 shares of common stock
for issuance under the 1996 Stock Option Plan. The Plan provides
for the award of options, which may be either incentive stock
options (ISO's) within the meaning of the Internal Revenue Code or
non-qualified options (NQO's) which are not subject to special tax
treatment. The Plan is administered by the board of directors or a
committee appointed by the board (the Administrator). Subject to
certain restrictions, the Administrator is authorized to designate
the number of shares to be covered by each award, the terms of the
award, the dates on which and the rates at which options or other
awards may be exercised, the method of payment and other terms.
The exercise price for ISO's cannot be less than the fair market
value of the stock subject to the option on the grant date. The
exercise price of a NQO shall be fixed by the Administrator at
whatever price the Administrator may determine in good faith.
Unless the Administrator determines otherwise, options generally
have a 10-year term. Unless the Administrator provides otherwise,
options terminate upon the termination of a participant's
employment, except that a participant may exercise an option to the
extent that it was exercisable on the date of termination for a
period of time after termination.
On December 5, 1996, 40,000 non-qualified options were granted
under the Plan. These options, which have an exercise price of
$3.75, were considered by management to have been issued at an
exercise price equal to market value.
Facilities Agreement
The Company has entered into a facilities agreement with InnoPet
Inc. whereby it has agreed to lease its premises, furnishings and
equipment from InnoPet Inc. until April 30, 2001. The future
minimum lease payments due under this agreement are as follows:
Minimum Lease Payments
----------------------
For the year ending:
1997 $ 294,000
1998 310,000
1999 325,000
2000 341,000
2001 114,000
---------
$1,384,000
=========
F-22
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 10. COMMITMENTS AND OTHER MATTERS
Financing Consulting Agreement
On December 5, 1996, the Company entered into a financial advisory
and consulting agreement with Joseph Stevens & Company, L.P. the
underwriter involved in the initial public offering (the
"Consultant"). The agreement outlines the Consultant's duties to
include, but not be limited to, rendering advice with regards to
financial reports, press releases, meetings with securities
analysts, and internal operations of the Company. The term of the
agreement is twenty-four months commencing on December 5, 1996,
with compensation of $48,000 due at commencement.
NOTE 11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The information set forth below provides disclosure of the estimated
fair value of the Company's financial instruments presented in
accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 107. Fair value estimates discussed herein are
based upon certain market assumptions and pertinent information
available to management as of December 31, 1996. Since the reported
fair values of financial instruments are based upon a variety of
factors, they may not represent actual values that could have been
realized as of December 31, 1996 or that will be realized in the
future.
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, accounts receivable, accounts payable and debt maturing
within one year. Fair values were assumed to approximate carrying
values for these financial instruments since they are short term in
nature and their carrying amounts approximate fair values or they are
receivable or payable on demand.
The fair value of non-current debt instruments and notes receivable
have been estimated using discounted cash flow models incorporating
discount rates based on current market interest rates for similar types
of instruments or quoted market prices, when applicable. At December
31, 1996, the differences between the estimated fair value and the
carrying value of non-current debt instruments and notes receivable
were considered immaterial in relation to the Company's financial
position.
F-23
<PAGE>
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Information Pertaining to the Six Months Ended
June 30, 1996 and 1997 is Unaudited)
(Continued)
NOTE 12. SUBSEQUENT EVENT
On March 3, 1997, the Company entered into a letter of intent to
purchase certain of the assets and liabilities of Natural Life Pet
Products for $3,500,000 plus the value of certain inventory in cash,
notes and common stock of the Company. Natural Life Pet Products, which
has approximately $9,000,000 in annual revenues, manufactures, markets
and sells premium pet food through veterinarian offices and specialty
pet stores. The Company is negotiating a definitive purchase agreement
which will be subject to a number of conditions including further due
diligence with respect to the assets to be acquired. There can be no
assurance that these negotiations will be successfully completed or
that a closing will occur.
<PAGE>
No underwriter, dealer, salesperson or other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any date subsequent to the date hereof. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making the offer is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any offer or sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained in this Prospectus is correct as of any date subsequent to
the date hereof.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION....................................................... 2
SUMMARY ................................................................... 3
THE COMPANY................................................................. 3
THE OFFERING................................................................ 4
SUMMARY FINANCIAL INFORMATION............................................... 5
RISK FACTORS................................................................ 6
THE COMPANY................................................................. 10
USE OF PROCEEDS............................................................. 10
PRICE RANGE OF COMMON STOCK
AND REDEEMABLE WARRANTS................................................... 10
DIVIDEND POLICY............................................................. 10
CAPITALIZATION.............................................................. 11
SELECTED FINANCIAL DATA..................................................... 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................. 13
BUSINESS ................................................................... 19
MANAGEMENT.................................................................. 24
EXECUTIVE COMPENSATION AND OTHER INFORMATION................................ 25
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS......................... 27
STOCK OPTION PLAN........................................................... 28
CERTAIN TRANSACTIONS........................................................ 29
PRINCIPAL STOCKHOLDERS...................................................... 30
SELLING SHAREHOLDERS........................................................ 32
PLAN OF DISTRIBUTION........................................................ 33
DESCRIPTION OF THE COMPANY'S SECURITIES..................................... 34
SHARES ELIGIBLE FOR FUTURE SALE............................................. 36
LEGAL MATTERS............................................................... 37
EXPERTS ................................................................... 37
ADDITIONAL INFORMATION...................................................... 37
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES............................ 38
-i-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 102(b) of the Delaware General Corporation Law (the "DGCL")
permits a provision in the certificate of Incorporation of each corporation
organized thereunder eliminating or limiting, with certain exceptions, the
personal liability of a director to the corporation or its stockholders for
monetary damages for certain breaches of fiduciary duty as a director. The
Certificate of Incorporation of the Registrant eliminates the personal liability
of directors to the fullest extent permitted by the DGCL.
Section 145 of the DGCL ("Section 145"), in summary, empowers a
Delaware corporation, within certain limitations, to indemnify its officers,
directors, employees and agents against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by them in connection with any nonderivative suit or proceeding, if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interest of the corporation, and, with respect to a
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful.
With respect to derivative actions, Section 145 permits a corporation
to indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit, provided such person meets the
standard of conduct described in the preceding paragraph, except that no
indemnification is permitted in respect of any claim where such person has been
found liable to the corporation, unless the Court of Chancery or the court in
which such action or suit was brought approves such indemnification and
determines that such person is fairly and reasonably entitled to be indemnified.
Reference is made to Article Eight of the Certificate of Incorporation
of the Registrant for the provisions which the Registrant has adopted relating
to the indemnification of officers, directors, employees and agents.
The Registrant has purchased directors' and officers liability
insurance.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, payable in
connection with the sale of the Common Stock and Redeemable Warrants
(collectively the "Securities") being registered hereby. Except for the SEC
registration fee, all expenses are estimated.
Item Amount
- ------------------------------------------------------------- ------
SEC registration fee......................................... $2,361.79
Printing and engraving expenses.............................. $20,000.00
Legal fees and expenses...................................... $50,000.00
Auditors' accounting fees and expenses....................... $15,000.00
==========
Total............................................... $87,361.79
In addition, the holders of the Securities being registered hereby will
be responsible for all selling commissions, transfer taxes and related charges
in connection with the offer and sale of the Securities offered hereby.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
From January through March 1996, IPI contributed capital of $2,221,348
in exchange for 1,182,432 shares of Common Stock. In June 1996, IPI also
purchased 43,497 shares of Common Stock in exchange for $139,190 in financing.
In June 1996, the employees of the Company also purchased the
corresponding number of shares listed next to their names in exchange for a
3-year interest-bearing note in the amount set forth below:
Name Shares Consideration
- ---- ------ -------------
Linda Duke 34,797 $111,350
Marc Duke 417,566 $1,336,213
Robin Hunter 43,497 $139,190
Albert A. Masters 43,497 $139,190
Dana Vaughn 86,993 $278,378
Eric Zurbuchen 17,399 $55,677
Susan Leonhardt 1,740 $5,568
John Jablonski 1,305 $4,176
Francis Daily(1) 435 $1,392
Tara Slack 783 $2,506
Deardra Thompson(1) 783 $2,506
Henry Ford 783 $2,506
Debra Iannaci 522 $1,670
Michael Zealy 522 $1,670
Mary Lou Bole 348 $1,114
Pamela Medlin 261 $835
David Santos 435 $3,392
James Kane 261 $835
Mary Huff 174 $557
Eve Uydess 174 $557
Michelle Raglind 174 $557
-------- ------------
TOTAL 652,449 $2,098,839
- ----------------------
(1) These shares have been repurchased by the Company for the value of the
underlying loan plus accrued interest. The 957 shares are now treasury
stock.
Pursuant to a private placement of units, each unit consisting of a
$50,000 10% promissory note and warrants to purchase 25,000 shares of Common
Stock, the following persons purchased from the Company the number of Private
Placement Warrants set forth next to each of their names during August 1996:
Name Warrants
- ---- --------
Carmine Agnello 25,000
Stanley Arkin 50,000
William Cutolo and Marguerite Cutolo (1) 25,000
Joseph V. DiMauro 25,000
Joseph V. DiMauro, as Custodian for Joseph Robert DiMauro 25,000
Jerry Finkelstein 50,000
Laurence Heller 50,000
Jack Kaster 25,000
Ralph K. Kato IRA 50,000
Steven H. Kessler 25,000
Daniel R. Lee 250,000
Barry J. Lind, Neil G. Blum (2) 50,000
II-2
<PAGE>
Barry J. Lind, Revocable Trust 50,000
Peter Maher and Patricia Maher (1) 50,000
Alfred S. Palagonia 50,000
Frank C. Rathge Trust 25,000
M. Jerome Rieger 25,000
Nancy A. Roehl 50,000
Peter G. Roehl 50,000
Francine Urdang 50,000
TOTAL 1,000,000
- -----------------------
(1) Joint tenants with rights of survivorship.
(2) Tenants-in-Common.
On April 29, 1997, the Company completed a $2.5 million private
placement (the "Private Placement"). The shares were purchased by
Entrepreneurial Investors, Ltd., a Bahamas company ("EIL"). The Private
Placement consisted of the sale of 625,000 shares of Series A 4% Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), at $4.00 per share. Each share of Series A Preferred Stock converts, at
the holder's option, into one share of common stock, par value $.01 per share
(the "Common Stock"). The Series A Preferred Stock bears a cumulative dividend
of four percent (4%) per annum, payable quarterly. The dividend shall be paid by
the issuance of Common Stock. The number of shares of Common Stock to be issued
as a dividend shall be determined based on the average closing bid price for
shares of the Common Stock as reported by the NASDAQ-SMC for the twenty (20)
trading days preceding the record date for the declaration of the dividend. The
placement agent for this Private Placement was Equity Services, Ltd., a Bahamas
company ("ESL"). ESL received options to purchase 62,500 shares of Series A
Preferred Stock. The option has a term of five (5) years commencing on April 29,
1998.
On July 9, 1997, the Company borrowed $1,500,000 from EIL. The Note is
collateralized with 600,000 shares of Common Stock. The principal amount of the
Note may be converted into Common Stock of the Company at $4.50 per share.
Additionally, in connection with the loan, the Company issued 225,000 Redeemable
Warrants to EIL.
The sales of the aforementioned securities were made in reliance upon
the exemption from the registration provisions of the Act afforded by section
4(2) thereof and /or Regulation D promulgated thereunder, as transactions by an
issuer not involving a public offering. To the best of Registrant's knowledge,
the purchase of the securities described above acquired them for their own
account, and with the view to any distribution thereof to the public.
Item 27. Exhibits.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
3.1 Certificate of Incorporation, as amended
3.2 Certificate of Designation of Series A Preferred Stock
3.3 By-Laws of the Registrant
4.1 Redeemable Warrant Agreement entered into between Registrant and Continental Stock
Transfer & Trust Co., including form of Redeemable Warrant Certificate
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
4.2 Form of Representative's Warrant Agreement including Form of Representative's Warrant
4.3 Specimens of Registrant's Common Stock, and Redeemable Warrant Certificate
4.4 Investor Subscription Agreement between Registrant and Entrepreneurial Investors, Ltd.
4.5 Registration Rights Agreement between Registrant and Entrepreneurial Investors, Ltd.
4.6 Loan Agreement between Registrant and Entrepreneurial Investors, Ltd. with exhibits
5.1 Opinion and Consent of Camhy Karlinsky & Stein LLP
10.1 1996 Stock Option Plan
10.2 Employment Agreement between Registrant and Marc Duke with exhibits
10.3 Employment Agreement between Registrant and John Bieber
10.4 Employment Agreement between Registrant and Linda Duke with exhibits
10.5 Employment Agreement between Registrant and Robin Hunter with exhibits
10.6 Employment Agreement between Registrant and Albert Masters with exhibits
10.7 Employment Agreement between Registrant and Dr. Dana Vaughn with exhibits
10.8 Facilities Agreement between Registrant and InnoPet Inc.
10.9 Supply Agreement between Registrant and Monfort, Inc.
11.1 Statement re: Computation of Earnings per Share
23.1 Consent of Camhy Karlinsky & Stein LLP - included in Exhibit 5.1
23.2 Consent of Rachlin Cohen & Holtz
24 Power of Attorney (contained on page II-6 of this Registration Statement)
</TABLE>
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales of the
Securities are being made, a post-effective amendment to this Registration
Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) may be reflected
in the form of prospectus filed with the Commission pursuant to Rule 424(b) if,
in aggregate, the changes in the volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any additional or changed material
information on the plan of distribution.
II-4
<PAGE>
2. That, for the purpose of determining liability under the Securities
Act, it shall treat each post-effective amendment as a new registration
statement of the securities offered, and treat the offering of the securities at
that time as an initial bona fide offering.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remains unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer of controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Shares being registered hereby, the
Company will, unless, in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question as to whether such indemnification by the Company against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Lauderdale, State of Florida, on the 29th day of
September, 1997.
INNOPET BRANDS CORP.
By:/s/ Marc Duke
Marc Duke
Chief Executive Officer and
Chairman of the Board
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Marc Duke, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments, including post-effective amendments and related registration
statements, to this Registration Statement, and to file same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agent, full power
and authority to do separately and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could so in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Chairman of the Board and Chief Executive September 29, 1997
/s/ Marc Duke Officer (Principal Executive Officer)
- -------------------------------------
Marc Duke
Vice-President, Chief Financial Officer and September 29, 1997
Secretary (Principal Financial and Accounting
/s/ Robin Hunter Officer)
- -------------------------------------
Robin Hunter
/s/ Albert A. Masters Vice President of Sales and Director September 29, 1997
- -------------------------------------
Albert A. Masters
/s/ Richard P. Greene Director September 29, 1997
- -------------------------------------
Richard P. Greene
/s/ Curtis Granet Director September 29, 1997
- -------------------------------------
Curtis Granet
/s/ John Bieber Vice President of Marketing and Director September 29, 1997
- -------------------------------------
John Bieber
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT INDEX
- ------ -----------------------
<S> <C>
3.1 Certificate of Incorporation, as amended
3.2 Certificate of Designation of Series A Preferred Stock
3.3 By-Laws of the Registrant
4.1 Redeemable Warrant Agreement entered into between Registrant and Continental Stock
Transfer & Trust Co., including form of Redeemable Warrant Certificate
4.2 Form of Representative's Warrant Agreement including Form of Representative's Warrant
4.3 Specimens of Registrant's Common Stock, and Redeemable Warrant Certificate
4.4 Investor Subscription Agreement between Registrant and Entrepreneurial Investors, Ltd.
4.5 Registration Rights Agreement between Registrant and Entrepreneurial Investors, Ltd.
4.6 Loan Agreement between Registrant and Entrepreneurial Investors, Ltd. with exhibits
5.1 Opinion and Consent of Camhy Karlinsky & Stein LLP
10.1 1996 Stock Option Plan
10.2 Employment Agreement between Registrant and Marc Duke with exhibits
10.3 Employment Agreement between Registrant and John Bieber
10.4 Employment Agreement between Registrant and Linda Duke with exhibits
10.5 Employment Agreement between Registrant and Robin Hunter with exhibits
10.6 Employment Agreement between Registrant and Albert Masters with exhibits
10.7 Employment Agreement between Registrant and Dr. Dana Vaughn with exhibits
10.8 Facilities Agreement between Registrant and InnoPet Inc.
10.9 Supply Agreement between Registrant and Monfort, Inc.
11.1 Statement re: Computation of Earnings per Share
23.1 Consent of Camhy Karlinsky & Stein LLP - included in Exhibit 5.1
23.2 Consent of Rachlin Cohen & Holtz
24 Power of Attorney (contained on page II-6 of this Registration Statement)
</TABLE>
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INNOPET PRODUCTS CORP.
INNOPET PRODUCTS CORP. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by the
unanimous written consent of its members, adopted resolutions proposing and
declaring advisable the following amendments to the Certificate of Incorporation
of the Corporation. The resolutions setting forth the proposed amendment are as
follows:
RESOLVED, that Article FIRST of the Certificate of
Incorporation of the Corporation be amended to read as
follows:
"FIRST: The name of the Corporation is InnoPet Brands Corp."
RESOLVED, that Article FOURTH of the Certificate of
Incorporation of the Corporation be amended to read as
follows:
"FOURTH: Authorized Shares.
1. The aggregate number of shares which the Corporation shall
have authority to issue is 30,000,000, of which 5,000,000
shares shall be designated Preferred Shares, with a par value
of $0.01 per share, and 25,000,000 shares shall be designated
Common Shares, with a par value of $0.01 per share.
2. Authority is hereby expressly granted to the Board of
Directors from time to time to issue the Preferred Shares as
Preferred Shares of any series and, in connection with the
creation of such series, to fix by the resolution or
resolutions providing for the issue of shares thereof, the
number of shares of such series, and the designations, powers,
preferences, and rights and the qualifications, limitations,
and restrictions, of such series, to the
<PAGE>
full extent now or hereafter permitted by the laws of the
State of Delaware."
SECOND: That in lieu of a meeting and vote of stockholders,
the stockholder has given unanimous written consent to said amendments in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed by Marc Duke, its Chairman of the Board and
Chief Executive Officer, this 17th day of May, 1996.
INNOPET PRODUCTS CORP.
By: /s/ Marc Duke
-------------------------------------------
Name: Marc Duke
Title: Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
InnoPet Products Corp.
FIRST. The name of the Corporation is InnoPet Products Corp.
SECOND. The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of common stock of the
par value of $.01 per share, all of the same class.
FIFTH. The name and mailing address of the incorporator is
William N. Haddad, Esq., c/o Camhy Karlinsky & Stein LLP, 1740 Broadway, 16th
Floor, New York, New York 10019.
SIXTH. Election of directors need not be by written ballot.
<PAGE>
SEVENTH. The Board of Directors is authorized to adopt, amend,
or repeal By-Laws of the Corporation (except as and to the extent provided in
the By-Laws).
EIGHTH. Any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (whether
or not by or in the right of the Corporation) by reason of the fact that he is
or was a director, officer, incorporator, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
incorporator, employee, partner, trustee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the Corporation to the
full extent then permitted by law against expenses (including reasonable counsel
fees and disbursements), judgments, fines (including excise taxes assessed on a
person with respect to an employee benefit plan), and amounts paid in settlement
incurred by him in connection with such action, suit, or proceeding. Such right
of indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Article EIGHTH. Such right of
indemnification shall continue as to a person who has ceased to be a director,
officer, incorporator, employee, partner, trustee, or agent and shall inure to
the benefit of the heirs and personal representatives of such a person. The
indemnification provided by this Article EIGHTH shall not be deemed exclusive of
any other rights which may be provided now or in the future under any provision
currently in effect or hereafter adopted of the By-Laws, by any agreement, by
vote of stockholders, by resolution of disinterested directors, by provision of
law, or otherwise.
-2-
<PAGE>
NINTH. No director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision does not eliminate
the liability of the director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine, amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, reasonable counsel fees and disbursements). Each person who serves
as a director of the corporation while this Article NINTH is in effect shall be
deemed to be doing so in reliance on the provisions of this Article NINTH, and
neither the amendment or repeal of this Article NINTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
NINTH, shall apply to or have any effect on the liability or alleged liability
of any director or the Corporation for, arising out of, based upon, or in
connection with any acts or omissions of such director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
this Article NINTH are cumulative and shall be in addition to and independent of
any and all other limitations on or eliminations of the liabilities of directors
of the Corporation, as such, whether such limitations or eliminations arise
under or are created by any law, rule, regulation, by-law, agreement, vote of
shareholders or disinterested directors, or otherwise.
-3-
<PAGE>
IN WITNESS WHEREOF, I have made, signed, and sealed this
Certificate of Incorporation this 11th day of January, 1996.
/s/ William N. Haddad
-----------------------------------
William N. Haddad, Incorporator
-4-
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF DESIGNATION OF
PREFERRED STOCK
OF
INNOPET BRANDS CORP.
InnoPet Brands Corp. (the "Company"), a corporation organized
and existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
that, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Company, and pursuant to the provisions of
Section 151 of Title 8 of the Delaware Code of 1953, said Board of Directors, by
unanimous written consent of its members, filed with the minutes of the Board,
adopted a resolution providing for the issuance of a series of shares of Series
A Preferred Stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the Company in accordance with the provisions of its Certificate
of Incorporation, a series of Preferred Stock of the Company be and hereby is
created, such series of Preferred Stock to be designated Series A Preferred
Stock, to consist of shares of the par value of $.01 per share, and shall
possess the rights and preferences set forth below:
Section 1. Designation and Amount. The shares of such series
shall have a par value of $.01 per share and shall be designated as Preferred
Stock (Series A) (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be Six Hundred Eighty Seven
Thousand Five Hundred (687,500). The Series A Preferred Stock shall be issued
for and shall be deemed to have an original issue price per share of $4.00 per
share.
Section 2. Rank. The Series A Preferred Stock shall rank: (i)
prior to all of the Company's common stock, $.01 par value per share (the
"Common Shares"); (ii) prior to any class or series of capital stock of the
Company hereafter created not specifically ranking by its terms senior to or on
parity with any Preferred Stock of whatever subdivision (collectively, with the
Common Shares, "Junior Securities"); and (iii) on parity with any class or
series of capital stock of the Company hereafter created specifically ranking by
its terms on parity with the Series A Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary (all such distributions
being referred to collectively as "Distributions").
Section 3. Dividends. The Series A Preferred Stock will bear a
dividend of four percent (4%) per annum, payable quarterly, which shall be paid
by the issuance of additional
<PAGE>
Common Shares of the Company as follows: The number of shares to be issued shall
be determined based on the average closing bid price for shares of Common Shares
as reported by the NASDAQ SmallCap Market for the twenty (20) trading days
preceding the record date for the declaration of the dividend.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, the holders of
Series A Preferred Stock (the "Holders") shall be entitled to receive, prior in
preference to any distribution to Junior Securities but in parity with any
distribution to Parity Securities, an amount per share equal to the original
preferred stock issue price. If upon the occurrence of such event, and after
payment in full of the preferential amounts with respect to the Senior
Securities, the assets and funds available to be distributed among the Holders
of the Series A Preferred Stock and Parity Securities shall be insufficient to
permit the payment to such Holders of the full preferential amounts due to the
Holders of the Series A Preferred Stock and the Parity Securities, respectively,
then the entire assets and funds of the Company legally available for
distribution shall be distributed among the Holders of the Series A Preferred
Stock and the Parity Securities, pro rata, based on the respective liquidation
amounts to which each such series of stock is entitled by the Company's
Certificate of Incorporation and any certificate(s) of designation relating
thereto.
(b) Upon the completion of the distribution required
by Section 4(a), if assets remain in this Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or
disposition of all or substantially all the assets of the Company to a private
entity, the common stock of which is not publicly traded, shall be deemed to be
a liquidation, dissolution or winding up within the meaning of this Section 4;
provided, however, that an event described in the prior clause that the Holder
does not elect to treat as a liquidation and a consolidation, merger,
acquisition, or other business combination of the Company with or into any other
company or companies shall not be treated as a liquidation, dissolution or
winding up within the meaning of this Section 4, but instead shall be treated
pursuant to Section 5(d) hereof (a Holder who elects to have the transaction
treated as a liquidation is herein referred to as a "Liquidating Holder").
(d) Prior to the closing of a transaction described
in Section 4(c) which would constitute a liquidation event, the Company shall
either (i) make all cash distributions it is required to make to the Liquidating
Holders pursuant to the first sentence of Section 4(a), (ii) set aside
sufficient funds from which the cash distributions required to be made to the
Liquidating Holders can be made, or (iii) establish an escrow or other similar
arrangement with a third party pursuant to which the proceeds payable to the
Company from a sale of all or substantially all the assets of the Company will
be used to make the liquidating payments to the
-2-
<PAGE>
Liquidating Holders immediately after the consummation of such sale. In the
event that the Company has not fully complied with either of the foregoing
alternatives, the Company shall either: (x) cause such closing to be postponed
until such cash distributions have been made, or (y) cancel such transaction, in
which event the rights of the Holders or other arrangements shall be the same as
existing immediately prior to such proposed transaction.
Section 5. Conversion. The record Holders of the Series A
Preferred Stock shall have conversion rights as follows:
(a) Right to Convert. Each record Holder of Series A
Preferred Stock shall be entitled to convert whole shares of Series A Preferred
Stock into Common Shares issuable upon conversion of the Series A Preferred
Stock, as follows: each outstanding share of Series A Preferred Stock is
convertible at any time into one fully-paid and non-assessable Common Share of
the Company, subject to adjustment as provided in Section 5(c) hereof. The
number of Common Shares issuable upon the conversion of one share of Series A
Preferred Stock is hereinafter referred to as the "Conversion Rate."
(b) Mechanics of Conversion. In order to convert
Series A Preferred Stock into full Common Shares, the Holder shall (i) fax, on
or prior to 6:00 p.m., New York City time on the Date of Conversion, a copy of a
fully executed notice of conversion ("Notice of Conversion") to the Company at
the office of the Company or to the Company's designated transfer agent (the
"Transfer Agent") for the Series A Preferred Stock stating that the Holder
elects to convert, which notice shall specify the date of conversion and the
number of shares of Series A Preferred Stock to be converted, and (ii) surrender
to a common courier for either overnight or two (2) day delivery to the office
of the Company or the Transfer Agent, the original certificates representing the
Series A Preferred Stock being converted (the "Series A Preferred Stock
Certificates"), duly endorsed for transfer, provided, however, that the Company
shall not be obligated to issue certificates evidencing the Common Shares
issuable upon such conversion unless the Series A Preferred Stock Certificates
are delivered to the Company or the Transfer Agent as provided above, or the
Holder notifies the Company or the Transfer Agent that such certificates have
been lost, stolen or destroyed (subject to the requirements of subparagraph (i)
below).
(i) Lost or Stolen Certificates. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of any Series
A Preferred Stock Certificates representing shares of Series A Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity or security
reasonably satisfactory to the Company, and upon surrender and cancellation of
the Series A Preferred Stock Certificate(s), if mutilated, the Company shall
execute and deliver new Series A Preferred Stock Certificate(s) of like tenor
and date.
However, the Company shall not be obligated
to re-issue such lost or stolen Series A Preferred Stock Certificates if Holder
contemporaneously requests the Company to convert such Series A Preferred Stock
into Common Shares.
-3-
<PAGE>
(ii) Delivery of Common Shares Upon Conversion. The
Company no later than 6:00 p.m. (New York City time) on the third (3rd) business
day after receipt by the Company or its Transfer Agent of all necessary
documentation duly executed and in proper form required for conversion,
including the original Series A Preferred Stock Certificates to be converted (or
after provision for security or indemnification in the case of lost, stolen or
destroyed certificates, if required), shall issue and deliver to the Holder as
shown on the stock records of the Company a certificate for the number of Common
Shares to which the Holder shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion of the
Series A Preferred Stock would create a fractional Common Share or a right to
acquire a fractional Common Share, such fractional share shall be disregarded
and the number of Common Shares issuable upon conversion, in the aggregate,
shall be the next higher number of shares.
(iv) Date of Conversion. The date on which conversion
occurs (the "Date of Conversion") shall be deemed to be the date such Notice of
Conversion is faxed to the Company or the Transfer Agent, as the case may be,
provided an advance copy of the Notice of Conversion is faxed to the Company on
or prior to 6:00 p.m, New York City time, on the Date of Conversion. The
original Series A Preferred Stock Certificates representing the shares of Series
A Preferred Stock to be converted shall be surrendered by depositing such
certificates with a common courier for either overnight or two (2) day delivery,
as soon as possible following the Date of Conversion. The person or persons
entitled to receive the shares of Common Shares issuable upon such conversion
shall be treated for all purposes as the record Holder or Holders of such Common
Shares on the Date of Conversion.
(c) Adjustment to Conversion Rate.
(i) Adjustment Due to Stock Split, Stock Dividend,
Etc. If, prior to the conversion of all the Series A Preferred Stock, the number
of outstanding Common Shares is increased by a stock split, stock dividend, or
other similar event, the Conversion Rate shall be proportionately increased, or
if the number of outstanding Common Shares is decreased by a combination or
reclassification of shares, or other similar event, the Conversion Rate shall be
proportionately decreased.
(ii) Adjustment Due to Merger, Consolidation, Etc.
If, prior to the conversion of all the Series A Preferred Stock, there shall be
any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which Common Shares of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets that is not
deemed to be a liquidation pursuant to Section 4(c), then the Holders of Series
A Preferred Stock shall thereafter have the right to receive upon conversion of
Series A Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the Common Shares, immediately
-4-
<PAGE>
theretofore issuable upon conversion, such stock, securities and/or other assets
which the Holder would have been entitled to receive in such transaction had the
Series A Preferred Stock been converted immediately prior to such transaction,
and in any such case appropriate provisions shall be made with respect to the
rights and interests of the Holders of the Series A Preferred Stock to the end
that the provisions hereof (including, without limitation, provisions for the
adjustment of the Conversion Rate and of the number of shares issuable upon
conversion of the Series A Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the conversion thereof. The Company shall not effect any
transaction described in this subsection 5(c)(ii) unless (a) it first gives
fifteen (15) calendar days prior notice of such merger, consolidation, exchange
of shares, recapitalization, reorganization, or other similar event (during
which time the Holders shall be entitled to convert their Series A Preferred
Stock into Common Shares to the extent permitted hereby) and (b) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
the obligation of the Company under this Certificate of Designation, including
the obligation of this subsection 5(d)(ii).
(iii) No Fractional Shares. If any adjustment under
this Section 5(c) would create a fractional Common Share or a right to acquire a
fractional Common Share, such fractional share shall be disregarded and the
number of Common Shares issuable upon conversion shall be the next higher number
of shares.
Section 6. Voting Rights. The Holders of the Series A
Preferred Stock shall have no voting power whatsoever, except as otherwise
provided by the General Corporation Law of the State of Delaware ("Delaware
Law"), and no Holder of Series A Preferred Stock shall vote or otherwise
participate in any proceeding in which actions shall be taken by the Company or
the shareholders thereof or be entitled to notification as to any meeting of the
shareholders.
Notwithstanding the above, the Company shall provide the
Holders of the Series A Preferred Stock with notification of any meeting of the
shareholders regarding any major corporate events affecting the Company. In the
event of any taking by the Company of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property
(including by way of merger, consolidation or reorganization), or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed sale, lease or conveyance of all or
substantially all the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail a notice to
such Holders, at least five (5) days prior to the record date specified therein,
of the date on which any such record is to be taken for the purpose of such
dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such dividend, distribution, right or other event to
the extent known at such time.
-5-
<PAGE>
To the extent that under Delaware Law the vote of the Holders
of the Series A Preferred Stock, voting separately as a class, is required to
authorize a given action of the Company, the affirmative vote or consent of the
Holders of at least a majority of the shares of the Series A Preferred Stock,
represented at a duly held meeting at which a quorum is present or by written
consent of a majority of the shares of Series A Preferred Stock (except as
otherwise may be required under Delaware Law) shall constitute the approval of
such action by the class. To the extent that under Delaware Law the Holders of
the Series A Preferred Stock are entitled to vote on a matter with holders of
Common Shares, voting together as one (1) class, each share of Series A
Preferred Stock shall be entitled to a number of votes equal to the number of
Common Shares into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the Conversion Rate
is calculated. Holders of the Series A Preferred Stock also shall be entitled to
notice of all shareholder meetings or written consents with respect to which
they would be entitled to vote, which notice would be provided pursuant to the
Company's by-laws and applicable statutes.
Section 7. Protective Provision. So long as shares of Series A
Preferred Stock are outstanding, the Company shall not without first obtaining
the approval (by vote or written consent, as provided by Delaware Law) of the
Holders of at least sixty-six and two-thirds percent (66 2/3%) of the then
outstanding Series A Preferred Stock, and at least sixty-six and two-thirds
percent (66 2/3%) of the then outstanding Holders:
(a) alter or change the rights, preferences or
privileges of the Series A Preferred Stock or any Senior Securities so as to
affect adversely the Series A Preferred Stock;
(b) create any new class or series of stock having a
preference over the Series A Preferred Stock or increase the size of the
authorized number of Series A Preferred Stock; or
(c) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result in taxation
of the holders of shares of the Series A Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as amended (or any comparable provision of
the Internal Revenue Code as hereafter from time to time amended).
Section 8. Status of Converted Stock. In the event any Series
A Preferred Stock shall be converted pursuant to Section 5 hereof, the shares so
converted shall be canceled, shall return to the status of authorized but
unissued Preferred Shares of no designated series, and shall not be issuable by
the Company as Series A Preferred Stock.
Section 9. Preference Rights. Nothing contained herein shall
be construed to prevent the Board of Directors of the Company from issuing one
(1) or more series of Series A Preferred Shares with dividend and/or liquidation
preferences junior to or in parity with the dividend and liquidation preferences
of the Series A Preferred Stock.
-6-
<PAGE>
Signed on April 28, 1997
/s/ Marc Duke
----------------------------------
Marc Duke, Chief Executive Officer
Attest:
/s/ Robin Hunter
- -------------------------------
Robin Hunter, Secretary
-7-
<PAGE>
EXHIBIT 3.3
BY-LAWS
of
INNOPET BRANDS CORP.
As adopted January 12, 1996
<PAGE>
INNOPET BRANDS CORP.
A Delaware Corporation
BY-LAWS
-------------------
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting.
An annual meeting of stockholders for the purpose of electing
directors and of transacting such other business as may come before it shall be
held each year at such date, time, and place, either within or without the State
of Delaware, as may be specified by the Board of Directors.
Section 1.2 Special Meetings.
Special meetings of stockholders for any purpose or purposes
may be held at any time upon call of the Chairman of the Board, if any, the
President, the Secretary, or a majority of the Board of Directors, at such time
and place either within or without the State of Delaware as may be stated in the
notice. A special meeting of stockholders shall be called by the President or
the Secretary upon the written request, stating time, place, and the purpose or
purposes of the meeting, of stockholders who together own of record a majority
percentage of the outstanding stock of all classes entitled to vote at such
meeting.
<PAGE>
Section 1.3 Notice of Meetings.
Written notice of stockholders meetings, stating the place,
date, and hour thereof, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given by the Chairman of the
Board, if any, the President, any Vice President, the Secretary, or an Assistant
Secretary, to each stockholder entitled to vote thereat at least ten (10) days
but not more than sixty (60) days before the date of the meeting, unless a
different period is prescribed by law.
Section 1.4 Quorum.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-Laws, at any meeting of stockholders, the holders of a
majority of the outstanding shares of each class of stock entitled to vote at
the meeting shall be present or represented by proxy in order to constitute a
quorum for the transaction of any business. In the absence of a quorum, a
majority in interest of the stockholders present or the chairman of the meeting
may adjourn the meeting from time to time in the manner provided in Section 1.5
of these By-Laws until a quorum shall attend.
Section 1.5 Adjournment.
Any meeting of stockholders, annual or special, may adjourn
from time to time to reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than
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<PAGE>
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.6 Organization.
The Chairman of the Board, if any, or in his absence the
President, or in their absence any Vice President, shall call to order meetings
of stockholders and shall act as chairman of such meetings. The Board of
Directors or, if the Board fails to act, the stockholders may appoint any
stockholder, director, or officer of the Corporation to act as chairman of any
meeting in the absence of the Chairman of the Board, the President, and all Vice
Presidents.
The Secretary of the Corporation shall act as secretary of
all meetings of stockholders, but, in the absence of the Secretary, the chairman
of the meeting may appoint any other person to act as secretary of the meeting.
Section 1.7 Voting.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-Laws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, a majority of the
votes cast at such meeting upon a given question by the holders of outstanding
shares of stock of all classes of stock of the Corporation entitled to vote
thereon who are present in person or by proxy shall decide such question. At any
meeting duly called and held for the election of directors at which a quorum is
present, directors shall be
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elected by a plurality of the votes cast by the holders (acting as such) of
shares of stock of the Corporation entitled to elect such directors.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office.
The business, property, and affairs of the Corporation shall
be managed by or under the direction of a Board of between one (1) and seven (7)
directors; provided, however, that the Board, by resolution adopted by vote of a
majority of the then authorized number of directors, may increase or decrease
the number of directors. The directors shall be elected by the holders of shares
entitled to vote thereon at the annual meeting of stockholders, and each shall
serve (subject to the provisions of Article IV) until the next succeeding annual
meeting of stockholders and until his respective successor has been elected and
qualified.
Section 2.2 Chairman of the Board.
The directors may elect one of their members to be Chairman of
the Board of Directors. The Chairman shall be subject to the control of and may
be removed by the Board of Directors. He shall perform such duties as may from
time to time be assigned to him by the Board.
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<PAGE>
Section 2.3 Meetings.
The annual meeting of the Board of Directors, for the election
of officers and the transaction of such other business as may come before the
meeting, shall be held without notice at the same place as, and immediately
following, the annual meeting of the stockholders.
Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined by the
Board.
Special meetings of the Board of Directors shall be held at
such time and place as shall be designated in the notice of the meeting whenever
called by the Chairman of the Board, if any, the President, or by a majority of
the directors then in office.
Section 2.4 Notice of Special Meetings.
The Secretary, or in his absence any other officer of the
Corporation, shall give each director notice of the time and place of holding of
special meetings of the Board of Directors by mail at least five (5) days before
the meeting, or by facsimile, cable, or telegram, overnight courier, or personal
service at least three (3) days before the meeting. Unless otherwise stated in
the notice thereof, any and all business may be transacted at any meeting
without specification of such business in the notice.
Section 2.5 Quorum and Organization of Meetings.
A majority of the total number of members of the Board of
Directors as constituted from time to time shall constitute a quorum for the
transaction of business, but, if at any meeting of the Board of Directors
(whether or not adjourned from a previous meeting) there shall be less than a
quorum present, a majority of those present may adjourn the meeting
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<PAGE>
to another time and place, and the meeting may be held as adjourned without
further notice or waiver. Except as otherwise provided by law or in the
Certificate of Incorporation or these By-Laws, a majority of the directors
present at any meeting at which a quorum is present may decide any question
brought before such meeting. Meetings shall be presided over by the Chairman of
the Board, if any, or in his absence by the President, or in the absence of both
by such other person as the directors may select. The Secretary of the
Corporation shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.6 Committees.
The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business, property, and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such committee shall have power or
authority in reference to: (i) amending the Certificate of Incorporation of the
Corporation
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<PAGE>
(provided, however, that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors pursuant to authority expressly granted to the Board
of Directors by the Corporation's Certificate of Incorporation, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation, or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation), (ii) adopting an agreement of merger or consolidation under
Section 251 or 252 of the General Corporation Law of the State of Delaware,
(iii) recommending to the stockholders the sale, lease, or exchange of all or
substantially all of the Corporation's property and assets, (iv) recommending to
the stockholders a dissolution of the Corporation or a revocation of
dissolution, or amending these By-Laws; and, unless the resolution expressly so
provided, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the General Corporation Law of
the State of Delaware. Each committee which may be established by the Board of
Directors pursuant to these By-Laws may fix its own rules and procedures. Notice
of meetings of committees, other than of regular meetings provided for by the
rules, shall be given to committee members. All action taken by committees shall
be recorded in minutes of the meetings.
Section 2.7 Action Without Meeting.
Nothing contained in these By-Laws shall be deemed to restrict
the power of members of the Board of Directors or any committee designated by
the Board to take any action required or permitted to be taken by them without a
meeting.
8
<PAGE>
Section 2.8 Telephone Meetings.
Nothing contained in these By-Laws shall be deemed to restrict
the power of members of the Board of Directors, or any committee designated by
the Board, to participate in a meeting of the Board, or committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
ARTICLE III
OFFICERS
Section 3.1 Executive Officers.
The executive officers of the Corporation shall be a
President, (one or more vice Presidents, a Treasurer, and a Secretary, each of
whom shall-be elected by the Board of Directors. The Board of Directors may
elect or appoint such other officers (including a Controller and one or more
Assistant Treasurers and Assistant Secretaries) as it may deem necessary or
desirable. Each officer shall hold office for such term as may be prescribed by
the Board of Directors from time to time. Any person may hold at one time two or
more offices.
Section 3.2 Powers and Duties.
The Chairman of the Board, if any, or, in his absence, the
President, shall preside at all meetings of the stockholders and of the Board of
Directors. In the absence of the President, a Vice President appointed by the
President or, if the President fails to make such appointment, by the Board,
shall perform all the duties of the President. The officers and agents of the
Corporation shall each have such powers and authority and shall perform such
duties in
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<PAGE>
the management of the business, property, and affairs of the Corporation as
generally pertain to their respective offices, as well as such powers and
authorities and such duties as from time to time may be prescribed by the Board
of Directors.
ARTICLE IV
RESIGNATIONS, REMOVALS, AND VACANCIES
Section 4.1 Resignations.
Any director or officer of the Corporation, or any member of
any committee, may resign at any time by giving written notice to the Board of
Directors, the President, or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time be
not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.
Section 4.2 Removals.
The Board of Directors, by a vote of not less than a majority
of the entire Board, at any meeting thereof, or by written consent, at any time,
may, to the extent permitted by law, remove with or without cause from office or
terminate the employment of any officer or member of any committee and may, with
or without cause, disband any committee.
Any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares entitled at
the time to vote at an election of directors.
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<PAGE>
Section 4.3 Vacancies.
Any vacancy in the office of any director or officer through
death, resignation, removal, disqualification, or other cause, and any
additional directorship resulting from increase in the number of directors, may
be filled at any time by a majority of the directors then in office (even though
less than a quorum remains) or, in the case of any vacancy in the office of any
director, by the stockholders, and, subject to the provisions of this Article
IV, the person so chosen shall hold office until his successor shall have been
elected and qualified; or, if the person so chosen is a director elected to fill
a vacancy, he shall (subject to the provisions of this Article IV) hold office
for the unexpired term of his predecessor.
ARTICLE V
CAPITAL STOCK
Section 5.1 Stock Certificates.
The certificates for shares of the capital stock of the
Corporation shall be in such form as shall be prescribed by law and approved,
from time to time, by the Board of Directors.
Section 5.2 Transfer of Shares.
Shares of the capital stock of the Corporation may be
transferred on the books of the Corporation only by the holder of such shares or
by his duly authorized attorney, upon the surrender to the Corporation or its
transfer agent of the certificate representing such stock properly endorsed.
11
<PAGE>
Section 5.3 Fixing Record Date.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof (or to express consent to corporate action in writing
without a meeting), or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which, unless otherwise provided by law, shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
Section 5.4 Lost Certificates.
The Board of Directors or any transfer agent of the
Corporation may direct a new certificate or certificates representing stock of
the Corporation to be issued in place of any certificate or certificates
theretofore issued by the Corporation, alleged to have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate to be lost, stolen, or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors (or any transfer agent
of the Corporation authorized to do so by a resolution of the Board of
Directors) may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as the Board of Directors (or any transfer agent so authorized) shall
direct to indemnify the Corporation against any claim that may be made against
the Corporation with respect to the certificate alleged to have been
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<PAGE>
lost, stolen, or destroyed or the issuance of such new certificates, and such
requirement may be general or confined to specific instances.
Section 5.5 Regulations.
The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer, registration, cancellation, and replacement of certificates
representing stock of the Corporation.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Corporate Seal.
The corporate seal shall have inscribed thereon the name of
the Corporation and shall be in such form as may be approved from time to time
by the Board of Directors.
Section 6.2 Fiscal Year.
The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
Section 6.3 Notices and Waivers Thereof.
Whenever any notice whatever is required by law, the
Certificate of Incorporation, or these By-Laws to be given to any stockholder,
director, or officer, such notice, except as otherwise provided by law, may be
given personally, or by mail, or, in the case of directors or officers, by
facsimile, telegram, or cable, addressed to such address as appears on the books
of the Corporation. Any notice given by facsimile, telegram, or cable, shall be
deemed to have
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been given when transmission is confirmed and any notice given by mail shall be
deemed to have been given when it shall have been deposited in the United States
mail with postage thereon prepaid.
Whenever any notice is required to be given by law, the
Certificate of Incorporation, or these By-Laws, a written waiver thereof, signed
by the person entitled to such notice, whether before or after the meeting or
the time stated therein, shall be deemed equivalent in all respects to such
notice to the full extent permitted by law.
Section 6.4 Stock of Other Corporations or Other Interests.
Unless otherwise ordered by the Board of Directors, the
President, the Secretary, and such attorneys or agents of the Corporation as may
be from time to time authorized by the Board of Directors or the President,
shall have full power and authority on behalf of this Corporation to attend and
to act and vote in person or by proxy at any meeting of the holders of
securities of any corporation or other entity in which this Corporation may own
or hold shares or other securities, and at such meetings shall possess and may
exercise all the rights and powers incident to the ownership of such shares or
other securities which this Corporation, as the owner or holder thereof, might
have possessed and exercised if present. The President, the Secretary, or such
attorneys or agents, may also execute and deliver on behalf of this Corporation
powers of attorney, proxies, consents, waivers, and other instruments relating
to the shares or securities owned or held by this Corporation.
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ARTICLE VII
AMENDMENTS
The holders of shares entitled at the time to vote for the
election of directors shall have power to adopt, amend, or repeal the By-Laws of
the Corporation by vote of not less than a majority of such shares, and except
as otherwise provided by law, the Board of Directors shall have power equal in
all respects to that of the stockholders to adopt, amend, or repeal the By-Laws
by vote of not less than a majority of the entire Board. However, any By-Law
adopted by the Board may be amended or repealed by vote of the holders of a
majority of the shares entitled at the time to vote for the election of
directors.
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==============================================================================
INNOPET BRANDS CORP.
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
----------------
WARRANT AGREEMENT
Dated as of ______________, 1996
==============================================================================
<PAGE>
WARRANT AGREEMENT, dated this ___ day of ________ 1996 [the effective
date of the Registration Statement], by and between INNOPET BRANDS CORP., a
Delaware corporation (the "Company"), and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY.
WITNESSETH:
WHEREAS, in connection with (i) the offering (the "Offering") to the
public of 2,250,000 units (the "Units"), each Unit consisting of one share of
the Company's common stock, $.01 par value per share (the "Common Stock"), and
one redeemable warrant (the "Warrants"), each redeemable warrant entitling the
holder thereof to purchase one share of Common Stock, (ii) the over-allotment
option granted to Joseph Stevens & Company, L.P., (the "Underwriter") in the
public offering referred to above, to purchase up to an additional 337,500 Units
(the "Over-Allotment Option"), and (iii) the sale to the Underwriter of warrants
(the "Underwriter's Warrants") to purchase up to 225,000 Units, the Company will
issue up to 2,812,500 Warrants (subject to increase as provided herein);
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent (as defined in Section
1(u) hereof) to act on behalf of the Company, and the Warrant Agent is willing
to so act, in connection with the issuance, registration, transfer and exchange
of certificates representing the Warrants and the exercise of the Warrants.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder
<PAGE>
of the Company, the Underwriter, the holders of certificates representing the
Warrants and the Warrant Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Commission" shall mean the Securities and Exchange
Commission.
(c) "Common Stock" shall have the meaning set forth in Section
8(d) hereof.
(d) "Company" shall have the meaning assigned to such term in
the first (1st) paragraph of this Agreement.
(e) "Corporate Office" shall mean the office of the Warrant
Agent at which at any particular time its principal business in New York, New
York shall be administered, which office is located on the date hereof at 2
Broadway, New York, New York 10004.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(g) "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly executed by the Registered Holder (as
defined in Section 1(m) hereof) thereof or his attorney duly authorized in
writing, and (ii) payment in cash or by check made payable to the Warrant Agent
for the account of the Company of an amount in lawful money of the United States
of America equal to the applicable Purchase Price (as defined in Section 1(k)
hereof).
(h) "Initial Warrant Exercise Date" shall mean __________,
1996 [the effective date of the Registration Statement].
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<PAGE>
(i) "Initial Warrant Redemption Date" shall mean __________,
1997 [the date twelve (12) months after the effective date of the Registration
Statement].
(j) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(k) "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8 hereof, $_____ [150% of the initial public
offering price per Unit] per Share.
(l) "Redemption Date" shall mean the date (which may not occur
before the Initial Warrant Redemption Date) fixed for the redemption of the
Warrants in accordance with the terms hereof.
(m) "Registered Holder" shall mean the person in whose name
any certificate representing the Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6(b) hereof.
(n) "Underwriter's Warrant Agreement" shall mean the agreement
dated as of __________, 1996 [the effective date of the Registration Statement]
between the Company and the Underwriter relating to and governing the terms and
provisions of the Underwriter's Warrants.
(o) "Subsidiary" or "Subsidiaries" shall mean any corporation
or corporations, as the case may be, of which stock having ordinary power to
elect a majority of the board of directors of such corporation or corporations
(regardless of whether or not at the time the stock of any other class or
classes of such corporation shall have or may have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
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(p) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company of New York, New York or its authorized successor.
(q) "Underwriting Agreement" shall mean the underwriting
agreement dated _______________, 1996 [the effective date of the Registration
Statement] between the Company and the Underwriter relating to the purchase for
resale to the public of 2,250,000 Units (without giving effect to the
Over-Allotment Option).
(r) "Warrant Agent" shall mean Continental Stock Transfer &
Trust Company of New York, New York or its authorized successor.
(s) "Warrant Certificate" shall mean a certificate
representing each of the Warrants substantially in the form annexed hereto as
Exhibit A.
(t) "Warrant Expiration Date" shall mean, unless the Warrants
are redeemed as provided in Section 9 hereof prior to such date, 5:00 p.m. (New
York time) on __________, 2001 [the 60 month anniversary of issuance] or, if
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then 5:00 p.m. (New York time) on the next following
day which in the State of New York is not a holiday or a day on which banks are
authorized to close, subject to the Company's right, prior to the Warrant
Expiration Date, with the consent of the Underwriter, to extend such Warrant
Expiration Date on five (5) business days prior written notice to the Registered
Holders.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) One Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one (1) share of Common Stock upon the exercise thereof, subject
to modification and adjustment as provided in Section 8 hereof.
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(b) Upon execution of this Agreement, Warrant Certificates
representing 2,250,000 Warrants to purchase up to an aggregate of 2,250,000
shares of Common Stock (subject to modification and adjustment as provided in
Section 8 hereof), shall be executed by the Company and delivered to the Warrant
Agent.
(c) Upon exercise of the Over-Allotment Option, in whole or in
part, Warrant Certificates representing up to 337,500 Warrants to purchase up to
an aggregate of 337,500 shares of Common Stock (subject to modification and
adjustment as provided in Section 8 hereof) shall be executed by the Company and
delivered to the Warrant Agent.
(d) Upon exercise of the Underwriter's Warrants as provided
therein, Warrant Certificates representing 225,000 Warrants to purchase up to an
aggregate of 225,000 shares of Common Stock (subject to modification and
adjustment as provided in Section 8 hereof and in the Underwriter's Warrant
Agreement), shall be countersigned, issued and delivered by the Warrant Agent
upon written order of the Company signed by its Chairman of the Board, President
or a Vice President and by its Treasurer or an Assistant Treasurer or its
Secretary or an Assistant Secretary.
(e) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
denominations of one or whole number multiples thereof to the person entitled
thereto in connection with any transfer or exchange permitted under this
Agreement. No Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) Warrant Certificates issued upon
any transfer or exchange of Warrants, (iii) Warrant Certificates issued in
replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 hereof, and (iv) Warrant Certificates issued pursuant to
the Underwriter's Warrant Agreement (including Warrants in
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excess of the 225,000 Underwriter's Warrants issued as a result of the
antidilution provisions contained in the Underwriter's Warrant Agreement) and
(v) at the option of the Company, Warrant Certificates in such form as may be
approved by its Board of Directors, to reflect any adjustment or change in the
Purchase Price, the number of shares of Common Stock purchasable upon the
exercise of a Warrant or the redemption price therefor.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates).
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before
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the date of issuance of the Warrant Certificates or before countersignature by
the Warrant Agent and issue and delivery thereof, such Warrant Certificates,
nevertheless, may be countersigned by the Warrant Agent and issued and delivered
with the same force and effect as though the officer of the Company who signed
such Warrant Certificates had not ceased to hold such office.
SECTION 4. Exercise.
(a) Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, together
with payment in cash or by check made payable to the Warrant Agent for the
account of the Company of an amount in lawful money of the United States of
America equal to the applicable Purchase Price, have been received by the
Warrant Agent. The person entitled to receive the securities deliverable upon
such exercise shall be treated for all purposes as the holder of such securities
as of the close of business on the Exercise Date. As soon as practicable on or
after the Exercise Date and in any event within five (5) business days after
such date, the Warrant Agent, on behalf of the Company, shall cause to be issued
to the person or persons entitled to receive the same a Common Stock certificate
or certificates for the shares of Common Stock deliverable upon such exercise,
and the Warrant Agent shall deliver the same to the person or persons entitled
thereto. Upon the exercise of any Warrants, the Warrant Agent shall promptly
notify the Company in writing of such fact and of
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the number of securities delivered upon such exercise and, subject to Section
4(b) hereof, shall cause all payments in cash or by check made payable to the
order of the Company in respect of the Purchase Price to be deposited promptly
in the Company's bank account or delivered to the Company.
(b) At any time upon the exercise of any Warrants after one
year and one day from the date hereof, the Warrant Agent shall, on a daily
basis, within two business days after such exercise, notify the Underwriter, its
successors or assigns of the exercise of any such Warrants and shall, on a
weekly basis (subject to collection of funds constituting the tendered Purchase
Price, but in no event later than five business days after the last day of the
calendar week in which such funds were tendered), for services rendered by the
Underwriter to the Registered Holders of the Warrants then being exercised,
remit to the Underwriter an amount equal to five percent (5%) of the Purchase
Price of such Warrants then being exercised unless the Underwriter shall have
notified the Warrant Agent that the payment of such amount with respect to such
Warrant is violative of the General Rules and Regulations promulgated under the
Exchange Act, or the rules and regulations of the NASD or applicable state
securities or "blue sky" laws, or the Warrants are those underlying the
Underwriter's Warrants in which event, the Warrant Agent shall have to pay such
amount to the Company; provided, that, the Warrant Agent shall not be obligated
to pay any amounts pursuant to this Section 4(b) during any week that such
amounts payable are less than $1,000 and the Warrant Agent's obligation to make
such payments shall be suspended until the amount payable aggregates $1,000, and
provided further, that, in any event, any such payment (regardless of amount)
shall be made not less frequently than monthly.
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(c) The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fractional interest shall be eliminated by rounding
any fraction up to the next full share or Warrant, as the case may be, or other
securities, properties or rights.
SECTION 5. Reservation of Shares, Listing, Payment of Taxes, etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that, upon exercise of the Warrants and payment of the
Purchase Price for the shares of Common Stock underlying the Warrants, all
shares of Common Stock which shall be issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable, free from all preemptive or
similar rights, and free from all taxes, liens and charges with respect to the
issuance thereof, and that upon issuance such shares shall be listed or quoted
on each securities exchange, if any, on which the other shares of outstanding
Common Stock are then listed or quoted, or if not then so listed or quoted on
each place (whether the Nasdaq Stock Market, Inc., the NASD OTC Electronic
Bulletin Board, the National Quotation Bureau "pink sheets" or otherwise) on
which the other shares of outstanding Common Stock are listed or quoted.
(b) The Company covenants that if any securities reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the
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federal securities laws or a post-effective amendment to a registration
statement, use its best efforts to cause the same to become effective, keep such
registration statement current while any of the Warrants are outstanding and
deliver a prospectus which complies with Section 10(a)(3) of the Act, to the
Registered Holder exercising the Warrant (except, if in the opinion of counsel
to the Company, such registration is not required under the federal securities
law or if the Company receives a letter from the staff of the Commission stating
that it would not take any enforcement action if such registration is not
effected). The Company will use its best efforts to obtain appropriate approvals
or registrations under the state "blue sky" securities laws of all states in
which Registered Holders reside. Warrants may not be exercised by, nor may
shares of Common Stock be issued to, any Registered Holder in any state in which
such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
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SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep, at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to any Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription or
assignment form, as the case may be, on the reverse thereof shall be duly
endorsed or be accompanied by a written instrument or instruments of
subscription or assignment, in form satisfactory to the Company and the Warrant
Agent, duly executed by the Registered Holder thereof or his attorney duly
authorized in writing.
(d) No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
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(e) All Warrant Certificates surrendered for exercise or for
exchange shall be promptly cancelled by the Warrant Agent.
(f) Prior to due presentment for registration or transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Adjustments to Purchase Price and Number of Securities.
(a) Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Purchase Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
(b) Stock Dividends and Distributions. In case the Company
shall pay dividend in, or make a distribution of, shares of Common Stock or of
the Company's capital stock convertible into Common Stock, the Purchase Price
shall forthwith be proportionately
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decreased. An adjustment made pursuant to this Section 8(b) shall be made as of
the record date for the subject stock dividend or distribution.
(c) Adjustment in Number of Securities. Upon each adjustment
of the Purchase Price pursuant to the provisions of this Section 8, the number
of Warrant Securities issuable upon the exercise at the adjusted Purchase Price
of each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Purchase Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Purchase Price.
(d) Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended or restated as of the date hereof, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event the Company shall after the date
hereof issue Common Stock with greater or superior voting rights than the shares
of Common Stock outstanding as of the date hereof, each Holder, at its option,
may receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
(e) Merger or Consolidation or Sale.
(i) In case of any consolidation of the Company with, or
merger of the Company with, or merger of the Company into, another corporation
(other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common
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Stock), the corporation formed by such consolidation or surviving such merger
shall execute and deliver to the Holder a supplemental warrant agreement
providing that the holder of each Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation, merger,
sale or transfer by a Holder of the number of shares of Common Stock of the
Company for which such Warrant might have been exercised immediately prior to
such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in this Section 8. The above provision of this subsection
shall similarly apply to successive consolidations or mergers.
(ii) In the event of (A) the sale by the Company of all or
substantially all of its assets, or (B) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Exchange Act or (C) a
distribution to the Company's stockholders of any cash, assets, property,
rights, evidences of indebtedness, securities or any other thing of value, or
any combination thereof, the Holders of the unexercised Warrants shall receive
notice of such sale, transaction or distribution twenty (20) days prior to the
date of such sale or the record date for such transaction or distribution, as
applicable, and, if they exercise such Warrants prior to the date of such
transaction or distribution, they shall be entitled, in addition to the shares
of Common Stock issuable upon the exercise thereof, to receive such property,
cash, assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
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(f) No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than ten cents ($.10) per share of Common Stock, provided,
however, that in such case any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least ten cents ($.10) per share of
Common Stock.
SECTION 9. Redemption.
(a) Commencing on the Initial Warrant Redemption Date, the
Company may (but only with the prior written consent of the Underwriter), on
thirty (30) days' prior written notice, redeem all of the Warrants, in whole and
not in part, at a redemption price of five cents ($.05) per Warrant; provided,
however, that before any such call for redemption of Warrants can take place,
the (i) average closing bid price for the Common Stock, as reported by the
National Association of Securities Dealers Automated Quotation System, or (ii)
if not so quoted, as reported by any other recognized quotation system on which
the Common Stock is quoted, shall have for any twenty (20) trading days within a
period of thirty (30) consecutive trading days ending on the fifth (5th) trading
day prior to the date on which the notice contemplated by Sections 9(b) and 9(c)
hereof is given, equalled or exceeded 150% of the then exercise price per share
of Common Stock (subject to adjustment in the event of any stock splits or other
similar events as provided in Section 8 hereof).
(b) In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last address as shall appear
on the records of the Warrant Agent. Any notice mailed in the
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manner provided herein shall be conclusively presumed to have been duly given
whether or not the Registered Holder receives such notice. Not less than five
(5) business days prior to the mailing to the Registered Holders of the Warrants
of the notice of redemption, the Company shall deliver or cause to be delivered
to the Underwriter or its successors or assigns a similar notice telephonically
and confirmed in writing, together with a list of the Registered Holders
(including their respective addresses and number of Warrants beneficially owned
by them) to whom such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificates shall be delivered and the redemption price shall be
paid, and (iv) that the Underwriter is the Company's exclusive warrant
solicitation agent and shall receive the commission contemplated by Section 4(b)
hereof and (v) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be the
"Redemption Date" for purposes of this Agreement. No failure to mail such notice
nor any defect therein or in the mailing thereof shall affect the validity of
the proceedings for such redemption except as to a holder (A) to whom notice was
not mailed or (B) whose notice was defective. An affidavit of the Warrant Agent
or the Secretary or Assistant Secretary of the Company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
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(e) The Company shall indemnify the Underwriter and each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act against all loss, claim, damage,
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from the registration statement or prospectus referred to in Section 5(b) hereof
to the same extent and with the same effect (including the provisions regarding
contribution) as the provisions pursuant to which the company has agreed to
indemnify the Underwriter contained in Section 7 of the Underwriting Agreement.
(f) Five business days prior to the Redemption Date, the
Company shall furnish to the Underwriter (i) opinions of counsel to the Company,
dated such date and addressed to the Underwriter, and (ii) a "cold comfort"
letter dated such date addressed to the Underwriter, signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities, including, without limitation, those matters covered in Sections
6(d), 6(e) and 6(j) of the Underwriting Agreement.
(g) The Company shall as soon as practicable after the
Redemption Date, and in any event within 15 months thereafter, make "generally
available to its security holders" (within the meaning of Rule 158 under the
Act) an earnings statement (which need not be
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audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the Redemption Date.
(h) The Company shall deliver within five business days prior
to the Redemption Date copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to such registration statement and
permit the Underwriter to do such investigation, upon reasonable advance notice,
with respect to information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with applicable securities
laws or rules of the NASD. Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as the Underwriter shall reasonably request.
SECTION 10. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the Underwriter, and its duties shall
be determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which
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may require any such adjustment, or with respect to the nature or extent of any
such adjustment, when made, or with respect to the method employed in making the
same. It shall not (i) be liable for any recital or statement of fact contained
herein or for any action taken, suffered or omitted by it in reliance on any
Warrant Certificate or other document or instrument believed by it in good faith
to be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in any Warrant Certificate, or (iii) be liable for any act or omission in
connection with this Agreement except for its own gross negligence or willful
misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company or the Underwriter) and
shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of the Board of Directors, President or any Vice
President (unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action taken,
suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and hold it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything
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<PAGE>
done or omitted by the Warrant Agent in the execution of its duties and powers
hereunder except losses, expenses and liabilities arising as a result of the
Warrant Agent's gross negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving thirty (30) days' prior written notice to the Company. At least
fifteen (15) days prior to the date such resignation is to become effective, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation the Company shall appoint in writing a new warrant agent. If
the Company shall fail to make such appointment within a period of thirty (30)
days after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having a capital and surplus, as shown
by its last published report to its stockholders, of not less than ten million
dollars ($10,000,000) or a stock transfer company doing business in New York,
New York. After acceptance in writing of such appointment by the new warrant
agent is received by the Company, such new warrant agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the warrant agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or deed,
the same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not later than
the
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effective date of any such appointment, the Company shall file notice thereof
with the resigning Warrant Agent and shall forthwith cause a copy of such notice
to be mailed to the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party, or any corporation succeeding to the corporate trust business of the
Warrant Agent or any new warrant agent shall be a successor warrant agent under
this Agreement without any further act, provided that such corporation is
eligible for appointment as successor to the Warrant Agent under the provisions
of the preceding paragraph. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed to the Company and
to the Registered Holders of each Warrant Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two (2)
years from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (a) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained,
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<PAGE>
or (b) that they may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Warrant Certificates; provided, however,
that this Agreement shall not otherwise be modified, supplemented or altered in
any respect except with the consent in writing of the Registered Holders holding
not less than sixty-six and two-thirds percent (66-2/3%) of the Warrants then
outstanding; provided, further, that no change in the number or nature of the
securities purchasable upon the exercise of any Warrant, and no change that
increases the Purchase Price of any Warrant, other than such changes as are
specifically set forth in this Agreement as originally executed, shall be made
without the consent in writing of each Registered Holders affected by such
change. In addition, this Agreement may not be modified, amended or supplemented
without the prior written consent of the Underwriter or its successors or
assigns, other than to cure any ambiguity or to correct any defective or
inconsistent provision or manifest mistake or error herein contained or to make
any such change that the Warrant Agent and the Company deem necessary or
desirable and which shall not adversely affect the interests of the Underwriter
or its successors or assigns.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission, if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at InnoPet Brands Corp., 1 East Broward Boulevard,
Suite 1100, Fort Lauderdale, Florida 33301, Attention: Marc Duke, Chairman of
the Board and Chief Executive Officer, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the Warrant
Agent, at its Corporate Office. Copies of any
22
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notice delivered pursuant to this Agreement shall be delivered to Joseph Stevens
& Company, L.P., 33 Maiden Lane, 8th Floor, New York, NY 10038, Attention:
Joseph Sorbara, Chief Executive Officer or at such other address as may have
been furnished to the Company and the Warrant Agent in writing.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to conflicts of laws
rules or principals.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation. The Underwriter is, and shall at
all times irrevocably be deemed to be, a third-party beneficiary of this
Agreement, with full power, authority and standing to enforce the rights granted
to it hereunder.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
INNOPET BRANDS CORP. CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
As Warrant Agent
By:________________________________ By:_______________________________
Name: Marc Duke Name:
Title: Chairman of the Board and Title:
Chief Executive Officer
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<PAGE>
EXHIBIT A
No. W ___________ VOID AFTER ____________________, 2001
_________ WARRANTS
REDEEMABLE WARRANT CERTIFICATE TO
PURCHASE SHARES OF COMMON STOCK
INNOPET BRANDS CORP.
CUSIP____
THIS CERTIFIES THAT, FOR VALUE RECEIVED __________________________________
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. One Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and non-assessable share of Common Stock, $.01 par
value per share, of Innopet Brands Corp., a Delaware corporation (the
"Company"), at any time from _____________, 1996 [the effective date of the
Registration Statement] and prior to the Expiration Date (as hereinafter
defined) upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004 as Warrant Agent, or its successor (the "Warrant Agent"), accompanied
by payment of $_____ [150% of the initial public offering price per Unit]
subject to adjustment (the "Purchase Price"), in lawful money of the United
States of America in cash or by check made payable to the Warrant Agent for the
account of the Company.
This Warrant Certificate is, and each Warrant represented hereby are,
issued pursuant to and are subject in all respects to the terms and conditions
set forth in the Warrant Agreement (the "Warrant Agreement"), dated __________,
1996 [the effective date of the Registration Statement], by and between the
Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional interests will be issued. In the case of
the exercise of less than all of the Warrants represented hereby, the Company
shall cancel this Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
A-1
<PAGE>
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on
__________, 2001 [the 60 month anniversary of the issuance of the Warrant]. If
such date shall in the State of New York be a holiday or a day on which banks
are authorized to close, then the Expiration Date shall mean 5:00 p.m. (New York
time) on the next day which in the State of New York is not a holiday or a day
on which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to such securities
is effective or an exemption thereunder is available. The Company has covenanted
and agreed that it will file a registration statement under the Federal
securities laws, use its best efforts to cause the same to become effective, to
keep such registration statement current, if required under the Act, while any
of the Warrants are outstanding, and deliver a prospectus which complies with
Section 10(a)(3) of the Act to the Registered Holder exercising this Warrant.
This Warrant shall not be exercisable by a Registered Holder in any state where
such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment and payment of any tax or other
charge imposed in connection therewith or incident thereto, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Subject to the provisions of the Warrant Agreement, this Warrant may be
redeemed at the option of the Company, in whole and not in part, at a redemption
price of $.05 per Warrant, at any time commencing __________, 1997 [twelve (12)
months from issuance] provided that the average closing bid price for the
Company's Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System (or, if not so quoted, as reported by any
other recognized quotation system on which the price of the Common Stock is
quoted), shall have, for any twenty (20) trading days within a period of thirty
(30) consecutive trading days ending on the fifth (5th) trading day prior to the
date on which the Notice of Redemption (as defined below) is given, equalled or
exceeded 150% of the then exercise price per share (subject to adjustment in the
event of any stock splits or other similar events). Notice of redemption (the
"Notice of Redemption") shall be given not later than the thirtieth (30th) day
before the date fixed for redemption, all as provided in the Warrant Agreement.
On and after the date fixed for redemption, the Registered Holder shall have no
rights with respect to this Warrant except to receive the $.05 per Warrant upon
surrender of this Certificate.
A-2
<PAGE>
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary, except as provided in the
Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ___________, 1996
INNOPET BRANDS CORP.
[SEAL]
By: ________________________________
Name: Marc Duke
Title: Chairman of the Board and
Chief Executive Officer
ATTEST:
By: ________________________________
Name:
Title:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Warrant Agent
By: _________________________
Authorized Officer
A-3
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
----------------------------
----------------------------
----------------------------
----------------------------
(please print or type name and address)
and be delivered to
----------------------------
----------------------------
----------------------------
(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
A-4
<PAGE>
IMPORTANT: PLEASE COMPLETE THE FOLLOWING:
1. If the exercise of this Warrant was
solicited by Joseph Stevens & Company,
L.P. please check the
following box / /
2. The exercise of this Warrant was
solicited by / /
--------------------------
3. If the exercise of this Warrant was
not solicited, please check the
following box / /
Dated: ______________________ X_________________________________
_________________________________
_________________________________
Address
--------------------------------
Social Security or Taxpayer
Identification Number
--------------------------------
Signature Guaranteed
--------------------------------
A-5
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, __________________________, hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER
----------------------------------
----------------------------------
----------------------------------
(please print or type name and address)
________________________ of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated: _______________________ X__________________________
---------------------------
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
INNOPET BRANDS AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST
BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
A-6
<PAGE>
===============================================================================
INNOPET BRANDS CORP.
AND
JOSEPH STEVENS & COMPANY L.P.
-----------------
UNDERWRITER'S
WARRANT AGREEMENT
________, 1996
==============================================================================
<PAGE>
UNDERWRITER'S WARRANT AGREEMENT dated as of _______ ____, 1996
by and between INNOPET BRANDS CORP., a Delaware corporation (the "Company"), and
JOSEPH STEVENS & COMPANY, L.P. ("Joseph Stevens") (Joseph Stevens is hereinafter
referred to variously as the "Holder" or the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Underwriter or
its designee(s) warrants ("Warrants") to purchase up to 225,000 Units (as
defined in Section 1 hereof, each Unit consisting of one (1) share of common
stock, $.01 par value per share, of the Company ("Common Stock") and one (1)
redeemable Common Stock purchase warrant, each to purchase one additional share
of Common Stock ("Redeemable Warrants")); and
WHEREAS, the Underwriter has agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated as of the date
between the Underwriter and the Company in connection with the proposed public
offering of 2,250,000 Units at a public offering price of $4.00 per Unit; and
WHEREAS, the Warrants to be issued pursuant to this Agreement
will be issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Underwriter in consideration for, and as part
of the Underwriter's compensation in connection with, Joseph Stevens acting as
the Underwriter pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the premises, the payment
by the Underwriter to the Company of twenty-two dollars and fifty cents
($22.50), the agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>
1. Grant. The Underwriter (or its designee(s)) is hereby
granted the right to purchase, at any time from __________, 1997 [one year from
the date hereof] until 5:00 p.m., New York time, on __________, 2001, [5 years
from the date hereof] up to 225,000 Units at an initial exercise price (subject
to adjustment as provided in Section 8 hereof) of $__________ [120% of the
initial public offering price per Unit] per Unit subject to the terms and
conditions of this Agreement. A "Unit" consists of one (1) share of Common Stock
and one (1) Redeemable Warrant. Each Redeemable Warrant is exercisable to
purchase one additional share of Common Stock at an initial exercise price of
$____ [150% of the initial public offering price per Unit] per share, commencing
on the date of issuance (the "Initial Exercise Date") and ending, at 5:00 p.m.
New York time on __________, 2001 [60 months from the date hereof] (the
"Redeemable Warrant Expiration Date") at which time the Redeemable Warrants
shall expire. Except as set forth herein, the Units issuable upon exercise of
the Warrants are in all respects identical to the Units being purchased by the
Underwriter for resale to the public pursuant to the terms and provisions of the
Underwriting Agreement.
2. Warrant Certificates. The warrant certificates (the
"Warrant Certificates") delivered and to be delivered pursuant to this Agreement
shall be in the form set forth in Exhibit A attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions and other
variations as required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants are initially exercisable
at an initial exercise price per Unit set forth in Section 6 hereof payable by
certified or official bank check in New York Clearing House funds, subject to
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
Certificate, together with the annexed Form of Election to
2
<PAGE>
Purchase duly executed and payment of the Exercise Price (as hereinafter
defined) for the Units purchased at the Company's principal offices in Fort
Lauderdale, Florida (presently located at 1 East Broward Boulevard, Suite 1100,
Fort Lauderdale, Florida 33301) the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased and a certificate or
certificates for the Redeemable Warrants so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock and Redeemable Warrants underlying the Warrants). In the event the
Company redeems all of the outstanding Redeemable Warrants, the Redeemable
Warrants underlying the Warrants may only be exercised if such exercise is
simultaneous with the exercise of the Warrants. Warrants may be exercised to
purchase all or part of the Units represented thereby. In the case of the
purchase of less than all the Units purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Units purchasable thereunder.
3.2 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder(s) of the Warrants shall have the right at any
time and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1 in
exchange for the number of Units equal to the product of (x) the number of Units
as to which the Warrants are being exercised, multiplied by (y) a fraction, the
numerator of which is the Market Price (as defined in Section 3.3 hereof) of the
Units minus the Exercise Price of the Units and the denominator of which is the
Market Price per Unit. Solely for the purposes of
3
<PAGE>
this Section 3.2, Market Price shall be calculated either (i) on the date on
which the form of election attached hereto is deemed to have been sent to the
Company pursuant to Section 14 hereof ("Notice Date") or (ii) as the average of
the Market Price for each of the five trading days immediately preceding the
Notice Date, whichever of (i) or (ii) results in a greater Market Price.
3.3 Definition of Market Price.
(a) As used herein, the phrase "Market Price" of the Units,
the Common Stock or the Redeemable Warrants, respectively, at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Units, the Common Stock or the
Redeemable Warrants, as the case may be, are listed or admitted to trading or by
the Nasdaq National Market ("Nasdaq National Market") or the Nasdaq Small Cap
Market ("Nasdaq Small Cap"), or, if the Units, the Common Stock or the
Redeemable Warrants, as the case may be, are not listed or admitted to trading
on any national securities exchange or quoted by the National Association of
Securities Dealers Automated Quotation System ("Nasdaq"), the average closing
bid price as furnished by the National Association of Securities Dealers, Inc.
("NASD") through Nasdaq or similar organization if Nasdaq is no longer reporting
such information (collectively, the "Appropriate Market Price").
(b) If the Market Price of Units cannot be determined pursuant
to Section 3.3(a), the Market Price of the Units at any date shall be deemed to
be the sum of the Market Price of the Common Stock and the Market Price of the
Redeemable Warrants.
4
<PAGE>
(c) If the Market Price of the Common Stock cannot be
determined pursuant to Section 3.3(a) above, the Market Price of the Common
Stock shall be determined in good faith (using customary valuation methods) by
resolution of the members of the Board of Directors of the Company, based on the
best information available to it.
(d) If the Market Price of the Redeemable Warrants cannot be
determined pursuant to Section 3.3(a) above, the Market Price of a Redeemable
Warrant shall equal the difference between the Market Price of the Common Stock
and the Exercise Price of the Redeemable Warrant.
4. Issuance of Certificates. Upon the exercise of the
Warrants, the issuance of certificates for shares of Common Stock and Redeemable
Warrants or other securities, properties or rights underlying such Warrants, and
upon the exercise of the Redeemable Warrants, the issuance of certificates for
shares of Common Stock or other securities, properties or rights underlying such
Redeemable Warrants shall be made forthwith (and in any event such issuance
shall be made within five (5) business days thereafter) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof.
The Warrant Certificates and the certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants and
the shares of Common Stock underlying each Redeemable Warrant or other
securities, property or rights shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then
5
<PAGE>
present Secretary or Assistant Secretary or Treasurer or Assistant Treasurer of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a
Warrant Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the date hereof, except to officers or partners of the
Underwriter.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $____ per Unit [120% of the initial public offering price per Unit]. The
adjusted exercise price shall be the price which shall result from time to time
from any and all adjustments of the initial exercise price in accordance with
the provisions of Section 8 hereof.
6.2 Exercise Price. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The
Warrants, the shares of Common Stock and the Redeemable Warrants underlying the
Warrants and the shares of Common Stock issuable upon exercise of the Redeemable
Warrants underlying the Warrants and the other securities issuable upon exercise
of the Warrants (collectively, the "Warrant Securities") have been registered
under the Securities Act of 1933, as amended (the "Act") pursuant to the
Company's Registration Statement on Form SB-2 (Registration No. __________)
6
<PAGE>
(the "Registration Statement"). All the representations and warranties of the
Company contained in the Underwriting Agreement relating to the Registration
Statement, the Preliminary Prospectus and Prospectus (as such terms are defined
in the Underwriting Agreement) and made as of the dates provided therein, are
hereby incorporated by reference. The Company agrees and covenants promptly to
file post effective amendments to such Registration Statement as may be
necessary to maintain the effectiveness of the Registration Statement as long as
any Warrants are outstanding. In the event that, for any reason, whatsoever, the
Company shall fail to maintain the effectiveness of the Registration Statement,
upon exercise, in part or in whole, of the Warrants, certificates representing
the shares of Common Stock and the Redeemable Warrants underlying the Warrants,
and upon exercise, in whole or in part of the Redeemable Warrants, certificates
representing the shares of Common Stock underlying the Redeemable Warrants and
the other securities issuable upon exercise of the Warrants shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not be offered, sold, pledged, hypothecated,
assigned or transferred except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent
applicable, Rule 144 under the Act (or any similar rule under
such Act relating to the disposition of securities), or (iii)
an opinion of counsel, if such opinion shall be reasonably
satisfactory to counsel to the issuer, that an exemption from
registration under such Act is available.
7.2 Piggyback Registration. If, at any time commencing after
the date hereof and expiring seven (7) years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form S-8,
S-4 or a comparable registration statement) the Company will give written notice
by registered mail, at least thirty (30) days prior to the filing of each such
registration statement, to the Underwriter and to all other Holders of the
Warrants and/or the Warrant Securities of its intention to do so. If the
Underwriter or other Holders of
7
<PAGE>
the Warrants and/or Warrant Securities notifies the Company within twenty (20)
days after receipt of any such notice of its or their desire to include any such
securities in such proposed registration statement, the Company shall afford the
Underwriter and such Holders of the Warrants and/or Warrant Securities the
opportunity to have any such Warrant Securities registered under such
registration statement.
Notwithstanding the provisions of this Section 7.2, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 7.2 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing after the date hereof and expiring
five (5) years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities (assuming
the exercise of all of the Warrants and the Redeemable Warrants underlying the
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Securities and Exchange Commission
(the "Commission"), on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Underwriter and Holders, in order to
comply with the provisions of the Act, so as to permit a public offering and
sale of their respective Warrant Securities for nine (9) consecutive months by
such Holders and any other Holders of the Warrants and/or Warrant
8
<PAGE>
Securities who notify the Company within ten (10) days after receiving notice
from the Company of such request.
(b) The Company covenants and agrees to give written notice of
any registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company shall have the option, upon
the written notice of election of a Majority of the Holders of the Warrants
and/or Warrant Securities to repurchase (i) any and all Warrant Securities at
the higher of the Market Price per share of Common Stock on (x) the date of the
notice sent pursuant to Section 7.3(a) or (y) the expiration of the period
specified in Section 7.4(a) and (ii) any and all Warrants at such Market Price
less the Exercise Price of such Warrant. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 7.4(a) or (ii) the delivery of the
written notice of election specified in this Section 7.3(c).
(d) In addition to the registration rights under Section 7.2
and subsection (a) of this Section 7.3, at any time commencing after the date
hereof and expiring five (5) years thereafter, any Holder of Warrants and/or
Warrant Securities shall have the right, exercisable by written request to the
Company, to have the Company prepare and file, on one occasion, with the
Commission a registration statement so as to permit a public offering and sale
for nine (9)
9
<PAGE>
consecutive months by any such Holder of its Warrant Securities provided,
however, that the provisions of Section 7.4(b) hereof shall not apply to any
such registration request and registration and all costs incident thereto shall
be at the expense of the Holder or Holders making such request.
7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within forty-five (45) days of receipt of any
demand therefor, shall use its best efforts to have any registration
statement declared effective at the earliest possible time, and shall
furnish each Holder desiring to sell Warrant Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling
commissions), fees and expenses in connection with all registration
statements filed pursuant to Sections 7.2 and 7.3(a) hereof including,
without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder(s) will pay all costs,
fees and expenses in connection with any registration statement filed
pursuant to Section 7.3(d). If the Company shall fail to comply with
the provisions of Section 7.4(a), the Company shall be liable for any
equitable or other relief available at law to the Holder(s) requesting
registration of their Warrant Securities, excluding consequential
damages.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included
in a registration statement for
10
<PAGE>
offering and sale under the securities or blue sky laws of such states
as reasonably are requested by the Holder(s), provided that the Company
shall not be obligated to execute or file any general consent to
service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each
person, if any, who controls such Holders within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), against all loss, claim, damage, expense
or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which any of them may become subject under the Act, the Exchange Act or
otherwise, arising from such registration statement but only to the
same extent and with the same effect as the provisions pursuant to
which the Company has agreed to indemnify the Underwriter contained in
Section 7 of the Underwriting Agreement. The Company further agree(s)
that upon demand by an indemnified person, at any time or from time to
time, it will promptly reimburse such indemnified person for any loss,
claim, damage, liability, cost or expense actually and reasonably paid
by the indemnified person as to which the Company has indemnified such
person pursuant hereto. Notwithstanding the foregoing provisions of
this Section 7.4(d) any such payment or reimbursement by the Company of
fees, expenses or disbursements incurred by an indemnified person in
any proceeding in which a final judgment by a court of competent
jurisdiction (after all appeals or the expiration of time to appeal) is
entered against the Company or such indemnified person as a direct
result
11
<PAGE>
of the Holder(s) or such person's gross negligence or willful
misfeasance will be promptly repaid to the Company.
(e) The Holder(s) of the Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns,
shall severally, and not jointly, indemnify the Company, its officers
and directors and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from
information furnished by or on behalf of such Holders, or their
successors or assigns, for specific inclusion in such registration
statement to the same extent and with the same effect as the provisions
contained in Section 7 of the Underwriting Agreement pursuant to which
the Underwriter have agreed to indemnify the Company. The Holder(s)
further agree(s) that upon demand by an indemnified person, at any time
or from time to time, they will promptly reimburse such indemnified
person for any loss, claim, damage, liability, cost or expense actually
and reasonably paid by the indemnified person as to which the Holder(s)
have indemnified such person pursuant hereto. Notwithstanding the
foregoing provisions of this Section 7.4(e) any such payment or
reimbursement by the Holder(s) of fees, expenses or disbursements
incurred by an indemnified person in any proceeding in which a final
judgment by a court of competent jurisdiction (after all appeals or the
expiration of time to appeal) is entered against the Company or such
indemnified person as a direct result of the
12
<PAGE>
Company or such person's gross negligence or willful misfeasance will
be promptly repaid to the Holder(s).
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Securities to be included in any
registration statement filed pursuant to Section 7.3 hereof without the
prior written consent of the Holders of the Warrants and Warrant
Securities representing a Majority of such securities (assuming the
exercise of all of the Warrants and the Redeemable Warrants underlying
the Warrants).
(h) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart,
addressed to such Holder or underwriter, of (i) an opinion of counsel
to the Company, dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, an
opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing
under the underwriting agreement) signed by the independent public
accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of such accountants' letter, with respect to events subsequent
to the date of such financial
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statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(i) The Company shall as soon as practicable after the
effective date of the registration statement, and in any event within
15 months thereafter, make "generally available to its security
holders" (within the meaning of Rule 158 under the Act) an earnings
statement (which need not be audited) complying with Section 11(a) of
the Act and covering a period of at least 12 consecutive months
beginning after the effective date of the registration statement.
(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and
memoranda described below and to the managing underwriter, if any,
copies of all correspondence between the Commission and the Company,
its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement
and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or
omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the
NASD. Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable
extent and at such reasonable times and as often as any such Holder or
underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement
with the managing underwriter selected for such underwriting by Holders
holding a Majority of the Warrant Securities requested to be included
in such underwriting, which may be the
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<PAGE>
Underwriter. Such agreement shall be satisfactory in form and substance
to the Company, each Holder and such managing underwriter, and shall
contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that
type used by the managing underwriter. The Holders shall be parties to
any underwriting agreement relating to an underwritten sale of their
Warrant Securities and may, at their option, require that any or all of
the representations, warranties and covenants of the Company to or for
the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their
intended methods of distribution.
(l) In addition to the Warrant Securities, upon the written
request therefor by any Holder(s), the Company shall include in the
registration statement any other securities of the Company held by such
Holder(s) as of the date of filing of such registration statement,
including without limitation, restricted shares of Common Stock,
options, warrants or any other securities convertible into shares of
Common Stock.
(m) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities shall mean
in excess of fifty percent (50%) of the then outstanding Warrants or
Warrant Securities that (i) are not held by the Company, an affiliate,
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith and (ii) have not been resold to the public
pursuant to a registration statement filed with the Commission under
the Act.
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8. Adjustments to Exercise Price and Number of Securities.
8.1 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.2 Stock Dividends and Distributions. In case the Company shall
pay dividend in, or make a distribution of, shares of Common Stock or of the
Company's capital stock convertible into Common Stock, the Exercise Price shall
forthwith be proportionately decreased. An adjustment made pursuant to this
Section 8.2 shall be made as of the record date for the subject stock dividend
or distribution.
8.3 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
Warrant Securities issuable upon the exercise at the adjusted Exercise Price of
each Warrant shall be adjusted to the nearest whole number by multiplying a
number equal to the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
8.4 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended or restated as of the date hereof, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value.
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<PAGE>
8.5 Merger or Consolidation or Sale.
(a) In case of any consolidation of the Company with, or
merger of the Company with, or merger of the Company into, another corporation
(other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the holder of each Warrant then
outstanding or to be outstanding shall have the right thereafter (until the
expiration of such Warrant) to receive, upon exercise of such Warrant, the kind
and amount of shares of stock and other securities and property receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of Common Stock of the Company for which such Warrant might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(b) In the event of (i) the sale by the Company of all or
substantially all of its assets, or (ii) the engagement by the Company or any of
its affiliates in a "Rule 13e-3 transaction" as defined in paragraph (a)(3) of
Rule 13e-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, or (iii) a distribution to the Company's stockholders
of any cash, assets, property, rights, evidences of indebtedness, securities or
any other thing of value, or any combination thereof, the Holders of the
unexercised Warrants shall receive notice of such sale, transaction or
distribution twenty (20) days prior to the date of such sale or the record date
for such transaction or distribution, as applicable, and, if they exercise such
Warrants prior to such date, they shall be entitled, in addition to the shares
of Common
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<PAGE>
Stock issuable upon the exercise thereof, to receive such property, cash,
assets, rights, evidence of indebtedness, securities or any other thing of
value, or any combination thereof, on the payment date of such sale, transaction
or distribution.
8.6 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of said adjustment
shall be less than ten cents ($.10) per Warrant Security, provided, however,
that in such case any adjustment that would otherwise be required then to be
made shall be carried forward and shall be made at the time of and together with
the next subsequent adjustment which, together with any adjustment so carried
forward, shall amount to at least ten cents ($.10) per Warrant Security.
8.7 Adjustment of Redeemable Warrants' Exercise Price. With
respect to any of the Redeemable Warrants whether or not the Redeemable Warrants
have been exercised (or are exercisable) and whether or not the Redeemable
Warrants are issued and outstanding, the Redeemable Warrant exercise price and
the number of shares of Common Stock underlying such Redeemable Warrants shall
be automatically adjusted in accordance with Section 8 of the Warrant Agreement
between the Company and Continental Stock Transfer & Trust Company dated
__________, 1996 (the "Redeemable Warrant Agreement"), upon the occurrence of
any of the events described therein. Thereafter, the underlying Redeemable
Warrants shall be exercisable at such adjusted Redeemable Warrant exercise price
for such adjusted number of underlying shares of Common Stock or other
securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate of like tenor and
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<PAGE>
date representing in the aggregate the right to purchase the same number of
Units in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock or Redeemable Warrants upon the exercise of the Warrants, or fractions of
shares of Common Stock upon the exercise of the Redeemable Warrants underlying
the Warrants, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock or Redeemable Warrants, as the case may be, or other
securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants and
the Redeemable Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common Stock and other securities
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any stockholder. The
Company further covenants and agrees that
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<PAGE>
upon exercise of the Redeemable Warrants underlying the Warrants and payment of
the respective Redeemable Warrant exercise price therefor, all shares of Common
Stock and other securities issuable upon such exercises shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants and the Redeemable Warrants and all Redeemable
Warrants underlying the Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock or the
Redeemable Warrants issued to the public in connection herewith may then be
listed and/or quoted on Nasdaq National Market or Nasdaq Small Cap Market.
12. Notices to Warrant Holders. Nothing contained in this
Agreement shall be construed as conferring upon the Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or
20
<PAGE>
exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Redeemable Warrants. The form of the certificate
representing Redeemable Warrants (and the form of election to purchase shares of
Common Stock upon the exercise of Redeemable Warrants and the form of assignment
printed on the reverse thereof) shall be substantially as set forth in Exhibit
"A" to the Redeemable Warrant Agreement. Each Redeemable Warrant issuable upon
exercise of the Warrants shall evidence the right to initially purchase one
fully paid and non-assessable share of Common Stock at an initial purchase price
of $____ [150% of the initial public offering price per Unit] per share
commencing on the Initial Exercise Date and ending at 5:00 p.m. New York time on
the Redeemable Warrant Expiration
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<PAGE>
Date at which time the Redeemable Warrants shall expire. The exercise price of
the Redeemable Warrants and the number of shares of Common Stock issuable upon
the exercise of the Redeemable Warrants are subject to adjustment, whether or
not the Warrants have been exercised and the Redeemable Warrants have been
issued, in the manner and upon the occurrence of the events set forth in Section
8 of the Redeemable Warrant Agreement, which is hereby incorporated herein by
reference and made a part hereof as if set forth in its entirety herein. Subject
to the provisions of this Agreement and upon issuance of the Redeemable Warrants
underlying the Warrants, each registered holder of such Redeemable Warrants
shall have the right to purchase from the Company (and the Company shall issue
to such registered holders) up to the number of fully paid and non-assessable
shares of Common Stock (subject to adjustment as provided herein and in the
Redeemable Warrant Agreement), free and clear of all preemptive rights of
stockholders, provided that such registered holder complies with the terms
governing exercise of the Redeemable Warrants set forth in the Redeemable
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Redeemable Warrant Agreement. Upon exercise of
the Redeemable Warrants, the Company shall forthwith issue to the registered
holder of any such Redeemable Warrant in his name or in such name as may be
directed by him, certificates for the number of shares of Common Stock so
purchased. Except as otherwise provided herein, the Redeemable Warrants
underlying the Warrants shall be governed in all respects by the terms of the
Redeemable Warrant Agreement. The Redeemable Warrants shall be transferable in
the manner provided in the Redeemable Warrant Agreement, and upon any such
transfer, a new Redeemable Warrant Certificate shall be issued promptly to the
transferee. The Company covenants to, and agrees with, the Holder(s) that
without the prior written consent of the Holder(s), the Redeemable Warrant
Agreement will
22
<PAGE>
not be modified, amended, cancelled, altered or superseded, and that the Company
will send to each Holder, irrespective of whether or not the Warrants have been
exercised, any and all notices required by the Redeemable Warrant Agreement to
be sent to holders of Redeemable Warrants.
14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice
to the Holders.
15. Supplements and Amendments. The Company and the
Underwriter may from time to time supplement or amend this Agreement without the
approval of any Holders of Warrant Certificates (other than the Underwriter) in
order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Underwriter may deem necessary or desirable and which
the Company and the Underwriter deem shall not adversely affect the interests of
the Holders of Warrant Certificates.
16. Successors. All the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
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<PAGE>
17. Termination. This Agreement shall terminate at the close
of business on __________, 2003 [7 years from the date hereof]. Notwithstanding
the foregoing, the indemnification provisions of Section 7 shall survive such
termination until the close of business on __________, 2008 [12 years from the
date hereof.]
18. Governing Law, Submission to Jurisdiction. This Agreement
and each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company, the Underwriter and the Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the State
of New York or of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Underwriter and the Holders hereby irrevocably waive
any objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Underwriter and the
Holders (at the option of the party bringing such action, proceeding or claim)
may be served by transmitting a copy thereof, by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address as set
forth in Section 14 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the party so served in any action, proceeding or
claim. The Company, the Underwriter and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
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<PAGE>
19. Entire Agreement; Modification. This Agreement (including
the Underwriting Agreement to the extent portions thereof are referred to
herein) and the Redeemable Warrant Agreement contain the entire understanding
between the parties hereto with respect to the subject matter hereof and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
20. Severability. If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. Captions. The caption headings of the Sections of this
Agreement are for convenience of reference only and are not intended, nor should
they be construed as, a part of this Agreement and shall be given no substantive
effect.
22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the Underwriter and any other registered Holder(s) of the Warrant
Certificates or Warrant Securities any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and the Underwriter and any other Holder(s) of the
Warrant Certificates or Warrant Securities.
23. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall to either constitute but one and
the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
INNOPET BRANDS CORP.
By:______________________________________________________
Marc Duke
Chairman of the Board and Chief Executive Officer
Attest:
____________________
Secretary
JOSEPH STEVENS & COMPANY, L.P.
By:___________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE
ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ________, 2001
No. W- ____ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Joseph Stevens &
Company, L.P., or registered assigns, is the registered holder of __________
Warrants to purchase initially, at any time from ____________, 1997 [one year
from the effective date of the Registration Statement] until 5:00 p.m. New York
time on ____________, 2001 [five years from the effective date of the
Registration Statement] ("Expiration Date"), up to ______________ Units, each
Unit consisting of one (1) fully-paid and non-assessable share of common stock,
$.01 par value ("Common Stock") of INNOPET BRANDS CORP., a Delaware corporation
(the "Company"), and one (1) redeemable common stock purchase warrant
("Redeemable Warrants") (each Redeemable Warrant entitling the holder to
purchase one fully-paid and non-assessable share of Common Stock), at the
initial exercise price, subject to adjustment in certain events (the "Exercise
Price"), of $_____________ [120% of the public offering price per Unit] per Unit
upon surrender of this Warrant Certificate and payment of the Exercise Price at
an office or agency of the Company, or by surrender of this Warrant Certificate
in lieu of cash payment, but subject to the conditions set forth herein and in
the warrant agreement dated as of _________________, 1996 between the Company
and Joseph Stevens & Company, L.P. (the "Warrant Agreement"). Payment of the
Exercise Price shall be made by certified or official bank check in New York
Clearing House funds payable to the order of the Company or by surrender of this
Warrant Certificate.
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<PAGE>
No Warrant may be exercised after 5:00 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such Warrant.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of , 1996
INNOPET BRANDS CORP.
[SEAL] By:______________________________________________________
Marc Duke
Chairman of the Board and Chief Executive Officer
Attest:
____________________
Secretary
3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _____________ Units
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of INNOPET BRANDS
CORP. in the amount of $__________, all in accordance with the terms of Section
3.1 of the Underwriter's Warrant Agreement dated as of ___________, 1996 between
INNOPET BRANDS CORP. and Joseph Stevens & Company, L.P. The undersigned requests
that certificates for such securities be registered in the name of
_______________ whose address is __________________________ and that such
certificates be delivered to ______________________________ whose address is
- ----------------------------.
Dated:
Signature______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
4
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ____________ Units
all in accordance with the terms of Section 3.2 of the Underwriter's Warrant
Agreement dated as of ______________, 1996 between INNOPET BRANDS CORP. and
Joseph Stevens & Company, L.P. The undersigned requests that certificates for
such securities be registered in the name of __________________ whose address is
___________________________________________ and that such certificates be
delivered to __________________________ whose address is _____________________.
Dated:
Signature______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
5
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers
unto _________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
Signature______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
6
<PAGE>
[TO COME]
<PAGE>
EXHIBIT 4.4
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. Lauderdale, Florida 33301 and Entrepreneurial
Investors, Ltd., a Bahamas company ("Buyer"), with offices at Citibank Building,
2nd Floor, East Mall Drive, P.O. Box 40643, 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
Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, NY
10019.
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
<PAGE>
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
2
<PAGE>
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.
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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;
6
<PAGE>
(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.
7
<PAGE>
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 Karlinsky & Stein 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
8
<PAGE>
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.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attn: CEO
Telephone: 954-453-2400
Telecopier: 954-453-2500
with a copy (which shall not constitute notice) to:
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019
Attn: Robert S. Matlin, Esq.
Telephone: 212-977-6600
Telecopier: 212-977-8389
9
<PAGE>
if to Buyer:
Entrepreneurial Investors, Ltd.
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: 242-352-7063
Telecopier: 242-352-3932
with a copy (which shall not constitute notice) to:
Novakov, Davidson & Flynn, P.C.
2000 St. Paul Place
750 N. St. Paul Street
Dallas, Texas 75201-3286
Attn: I. Bobby Majumder, Esq.
Telephone: 214-922-9221
Telecopier: 214-969-7557
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.
10
<PAGE>
IN WITNESS WHEREOF, this Agreement was duly executed on the
date first written above.
INNOPET BRANDS CORP.
By: /s/ Marc Duke
-------------------------------
Name: Marc Duke
Title: Chief Executive Officer
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Robert E. Cordes
-------------------------------
Name: Robert E. Cordes
Title: Director
11
<PAGE>
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of the 28th day of April, 1997 by and between INNOPET BRANDS
CORP., a Delaware corporation (the "Company") and ENTREPRENEURIAL INVESTORS,
LTD. (the "Shareholder").
R E C I T A L S :
WHEREAS, the Shareholder is acquiring 625,000 shares (the
"Shares") of Series A 4% Convertible Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"), pursuant to the Investor Subscription
Agreement by and between the Company and the Shareholder dated the same date as
hereof (the "Investor Agreement"); and
WHEREAS, the Company desires to grant to the Shareholder
certain registration rights relating to the shares of common stock, par value
$.01 per share (the "Common Stock") issuable upon conversion of the Shares and
the Shareholder desires to obtain such registration rights, subject to the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions and References. For purposes of this Agreement,
in addition to the definitions set forth above and elsewhere herein, the
following terms shall have the following meanings:
(a) The term "Commission" shall mean the Securities and
Exchange Commission and any successor agency.
(b) The terms "register", "registered" and
"registration" shall refer to a registration effected by
preparing and filing a registration statement or similar
document in compliance with the 1933 Act (as herein defined)
and the declaration or ordering of effectiveness of such
registration statement or document.
(c) For purposes of this Agreement, the term
"Registrable Stock" shall mean (i) any shares of Common Stock
issued or issuable upon the conversion of Shares, (ii) any
Common Stock issued by way of a stock split, and (iii) any
Common Stock issued as a stock dividend of the Shares. For
purposes of this Agreement, any Registrable Stock shall cease
to be Registrable Stock when (v)
<PAGE>
a registration statement covering such Registrable Stock has
been declared effective and such Registrable Stock has been
disposed of pursuant to such effective registration statement,
(w) such Registrable Stock is sold pursuant to Rule 144 (or
any similar provision then in force) under the 1933 Act, (x)
such Registrable Stock is eligible to be sold pursuant to Rule
144(k) under the 1933 Act, (y) such Registrable Stock has been
otherwise transferred, no stop transfer order affecting such
stock is in effect and the Company has delivered new
certificates or other evidences of ownership for such
Registrable Stock not bearing any legend indicating that such
shares have not been registered under the 1933 Act, or (z)
such Registrable Stock is sold by a person in a transaction in
which the rights under the provisions of this Agreement are
not assigned.
(d) The term "Holder" shall mean the Shareholder or any
transferee or assignee thereof to whom the rights under this
Agreement are assigned in accordance with Section 10 hereof,
provided that the Shareholder or such transferee or assignee
shall then own the Registrable Stock.
(e) The term "1933 Act" shall mean the Securities Act
of 1933, as amended.
(f) An "affiliate of such Holder" shall mean a person
who controls, is controlled by or is under common control with
such Holder, or the spouse or children (or a trust exclusively
for the benefit of the spouse and/or children) of such Holder,
or, in the case of a Holder that is a partnership, its
partners.
(g) The term "Person" shall mean an individual,
corporation, partnership, trust, limited liability company,
unincorporated organization or association or other entity,
including any governmental entity.
(h) The term "Requesting Holder" shall mean a Holder or
Holders of in the aggregate of at least a majority of the
Registrable Stock.
(i) References in this Agreement to any rules,
regulations or forms promulgated by the Commission shall
include rules, regulations and forms succeeding to the
functions thereof, whether or not bearing the same
designation.
2. Demand Registration.
(a) Commencing ninety (90) days after the date of
Closing (as defined in the Investor Agreement), any Requesting
Holders may make a written request to the Company (specifying
that it is being made pursuant to this Section 2) that the
Company file a registration statement under the 1933 Act (or a
similar document pursuant to any other statute then in effect
corresponding to the 1933 Act) covering the registration of
Registrable Stock. In such event, the Company shall (x) within
ten (10) days thereafter notify in writing all other Holders
of Registrable
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<PAGE>
Stock of such request, and (y) use its best efforts to cause
to be registered under the 1933 Act all Registrable Stock that
the Requesting Holders and such other Holders have, within
forty-five (45) days after the Company has given such notice,
requested be registered.
(b) If the Requesting Holders intend to distribute the
Registrable Stock covered by their request by means of an
underwritten offering, they shall so advise the Company as a
part of their request pursuant to Section 2(a) above, and the
Company shall include such information in the written notice
referred to in clause (x) of Section 2(a) above. In such
event, the Holder's right to include its Registrable Stock in
such registration shall be conditioned upon such Holder's
participation in such underwritten offering and the inclusion
of such Holder's Registrable Stock in the underwritten
offering to the extent provided in this Section 2. All Holders
proposing to distribute Registrable Stock through such
underwritten offering shall enter into an underwriting
agreement in customary form with the underwriter or
underwriters. Such underwriter or underwriters shall be
selected by a majority in interest of the Requesting Holders
and shall be approved by the Company, which approval shall not
be unreasonably withheld; provided, that all of the
representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting
agreement shall be conditions precedent to the obligations of
such Holders; and provided further, that no Holder shall be
required to make any representations or warranties to or
agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such
Holder, the Registrable Stock of such Holder and such Holder's
intended method of distribution and any other representation
required by law or reasonably required by the underwriter.
(c) Notwithstanding any other provision of this Section
2 to the contrary, if the managing underwriter of an
underwritten offering of the Registrable Stock requested to be
registered pursuant to this Section 2 advises the Requesting
Holders in writing that in its opinion marketing factors
require a limitation of the number of shares to be
underwritten, the Requesting Holders shall so advise all
Holders of Registrable Stock that would otherwise be
underwritten pursuant hereto, and the number of shares of
Registrable Stock that may be included in such underwritten
offering shall be allocated among all such Holders, including
the Requesting Holders, in proportion (as nearly as
practicable) to the amount of Registrable Stock requested to
be included in such registration by each Holder at the time of
filing the registration statement; provided, that in the event
of such limitation of the number of shares of Registrable
Stock to be underwritten, the Holders shall be entitled to an
additional demand registration pursuant to this Section 2. If
any Holder of Registrable Stock disapproves of the terms of
the underwriting, such Holder may elect to withdraw by written
notice to the
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<PAGE>
Company, the managing underwriter and the Requesting Holders.
The securities so withdrawn shall also be withdrawn from
registration.
(d) Notwithstanding any provision of this Agreement to
the contrary, the Company shall not be required to effect a
registration pursuant to this Section 2 during the period
starting with the fourteenth (14th) day immediately preceding
the date of an anticipated filing by the Company of, and
ending on a date ninety (90) days following the effective date
of, a registration statement pertaining to a public offering
of securities for the account of the Company; provided, that
the Company shall actively employ in good faith all reasonable
efforts to cause such registration statement to become
effective; and provided further, that the Company's estimate
of the date of filing such registration statement shall be
made in good faith.
(e) The Company shall be obligated to effect and pay
for a total of only one (1) registration pursuant to this
Section 2, unless increased pursuant to Section 2(c) hereof;
provided, that a registration requested pursuant to this
Section 2 shall not be deemed to have been effected for
purposes of this Section 2(e), unless (i) it has been declared
effective by the Commission, (ii) if it is a shelf
registration, it has remained effective for the period set
forth in Section 3(b), (iii) the offering of Registrable Stock
pursuant to such registration is not subject to any stop
order, injunction or other order or requirement of the
Commission (other than any such action prompted by any act or
omission of the Holders), and (iv) no limitation of the number
of shares of Registrable Stock to be underwritten has been
required pursuant to Section 2(c) hereof.
3. Obligations of the Company. Whenever required under Section
2 to use its best efforts to effect the registration of any Registrable Stock,
the Company shall, as expeditiously as possible:
(a) prepare and file with the Commission, not later
than 90 days after receipt of a request to file a registration
statement with respect to such Registrable Stock, a
registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of
such issue of Registrable Stock in accordance with the
intended method of distribution thereof, and use its best
efforts to cause such registration statement to become
effective as promptly as practicable thereafter; provided that
before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will (i)
furnish to one counsel selected by the Requesting Holders
copies of all such documents proposed to be filed, and (ii)
notify each such Holder of any stop order issued or threatened
by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if
entered;
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(b) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
period of not less than one year or such shorter period which
will terminate when all Registrable Stock covered by such
registration statement has been sold (but not before the
expiration of the forty (40) or ninety (90) day period
referred to in Section 4(3) of the 1933 Act and Rule 174
thereunder, if applicable), and comply with the provisions of
the 1933 Act with respect to the disposition of all securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each Holder and any underwriter of
Registrable Stock to be included in a registration statement
copies of such registration statement as filed and each
amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus)
and such other documents as such Holder may reasonably request
in order to facilitate the disposition of the Registrable
Stock owned by such Holder;
(d) use its best efforts to register or qualify such
Registrable Stock under such other securities or blue sky laws
of such jurisdictions as any selling Holder or any underwriter
of Registrable Stock reasonably requests, and do any and all
other acts which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Stock owned by such Holder;
provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(d)
hereof, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process
in any such jurisdiction;
(e) use its best efforts to cause the Registrable Stock
covered by such registration statement to be registered with
or approved by such other governmental agencies or other
authorities as may be necessary by virtue of the business and
operations of the Company to enable the selling Holders
thereof to consummate the disposition of such Registrable
Stock;
(f) notify each selling Holder of such Registrable
Stock and any underwriter thereof, at any time when a
prospectus relating thereto is required to be delivered under
the 1933 Act (even if such time is after the period referred
to in Section 3(b)), of the happening of any event as a result
of which the prospectus included in such registration
statement contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances being made not misleading, and prepare a
supplement or amendment to such prospectus so that,
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as thereafter delivered to the purchasers of such Registrable
Stock, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
in light of the circumstances being made not misleading;
(g) make available for inspection by any selling
Holder, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or
underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), and
cause the Company's officers, directors and employees to
supply all information reasonably requested by any such
Inspector, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, in connection
with such registration statement. Records or other information
which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records or other information is
necessary to avoid or correct a misstatement or omission in
the registration statement, or (ii) the release of such
Records or other information is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction. Each
selling Holder shall, upon learning that disclosure of such
Records or other information is sought in a court of competent
jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the Records or other
information deemed confidential;
(h) furnish, at the request of any Requesting Holder,
on the date that such shares of Registrable Stock are
delivered to the underwriters for sale pursuant to such
registration or, if such Registrable Stock is not being sold
through underwriters, on the date that the registration
statement with respect to such shares of Registrable Stock
becomes effective, (1) a signed opinion, dated such date, of
the legal counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and
if such Registrable Stock is not being sold through
underwriters, then to the Requesting Holders as to such
matters as such underwriters or the Requesting Holders, as the
case may be, may reasonably request and as would be customary
in such a transaction; and (2) a letter dated such date, from
the independent certified public accountants of the Company,
addressed to the underwriters, if any, and if such Registrable
Stock is not being sold through underwriters, then to the
Requesting Holders and, if such accountants refuse to deliver
such letter to such Holder, then to the Company (i) stating
that they are independent certified public accountants within
the meaning of the 1933 Act and that, in the opinion of such
accountants, the financial statements and other financial data
of the Company included in the registration statement or the
prospectus, or any amendment or supplement thereto, comply as
to form in all material respects with the applicable
accounting requirements of the 1933 Act, and (ii) covering
such other financial matters (including information as to the
period
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<PAGE>
ending not more than five (5) business days prior to the date
of such letter) with respect to the registration in respect of
which such letter is being given as the Requesting Holders may
reasonably request and as would be customary in such a
transaction;
(i) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an
underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Stock to be so
included in the registration statement;
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, but not later than eighteen (18) months after the
effective date of the registration statement, an earnings
statement covering the period of at least twelve (12) months
beginning with the first full month after the effective date
of such registration statement, which earnings statements
shall satisfy the provisions of Section 11(a) of the 1933 Act;
and
(k) use its best efforts to cause all such Registrable
Stock to be listed on the Nasdaq SmallCap Market and/or any
other securities exchange on which similar securities issued
by the Company are then listed or traded.
The Company may require each selling Holder of Registrable
Stock as to which any registration is being effected to furnish to the Company
such information regarding the distribution of such Registrable Stock as the
Company may from time to time reasonably request in writing.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f)
hereof, such Holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Stock current at the time of receipt of such notice.
In the event the Company shall give any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement (including the period referred to in
Section 3(b)) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 3(f) hereof to and
including the date when each selling Holder of Registrable Stock covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by Section 3(f) hereof.
4. Incidental Registration. Commencing immediately after the
date of Closing (as defined in the Investor Agreement), if the Company
determines that it shall file a registration
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statement under the 1933 Act (other than a registration statement on a Form S-4
or S-8 or filed in connection with an exchange offer or an offering of
securities solely to the Company's existing stockholders) on any form that would
also permit the registration of the Registrable Stock and such filing is to be
on its behalf and/or on behalf of selling holders of its securities for the
general registration of its common stock to be sold for cash, at each such time
the Company shall promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such registration
statement, which date shall be no earlier than forty (40) days from the date of
such notice, and advising each Holder of its right to have Registrable Stock
included in such registration. Upon the written request of any Holder received
by the Company no later than twenty (20) days after the date of the Company's
notice, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Stock that each such Holder has so requested
to be registered. If, in the written opinion of the managing underwriter or
underwriters (or, in the case of a non-underwritten offering, in the written
opinion of the placement agent, or if there is none, the Company), the total
amount of such securities to be so registered, including such Registrable Stock,
will exceed the maximum amount of the Company's securities which can be marketed
(i) at a price reasonably related to the then current market value of such
securities, or (ii) without otherwise materially and adversely affecting the
entire offering, then the amount of Registrable Stock to be offered for the
accounts of Holders shall be reduced pro rata to the extent necessary to reduce
the total amount of securities to be included in such offering to the
recommended amount; provided, that if securities are being offered for the
account of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of securities intended to be offered
by Holders than the fraction of similar reductions imposed on such other Persons
other than the Company over the amount of securities they intended to offer.
5. Holdback Agreement - Restrictions on Public Sale by Holder.
(a) To the extent not inconsistent with applicable law,
each Holder whose Registrable Stock is included in a
registration statement agrees not to effect any public sale or
distribution of the issue being registered or a similar
security of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the 1933 Act, during the
fourteen (14) days prior to, and during the ninety (90) day
period beginning on, the effective date of such registration
statement (except as part of the registration), if and to the
extent requested by the Company in the case of a
non-underwritten public offering or if and to the extent
requested by the managing underwriter or underwriters in the
case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company and
Others. The Company agrees (i) not to effect any public sale
or distribution of any securities similar to those being
registered, or any securities convertible into or exchangeable
or exercisable for such securities, during the fourteen (14)
days prior to, and during the ninety (90) day period beginning
on, the effective date of any registration statement in which
Holders are participating (except as part of such
registration), if and to the extent requested by the Holders
in the case of a non-underwritten
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<PAGE>
public offering or if and to the extent requested by the
managing underwriter or underwriters in the case of an
underwritten public offering; and (ii) that any agreement
entered into after the date of this Agreement pursuant to
which the Company issues or agrees to issue any securities
convertible into or exchangeable or exercisable for such
securities (other than pursuant to an effective registration
statement) shall contain a provision under which holders of
such securities agree not to effect any public sale or
distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant
to Rule 144 under the 1933 Act.
6. Expenses of Registration. The Company agrees to pay all
expenses incurred in connection with each registration pursuant to Sections 2
and 4 of this Agreement, excluding underwriters' discounts and commissions, but
including, without limitation, all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance), exchange listing fees or National
Association of Securities Dealers fees, messenger and delivery expenses, all
fees and expenses of complying with securities or blue sky laws, fees and
disbursements of counsel for the Company. The selling Holders shall bear and pay
the underwriting commissions and discounts applicable to the Registrable Stock
offered for their account in connection with any registrations, filings and
qualifications made pursuant to this Agreement.
7. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify, to the full extent permitted by law, each
Holder, its officers, directors and agents and each Person who
controls such Holder (within the meaning of the 1933 Act)
against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or
preliminary prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement therein (in case of a
prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. The
Company will also indemnify any underwriters of the
Registrable Stock, their officers and directors and each
Person who controls such underwriters (within the meaning of
the 1933 Act) to the same extent as provided above with
respect to the indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder is participating,
each such Holder will furnish to the Company in writing such
information with respect to such Holder as the Company
reasonably requests for use in connection with any such
registration statement or prospectus and agrees to indemnify,
to the extent permitted by law, the Company, its directors and
officers and each Person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages,
liabilities and
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<PAGE>
expenses resulting from any untrue or alleged untrue statement
of material fact or any omission or alleged omission of a
material fact required to be stated in the registration
statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or necessary to make
the statements therein (in the case of a prospectus or
preliminary prospectus, in the light of the circumstances
under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission was
made in reliance upon and in conformity with any information
with respect to such Holder so furnished in writing by such
Holder. Notwithstanding the foregoing, the liability of each
such Holder under this Section 7(b) shall be limited to an
amount equal to the initial public offering price of the
Registrable Stock sold by such Holder, unless such liability
arises out of or is based on willful misconduct of such
Holder.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder agrees to give prompt
written notice to the indemnifying party after the receipt by
such Person of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof
made in writing for which such Person will claim
indemnification or contribution pursuant to this Agreement
and, unless in the reasonable judgment of such indemnified
party a conflict of interest may exist between such
indemnified party and the indemnifying party with respect to
such claim, permit the indemnifying party to assume the
defense of such claims with counsel reasonably satisfactory to
such indemnified party. Whether or not such defense is assumed
by the indemnifying party, the indemnifying party will not be
subject to any liability for any settlement made without its
consent (but such consent will not be unreasonably withheld).
Failure by such Person to provide said notice to the
indemnifying party shall itself not create liability except to
the extent of any injury caused thereby. No indemnifying party
will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect
of such claim or litigation. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim,
it will not be obligated to pay the fees and expenses of more
than one (1) counsel with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any
other such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay
the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnity
provided for in this Section 7 is unavailable to, or is
insufficient to hold harmless, an indemnified party, then the
indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation
provided by clause (i) above is not permitted by
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applicable law, or provides a lesser sum to the indemnified
party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnifying party on the one hand
and the indemnified party on the other but also the relative
fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other
things, whether any action in question, including any untrue
or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party
or indemnified parties; and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as
a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject
to the limitations set forth in Section 7(c), any legal or
other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7 (d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
If indemnification is available under this Section 7,
the indemnifying parties shall indemnify each indemnified
party to the full extent provided in Sections 7(a) and (b)
without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable
consideration provided for in this Section 7.
8. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Rule 144. The Company covenants that it will file the
reports required to be filed by it under the 1933 Act and the Securities
Exchange Act of 1934, as amended, and the rules and regulations adopted by the
Commission thereunder; and it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Stock without registration under the 1933 Act within
the limitation of the exemptions provided by (a) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon
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the request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
10. Transfer of Registration Rights. The registration rights
of any Holder under this Agreement with respect to any Registerable Stock may be
transferred to any transferee of such Registrable Stock; provided that such
transfer may otherwise be effected in accordance with applicable securities
laws; provided further, that the transferring Holder shall give the Company
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
the Company, to be bound as a Holder by the provisions of this Agreement; and
provided further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by such
transferee is restricted under the 1933 Act. Except as set forth in this Section
10, no transfer of Registrable Stock shall cause such Registrable Stock to lose
such status.
11. Mergers, Etc. The Company shall not, directly or
indirectly, enter into any merger, consolidation or reorganization in which the
Company shall not be the surviving corporation unless the proposed surviving
corporation shall, prior to such merger, consolidation or reorganization, agree
in writing to assume the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Stock" shall be deemed to
be references to the securities which the Holders would be entitled to receive
in exchange for Registrable Stock under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Section 11 shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if each Holder is entitled to
receive in exchange for its Registrable Stock consideration consisting solely of
(i) cash, (ii) securities of the acquiring corporation which may be immediately
sold to the public without registration under the 1933 Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within ninety (90) days of completion of the transaction for resale to
the public pursuant to the 1933 Act.
12. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its
securities which is inconsistent with the rights granted to
the Holders in this Agreement.
(b) Remedies. Each Holder, in addition to being
entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance
of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of
this Agreement and hereby agrees to waive (to the extent
permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
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<PAGE>
(c) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written
consent of the Holders of at least a majority of the
Registrable Stock then outstanding affected by such amendment,
modification, supplement, waiver or departure.
(d) Successors and Assigns. Except as otherwise
expressly provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto or their
respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
(e) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the
State of Delaware applicable to contracts made and to be
performed wholly within that state, without regard to the
conflict of law rules thereof.
(f) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(g) Headings. The headings in this Agreement are used
for convenience of reference only and are not to be considered
in construing or interpreting this Agreement.
(h) Notices. Any notice required or permitted under
this Agreement shall be given in writing and shall be
delivered in person or by telecopy or by overnight courier
guaranteeing no later than second business day delivery,
directed to (i) the Company at the address set forth below its
signature hereof or (ii) a Holder at the address set forth
below its signature hereof. Any party may change its address
for notice by giving ten (10) days advance written notice to
the other parties. Every notice or other communication
hereunder shall be deemed to have been duly given or served on
the date on which personally delivered, or on the date
actually received, if sent by telecopy or overnight courier
service, with receipt acknowledged.
(i) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be
in any way impaired thereby, it being
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intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings other than
those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(k) Enforceability. This Agreement shall remain in
full force and effect notwithstanding any breach or purported
breach of, or relating to, the Purchase Agreement.
(l) Recitals. The recitals are hereby incorporated in
the Agreement as if fully set forth herein.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INNOPET BRANDS CORP.
By: /s/ Marc Duke
-------------------------------
Name: Marc Duke
Title: Chairman and CEO
One East Broward Boulevard
Suite 1100
Ft. Lauderdale, Florida 33301
Tel: (954) 453-2400
ENTREPRENEURIAL INVESTORS, LTD.
By: /s/ Robert E. Cordes
-------------------------------
Name: Robert E. Cordes
Title: Director
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: 242-352-7063
Telecopier: 242-352-3932
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Exhibit 4.6
LOAN AGREEMENT
This LOAN AGREEMENT (the "Agreement") is being entered into as
of this 9th day of July, 1997 by and between INNOPET BRANDS CORP., a Delaware
corporation ("INBC" or "Company"), with offices at One East Broward Blvd., Suite
1100, Ft. Lauderdale, Florida 33301 and ENTREPRENEURIAL INVESTORS, LTD., a
Bahamas company ("EIL" or the "Holder"), with offices at Citibank Building, 2nd
Floor, East Mall Drive, P.O. Box 40643, Freeport, Bahamas.
W I T N E S S E T H :
WHEREAS, EIL desires to loan (the "Loan") the Company $1.5
million (U.S.) (the "Funds") and the Company desires to borrow the Funds from
EIL;
WHEREAS, the Loan shall be senior to all other indebtedness of
the Company and convertible, under certain circumstances, into the common stock,
par value $.01 per share (the "Common Stock") of the Company;
WHEREAS, in connection with the Loan, the Company shall issue
warrants (the "Warrants") as described herein to EIL; and
WHEREAS, the Loan and issuance of the Warrants shall be
subject to the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows.
1. Loan. On the date of this Agreement, EIL shall loan the
Company the sum of $1.5 million (U.S.). The Funds shall be delivered to the
Company by wire transfer.
2. Note. (a) As evidence of the Loan, the Company shall
execute and deliver to EIL a promissory note (the "Senior Note") substantially
in the form attached hereto as Exhibit A. The Senior Note shall be senior to all
other indebtedness of the Company and shall not be subordinated.
(b) The principal of the Note shall be due on January
15, 1998 (the "Maturity Date").
(c) Interest on the Note shall accrue at the rate of
14% per annum (not compounded) and shall be due and payable on the Maturity
Date. Interest on the Note may be
<PAGE>
paid by the Company in cash or in Common Stock, at the option of the Holder. If
the interest is paid in Common Stock, the Common Stock shall be valued at $4.50
per share.
3. Collateral. The Note will be secured and collateralized by
the Company's pledge of 600,000 shares of the Company's Common Stock (the
"Collateral"), such pledge to be evidenced by a Pledge Agreement, the form of
which is attached hereto as Exhibit B. Within five business days after the Loan
is funded, the Company hereby covenants and agrees to (i) execute the Pledge
Agreement and (ii) deliver the Pledge Agreement and the Collateral (to an escrow
agent) along with stock powers duly executed in blank. In the event that the
Company's Common Stock price as listed in the Wall Street Journal, closes at a
price less than $4.00 per share for five consecutive trading days, the Company
will promptly deposit with the escrow agent under the Pledge Agreement
additional shares of Common Stock, with stock powers duly executed in blank (the
"Additional Collateral"), so that the Collateral and the Additional Collateral
shall provide 150% coverage of the outstanding amount of the Loan.
4. Prepayment. The Loan may be prepaid, at the option of the
Company, without penalty or premium, at any time.
5. Convertibility. (a) The Holder may, at any time, at its
option, convert the debt into Common Stock, with the Common Stock valued at
$4.50 per share.
(b) Additionally, if the Common Stock price, as
listed in the Wall Street Journal, closes at a price of less than $3.00 per
share, the Holder shall have the right to take possession of the Collateral and
to liquidate the same to satisfy the conditions of the Loan.
6. Use of Proceeds.
The Company will use the Funds for the acquisition of Natural
Life Pet Products ("Natural Life") from Triple T Foods ("Triple T").
Notwithstanding the foregoing, if Triple T materially breaches the purchase
agreement between INBC and Triple T, or if Triple T does not obtain the
applicable consents or approvals required under such purchase agreement, or
Triple T fails to satisfy any material conditions to the closing of such
acquisition, or if there is a force majeure event beyond the control of the
Company, such as a flood, earthquake, or war that materially and adversely
affects the value of Natural Life, then the Company shall not be obligated to
consummate the acquisition of Natural Life. Nevertheless, even if the Natural
Life acquisition is not consummated, the Company shall remain obligated to EIL
for the Loan.
7. Registration Rights. (a) Promptly after the date hereof
(within 10 business days), the Company will file with the SEC, registration
statements for the sale of the Warrants, the shares underlying the Warrants, the
Collateral (and if applicable, the Additional Collateral), and all other shares
of Common Stock heretofore acquired by EIL.
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<PAGE>
(b) EIL consents to the Company registering other
shares of the Company or of other selling shareholders with the foregoing
registration.
8. Warrants.
In connection with the Loan, the Company shall issue 225,000
Warrants at an exercise price of $6 per share.
9. EIL's Representations and Comments.
EIL represents, warrants, and covenants to INBC as follows:
(a) This Agreement has been duly authorized, validly
executed, and delivered on behalf of EIL and is the valid and binding agreement
of EIL enforceable in accordance with its terms.
(b) EIL has received and carefully reviewed copies of
the Public Documents (as defined in Section 10). EIL understands that the Loan
is being made only by means of this Agreement. No representations or warranties
have been made to EIL by INBC, the officers or directors of INBC, or any agent,
employee or affiliate of INBC, except as specifically set forth herein or as set
forth in documents referenced herein. EIL is aware that the Loan involves a high
degree of risk and that it may sustain, and has the financial ability to
sustain, the loss of the entire amount of the Loan. EIL has had the opportunity
to ask questions of, and receive answers satisfactory to it from, INBC's
management regarding INBC. EIL understands that no federal or state governmental
authority has made any finding or determination relating to the fairness of an
investment in the Loan and that no federal or state governmental authority has
recommended or endorsed, or will recommend or endorse, the Loan. EIL, in making
the decision to make the Loan, has relied upon independent investigation made by
it and has not relied on any information or representations made by third
parties. EIL has significant assets and upon consummation of the Loan will
continue to have significant assets exclusive of the Note. EIL has not been
organized for the sole purpose of making the Loan.
(c) EIL 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").
(d) EIL understands that the Loan is being made in
reliance on specific provisions of federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings of EIL set forth
herein in order to determine the applicability of such provisions.
(e) EIL agrees that for a period of two (2) years
from the date of the funding of the Loan it shall not offer, sell, contract to
3
<PAGE>
sell, grant any option to purchase or otherwise dispose of any Common Stock
(any of the foregoing, a "Short-Sale") that EIL does not own as of the date of
the funding of the Loan.
(f) EIL is capable of evaluating the risks and merits
of this Loan by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters.
(g) EIL 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
10. Company's Representations and Covenants.
The Company represents, warrants, and covenants to EIL as
follows:
(a) The Company 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 INBC.
(b) INBC 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).
(c) INBC has furnished EIL with copies of INBC'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.
(d) This Agreement has been duly authorized, validly
executed and delivered on behalf of INBC and is the valid and binding agreement
of INBC enforceable in accordance with its terms.
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<PAGE>
(e) INBC 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.
11. Miscellaneous.
(a) 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.
(b) 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.
(c) Each of the parties agrees to pay its own
expenses incident to this Agreement and the performance of its obligations
hereunder, including, without limitation, the fees and expenses of each such
party's legal counsel.
(d) 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 11.
if to INBC:
InnoPet Brands Corp.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attn: Marc Duke, Chairman and CEO
Telephone: 954-453-2400
Telecopier: 954-453-2500
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<PAGE>
if to EIL:
Entrepreneurial Investors, Ltd.
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: 242-352-7063
Telecopier: 242-352-3932
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.
(e) This Agreement 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.
IN WITNESS WHEREOF, this Agreement was duly executed on the
date first written above.
INNOPET BRANDS CORP.
By:
--------------------------------------
Name: Marc Duke
Title: Chief Executive Officer
ENTREPRENEURIAL INVESTORS, LTD.
By:
--------------------------------------
Name: Robert E. Cordes
Title: Director
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<PAGE>
EXHIBIT A
SENIOR CONVERTIBLE NOTE
$1,500,000 Ft. Lauderdale, Florida
14.0% July __, 1997
FOR VALUE RECEIVED, the undersigned, INNOPET BRANDS CORP.
("Maker"), promises to pay to the order of Entrepreneurial Investors Ltd.
("Payee") at Freeport, Bahamas, or at such other place as Payee may from time to
time designate by written notice to Maker, in lawful money of the United States
of America, the sum of One Million Five Hundred Thousand Dollars ($1,500,000),
plus interest from the date of this Note on the unpaid balance.
Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to:
Fourteen percent (14%) per annum (not compounded).
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed.
(c) All agreements between Maker and Payee are expressly
limited so that in no contingency or event whatsoever shall the amount paid or
agreed to be paid to Payee for the use, forbearance, or detention of the
indebtedness evidenced by this Note shall exceed the maximum amount permissible
under applicable law. If from any circumstance Payee should ever receive as
interest or imputed interest an amount which would exceed the highest lawful
rate, such amount as would be excessive interest shall be applied to the
reduction of the principal amount owing under this Note and not to the payment
of interest.
<PAGE>
(d) Interest may be paid in cash or Common Stock of the Maker,
at the option of the Payee. For purposes of this Section 1(d), if the interest
is paid in Common Stock, the Common Stock shall be valued at $4.50 per share.
Section 2. Payments.
(a) On January 15, 1998, all outstanding amounts owing under
this Note, including accrued interest and the outstanding principal, shall be
paid. All payments shall be applied first to accrued interest and then to
principal.
(b) Maker shall have the right to prepay this Note in full or
in part at any time, without premium or penalty. All prepayments shall be
applied first to accrued interest and then to principal. Any prepayment shall
not be less than One Hundred Thousand Dollars ($100,000.00).
Section 3. Security.
This Note is secured by and entitled to the benefits of
600,000 shares of Common Stock (the "Collateral") of the Maker that will be
deposited with Cardinal International Corporation, Ltd. (the "Escrow Agent")
within five business days of the date of this Note. In the event that the
Maker's Common Stock price, as listed in the Wall Street Journal, closes at a
price less than $4.00 per share for five (5) consecutive trading days, the
Company will deposit additional shares of Common Stock (the "Additional
Collateral") so that the Collateral and the Additional Collateral shall provide
150% coverage on the amount of indebtedness.
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<PAGE>
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
entire unpaid principal of this Note, together with accrued interest, shall
become immediately due and payable, at the election of Payee, upon the
occurrence of any of the following events:
(a) Any failure on the part of Maker to make any payment when
due, whether by acceleration or otherwise, and the continuation of such failure
for a period of ten (10) days after written notice thereof from Payee.
(b) Any failure on the part of Maker to keep or perform any of
the terms or provisions of this Note or any amendment thereof, or any other
documents evidencing, governing, or securing this Note and the continuation of
such failure for more than twenty (20) days after written notice thereof from
Payee. Notwithstanding the foregoing, if the breach cannot be cured within
twenty (20) days, Maker shall not be in default so long as Maker, upon written
notice from Payee, commences cure and thereafter diligently and continuously
proceeds to completion.
(c) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, moratorium or similar law or statute.
(d) A proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
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<PAGE>
similar law or statute and relief is ordered against it, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof.
(e) Maker consents to or suffers the appointment of a
receiver, trustee or custodian to any substantial part of its assets that is not
vacated within sixty (60) days.
Section 5. Subordination.
This Note shall be a general obligation of Maker and is senior
and not subordinated to any and all obligations of Maker (e.g., to any bank or
other financial institution), regardless of whether such obligations are
presently existing or are subsequently incurred.
Section 6. Convertibility.
(a) Upon maturity, the Holder may, at its option, convert the
debt into Common Stock, with the Common Stock valued at $4.50 per share.
(b) Additionally, if the Common Stock, as listed in the Wall
Street Journal, closes at a price of less than $3.00 per share, the Payee shall
have the right to take possession of the Collateral and to liquidate the same to
satisfy the conditions of the Note.
Section 7. Waivers.
Maker waives demand, presentment, protest, notice of protest,
notice of dishonor, and all other notices or demands of any kind or nature with
respect to this Note.
-4-
<PAGE>
Section 8. Assignment of Note.
Neither Maker nor Payee may assign or transfer this Note in
any manner whatsoever. Any such purported assignment shall be void ab initio.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
(b) This Note shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
such state's principles of the conflict of laws.
(c) 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 9(c).
if to INBC:
InnoPet Brands Corp.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attn: Marc Duke, Chairman and CEO
Telephone: 954-453-2400
Telecopier: 954-453-2500
-5-
<PAGE>
if to EIL:
Entrepreneurial Investors, Ltd.
Citibank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: 242-352-7063
Telecopier: 242-352-3932
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.
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
MAKER: INNOPET BRANDS CORP.
-----------------------------------
Name: Marc Duke
Title: Chairman and CEO
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<PAGE>
Exhibit B
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") dated as of the 9th
day of July, 1997, is made by and between INNOPET BRANDS CORP., a Delaware
corporation (the "Debtor") and ENTREPRENEURIAL INVESTORS, LTD. (the "Secured
Party").
INTRODUCTORY PROVISIONS:
A. The Debtor has this day executed a Senior Convertible Note
(the "Note"), payable to the order of the Secured Party, which Note evidences a
loan from Secured Party to the Debtor in the original principal amount thereof
(the "Loan"). The Loan is further evidenced by that certain Loan Agreement of
even date herewith (the "Loan Agreement") by and between Debtor and Secured
Party.
B. As a condition to the making of the Loan to the Debtor, the
Secured Party requires that the Debtor pledge to and grant a security interest
in certain shares of stock to secure the payment and performance of the Note.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereto agree as follows:
1. The Pledge and Security Interest. The Debtor hereby grants
to the Secured Party security interests in and to any and all present or future
rights of the Debtor in and to all of the following rights, interests, and
property (all of the following being herein sometimes called the "Collateral"):
(a) 600,000 shares of the common stock, $.01 par value per share, of InnoPet
Brands Corp. represented by Certificate(s) No. _____ registered in the name of
Debtor (the "Stock Certificate"), and any and all substitutes, replacements,
accessions, attachments, increase, profits, revisions, or additions thereto; and
(b) any and all proceeds arising from or by virtue of the sale or other
disposition of, or from the collection of, the Collateral described in (a)
preceding.
2. The Indebtedness. This Agreement is being executed and
delivered to secure and the security interests herein granted (the "Security
Interests") shall secure full payment and performance of all of the indebtedness
and obligations owing to the Secured Party by the Debtor under the Note,
together with any and all renewals and extensions of the same, or any part
thereof (the "Indebtedness").
3. Representations and Warranties of the Debtor. The Debtor
represents and warrants to the Secured Party that: (a) the Security Interests
are first and prior security interests in and to all of the Collateral; (b) the
<PAGE>
Debtor is the owner of the Collateral; (c) no dispute, right of set off,
counterclaim, or defenses exist with respect to all or any part of the
Collateral; and (d) the shares represented by the Stock Certificate were duly
authorized treasury shares and are fully paid and non-assessable. The delivery
at any time by the Debtor to the Secured Party of Collateral shall constitute a
representation and warranty by the Debtor under this Agreement that the matters
heretofore warranted in clause (a) of this paragraph remain true and correct.
4. Negative Covenants of the Debtor. The Debtor further
covenants and agrees that, without the prior written consent of the Secured
Party, the Debtor will not (a) sell, assign or transfer any of the Debtor's
rights in the Collateral, and (b) create any other security interest in,
mortgage or otherwise encumber the Collateral, or any part thereof, or permit
the same to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process or any encumbrance of any kind
or character, except the security interest herein created.
5. Delivery of Collateral to the Escrow Agent. The Debtor,
simultaneously with the execution of this Agreement, is delivering to Cardinal
International Corporation, Ltd. (the "Escrow Agent") at their offices located at
Norfolk House, 3rd Floor, Nassau, Bahamas, or at such other escrow agent chosen
by Secured Party and reasonably acceptable to Debtor, stock certificates,
endorsed in blank for transfer or accompanied by stock powers appropriate for
transfer, evidencing the collateral to be held by the Escrow Agent in accordance
with the terms and provisions of an Escrow Agreement (herein so called) between
Debtor, Secured Party and the Escrow Agent.
6. Default. As used herein, the term "Default" or "Event of
Default" means the occurrence of one or more of the following: (a) the failure
to timely pay or perform any obligations or covenants contained herein, in the
Loan Agreement or in the Note secured hereby (after any applicable notice or
grace period); (b) any warranty, representation or statement made or furnished
to the Secured Party by or in behalf of the Debtor is incorrect in any material
respect (which remains incorrect after any applicable cure period); (c) the
sale, loss, theft, destruction, encumbrance or transfer of any of the Collateral
in violation hereof, or substantial damage to any of the Collateral; (d) the
dissolution, merger or consolidation, termination of existence, or business
failure of the Debtor; (e) appointment of a receiver for any part of the
Collateral; (f) assignment for the benefit of creditors or the commencement of
any proceeding under any bankruptcy or insolvency law by or against the Debtor
or any partnership of which the Debtor is a partner or by or against any maker,
or upon the Collateral; (g) the levy on, seizure or attachment of the
Collateral, or any part thereof; (h) the filing of any financing statement with
regard to the Collateral, other than relating to the security interest herein
created; or (i) attachment of any lien or security interest, except a lien for
current ad valorem taxes not yet due and the security interests hereunder, to
any portion of the Collateral.
7. Remedies. Upon the occurrence of any Default, in addition
to any and all other rights and remedies which the Secured Party may then have
hereunder, under the Uniform Commercial Code of the State of Delaware or of any
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<PAGE>
other pertinent jurisdiction (the "Code"), or otherwise, the Secured Party may,
at its option: (a) reduce its claim to judgment or foreclose or otherwise
enforce the Security Interests, in whole or in part, by any available judicial
procedure; (b) after notification, if any, provided for herein, sell, lease or
otherwise dispose of, at the office of the Secured Party, on the premises of the
Debtor, or elsewhere, all or any part of the Collateral, in its then condition
or following any commercially reasonable preparation or processing, and any such
sale or other disposition may be as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust the Secured Party's power of
sale, but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Indebtedness has been paid and performed
in full), and at any such sale it shall not be necessary to exhibit any of the
Collateral; (c) at its discretion, vote the shares of stock included in the
Collateral; and (d) exercise any and all other rights, remedies,and privileges
it may have under any document which secures the Indebtedness.
In the event any consent, approval or authorization of any
governmental agency (other than an agency regulating the sale of securities
under applicable securities laws) shall be necessary to enforce the Security
Interests or sell, lease or otherwise dispose of or retain the Collateral, the
Debtor shall execute and file all such applications or other instruments as may
be reasonably required. In the event of a sale of all or part of the Collateral,
public or private, the Debtor shall pay all costs and expenses of every kind of
sale or delivery, including brokers' and attorneys' fees and all expenses
incurred by Secured Party in protecting and enforcing its rights under this
Agreement or the Note.
Any and all proceeds ever received by any Secured Party from
any sale or other disposition of the Collateral, or any part thereof, or the
exercise of any other remedy pursuant hereto shall be applied by the Secured
Party to the Indebtedness in such order and manner as the Secured Party, in its
sole discretion, may deem appropriate, notwithstanding any directions or
instructions to the contrary by the Debtor.
With respect to any part of the Collateral which is stock
certificates, bonds, or other securities, the Secured Party shall have
authority, upon the occurrence of any Default, without notice to the Debtor,
either to have them registered in the Secured Party's name, or in the name of a
nominee, and, with or without such registration, to demand of the corporation or
association issuing the same, and to receive and receipt for, any and all
dividends and other distributions payable in respect thereof, regardless of the
medium in which paid and whether they be ordinary or extraordinary. Any entity
making payment to the Secured Party hereunder shall be fully protected in
relying upon the written statement of the Secured Party that the Secured Party
then holds the Security Interests which entitles it to receive such payment, and
the receipt of the Secured Party for such payment shall be full acquittance
therefor to the person making such payment.
8. Notice. Reasonable notification of the time and place of
any public sale of the Collateral, or reasonable notification of the time after
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<PAGE>
which any private sale or other intended disposition of the Collateral, or
reasonable notification of the time after which any private sale or other
intended disposition of the Collateral is to be made (including retention
thereof in satisfaction of the Indebtedness), shall be sent to the Debtor and to
any other person entitled under the Code to notice. It is agreed that notice
sent or given at least ten (10) calendar days prior to the taking of the action
to which the notice relates is reasonable notification and notice for the
purposes of this paragraph.
9. Limitations on Interest. It being the intention of the
parties hereto to strictly conform to the applicable usury laws, all agreements
between the Debtor and the Secured Party, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
event, whether by reason of acceleration of the maturity of the Note or
otherwise, shall the amount paid, or agreed to be paid to the Secured Party for
the use, forbearance or detention of money hereunder or otherwise exceed the
maximum rate permitted by applicable law. If due to any circumstance or reason
whatsoever, fulfillment of any provision hereof or of the Note or of any
mortgage, loan agreement, or other document evidencing or securing the
indebtedness evidenced by the Note, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then, ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity, and if the Secured Party shall ever receive anything of
value deemed interest under the applicable law which would exceed interest at
the maximum rate permitted by applicable law, such amount which would have been
excessive interest shall instead automatically be applied to the reduction of
the principal amount owing under the Note in the inverse order of its maturity
and not to the payment of interest, and if such amount which would have been
excessive interest exceeds the unpaid balance of principal of the Note, such
excess shall be refunded to the Debtor. All sums paid or agreed to be paid to
the Secured Party for the use, forbearance or detention of the indebtedness of
the Debtor to the Secured Party shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full stated
term of such indebtedness so that the rate of interest on such indebtedness does
not exceed the maximum permitted by applicable law. The provisions of this
paragraph shall control all agreements between the Debtor and the Secured Party.
10. Rights Cumulative. All rights and remedies of the Secured
Party hereunder are cumulative of each other and of every other right or remedy
which the Secured Party may otherwise have at law or in equity or under any
other contract or other writing for the enforcement of the security interest
herein or in the collection of the Note or the Indebtedness, and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
11. Assignment. The rights, powers and interests held by the
Secured Party hereunder, together with the Collateral, may be transferred and
assigned by the Secured Party, in whole or in part, at such time and upon such
terms as the Secured Party may deem advisable.
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<PAGE>
12. No Waivers. No failure on the part of the Secured Party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Secured Party of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
13. Binding Effect. This Agreement shall be binding on the
Debtor and the Debtor's successors and assigns and shall inure to the benefit of
the Secured Party, and the Secured Party's successors and assigns.
14. Termination. This Agreement and the security interest in
the Collateral will terminate when the Indebtedness secured hereby has been paid
in full by extinguishment thereof but not by renewal, modification or extension
thereof.
15. Governing Law. The law governing this Agreement will be
that of the State of Delaware in force on the date of execution of this
Agreement. All obligations of the Debtor under the terms of this Agreement shall
be performable in Delaware.
16. Notice. Any notice, request, instruction or other document
required or permitted to be delivered hereunder by either party hereto to the
other will 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 19:
To the Debtor: InnoPet Brands Corp.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attn: Marc Duke, Chairman and CEO
Telephone: 954-453-2400
Telecopier: 954-453-2500
To the Secured Party: Entrepreneurial Investors, Ltd.
Citbank Building, 2nd Floor
East Mall Drive
P.O. Box 40643
Freeport, Bahamas
Attn: Mr. Robert E. Cordes, Director
Telephone: 242-352-7063
Telecopier: 242-352-3932
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
5
<PAGE>
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 if acknowledged, if
telecopied.
17. Agreement as Financing Statement. The Secured Party shall
have the right at any time to execute and file this Agreement as a financing
statement, but the failure of the Secured Party to do so shall not impair the
validity or enforceability of this Agreement.
DEBTOR:
INNOPET BRANDS CORP.,
a Delaware Corporation
By:
----------------------------------------
Marc Duke, Chief Executive Officer
SECURED PARTY:
ENTREPRENEURIAL INVESTORS, LTD.
By:
----------------------------------------
Robert E. Cordes, Director
6
<PAGE>
EXHIBIT 5.1
LEGAL OPINION
[LETTERHEAD OF CAMHY KARLINSKY & STEIN LLP]
September 29, 1997
Board of Directors
InnoPet Brands Corp.
One East Broward Blvd., Suite 1100
Fort Lauderdale, Florida 33301
Re: InnoPet Brands Corp. - Registration Statement on Form SB-2
Dear Sirs:
You have requested our opinion as counsel for InnoPet Brands
Corp., a Delaware corporation (the "Company"), in connection with the
registration statement (the "Registration Statement") on Form SB-2 filed by the
Company with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), with respect to the issuance by
the Company of: (i) 1,332,456 shares (the "Shares") of common stock, par value
$.01 per share, (the "Common Stock") which includes (a) certain shares of Common
Stock underlying series A 4% cumulative convertible preferred stock (the "Series
A Preferred Stock") issued in connection with the April 29, 1997 private
placement (the "Private Placement") with Entrepreneurial Investors, Ltd. ("EIL")
(the "Private Placement Common Shares"), (b) certain shares of Common Stock
which may be issued in the future as a dividend on the Series A Preferred Stock
(the "Dividend Shares"), (c) certain shares of Common Stock (the "Option
Shares") underlying an option, granted to the placement agent in the Private
Placement, to purchase 62,500 shares of Series A Preferred Stock which may be
issued in the future upon the proper exercise of the option, (d) certain shares
of Common Stock (the "Warrant Shares") to be issued upon the proper exercise of
an outstanding common stock purchase warrant (the "Warrant"), issued in
connection with the July 9, 1997 loan made to the Company by EIL (the "Loan"),
(e) certain shares of Common Stock (the "Collateral Shares") which may be issued
in the future upon the proper conversion of the debt underlying the Loan into
shares of Common Stock, and (f) certain shares of Common Stock (the "Interest
Shares") which may be issued to EIL in the future as interest on the Loan; and
(ii) certain Warrants issued to EIL in connection with the Loan.
<PAGE>
Board of Directors
InnoPet Brands Corp.
September 29, 1997
Page 2
In rendering the opinions hereafter we have relied upon such
documents and instruments as we have deemed appropriate.
In conducting our examination, we have assumed, without
investigation, the genuineness of all signatures, the correctness of all
certificates, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the originals of such
copies, and the accuracy and completeness of all records made available to us by
the Company.
The opinions hereafter expressed are subject to the following
qualifications:
A. Our opinion in paragraph 1 below as to the good
standing of the Company is based solely upon a certificate from public
officials.
B. Our opinions below are limited to the matters
expressly set forth in this opinion letter, and no opinion is to be implied or
may be inferred beyond the matters expressly so stated.
C. We disclaim any obligation to update this opinion
letter for events occurring after the date of this opinion.
D. We are members of the Bar of the State of New
York. Our opinions below are limited to the effect of the laws of the State of
New York and of the federal laws of the United States.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws
of Delaware.
2. The Private Placement Common Shares are duly
authorized, and when issued, upon proper conversion
and in accordance with the terms of the Series A
Preferred Stock, will be legally issued, fully paid
and non-assessable.
3. The Dividend Shares are duly authorized and when
issued, upon proper declaration of a dividend and in
accordance with the terms of the Series A Preferred
Stock, will be legally issued, fully paid and
non-assessable.
<PAGE>
Board of Directors
InnoPet Brands Corp.
September 29, 1997
Page 3
4. The Option Shares are duly authorized and when
issued, upon proper exercise of the option and in
accordance with the terms thereof and the terms of
the Series A Preferred Stock, will be legally issued,
fully paid and non-assessable.
5. The Warrant Shares are duly authorized and when
issued, against payment therefor in accordance with
the terms of the Warrant, will be legally issued,
fully paid and non-assessable.
6. The Collateral Shares are duly authorized and when
issued, in accordance with the terms of the Note
underlying the Loan, will be legally issued, fully
paid and non-assessable.
7. The Interest Shares are duly authorized and when
issued, in accordance with the terms of the Note
underlying the Loan, will be legally issued, fully
paid and non-assessable.
8. The Warrants are duly authorized, legally issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving this consent, we do not thereby admit
that we are in the category of persons whose consent is required pursuant to
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder.
<PAGE>
Board of Directors
InnoPet Brands Corp.
September 29, 1997
Page 4
This opinion letter is rendered solely for the benefit of the
addressee. Without our prior written consent, this opinion letter may not be:
(i) relied upon by any other party or for any other purpose; (ii) quoted in
whole or in part or otherwise referred to in any report or document; or (iii)
furnished (the original or copies thereof) to any other party.
Very truly yours,
/s/ CAMHY KARLINSKY & STEIN LLP
CAMHY KARLINSKY & STEIN LLP
<PAGE>
Exhibit 10.1
INNOPET BRANDS CORP.
1996 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN
1. Purpose
The purpose of this Stock Option Plan (the "Plan") is to encourage and
enable key employees (which term, as used herein, shall include officers), and
directors (other than members of the Committee, as hereinafter defined), of
InnoPet Brands Corp. or a parent (if any) or subsidiary thereof (collectively,
unless the context otherwise requires, the "Corporation"), consultants, and
advisors to the Corporation, and other persons or entities providing goods or
services to the Corporation to acquire a proprietary interest in the Corporation
through the ownership of common stock of the Corporation. As used herein, the
term "parent" or "subsidiary" shall mean any present or future corporation which
is or would be a "parent corporation" or "subsidiary corporation" of the
Corporation as the term is defined in section 424 of the Internal Revenue Code
of 1986, as amended (the "Code") (determined as if the Corporation were the
employer corporation). Such directors, consultants, advisors, and other persons
or entities providing goods or services to the Corporation and entitled to
receive options hereunder are hereinafter collectively referred to as the
"Associates," and the relationship of the Associates to the Corporation is
hereinafter referred to as "association with" the Corporation. An employee or
Associate to whom an option has been granted is referred to as a "Grantee". Such
ownership will provide such Grantees with a more direct stake in the future
welfare of the Corporation and encourage them to remain employed by or
associated with the Corporation. It is also expected that the Plan will
encourage qualified persons to seek and accept employment or association with
the Corporation.
2. Administration
(a) The Plan shall be administered by a Stock Option Committee (the
"Committee"), consisting of at least two members of the Board of Directors of
the Corporation who are disinterested persons within the meaning of Rule
16(b)-3(c)(2)(i) promulgated under the Securities Exchange Act of 1934, as
amended from time to time.
(b) A majority of the members of the Committee shall constitute a quorum,
and the action of a majority of the members of the Committee present at a
meeting at which a quorum is present, as well as actions taken pursuant to the
unanimous written consent of all of the members of the Committee without holding
a meeting, shall be deemed to be actions of the Committee. All actions of the
Committee and all interpretations and decisions made by the Committee with
respect to any question arising under the Plan shall be final and conclusive and
shall be binding upon the Corporation and all other interested parties.
(c) Subject to the terms and conditions of the Plan and such limitations
as the Board of Directors may from time to time impose, the Committee shall be
responsible for the overall management and administration of the Plan and shall
<PAGE>
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority to (i)
interpret and construe the Plan and to determine the terms of all options
granted pursuant to the Plan, including, but not limited to, the persons to
whom, and the time or times at which grants shall be made, the number of options
to be included in the grants, the number of options which shall be treated as
incentive stock options (in the case of options granted to employees) as
described in section 422 of the Code, the number of options which do not qualify
as incentive stock options ("nonqualified options"), and the terms and
conditions thereof; (ii) to adopt rules and regulations and to prescribe forms
for the operation and administration of the Plan; and (iii) to take any other
action not inconsistent with the provisions of the Plan that it may deem
necessary or appropriate.
3. Eligibility and Participation
(a) Key employees and Associates are eligible to receive options. Each
option shall be granted, and the number of shares subject thereto shall be
determined by the Committee.
(b) Directors who are not officers of the Corporation, including, without
limitations, Directors who serve as members of the Committee, shall receive as
formula grants, on an annual basis on the last trading day of each November,
starting November, 1996, stock options for 2,500 shares of the Corporation's
common stock, at an exercise price equal to the fair market value of the stock
on the date of grant. The fair market value shall be determined in accordance
with Section 8 hereof.
4. Shares Subject to the Plan
(a) Options shall be evidenced by written agreements which shall, among
other things (i) designate the option as either an incentive stock option or a
nonqualified stock option, (ii) specify the number of shares covered by the
option; (iii) specify the exercise price, determined in accordance with
paragraph 7 hereof, for the shares subject to the option; (iv) specify the
option period determined in accordance with paragraph 6 hereof; (v) set forth
specifically or incorporate by reference the applicable provisions of the Plan;
and (vi) contain such other terms and conditions consistent with the Plan as the
Committee may, in its discretion, prescribe.
(b) The stock to be offered and delivered under the Plan, pursuant to the
exercise of an option, shall be both classes of shares of the Corporation's
authorized common stock and may be unissued shares or reacquired shares, as the
Committee may from time to time determine. Subject to adjustment as provided in
paragraph 13 hereof, the aggregate number of shares to be delivered under the
Plan shall not exceed four hundred thousand (400,000) shares of common stock. If
an option expires or terminates for any reason during the term of the Plan prior
to the exercise thereof in full, the shares subject to but not delivered under
such option shall be available for options thereafter granted.
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5. Incentive Stock Options
(a) An option designated by the Committee as an "incentive stock option"
is intended to qualify as an "incentive stock option" within the meaning of
section 422 of the Code. An incentive stock option shall be granted only to an
employee of the Corporation.
(b) No incentive stock option shall provide any person with a right to
purchase shares to the extent that such right first becomes exercisable during a
prescribed calendar year and the sum of (i) the fair market value (determined as
of the date of grant) of the shares subject to such incentive stock option which
first become available for purchase during such calendar year, plus (ii) the
fair market value (determined as of the date of grant) of all shares subject to
incentive stock options previously granted to such person under all plans of the
Corporation first become available for purchase during such calendar year
exceeds $100,000.
(c) Without prior written notice to the Committee, a Grantee may not
dispose of shares acquired pursuant to the exercise of an incentive stock option
until after the later of (i) the second anniversary of the date on which the
incentive stock option was granted, or (ii) the first anniversary of the date on
which the shares were acquired; provided, however, that a transfer to a trustee,
receiver, or other fiduciary in any insolvency proceeding, as described in
section 422(c)(3) of the Code, shall not be deemed to be such a disposition. The
optionee shall make appropriate arrangements with the Corporation for any taxes
which the Corporation is obligated to collect in connection with any disposition
of shares acquired pursuant to the exercise of an incentive stock option,
including any Federal, state or local withholding taxes.
(d) Should Section 422 of the Code be amended during the term of the Plan,
the Committee may modify the Plan consistently with such amendment.
6. Term of Option Period
The term during which options may be granted under the Plan shall expire
on May 15, 2006 and the option period during which each option may be exercised
shall, subject to the provisions of paragraph 12 hereof, be during such period,
expiring not later than the tenth anniversary (the fifth anniversary in the case
of incentive stock options granted to a person who owns (within the meaning of
section 424(d) of the Code) more than 10 percent of the total combined voting
power of all classes of stock of the Corporation at the time such option is
granted) of the date the option is granted, as may be determined by the
Committee.
7. Option Price
The price at which shares may be purchased upon exercise of a particular
option shall be such price as may be fixed by the Committee but in no event less
than the minimum required in order to comply with any applicable law, rule or
regulation and, in the case of incentive stock options, shall not be less than
100 percent, or in the case of incentive stock options granted to an optionee
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<PAGE>
who is a 10 percent stockholder (within the meaning of paragraph 6 hereof),
shall not be less than 110 percent, of the fair market value (as defined in
paragraph 8) of such shares on the date such option is granted.
8. Stock as Form of Exercise Payment
At the discretion of the Committee, a Grantee who owns shares of the
Corporation's common stock may elect to use such shares, with the value thereof
to be determined as the fair market value of such shares on the day prior to the
date of exercise of the option, to pay all or part of the option price required
under the Plan. As used herein, fair market value shall be deemed to be the
closing price on such day of the Corporation's common stock (if the
Corporation's common stock is then traded on a national securities exchange or
in the NASDAQ National Market System or Small-Cap Market System) or, if not so
traded, the average of the closing bid and asked prices thereof on such day.
9. Exercise of Options
(a) Each option granted shall be exercisable in whole or in part at any
time, or from time to time, during the option period as the Committee may
provide in the terms of such option; provided that the election to exercise an
option shall be made in accordance with applicable federal and state laws and
regulations.
(b) No option may at any time be exercised with respect to a fractional
share.
(c) No shares shall be delivered pursuant to the exercise of any option,
in whole or in part, until qualified for delivery under such securities laws and
regulations as may be deemed by the Committee to be applicable thereto, until
such shares are listed on each securities exchange on which the Corporation's
common stock may then be listed, until, in the case of the exercise of an
option, payment in full of the option price is received by the Corporation in
cash or stock as provided in paragraph 8 and until payment in cash of any
applicable withholding taxes is received by the Corporation. Unless prior to the
exercise of the option the shares of the Corporation's common stock issuable
upon such exercise have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, the notice of exercise shall
be accompanied by a representation or agreement of the individual exercising the
option to the Corporation to the effect that such shares are being acquired for
investment and not with a view to the resale or distribution thereof or such
other documentation as may be required by the Corporation unless in the.opinion
of counsel to the Corporation such representation, agreement, or documentation
is not necessary to comply with said Act. No holder of an option, or such
holder's legal representative, legatee, or distributee shall be or be deemed to
be a holder of any shares subject to such option unless and until a certificate
or certificates therefor is issued in his name.
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<PAGE>
10. Acceleration of Vesting
(a) An option shall automatically be vested and immediately exercisable in
full upon the occurrence of any of the following events:
(i) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, other than the Corporation, has become
the beneficial owner, within the meaning of Rule 13d-3 under such Act, of
30 percent or more of the combined voting power of the Corporation's then
outstanding voting securities, unless such ownership by such person has
been approved by the Board of Directors immediately prior to the
acquisition of such securities by such person;
(ii) The first day on which shares of the Corporation's common stock
are purchased pursuant to a tender offer or exchange offer, unless such
offer is made by the corporation or unless such officer has been approved
or not opposed by the Board of Directors;
(iii) The stockholders of the Corporation have approved an agreement
to merge or consolidate with or into another corporation (and the
Corporation is not the survivor of such merger or consolidation) or an
agreement to sell or otherwise dispose of all or substantially all of the
Corporation's assets (including a plan of liquidation), unless the Board
of Directors has resolved that options shall not automatically vest; or
(iv) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for the election by the
Corporation's stockholders of each new director was approved by a vote of
at least a majority of the directors then still in office who were
directors at the beginning of the period.
(b) Other than upon the occurrence of any of the events described in
paragraph 10(a), the Committee shall have the authority at any time or from time
to time to accelerate the vesting of any individual option and to permit any
stock option not theretofore exercisable to become immediately exercisable.
11. Transfer of Options
Options granted under the Plan may not be transferred except by will or
the laws of descent and distribution and, during the lifetime of the Grantee to
whom granted, may be exercised only by such or by such Grantee's guardian or
legal representative.
12. Termination of Employment
(a) Except as specifically provided in this paragraph 12, an option shall
be exercisable only if the Grantee has maintained continuous status as an
employee of the Corporation or as an Associate since the date of grant of
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<PAGE>
such option. If the Grantee's status as an employee of the Corporation or as an
Associate is terminated by the Corporation for any reason whatsoever, including
death, Disability, Retirement, or with or without cause, that part of the Option
that has already vested shall be exercisable for the lesser of (i) three (3)
months from the date of such termination of employment or (ii) the balance of
such Option's term. In no event, however, shall any option be exercisable after
five years from the date it was granted. Nothing in the Plan or in any option
shall confer upon any Grantee the right to continue in the employ of or
association with the Corporation or interfere in any way with the right of the
Corporation to terminate the employment or association of a Grantee at any time.
The Committee's determination that a Grantee's employment or association has
terminated and the date thereof shall be final and conclusive on all persons
affected thereby.
(b) The Committee may, if it determines that to do so would be in the
Corporation's best interests, provide in a specific case or cases for the
exercise of options which would otherwise terminate upon termination of
employment or association with the Corporation for any reason, upon such terms
and conditions as the Committee determines to be appropriate.
(c) In the case of a Grantee on an approved leave of absence, the
Committee may, if it determines that to do so would be in the best interests of
the Corporation, provide in a specific case for continuation of options during
such leave of absence, such continuation to be on such terms and conditions as
the Committee determines to be appropriate. Leaves of absence for such period
and purposes conforming to the personnel policy of the Corporation as may be
approved by the Committee shall not be deemed terminations or interruptions of
employment.
13. Adjustments Upon Changes in Capitalization
(a) If the Corporation's outstanding common stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination, or exchange of shares or the
like, or dividends payable in shares of the Corporation's common stock, an
appropriate adjustment shall be made by the Board upon recommendation of the
Committee in the aggregate number of shares available under the Plan and in the
number of shares and price per share subject to outstanding options. If the
Corporation shall be reorganized, consolidated, or merged with another
corporation, or if all or substantially all of the assets of the Corporation
shall be sold or exchanged, the holder of an option shall, after the occurrence
of such a corporate event, be entitled to receive upon the exercise of his
option the same number and kind of shares of stock or the same amount of
property, cash, or securities as he would have been entitled to receive upon the
happening of any such corporate event as if he had exercised such option and had
been, immediately prior to such event, the holder of the number of shares
covered by such option. All adjustments made pursuant to this paragraph to the
terms or conditions of an incentive stock option shall be subject to the
requirements of section 424 of the Code.
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<PAGE>
(b) Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of any option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next higher whole number of shares.
14. Termination, Modification, and Amendment
(a) The Plan shall terminate 10 years from the earlier of the date of its
adoption by the Board of Directors or the date on which the Plan is approved by
the stockholders of the Corporation and no option shall be granted after
termination of the Plan.
(b) The Plan may from time to time be terminated, modified, or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
the Corporation entitled to vote thereon.
(c) The Board of Directors may at any time terminate the Plan or from time
to time make such modifications or amendments of the Plan as it may deem
advisable including, without limitation, modifications to reflect changes in
applicable law; provided, however, that the Board of Directors shall not (i)
modify or amend the Plan in any way that would disqualify any incentive stock
option issued pursuant to the Plan as an incentive stock option as defined in
section 422 of the Code or (ii) without approval by the affirmative vote of the
holders of a majority of the outstanding shares of the Corporation entitled to
vote thereon, increase (except as provided by paragraph 14) the maximum number
of shares as to which options may be granted under the Plan.
(d) No termination, modification, or amendment of the Plan, may, without
the consent of the Grantee, adversely affect the rights conferred by such
option.
15. Effective Date
The Plan shall become effective upon the adoption by the Board of
Directors, subject to the approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation present, in person, or by
proxy, at a stockholders meeting duly held within one year following adoption of
the Plan by the Board of Directors. All options granted prior to the date of
such stockholder approval shall be subject to such approval.
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made and is
effective as of the 1st day of June, 1996 between INNOPET BRANDS CORP., a
Delaware corporation (the "Company"), having its principal offices at One East
Broward Boulevard, Fort Lauderdale, Florida 33301 and MARC DUKE ("MD"), an
individual with an address at 633 Northeast Ninth Avenue, Ft. Lauderdale,
Florida 33304.
W I T N E S S E T H:
WHEREAS, the Company desires to continue to employ MD and MD
desires to continue to be employed by the Company as its Chief Executive Officer
upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual premises and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs MD and MD agrees to continue to serve the Company as its Chief
Executive Officer, upon the terms and conditions contained herein, for a term
commencing as of June 1, 1996 and continuing until May 31, 2000 (the "Employment
Term").
2. Duties and Powers.
(a) During the Employment Term, MD shall be employed
by the Company as Chief Executive Officer, which position is the senior
executive officer of the Company. MD
<PAGE>
shall devote substantially his full working time to his duties as Chief
Executive Officer of the Company, except for the time he spends working for
InnoPet Inc. and its other subsidiaries. In performance of his duties, MD shall
be subject to the direction of the Board of Directors of the Company. As Chief
Executive Officer, MD shall be responsible for managing, directing, and
supervising all aspects of the business of the Company worldwide. The Chief
Executive Officer shall be responsible for developing the business plan and
objectives of the Company and managing the execution of such plan. Without
limiting the generality of the authority of the Chief Executive Officer, the
Chief Executive Officer has the right to hire and terminate any employee of the
Company.
(b) So long as MD is (i) an employee of the Company,
or (ii) owns more than 5% of the issued and outstanding common stock of the
Company (assuming and inclusive of the exercise by MD of any unexercised
warrants or options), MD shall be nominated as a director of the Company.
3. Compensation.
(a) Base Salary. As compensation for his services
hereunder, the Company shall pay MD, during the Employment Term, a salary (the
"Base Salary") payable in equal semi-monthly installments at the annual rate of
$200,000 through December 31, 1997, and thereafter, at the annual rate of
$250,000.
(b) Incentive Bonus. In addition to the salary
provided herein and subject to the discretion of the Compensation and Stock
Option Committee (the "Compensation Committee"), MD shall receive, an annual
bonus (the "Incentive Bonus"). The Incentive Bonus
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<PAGE>
shall be an amount up to 25% of the annual Base Salary. Such bonus shall be paid
to MD within thirty (30) days after completion of the Company's annual audit.
(c) (i) Options. MD may be granted stock options in
the Company, on an annual basis, pursuant to the Company Stock Option Plan, at
the discretion of the Company's Compensation Committee. In the event that MD is
terminated for any reason other than "for cause" as specified in Section 10(d)
below, all options granted pursuant to this Section 4(c) shall vest immediately.
(d) Performance Bonus. In addition to the Base Salary
and Incentive Bonus set forth herein, MD shall be entitled to a performance
bonus (the "Performance Bonus") to be determined each year by the Compensation
Committee of the Board of Directors based on the Company's net earnings in any
given fiscal year. Such bonus shall be paid to MD within thirty (30) days after
completion of the Company's annual audit. Notwithstanding the foregoing, the
Performance Bonus shall not exceed three times the Base Salary for a particular
year. No Performance Bonus shall be payable for a particular year if net
earnings of the Company for such year are less that $100,000.
4. Expenses; Vacation; Insurance; Other Benefits.
(a) Reimbursement. MD shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company.
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<PAGE>
(b) Vacation. MD shall be entitled to four (4) weeks
vacation time per annum in accordance with the regular procedures of the Company
governing senior executive officers. Unused vacation time shall be paid to MD in
accordance with the regular procedures of the Company.
(c) Life Insurance. So long as MD is employed by the
Company, the Company shall provide MD with term life insurance in the face
amount of at least Five Hundred Thousand Dollars ($500,000) but not more then
One Million Dollars ($1,000,000.00). MD shall cooperate in submitting to any
physical exams that may be required by any appropriate provider of insurance.
(d) Automobile Expenses. So long as MD is employed by
the Company, the Company shall provide MD with an automobile allowance of Eight
Hundred Dollars ($800) per month to cover the costs of leasing an automobile,
insurance, and the maintenance of such automobile.
(e) Additional Office Expenses. MD shall be entitled
for reimbursement for all costs reasonably incurred in connection with providing
office equipment and related services at his home office, including, without
limitation, the costs of appropriate computer equipment, fax equipment, and
related telephone services.
5. Representations and Warranties.
(a) MD represents and warrants to the Company that
(i) MD is under no contractual or other obligation which is inconsistent with
the execution of this Agreement, the
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<PAGE>
performance of his duties hereunder, or the other rights of the Company
hereunder and (ii) MD is under no physical or mental disability that would
hinder his performance of duties under this Agreement.
(b) The Company acknowledges that MD is and will
continue to be the Chief Executive Officer and Chairman of the Board of
Directors of InnoPet Inc., and be an officer and director of The Original Pet
Drink Co., Inc. and AniVet, Inc. (collectively, "InnoPet") during the term of
this Agreement and that such positions do not conflict in any way with his
obligations and duties to the Company. MD agrees to work a minimum of forty (40)
hours a week on behalf of the Company.
6. Non-Competition. MD agrees that he will not (a) during the
period he is employed by the Company engage in, or otherwise directly or
indirectly be employed by, or act as a consultant or lender to, or be a
director, officer, employee, owner, or partner of, any other business or
organization that is or shall then be competing with the Company, and (b) for a
period of one (1) year after he ceases to be employed by the Company, directly
or indirectly compete with or be engaged in the same business as the Company, or
be employed by, or act as consultant or lender to, or be a director, officer,
employee, owner, or partner of, any business or organization which, at the time
of such cessation, competes with or is engaged in the same business as the
Company, except that in each case the provisions of this Section 6 will not be
deemed breached merely because MD owns not more than five percent (5%) of the
outstanding common stock of a corporation, if, at the time of its acquisition by
MD, such stock is listed on a national securities exchange, is reported on
NASDAQ, or is regularly traded in the
-5-
<PAGE>
over-the-counter market by a member of a national securities exchange. Subject
to Section 5(b) hereof, these restrictions do not, and will not, apply in any
way to MD's positions and work for InnoPet Inc.
7. Patents; Copyrights. Any interest in patents, patent
applications, inventions, copyrights, developments, and processes ("Such
Inventions") which MD now or hereafter during the period he is employed by the
Company may own or develop relating to the fields in which the Company may then
be engaged shall belong to the Company; and forthwith upon request of the
Company, MD shall execute all such assignments and other documents and take all
such other action as the Company may reasonably request in order to vest in the
Company all his right, title, and interest in and to Such Inventions, free and
clear of all liens, charges and encumbrances.
8. Confidential Information. All confidential information
which MD may now possess or may obtain during the Employment Term relating to
the business of the Company shall not be published, disclosed, or made
accessible by him to any other person, firm, or corporation during the
Employment Term or any time thereafter without the prior written consent of the
Company. MD shall return all tangible evidence of such confidential information
to the Company prior to or at the termination of his employment.
9. Purchase of Shares. MD agrees to purchase 417,566 shares
(the "Shares") of common stock of the Company for $1,336,213 pursuant to the
terms of a note ("the Note") in the form attached hereto as Exhibit A. MD agrees
to execute the Note, a Stock Subscription
-6-
<PAGE>
and Security Agreement and a stock power in the forms attached hereto as
Exhibits B and C, respectively.
10. Termination.
(a) If MD is terminated other than pursuant to
Sections 10(b), (c), and (d) below, the Company shall be obligated to pay to MD
an amount equal to three times MD's average annual salary payments over the
course of the previous five years (or such period he is employed by the Company
if such term is less than five years). Such payment shall be made in two
installments; half on the date of termination and the balance six months
thereafter.
(b) Disability. In the event that MD shall be
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge his duties hereunder for a period of six (6) months, then this
Agreement shall terminate upon thirty (30) days' written notice to MD, and MD
shall be entitled to receive an additional six months of Base Salary, as well as
any accrued but unpaid Incentive and Performance Bonus payments to the date of
termination, and any other payments provided under any disability insurance
policy carried by the Company.
(c) Death. In the event that MD shall die, then this
Agreement shall terminate on the date of MD's death, and no further compensation
shall be payable to MD, except for any accrued but unpaid Base Salary and/or
Incentive and Performance Bonus payments to the date of termination, and any
payments provided under the insurance policy referred to in Section 5(c) hereof.
-7-
<PAGE>
(d) For Cause. Notwithstanding anything herein
contained, if on or after the date hereof and prior to the end of the Employment
Term, MD is terminated "For Cause" (as defined below) then the Company shall
have the right to give notice of termination of MD's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on the
date so specified. Termination "For Cause" shall mean MD shall (i) be convicted
of a felony crime, (ii) commit an act of fraud against the Company, or (iii)
materially breach any term of this Agreement and fail to correct such breach
within twenty days after notice of commission thereof.
11. Merger, Etc.
(a) In the event of a future disposition of the
properties and business of the Company, substantially as an entirety, by merger,
consolidation, sale of assets, sale of stock, or otherwise (each, a "Change of
Control Event"), then the Company shall assign this Agreement and all of its
rights and obligations hereunder to the acquiring or surviving corporation.
(b) In the event there is a Change of Control Event
and MD's employment is terminated within two (2) years from the date of the
Change of Control Event other than pursuant to Sections 10(b), (c) or (d), then
the Company shall, in addition to any payments due under Section 10(a), be
obligated to pay to MD an amount equal to three times MD's average annual salary
and bonus payments over the course of the previous five years (or such period he
is employed by the Company if such term of employment is less than five years).
Such payment
-8-
<PAGE>
shall be paid in two installments; half on the date of termination and the
balance six months thereafter.
12. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive MD's
termination of employment, irrespective of any investigation made by or on
behalf of any party.
13. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
14. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 14).
Notice to the estate of MD shall be sufficient if addressed to MD as provided in
this Section 14. Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof.
15. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such
-9-
<PAGE>
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement. Any waiver
must be in writing.
16. Binding Effect. MD's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of MD's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of MD and his heirs and
personal representatives, and shall be binding upon and inure to the benefit of
the Company and its successors and those who are its assigns under Section 11.
17. Headings. The headings in this Agreement are solely for
the convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
18. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts (and by facsimile), each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. It shall be governed by, and
-10-
<PAGE>
construed in accordance with, the laws of the State of Delaware, without giving
effect to the rules governing the conflicts of laws.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By: ____________________________________________
Name:
Title:
________________________________________________
MARC DUKE
-11-
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Amount: $__________ Ft. Lauderdale, Florida
Interest Rate: 5.75% June 1, 1996
FOR VALUE RECEIVED, the undersigned, _____________________________
- ------------------------------------------------------------------------------
("Maker"), promises to pay to the order of InnoPet Brands Corp. (formerly known
as InnoPet Products Corp.), a Delaware corporation ("Payee"), at One East
Broward Boulevard, Ft. Lauderdale, Florida 33301, or at such other place as
Payee may from time to time designate by written notice to Maker, in lawful
money of the United States of America, the sum of
- -----------------------------------------------------------------------------
Dollars ($____________) plus interest from the date of this Note on the unpaid
balance. All payments of principal and interest are to be made as set forth
below without setoff or counterclaim. Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to five and
three-quarters percent (5.75%) per annum.
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed. After maturity (whether by
acceleration or otherwise, and before as well as after judgments), all unpaid
principal and interest shall bear interest until it is paid at a rate equal to
the highest rate allowed by law.
Section 2. Payments.
(a) Together with each payment of principal of this Note there
shall also be due and payable and paid the amount of accrued unpaid interest on
said payment. All references herein to the unpaid portion of this Note shall be
deemed and treated as referring to and
EXH. A-1
<PAGE>
including both the then unpaid principal of this Note and the then accrued
unpaid interest thereon. The unpaid portion of the Note may be paid in dollars
or in property, including, without limitation, all or any part of the Shares, as
defined below. If the Note is paid by Shares then their value shall be equal to
their Fair Market Value, as defined herein. Fair Market Value shall mean the
average closing bid price as reported by the Nasdaq SmallCap Market (or such
other exchange or quotation system that is the then primary forum for trading
the Shares) for the five (5) trading days immediately preceding the day payment
of the Note is made by presentment of the Shares provided, however, that in no
event shall the Shares be deemed to have a Fair Market Value of less than $1.55
per share.
(b) Upon the sale of any shares of common stock (the "Shares")
of Payee issued originally by Payee to Maker against delivery to Payee of this
Note, and upon receipt by Payee of the proceeds from such sale, the Maker shall
promptly pay to Payee an amount equal to $3.20 per share sold and the then
unpaid portion of this Note shall be correspondingly reduced.
(c) The then unpaid portion of this Note shall be due and
payable on June 1, 1999.
(d) Maker shall have the right to prepay the unpaid portion of
this Note in full or in part at any time, without premium or penalty. All
prepayments shall be applied first to the then accrued unpaid interest and then
to the unpaid principal.
Section 2. Security.
This Note is secured by the Shares owned by the Maker.
EXH. A-2
<PAGE>
Section 3. Recourse.
Until June 1, 1998, the obligations of the Maker under this
Note shall be recourse against the Maker. Thereafter, the obligations of the
Maker under this Note shall be non-recourse and the Payee's sole recourse for
payment of this Note shall be the Shares (or any other property then pledged as
security for repayment of the Note).
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
then unpaid portion of this Note shall become immediately due and payable, at
the election of Payee, upon the occurrence of any of the following events:
(a) any failure on the part of Maker to make any payment
hereunder when due, whether by acceleration or otherwise, and the continuation
of such failure for a period of ten (10) days after written notice thereof from
Payee;
(b) any failure on the part of Maker to keep or perform any of
the terms or provisions (other than payment) of this Note or the Stock
Subscription and Security Agreement executed herewith, or any amendments
thereof, and the continuation of such failure for more than ten (10) days after
written notice thereof from Payee.
(c) any failure on the part of Maker to pay any debt within
sixty (60) days of its due date (except where contested in good faith);
EXH. A-3
<PAGE>
(d) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, moratorium or similar law or statute;
(e) a proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
similar law or statute and relief is ordered against him, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof;
(f) Maker consents to or suffers the appointment of a
receiver, trustee or custodian of any substantial part of his assets that is not
vacated within thirty (30) days;
(g) any information furnished to Payee by or on behalf of
Maker shall be false or misleading in any material respect.
Section 5. Jurisdiction and Service of Process.
Maker irrevocably consents to the jurisdiction of the courts
of the State of Florida and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this Note
or a breach of this Note. Maker waives, to the full extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Note brought in the
State of Florida, and further irrevocably waives, to the full extent permitted
by law, any claim that any such action or proceeding brought in such State has
been brought in an inconvenient forum. In any such action or proceeding, Maker
waives, to the full extent permitted by law, personal service
EXH. A-4
<PAGE>
of any summons, complaint, or other process and agrees that service thereof may
be made on Maker by certified or registered U.S. mail or by personal delivery.
Within thirty (30) days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to such action
or proceeding Maker shall appear or answer such summons, complaint, or other
process. Should Maker so served fail to appear or answer within such thirty
(30)-day period or such extended period, as the case may be, Maker shall be
deemed in default and judgment may be entered by Payee against Maker for the
amount as demanded in any summons, complaint, or other process so served.
Section 6. Waivers.
(a) Maker waives demand, presentment, protest, notice of
protest, notice of dishonor, and all other notices or demands of any kind or
nature with respect to this Note.
(b) Maker agrees that a waiver of rights under this Note shall
not be deemed to be made by Payee unless such waiver shall be in writing, duly
signed by Payee, and each such waiver, if any, shall apply only with respect to
the specific instance involved and shall in no way impair the rights of Payee or
the obligations of Maker in any other respect at any other time.
(c) Maker agrees that in the event Payee demands or accepts
partial payment of this Note, such demand or acceptance shall not be deemed to
constitute a waiver of any right to demand the entire unpaid portion of this
Note at any time in accordance with the terms of this Note.
EXH. A-5
<PAGE>
(d) In any action or proceeding arising out of or relating to
this Note, Maker waives (to the full extent permitted by law) all right to a
trial by jury or to plead as a defense any statute of limitations or any other
similar law or equitable doctrine.
Section 7. Collection Costs.
Maker will upon demand pay to Payee the amount of any and all
reasonable costs and expenses, including, without limitation, the reasonable
fees and disbursements of its counsel (whether or not suit is instituted) and of
any experts and agents, which Payee may incur in connection with the following:
(i) the enforcement of this Note; and (ii) the enforcement of payment of all
obligations of Maker by any action or participation in, or in connection with, a
case or proceeding under Chapters 7, 11, or 13 of the Bankruptcy Code, or any
successor statute thereto.
Section 8. Assignment of Note.
Maker may not assign or transfer this Note or any of its
obligations under this Note in any manner whatsoever without the prior written
consent of Payee which shall not be unreasonably withheld. The Note may be
assigned at any time by Payee . Maker agrees not to assert against any assignee
of this Note any claim or defense which Maker may have against any assignor of
this Note.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
EXH. A-6
<PAGE>
(b) This Note shall be governed by, and construed in
accordance with, the laws of the State of Florida, without giving effect to such
state's principles of conflict of laws.
(c) Subject to Section 8, the covenants, terms, and conditions
contained in this Note apply to and bind the heirs, successors, executors,
administrators and assigns of the parties.
(d) If any provision or any word, term, clause, or other part
of any provision of this Note shall be invalid for any reason, the same shall be
ineffective, but the remainder of this Note shall not be affected and shall
remain in full force and effect.
(e) All notices, consents, or other communications provided
for in this Note or otherwise required by law shall be in writing and may be
given to or made upon the respective parties at the following mailing addresses:
Payee: InnoPet Brands Corp.
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Attention: CEO
Maker: _____________________________
_____________________________
_____________________________
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt; provided, however, that a
notice (other than a notice of a changed address) sent by certified or
registered U.S. mail, with postage prepaid, shall be presumed received not later
than three (3) business days following the date of sending.
(f) Time is of the essence under this Note.
EXH. A-7
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
(Sign)
---------------------------------
Print Name:
Print SS#:_______________________
EXH. A-8
<PAGE>
EXHIBIT B
STOCK SUBSCRIPTION AND SECURITY AGREEMENT
June 1, 1996
To: InnoPet Brands Corp.
_______________ (the "Subscriber") hereby subscribes for
___________ shares (the "Shares") of common stock, par value $.01 per share, of
InnoPet Brands Corp (the "Company").
Subscriber hereby agrees, represents, and warrants that:
(1) Subscriber is acquiring such shares for
Subscriber's own account for investment purposes only and not with a view to the
distribution or resale thereof;
(2) By virtue of its position, Subscriber has access
to the same kind of information which would be available in a registration
statement filed under the Securities Act of 1933;
(3) Subscriber is a sophisticated investor;
(4) Subscriber understands that it may not sell or
otherwise dispose of such shares in the absence of either a registration
statement under the Securities Act of 1933 or an exemption from the registration
provisions under the Securities Act of 1933; and
(5) The certificates representing such shares may
contain a legend to the effect of (4) above.
(6) Subscriber grants the Company a security interest
in the Shares to secure the repayment of a certain note (the "Note") used to
purchase the Shares. The Subscriber agrees that the Company shall hold the
Shares until the Note is paid in full, except that upon written demand of the
Subscriber, his estate or heirs to release all or any part of the Shares to
effect a sale of such Shares by the Subscriber, his estate or heirs, the Company
shall immediately deliver the number of Shares requested to be released to the
transfer agent in escrow so that such sale may occur. The Company shall have a
security interest in the proceeds of the such sale to the extent set forth in
the Note until such proceeds are applied in accordance with the terms of the
Note. If the sale does not occur the Shares shall be immediately returned to the
Company as
EXH. B-1
<PAGE>
security for the repayment of the Note. The Subscriber agrees to execute a stock
power in blank with respect to the Shares and that the Company shall also hold
such stock power.
(Sign)
-----------------------------------
Print Name:
SS#:
Agreed to and Accepted:
INNOPET BRANDS CORP.
- ------------------------------
Name: Marc Duke
Title: CEO
EXH. B-2
<PAGE>
EXHIBIT C
STOCK POWER
FOR VALUE RECEIVED,_________________ hereby sells, assigns and transfers unto
INNOPET BRANDS CORP. shares of Common Stock of the INNOPET BRANDS CORP.
standing in its name on the books of said Corporation represented by
Certificate(s) No.(s). herewith, and do hereby irrevocably constitute and
appoint ______________________________________________________________________
attorney to transfer the said stock on the books of said Corporation with full
power of substitution in the premises.
Dated: June 1, 1996
(Sign)
----------------------------------
Print Name:
EXH. C-1
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of this 1st
day of January, 1997 between InnoPet Brands Corp., a Delaware corporation (the
"Company"), having its principal offices at One East Broward Boulevard, Ft.
Lauderdale, Florida, and John Bieber (the "Employee"), an individual residing at
.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company as its Vice President of Marketing upon
the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs Employee and Employee agrees to serve the Company as its Vice
President of Marketing upon the terms and conditions contained herein, for a
term commencing as of January 6, 1997 and continuing until the close of business
on December 31, 1999 (the "Employment Term"). This Agreement will automatically
renew for one additional term of one year if notice of termination is not given
by either party at least forty-five (45) days prior to the end of the Employment
Term.
<PAGE>
2. Duties and Powers as Employee. During the Employment Term,
Employee agrees to devote all of his full working time, energy, and efforts to
the business of the Company. The Employee's duties shall include, without
limitation, the supervision of marketing activities of the Company and related
areas of responsibility. In performance of his duties, Employee shall be subject
to the direction of the Chief Executive Officer of the Company. Employee shall
be available to travel as the needs of the business require.
3. Compensation.
(a) As compensation for his services hereunder, the Company
shall pay Employee a salary, payable in equal semi-monthly installments, at the
annual rate of $100,000. Additionally, Employee shall participate in the present
or future employee benefit plans of the Company provided that he meets the
eligibility requirements therefor.
(b) Employee shall be eligible to receive raises each year
of the Employment Term at a minimum to reflect cost of living increases, if any,
and merit raises, subject to satisfactory performance as determined by the Chief
Executive Officer.
(c) Employee shall be reimbursed for all relocation
expenses up to $15,000; which shall be paid upon submission of documented
relocation expenses actually incurred by the Employee.
(d) Employee shall be reimbursed for his reasonable living
expenses for an aggregate amount not to exceed $1,500 a month for up to six (6)
months from January 1997 through and including June 1997. The Employee shall be
reimbursed within thirty (30) days after the submission of written documentation
that such expenses were actually incurred.
-2-
<PAGE>
(e) The Employee shall be granted options (the "Options")
to purchase 25,000 shares of Common Stock at an exercise price determined in
accordance with the Company's option plan (the "Plan"). The exercise price of
the Options shall be the closing bid price as reported on the NASDAQ SmallCap
Market for January 2, 1997. The Options shall vest as long as the Employee is
employed by the Company on the following dates:
5,000 on December 31, 1997
10,000 on December 31, 1998
10,000 on December 31, 1999
The Options shall be subject to all of the terms of the
Plan and shall be evidenced by a stock option grant certificate that shall be
issued by the Company.
4. Expenses; Vacations. Employee shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company. During the first year of this Agreement, Employee
shall be entitled to ten (10) days paid vacation time in accordance with then
regular procedures of the Company governing executives as determined from time
to time by the Company's Board of Directors. After the first year of the
Agreement, Employee shall be entitled to fifteen (15) days paid vacation time
per year.
-3-
<PAGE>
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) Employee is under no contractual
or other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights of
the Company hereunder; and (b) Employee is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition.
(a) The Employee agrees that during the Employment Term he
will not engage in, or otherwise directly or indirectly be employed by, or act
as a consultant, or be a director, officer, employee, owner, agent, member or
partner of, any other business or organization that is or shall then be
competing with the Company.
(b) If this Agreement is terminated pursuant to Section
9(a), 9(c) or 9(e), Employee, for a period of six (6) months from the date of
termination, shall not, directly or indirectly, be engaged in the marketing or
manufacturing of (i) any form of pet food for cats, dogs, puppies or kittens; or
(ii) any products for cats, dogs, puppies or kittens similar to those that he
worked on or had knowledge of during the Employment Term.
(c) If this Agreement is terminated pursuant to Section
9(b), Employee, for a period of six (6) months from the date of termination,
shall not, directly or indirectly, compete with or be engaged in the same
business as the company, or be employed by, or act as consultant, or be a
director, officer, employee, owner, agent, member or partner of, any business or
organization which, at the time of such termination, competes with or is engaged
in the same business as the Company. At the end of this period, Employee, for a
period of six (6) months thereafter, shall not, directly or indirectly, be
-4-
<PAGE>
engaged in the marketing or manufacturing of (i) any pet food to be given to
cats, dogs, puppies or kittens; or (ii) any products for cats, dogs, puppies or
kittens similar to those that he worked on or had knowledge of during the
Employment Term.
7. Inventions; Patents; Copyrights. Any interest in patents,
patent applications, inventions, copyrights, developments, and processes ("Such
Inventions") which Employee now or hereafter during the period he is employed by
the Company under this Agreement may, directly or indirectly, own or develop
relating to the fields in which the Company may then be engaged shall belong to
the Company; and forthwith upon request of the Company, Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions, free and clear of all liens,
charges, and encumbrances.
8. Confidential Information. All confidential information
which Employee may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible by
him to any other person, firm, or corporation during the Employment Term or any
time thereafter without the prior written consent of the Company. Employee shall
return all tangible evidence of such confidential information to the Company
prior to or at the termination of his employment.
-5-
<PAGE>
9. Termination.
(a) Notwithstanding anything herein contained, if on or
after the date hereof and prior to the end of the Employment Term, Employee is
terminated "For Cause" (as defined below) then the Company shall have the right
to give notice of termination of Employee's services hereunder as of a date to
be specified in such notice, and this Agreement shall terminate on the date so
specified. Termination "For Cause" shall mean Employee shall (i) be convicted of
a felony crime, (ii) commit any act or omit to take any action in bad faith and
to the detriment of the Company, (iii) commit an act of moral turpitude, (iv)
commit an act of fraud against the Company, or (v) materially breach any term of
this Agreement and fail to correct such breach within ten (10) days after
commission thereof. In the event that this Agreement is terminated "For Cause",
pursuant to Section 9(a), then Employee shall be entitled to receive only his
salary at the rate provided in Section 3 to the date on which termination shall
take effect.
(b) In the event that Employee, prior to the end of the
Employment Term, is terminated by the Company other than pursuant to Section
9(a) hereof, he shall be entitled to receive six (6) months of his annual salary
at the rate provided in Section 3 (the "Severance Payment"). The Severance
Payment shall be paid by the Company in six (6) equal installments beginning
thirty (30) days after the date of termination and every thirty (30) days
thereafter until fully paid. The date of termination shall be specified in a
notice of termination to be provided by the Company.
-6-
<PAGE>
(c) In the event that Employee shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive calendar months, then this
Agreement shall terminate upon 90 days' written notice to Employee, and no
further compensation shall be payable to Employee, except as may otherwise be
provided under any disability insurance policy.
(d) In the event that Employee shall die, then this
Agreement shall terminate on the date of Employee's death, and no further
compensation shall be payable to Employee, except as may otherwise be provided
under any insurance policy or similar instrument.
(e) The Employee may terminate this Agreement on sixty (60)
days notice. If the Employee terminates this Agreement pursuant to this Section
9(e) he shall not be entitled to receive any Severance Payment.
(f) Nothing contained in this Section 9 shall be deemed to
limit any other right the Company may have to terminate Employee's employment
hereunder upon any ground permitted by law.
10. Merger, Etc. In the event of a future disposition of the
properties and business of the Company, as or substantially as an entirety, by
merger, consolidation, sale of assets, sale of stock, or otherwise, then the
Company may elect to assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; and upon such assignment
Employee's rights and obligations hereunder shall continue with the same force
and effect as if such acquiring or surviving corporation had ab initio been a
party hereto in lieu and stead of InnoPet Brands Corp.
-7-
<PAGE>
11. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
12. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 13). In
the case of a notice to the Company, a copy of such notice (which copy shall not
constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attn. Daniel I. DeWolf, Esq.
Notice to the estate of Employee shall be sufficient if addressed to Employee as
provided in this Section 13. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
14. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
-8-
<PAGE>
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
15. Binding Effect. Employee's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of Employee's creditors, and
any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and those who are its assigns under
Section 10.
16. Headings. The headings in this Agreement are solely for
the convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
17. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. It shall be governed by, and construed in accordance with, the laws
of the State of Florida, without given effect to the rules governing the
conflicts of laws.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By:
------------------------------------
Name: Marc Duke
Title: CEO
----------------------------------------
John Bieber
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of this 1st
day of June, 1996 between InnoPet Brands Corp. (formerly known as InnoPet
Products Corp.), a Delaware corporation (the "Company"), having its principal
offices at One East Broward Boulevard, Ft. Lauderdale, Florida, and Linda Duke
(the "Employee"), an individual residing at 633 N.E. 9th Avenue, #3, Ft.
Lauderdale, Florida 33304.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company as its Director of Operations upon the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs Employee and Employee agrees to serve the Company as its Director
of Operations upon the terms and conditions contained herein, for a term
commencing as of June 1, 1996 and continuing until the end of business on May
31, 1999, (the "Employment Term"). This Agreement will automatically renew for
one additional term of one year if notice of termination is not given by either
party at least forty-five (45) days prior to the end of the Employment Term.
<PAGE>
2. Duties and Powers as Employee. During the Employment Term,
Employee agrees to devote all of her full working time, energy, and efforts to
the business of the Company. The Employee's duties shall include, without
limitation, those involving any of the operations of the Company and which are
assigned to her by any of the other officers of the Company and related areas of
responsibility. In performance of her duties, Employee shall be subject to the
direction of the Chief Executive Officer of the Company. Employee shall be
available to travel as the needs of the business require.
3. Compensation.
(a) As compensation for her services hereunder, the
Company shall pay Employee a salary, payable in equal semi-monthly installments,
at the annual rate of $65,000. Additionally, Employee shall participate in the
present or future employee benefit plans of the Company provided that she meets
the eligibility requirements therefor.
(b) Employee shall be eligible to receive raises each
year of the Employment Term at a minimum to reflect cost of living increases, if
any, and merit raises, subject to satisfactory performance as determined by the
Board of Directors.
(c) Upon execution of this Agreement and the Note,
defined below, the Employee shall purchase 34,797 shares (the "Shares") of
common stock of the Company at a purchase price of $111,350. The Shares shall be
purchased by a note (the "Note") in the form attached hereto as Exhibit A. The
Employee shall also execute a Stock Subscription and Security Agreement and a
proxy in the forms attached hereto as Exhibit B and C, respectively.
-2-
<PAGE>
(d) The Shares shall be held by the Company as
security for the repayment of the Note. The Company shall hold the Shares until
the Note is repaid in full. The Employee shall also execute a stock power with
respect to such shares in the firm attached hereto as Exhibit D.
4. Expenses; Vacations. Employee shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of her duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company. Employee shall be entitled to thirty (30) days paid
vacation time in accordance with then regular procedures of the Company
governing executives as determined from time to time by the Company's Board of
Directors.
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) Employee is under no contractual
or other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of her duties hereunder, or the other rights of
the Company hereunder; and (b) Employee is under no physical or mental
disability that would hinder her performance of duties under this Agreement.
6. Non-Competition.
(a) The Employee agrees that during the Employment
Term she will not engage in, or otherwise directly or indirectly be employed by,
or act as a consultant, or be a director, officer, employee, owner, agent,
member or partner of, any other business or organization that is or shall then
be competing with the Company.
-3-
<PAGE>
(b) If this Agreement is terminated pursuant to
Section 9(a), 9(c) or 9(e), Employee, for a period of six (6) months from the
date of termination, shall not, directly or indirectly, be engaged in the
marketing or manufacturing of (i) any form of pet food for cats, dogs, puppies
or kittens; or (ii) any products for cats, dogs, puppies or kittens similar to
those that she worked on or had knowledge of during the Employment Term.
(c) If this Agreement is terminated pursuant to
Section 9(b), Employee, for a period of six (6) months from the date of
termination, shall not, directly or indirectly, compete with or be engaged in
the same business as the company, or be employed by, or act as consultant, or be
a director, officer, employee, owner, agent, member or partner of, any business
or organization which, at the time of such termination, competes with or is
engaged in the same business as the Company. At the end of this period,
Employee, for a period of six (6) months thereafter, shall not, directly or
indirectly, be engaged in the marketing or manufacturing of (i) any pet food to
be given to cats, dogs, puppies or kittens; or (ii) any products for cats, dogs,
puppies or kittens similar to those that he worked on or had knowledge of during
the Employment Term.
7. Inventions; Patents; Copyrights. Any interest in patents,
patent applications, inventions, copyrights, developments, and processes ("Such
Inventions") which Employee now or hereafter during the period she is employed
by the Company under this Agreement may, directly or indirectly, own or develop
relating to the fields in which the Company may then be engaged shall belong to
the Company; and forthwith upon request of the Company, Employee shall execute
all such assignments and other documents and take all such other action as the
-4-
<PAGE>
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions, free and clear of all liens,
charges, and encumbrances.
8. Confidential Information. All confidential information
which Employee may now possess, may obtain during the Employment Term, or may
create prior to the end of the period she is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible by
her to any other person, firm, or corporation during the Employment Term or any
time thereafter without the prior written consent of the Company. Employee shall
return all tangible evidence of such confidential information to the Company
prior to or at the termination of his employment.
9. Termination.
(a) Notwithstanding anything herein contained, if on
or after the date hereof and prior to the end of the Employment Term, Employee
is terminated "For Cause" (as defined below) then the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on the
date so specified. Termination "For Cause" shall mean Employee shall (i) be
convicted of a felony crime, (ii) commit any act or omit to take any action in
bad faith and to the detriment of the Company, (iii) commit an act of moral
turpitude, (iv) commit an act of fraud against the Company, or (v) materially
breach any term of this Agreement and fail to correct such breach within ten
(10) days after commission thereof. In the event that this Agreement is
terminated "For Cause", pursuant to Section 9(a), then Employee shall be
entitled to receive
-5-
<PAGE>
only her salary at the rate provided in Section 3 to the date on which
termination shall take effect.
(b) In the event that Employee, prior to the end of
the Employment Term, is terminated by the Company other than pursuant to Section
9(a) hereof, she shall be entitled to receive three (3) months of her annual
salary at the rate provided in Section 3 (the "Severance Payment"). The
Severance Payment shall be paid by the Company in three (3) equal installments
beginning thirty (30) days after the date of termination and every thirty (30)
days thereafter until fully paid. The date of termination shall be specified in
a notice of termination to be provided by the Company.
(c) In the event that Employee shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive calendar months, then this
Agreement shall terminate upon 90 days' written notice to Employee, and no
further compensation shall be payable to Employee, except as may otherwise be
provided under any disability insurance policy.
(d) In the event that Employee shall die, then this
Agreement shall terminate on the date of Employee's death, and no further
compensation shall be payable to Employee, except as may otherwise be provided
under any insurance policy or similar instrument.
(e) The Employee may terminate this Agreement on
sixty (60) days notice. If the Employee terminates this Agreement pursuant to
this Section 9(e) she shall not be entitled to receive any Severance Payment.
-6-
<PAGE>
(f) Nothing contained in this Section 9 shall be
deemed to limit any other right the Company may have to terminate Employee's
employment hereunder upon any ground permitted by law.
10. Merger, Etc. In the event of a future disposition of the
properties and business of the Company, as or substantially as an entirety, by
merger, consolidation, sale of assets, sale of stock, or otherwise, then the
Company may elect to assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; and upon such assignment
Employee's rights and obligations hereunder shall continue with the same force
and effect as if such acquiring or surviving corporation had ab initio been a
party hereto in lieu and stead of InnoPet Brands Corp.
11. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
12. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of
-7-
<PAGE>
such party set forth in the preamble to this Agreement (or to such other address
as the party shall have furnished in writing in accordance with the provisions
of this Section 13). In the case of a notice to the Company, a copy of such
notice (which copy shall not constitute notice) shall be delivered to Camhy
Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, New York 10019,
Attn. Daniel I. DeWolf, Esq. Notice to the estate of Employee shall be
sufficient if addressed to Employee as provided in this Section 13. Any notice
or other communication given by certified mail shall be deemed given at the time
of certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
14. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
15. Binding Effect. Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of Employee's creditors, and
any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and those who are its assigns under
Section 10.
16. Headings. The headings in this Agreement are solely for
the convenience of
-8-
<PAGE>
reference and shall be given no effect in the construction or interpretation of
this Agreement.
17. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. It shall be governed by, and construed in accordance with, the laws
of the State of Florida, without given effect to the rules governing the
conflicts of laws.
18. Termination of Contract with InnoPet Inc. The Employee
acknowledges that her employment agreement with InnoPet Inc. is terminated,
except that any options (the "Options") granted thereunder to the Employee will
continue to exist and be subject to the terms of any vesting schedule contained
therein. The Employee also releases InnoPet Inc. from all liabilities and
claims, if any, under such employment agreement. The Company acknowledges that
it has no rights or claims to any of the Options.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By:________________________________________
Name: Marc Duke
Title: CEO
___________________________________________
LINDA DUKE
-9-
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Amount: $__________ Ft. Lauderdale, Florida
Interest Rate: 5.75% June 1, 1996
FOR VALUE RECEIVED, the undersigned, ________________________
- ------------------------------------------------------------------------------
("Maker"), promises to pay to the order of InnoPet Brands Corp. (formerly known
as InnoPet Products Corp.), a Delaware corporation ("Payee"), at One East
Broward Boulevard, Ft. Lauderdale, Florida 33301, or at such other place as
Payee may from time to time designate by written notice to Maker, in lawful
money of the United States of America, the sum of
- -------------------------------------------------------------------------------
Dollars ($____________) plus interest from the date of this Note on the unpaid
balance. All payments of principal and interest are to be made as set forth
below without setoff or counterclaim. Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to five and
three-quarters percent (5.75%) per annum.
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed. After maturity (whether by
acceleration or otherwise, and before as well as after judgments), all unpaid
principal and interest shall bear interest until it is paid at a rate equal to
the highest rate allowed by law. Section 2. Payments.
(a) Together with each payment of principal of this Note there
shall also be due and payable and paid the amount of accrued unpaid interest on
said payment. All references herein to the unpaid portion of this Note shall be
deemed and treated as referring to and
EXH. A-1
<PAGE>
including both the then unpaid principal of this Note and the then accrued
unpaid interest thereon. The unpaid portion of the Note may be paid in dollars
or in property, including, without limitation, all or any part of the Shares, as
defined below. If the Note is paid by Shares then their value shall be equal to
their Fair Market Value, as defined herein. Fair Market Value shall mean the
average closing bid price as reported by the Nasdaq SmallCap Market (or such
other exchange or quotation system that is the then primary forum for trading
the Shares) for the five (5) trading days immediately preceding the day payment
of the Note is made by presentment of the Shares provided, however, that in no
event shall the Shares be deemed to have a Fair Market Value of less than $1.55
per share.
(b) Upon the sale of any shares of common stock (the "Shares")
of Payee issued originally by Payee to Maker against delivery to Payee of this
Note, and upon receipt by Payee of the proceeds from such sale, the Maker shall
promptly pay to Payee an amount equal to $3.20 per share sold and the then
unpaid portion of this Note shall be correspondingly reduced.
(c) The then unpaid portion of this Note shall be due and
payable on June 1, 1999.
(d) Maker shall have the right to prepay the unpaid portion of
this Note in full or in part at any time, without premium or penalty. All
prepayments shall be applied first to the then accrued unpaid interest and then
to the unpaid principal.
Section 2. Security.
This Note is secured by the Shares owned by the Maker.
EXH. A-2
<PAGE>
Section 3. Recourse.
Until June 1, 1998, the obligations of the Maker under this
Note shall be recourse against the Maker. Thereafter, the obligations of the
Maker under this Note shall be non-recourse and the Payee's sole recourse for
payment of this Note shall be the Shares (or any other property then pledged as
security for repayment of the Note).
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
then unpaid portion of this Note shall become immediately due and payable, at
the election of Payee, upon the occurrence of any of the following events:
(a) any failure on the part of Maker to make any payment
hereunder when due, whether by acceleration or otherwise, and the continuation
of such failure for a period of ten (10) days after written notice thereof from
Payee;
(b) any failure on the part of Maker to keep or perform any of
the terms or provisions (other than payment) of this Note or the Stock
Subscription and Security Agreement executed herewith, or any amendments
thereof, and the continuation of such failure for more than ten (10) days after
written notice thereof from Payee.
(c) any failure on the part of Maker to pay any debt within
sixty (60) days of its due date (except where contested in good faith);
(d) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt,
EXH. A-3
<PAGE>
moratorium or similar law or statute;
(e) a proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
similar law or statute and relief is ordered against him, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof;
(f) Maker consents to or suffers the appointment of a
receiver, trustee or custodian of any substantial part of his assets that is not
vacated within thirty (30) days;
(g) any information furnished to Payee by or on behalf of
Maker shall be false or misleading in any material respect.
Section 5. Jurisdiction and Service of Process.
Maker irrevocably consents to the jurisdiction of the courts
of the State of Florida and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this Note
or a breach of this Note. Maker waives, to the full extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Note brought in the
State of Florida, and further irrevocably waives, to the full extent permitted
by law, any claim that any such action or proceeding brought in such State has
been brought in an inconvenient forum. In any such action or proceeding, Maker
waives, to the full extent permitted by law, personal service of any summons,
complaint, or other process and agrees that service thereof may be made on Maker
by certified or registered U.S. mail or by personal delivery. Within thirty (30)
days after
EXH. A-4
<PAGE>
such service, or such other time as may be mutually agreed upon in writing by
the attorneys for the parties to such action or proceeding Maker shall appear or
answer such summons, complaint, or other process. Should Maker so served fail to
appear or answer within such thirty (30)-day period or such extended period, as
the case may be, Maker shall be deemed in default and judgment may be entered by
Payee against Maker for the amount as demanded in any summons, complaint, or
other process so served.
Section 6. Waivers.
(a) Maker waives demand, presentment, protest, notice of
protest, notice of dishonor, and all other notices or demands of any kind or
nature with respect to this Note.
(b) Maker agrees that a waiver of rights under this Note shall
not be deemed to be made by Payee unless such waiver shall be in writing, duly
signed by Payee, and each such waiver, if any, shall apply only with respect to
the specific instance involved and shall in no way impair the rights of Payee or
the obligations of Maker in any other respect at any other time.
(c) Maker agrees that in the event Payee demands or accepts
partial payment of this Note, such demand or acceptance shall not be deemed to
constitute a waiver of any right to demand the entire unpaid portion of this
Note at any time in accordance with the terms of this Note.
(d) In any action or proceeding arising out of or relating to
this Note, Maker waives (to the full extent permitted by law) all right to a
trial by jury or to plead as a defense
EXH. A-5
<PAGE>
any statute of limitations or any other similar law or equitable doctrine.
Section 7. Collection Costs.
Maker will upon demand pay to Payee the amount of any and all
reasonable costs and expenses, including, without limitation, the reasonable
fees and disbursements of its counsel (whether or not suit is instituted) and of
any experts and agents, which Payee may incur in connection with the following:
(i) the enforcement of this Note; and (ii) the enforcement of payment of all
obligations of Maker by any action or participation in, or in connection with, a
case or proceeding under Chapters 7, 11, or 13 of the Bankruptcy Code, or any
successor statute thereto.
Section 8. Assignment of Note.
Maker may not assign or transfer this Note or any of its
obligations under this Note in any manner whatsoever without the prior written
consent of Payee which shall not be unreasonably withheld. The Note may be
assigned at any time by Payee . Maker agrees not to assert against any assignee
of this Note any claim or defense which Maker may have against any assignor of
this Note.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
(b) This Note shall be governed by, and construed in
accordance with, the laws
EXH. A-6
<PAGE>
of the State of Florida, without giving effect to such state's principles of
conflict of laws.
(c) Subject to Section 8, the covenants, terms, and conditions
contained in this Note apply to and bind the heirs, successors, executors,
administrators and assigns of the parties.
(d) If any provision or any word, term, clause, or other part
of any provision of this Note shall be invalid for any reason, the same shall be
ineffective, but the remainder of this Note shall not be affected and shall
remain in full force and effect.
(e) All notices, consents, or other communications provided
for in this Note or otherwise required by law shall be in writing and may be
given to or made upon the respective parties at the following mailing addresses:
Payee: InnoPet Brands Corp.
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Attention: CEO
Maker: _____________________________
_____________________________
_____________________________
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt; provided, however, that a
notice (other than a notice of a changed address) sent by certified or
registered U.S. mail, with postage prepaid, shall be presumed received not later
than three (3) business days following the date of sending.
(f) Time is of the essence under this Note.
EXH. A-7
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
(Sign)
----------------------------------
Print Name:
Print SS#:________________________
EXH. A-8
<PAGE>
EXHIBIT B
STOCK SUBSCRIPTION AND SECURITY AGREEMENT
June 1, 1996
To: InnoPet Brands Corp.
_______________ (the "Subscriber") hereby subscribes for
___________ shares (the "Shares") of common stock, par value $.01 per share, of
InnoPet Brands Corp (the "Company").
Subscriber hereby agrees, represents, and warrants that:
(1) Subscriber is acquiring such shares for
Subscriber's own account for investment purposes only and not with a view to the
distribution or resale thereof;
(2) By virtue of its position, Subscriber has access
to the same kind of information which would be available in a registration
statement filed under the Securities Act of 1933;
(3) Subscriber is a sophisticated investor;
(4) Subscriber understands that it may not sell or
otherwise dispose of such shares in the absence of either a registration
statement under the Securities Act of 1933 or an exemption from the registration
provisions under the Securities Act of 1933; and
(5) The certificates representing such shares may
contain a legend to the effect of (4) above.
(6) Subscriber grants the Company a security interest
in the Shares to secure the repayment of a certain note (the "Note") used to
purchase the Shares. The Subscriber agrees that the Company shall hold the
Shares until the Note is paid in full, except that upon written demand of the
Subscriber, his estate or heirs to release all or any part of the Shares to
effect a sale of such Shares by the Subscriber, his estate or heirs, the Company
shall immediately deliver the number of Shares requested to be released to the
transfer agent in escrow so that such sale may occur. The Company shall have a
security interest in the proceeds of the such sale to the extent set forth in
the Note until such proceeds are applied in accordance with the terms of the
Note. If the sale does not occur the Shares shall be immediately returned to the
Company as security for the repayment of the Note. The Subscriber agrees to
execute a stock power in blank
EXH. B-1
<PAGE>
with respect to the Shares and that the Company shall also hold such stock
power.
(Sign)
--------------------------
Print Name:
SS#:
Agreed to and Accepted:
INNOPET BRANDS CORP.
- ------------------------------
Name: Marc Duke
Title: CEO
EXH. B-2
<PAGE>
EXHIBIT C
IRREVOCABLE PROXY
____________________ (the "Employee"), a stockholder of
InnoPet Brands Corp., hereby irrevocably appoints Marc Duke as proxy and
attorney-in-fact, with right of substitution, and hereby authorizes him to
represent and vote in his discretion ______________________________ shares of
common stock of InnoPet Brands Corp. owned by Employee at all shareholders
meetings, or any adjournment or adjournments thereof. This proxy is irrevocable
and shall remain in full force and effect until May 31, 1999.
Dated: June 1, 1996
(Sign)
------------------------------
Print Name:
EXH. C-1
<PAGE>
EXHIBIT D
STOCK POWER
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
INNOPET BRANDS CORP. shares of Common Stock of the INNOPET BRANDS CORP. standing
in its name on the books of said Corporation represented by Certificate(s)
No.(s). herewith, and do hereby irrevocably constitute and appoint
____________________ attorney to transfer the said stock on the books of said
Corporation with full power of substitution in the premises.
Dated: June 1, 1996
(Sign)
----------------------------------
Print Name:
EXH. D-1
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of this 1st
day of June, 1996 between InnoPet Brands Corp. (formerly known as InnoPet
Products Corp.), a Delaware corporation (the "Company"), having its principal
offices at One East Broward Boulevard, Ft. Lauderdale, Florida, and Robin Hunter
(the "Employee"), an individual residing at ___________________________________
________________________________________________________________.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company as its Vice President and Chief Financial
Officer upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs Employee and Employee agrees to serve the Company as its Vice
President and Chief Financial Officer upon the terms and conditions contained
herein, for a term commencing as of June 1, 1996 and continuing until the close
of business on May 31, 1999, (the "Employment Term"). This Agreement will
automatically renew for one additional term of one year if notice of termination
is not given by either party at least forty-five (45) days prior to the end of
the Employment Term.
<PAGE>
2. Duties and Powers as Employee. During the Employment
Term, Employee agrees to devote all of his full working time, energy, and
efforts to the business of the Company. The Employee's duties shall include,
without limitation, those normally performed by a chief financial officer of a
corporation including the supervision of all matters of finance relating to or
involving the Company and calling for action or inaction on its part and related
areas of responsibility. In performance of his duties, Employee shall be subject
to the direction of the Chief Executive Officer of the Company. Employee shall
be available to travel as the needs of the business require.
3. Compensation.
(a) As compensation for his services hereunder, the
Company shall pay Employee a salary, payable in equal semi-monthly installments,
at the annual rate of $85,000. Additionally, Employee shall participate in the
present or future employee benefit plans of the Company provided that he meets
the eligibility requirements therefor.
(b) Employee shall be eligible to receive raises each
year of the Employment Term at a minimum to reflect cost of living increases,
if any, and merit raises, subject to satisfactory performance as determined by
the Board of Directors.
(c) Upon execution of this Agreement and the Note,
defined below, the Employee shall purchase 43,497 shares (the "Shares") of
common stock of the Company at a purchase price of $139,190. The Shares shall
be purchased by a note (the "Note") in the form attached hereto as Exhibit A.
The Employee shall also execute a Stock Subscription and Security Agreement and
a proxy in the forms attached hereto as Exhibits B and C, respectively.
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<PAGE>
(d) The Shares shall be held by the Company as security
for the repayment of the Note. The Company shall hold the Shares until the Note
is repaid in full. The Employee shall also execute a stock power with respect
to such shares in the form attached hereto as Exhibit D.
4. Expenses; Vacations. Employee shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company. Employee shall be entitled to thirty (30) days paid
vacation time in accordance with then regular procedures of the Company
governing executives as determined from time to time by the Company's Board of
Directors.
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) Employee is under no contractual
or other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights of
the Company hereunder; and (b) Employee is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition.
(a) The Employee agrees that during the Employment Term
he will not engage in, or otherwise directly or indirectly be employed by, or
act as a consultant, or be a director, officer, employee, owner, agent, member
or partner of, any other business or organization that is or shall then be
competing with the Company.
(b) If this Agreement is terminated pursuant to Section
9(a), 9(c) or 9(e), Employee, for a period of six (6) months from the date of
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<PAGE>
termination, shall not, directly or indirectly, be engaged in the marketing or
manufacturing of (i) any form of pet food for cats, dogs, puppies or kittens;
or (ii) any products for cats, dogs, puppies or kittens similar to those that
he worked on or had knowledge of during the Employment Term.
(c) If this Agreement is terminated pursuant to Section
9(b), Employee, for a period of six (6) months from the date of termination,
shall not, directly or indirectly, compete with or be engaged in the same
business as the company, or be employed by, or act as consultant, or be a
director, officer, employee, owner, agent, member or partner of, any business
or organization which, at the time of such termination, competes with or is
engaged in the same business as the Company. At the end of this period,
Employee, for a period of six (6) months thereafter, shall not, directly or
indirectly, be engaged in the marketing or manufacturing of (i) any pet food to
be given to cats, dogs, puppies or kittens; or (ii) any products for cats, dogs,
puppies or kittens similar to those that he worked on or had knowledge of
during the Employment Term.
7. Inventions; Patents; Copyrights. Any interest in patents,
patent applications, inventions, copyrights, developments, and processes ("Such
Inventions") which Employee now or hereafter during the period he is employed by
the Company under this Agreement may, directly or indirectly, own or develop
relating to the fields in which the Company may then be engaged shall belong to
the Company; and forthwith upon request of the Company, Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions, free and clear of all liens,
charges, and encumbrances.
-4-
<PAGE>
8. Confidential Information. All confidential information
which Employee may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible
by him to any other person, firm, or corporation during the Employment Term or
any time thereafter without the prior written consent of the Company. Employee
shall return all tangible evidence of such confidential information to the
Company prior to or at the termination of his employment.
9. Termination.
(a) Notwithstanding anything herein contained, if on or
after the date hereof and prior to the end of the Employment Term, Employee is
terminated "For Cause" (as defined below) then the Company shall have the right
to give notice of termination of Employee's services hereunder as of a date to
be specified in such notice, and this Agreement shall terminate on the date so
specified. Termination "For Cause" shall mean Employee shall (i) be convicted
of a felony crime, (ii) commit any act or omit to take any action in bad faith
and to the detriment of the Company, (iii) commit an act of moral turpitude,
(iv) commit an act of fraud against the Company, or (v) materially breach any
term of this Agreement and fail to correct such breach within ten days after
commission thereof. In the event that this Agreement is terminated "For Cause",
pursuant to Section 9(a), then Employee shall be entitled to receive only his
salary at the rate provided in Section 3 to the date on which termination shall
take effect.
-5-
<PAGE>
(b) In the event that Employee, prior to the end of the
Employment Term, is terminated by the Company other than pursuant to Section
9(a) hereof, he shall be entitled to receive six (6) months of his annual
salary at the rate provided in Section 3 (the "Severance Payment"). The
Severance Payment shall be paid by the Company in six (6) equal installments
beginning thirty (30) days after the date of termination and every thirty (30)
days thereafter until fully paid. The date of termination shall be specified in
a notice of termination to be provided by the Company.
(c) In the event that Employee shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive calendar months, then this
Agreement shall terminate upon 90 days' written notice to Employee, and no
further compensation shall be payable to Employee, except as may otherwise be
provided under any disability insurance policy.
(d) In the event that Employee shall die, then this
Agreement shall terminate on the date of Employee's death, and no further
compensation shall be payable to Employee, except as may otherwise be provided
under any insurance policy or similar instrument.
(e) The Employee may terminate this Agreement on sixty
(60) days notice. If the Employee terminates this Agreement pursuant to this
Section 9(e) he shall not be entitled to receive any Severance Payment.
(f) Nothing contained in this Section 9 shall be deemed
to limit any other right the Company may have to terminate Employee's employment
hereunder upon any ground permitted by law.
-6-
<PAGE>
10. Merger, Etc. In the event of a future disposition of the
properties and business of the Company, as or substantially as an entirety, by
merger, consolidation, sale of assets, sale of stock, or otherwise, then the
Company may elect to assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; and upon such assignment
Employee's rights and obligations hereunder shall continue with the same force
and effect as if such acquiring or surviving corporation had ab initio been a
party hereto in lieu and stead of InnoPet Brands Corp.
11. Survival. The covenants, agreements, representations,
and warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
12. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
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<PAGE>
furnished in writing in accordance with the provisions of this Section 13). In
the case of a notice to the Company, a copy of such notice (which copy shall not
constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attn. Daniel I. DeWolf, Esq.
Notice to the estate of Employee shall be sufficient if addressed to Employee
as provided in this Section 13. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
14. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
15. Binding Effect. Employee's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of Employee's creditors, and
any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and those who are its assigns under
Section 10.
16. Headings. The headings in this Agreement are solely for
the convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
-8-
<PAGE>
17. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. It shall be governed by, and construed in accordance with, the laws
of the State of Florida, without given effect to the rules governing the
conflicts of laws.
18. Termination of Contract with InnoPet Inc. The Employee
acknowledges that his employment agreement with InnoPet Inc. is terminated,
except that any options (the "Options") granted thereunder to the Employee will
continue to exist and be subject to the terms of any vesting schedule contained
therein. The Employee also releases InnoPet Inc. from all liabilities and
claims, if any, under such employment agreement. The Company acknowledges that
it has no rights or claims to any of the Options.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By: ______________________________________________
Name: Marc Duke
Title: CEO
__________________________________________________
ROBIN HUNTER
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
Amount: $__________ Ft. Lauderdale, Florida
Interest Rate: 5.75% June 1, 1996
FOR VALUE RECEIVED, the undersigned, _________________________
________________________________________________________________________________
("Maker"), promises to pay to the order of InnoPet Brands Corp. (formerly known
as InnoPet Products Corp.), a Delaware corporation ("Payee"), at One East
Broward Boulevard, Ft. Lauderdale, Florida 33301, or at such other place as
Payee may from time to time designate by written notice to Maker, in lawful
money of the United States of America, the sum of ______________________________
Dollars ($____________) plus interest from the date of this Note on the unpaid
balance. All payments of principal and interest are to be made as set forth
below without setoff or counterclaim. Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to five and
three-quarters percent (5.75%) per annum.
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed. After maturity (whether by
acceleration or otherwise, and before as well as after judgments), all unpaid
principal and interest shall bear interest until it is paid at a rate equal to
the highest rate allowed by law.
Section 2. Payments.
(a) Together with each payment of principal of this Note there
shall also be due and payable and paid the amount of accrued unpaid interest on
said payment. All references herein to the unpaid portion of this Note shall be
deemed and treated as referring to and including both the then unpaid principal
EXH. A-1
<PAGE>
of this Note and the then accrued unpaid interest thereon. The unpaid portion
of the Note may be paid in dollars or in property, including, without
limitation, all or any part of the Shares, as defined below. If the Note is paid
by Shares then their value shall be equal to their Fair Market Value, as
defined herein. Fair Market Value shall mean the average closing bid price as
reported by the Nasdaq SmallCap Market (or such other exchange or quotation
system that is the then primary forum for trading the Shares) for the five (5)
trading days immediately preceding the day payment of the Note is made by
presentment of the Shares provided, however, that in no event shall the Shares
be deemed to have a Fair Market Value of less than $1.55 per share.
(b) Upon the sale of any shares of common stock (the "Shares")
of Payee issued originally by Payee to Maker against delivery to Payee of this
Note, and upon receipt by Payee of the proceeds from such sale, the Maker shall
promptly pay to Payee an amount equal to $3.20 per share sold and the then
unpaid portion of this Note shall be correspondingly reduced.
(c) The then unpaid portion of this Note shall be due and
payable on June 1, 1999.
(d) Maker shall have the right to prepay the unpaid portion
of this Note in full or in part at any time, without premium or penalty. All
prepayments shall be applied first to the then accrued unpaid interest and then
to the unpaid principal.
Section 2. Security.
This Note is secured by the Shares owned by the Maker.
EXH. A-2
<PAGE>
Section 3. Recourse.
Until June 1, 1998, the obligations of the Maker under this
Note shall be recourse against the Maker. Thereafter, the obligations of the
Maker under this Note shall be non-recourse and the Payee's sole recourse for
payment of this Note shall be the Shares (or any other property then pledged as
security for repayment of the Note).
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
then unpaid portion of this Note shall become immediately due and payable, at
the election of Payee, upon the occurrence of any of the following events:
(a) any failure on the part of Maker to make any payment
hereunder when due, whether by acceleration or otherwise, and the continuation
of such failure for a period of ten (10) days after written notice thereof from
Payee;
(b) any failure on the part of Maker to keep or perform any of
the terms or provisions (other than payment) of this Note or the Stock
Subscription and Security Agreement executed herewith, or any amendments
thereof, and the continuation of such failure for more than ten (10) days after
written notice thereof from Payee.
(c) any failure on the part of Maker to pay any debt within
sixty (60) days of its due date (except where contested in good faith);
(d) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, moratorium or similar law or statute;
EXH. A-3
<PAGE>
(e) a proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
similar law or statute and relief is ordered against him, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof;
(f) Maker consents to or suffers the appointment of a
receiver, trustee or custodian of any substantial part of his assets that is not
vacated within thirty (30) days;
(g) any information furnished to Payee by or on behalf of
Maker shall be false or misleading in any material respect.
Section 5. Jurisdiction and Service of Process.
Maker irrevocably consents to the jurisdiction of the courts
of the State of Florida and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this Note
or a breach of this Note. Maker waives, to the full extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Note brought in the
State of Florida, and further irrevocably waives, to the full extent permitted
by law, any claim that any such action or proceeding brought in such State has
been brought in an inconvenient forum. In any such action or proceeding, Maker
waives, to the full extent permitted by law, personal service of any summons,
complaint, or other process and agrees that service thereof may be made on Maker
by certified or registered U.S. mail or by personal delivery. Within thirty (30)
days after such service, or such other time as may be mutually agreed upon in
EXH. A-4
<PAGE>
writing by the attorneys for the parties to such action or proceeding Maker
shall appear or answer such summons, complaint, or other process. Should Maker
so served fail to appear or answer within such thirty (30)-day period or such
extended period, as the case may be, Maker shall be deemed in default and
judgment may be entered by Payee against Maker for the amount as demanded in
any summons, complaint, or other process so served.
Section 6. Waivers.
(a) Maker waives demand, presentment, protest, notice of
protest, notice of dishonor, and all other notices or demands of any kind or
nature with respect to this Note.
(b) Maker agrees that a waiver of rights under this Note shall
not be deemed to be made by Payee unless such waiver shall be in writing, duly
signed by Payee, and each such waiver, if any, shall apply only with respect to
the specific instance involved and shall in no way impair the rights of Payee or
the obligations of Maker in any other respect at any other time.
(c) Maker agrees that in the event Payee demands or accepts
partial payment of this Note, such demand or acceptance shall not be deemed to
constitute a waiver of any right to demand the entire unpaid portion of this
Note at any time in accordance with the terms of this Note.
(d) In any action or proceeding arising out of or relating to
this Note, Maker waives (to the full extent permitted by law) all right to a
trial by jury or to plead as a defense any statute of limitations or any other
similar law or equitable doctrine.
EXH. A-5
<PAGE>
Section 7. Collection Costs.
Maker will upon demand pay to Payee the amount of any and all
reasonable costs and expenses, including, without limitation, the reasonable
fees and disbursements of its counsel (whether or not suit is instituted) and of
any experts and agents, which Payee may incur in connection with the following:
(i) the enforcement of this Note; and (ii) the enforcement of payment of all
obligations of Maker by any action or participation in, or in connection with, a
case or proceeding under Chapters 7, 11, or 13 of the Bankruptcy Code, or any
successor statute thereto.
Section 8. Assignment of Note.
Maker may not assign or transfer this Note or any of its
obligations under this Note in any manner whatsoever without the prior written
consent of Payee which shall not be unreasonably withheld. The Note may be
assigned at any time by Payee. Maker agrees not to assert against any assignee
of this Note any claim or defense which Maker may have against any assignor of
this Note.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
(b) This Note shall be governed by, and construed in
accordance with, the laws of the State of Florida, without giving effect to
such state's principles of conflict of laws.
EXH. A-6
<PAGE>
(c) Subject to Section 8, the covenants, terms, and conditions
contained in this Note apply to and bind the heirs, successors, executors,
administrators and assigns of the parties.
(d) If any provision or any word, term, clause, or other part
of any provision of this Note shall be invalid for any reason, the same shall
be ineffective, but the remainder of this Note shall not be affected and shall
remain in full force and effect.
(e) All notices, consents, or other communications provided
for in this Note or otherwise required by law shall be in writing and may be
given to or made upon the respective parties at the following mailing addresses:
Payee: InnoPet Brands Corp.
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Attention: CEO
Maker: _______________________________
_______________________________
_______________________________
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt; provided, however, that a
notice (other than a notice of a changed address) sent by certified or
registered U.S. mail, with postage prepaid, shall be presumed received not later
than three (3) business days following the date of sending.
(f) Time is of the essence under this Note.
EXH. A-7
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
(Sign)_____________________________________________
Print Name:
Print SS#:
EXH. A-8
<PAGE>
EXHIBIT B
STOCK SUBSCRIPTION AND SECURITY AGREEMENT
June 1, 1996
To: InnoPet Brands Corp.
_______________ (the "Subscriber") hereby subscribes for
___________ shares (the "Shares") of common stock, par value $.01 per share, of
InnoPet Brands Corp (the "Company").
Subscriber hereby agrees, represents, and warrants that:
(1) Subscriber is acquiring such shares for Subscriber's
own account for investment purposes only and not with a view to the
distribution or resale thereof;
(2) By virtue of its position, Subscriber has access to
the same kind of information which would be available in a registration
statement filed under the Securities Act of 1933;
(3) Subscriber is a sophisticated investor;
(4) Subscriber understands that it may not sell or
otherwise dispose of such shares in the absence of either a registration
statement under the Securities Act of 1933 or an exemption from the registration
provisions under the Securities Act of 1933; and
(5) The certificates representing such shares may
contain a legend to the effect of (4) above.
(6) Subscriber grants the Company a security interest
in the Shares to secure the repayment of a certain note (the "Note") used to
purchase the Shares. The Subscriber agrees that the Company shall hold the
Shares until the Note is paid in full, except that upon written demand of the
Subscriber, his estate or heirs to release all or any part of the Shares to
effect a sale of such Shares by the Subscriber, his estate or heirs, the
Company shall immediately deliver the number of Shares requested to be released
to the transfer agent in escrow so that such sale may occur. The Company shall
have a security interest in the proceeds of the such sale to the extent set
forth in the Note until such proceeds are applied in accordance with the terms
of the Note. If the sale does not occur the Shares shall be immediately
returned to the Company as security for the repayment of the Note.
EXH. B-1
<PAGE>
The Subscriber agrees to execute a stock power in blank with respect to the
Shares and that the Company shall also hold such stock power.
(Sign)_____________________________________________
Print Name:
SS#:
Agreed to and Accepted:
INNOPET BRANDS CORP.
________________________
Name: Marc Duke
Title: CEO
EXH. B-2
<PAGE>
EXHIBIT C
IRREVOCABLE PROXY
____________________ (the "Employee"), a stockholder of
InnoPet Brands Corp., hereby irrevocably appoints Marc Duke as proxy and
attorney-in-fact, with right of substitution, and hereby authorizes him to
represent and vote in his discretion ______________________________ shares of
common stock of InnoPet Brands Corp. owned by Employee at all shareholders
meetings, or any adjournment or adjournments thereof. This proxy is irrevocable
and shall remain in full force and effect until May 31, 1999.
Dated: June 1, 1996
(Sign)_____________________________________________
Print Name:
EXH. C-1
<PAGE>
EXHIBIT D
STOCK POWER
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
INNOPET BRANDS CORP. shares of Common Stock of the INNOPET BRANDS CORP.
standing in its name on the books of said Corporation represented by
Certificate(s) No.(s). herewith, and do hereby irrevocably constitute and
appoint _______________________________________________________________________
attorney to transfer the said stock on the books of said Corporation with full
power of substitution in the premises.
Dated: June 1, 1996
(Sign)_____________________________________________
Print Name:
EXH. D-1
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of this 1st
day of June, 1996 between InnoPet Brands Corp. (formerly known as InnoPet
Products Corp.), a Delaware corporation (the "Company"), having its principal
offices at One East Broward Boulevard, Ft. Lauderdale, Florida, and Albert
Masters (the "Employee"), an individual residing at
.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company as its Vice President of Sales upon the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs Employee and Employee agrees to serve the Company as its Vice
President of Sales upon the terms and conditions contained herein, for a term
commencing as of June 1, 1996 and continuing until the close of business on May
31, 1999, (the "Employment Term"). This Agreement will automatically renew for
one additional term of one year if notice of termination is not given by either
party at least forty-five (45) days prior to the end of the Employment Term.
<PAGE>
2. Duties and Powers as Employee. During the Employment Term,
Employee agrees to devote all of his full working time, energy, and efforts to
the business of the Company. The Employee's duties shall include, without
limitation, the supervision of selling activities of the Company and related
areas of responsibility. In performance of his duties, Employee shall be subject
to the direction of the Chief Executive Officer of the Company. Employee shall
be available to travel as the needs of the business require.
3. Compensation.
(a) As compensation for his services hereunder, the
Company shall pay Employee a salary, payable in equal semi-monthly installments,
at the annual rate of $104,000. Additionally, Employee shall participate in the
present or future employee benefit plans of the Company provided that he meets
the eligibility requirements therefor.
(b) Employee shall be eligible to receive raises each
year of the Employment Term at a minimum to reflect cost of living increases, if
any, and merit raises, subject to satisfactory performance as determined by the
Board of Directors.
(c) Upon execution of this Agreement and the Note,
defined below, the Employee shall purchase 43,497 shares (the "Shares") of
common stock of the Company at a purchase price of $139,190. The Shares shall be
purchased by a note (the "Note") in the form attached hereto as Exhibit A. The
Employee shall also execute a Stock Subscription and Security Agreement and a
proxy in the forms attached hereto as Exhibits B and C, respectively.
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<PAGE>
(d) The Shares shall be held by the Company as
security for the repayment of the Note. The Company shall hold the Shares until
the Note is repaid in full. The Employee shall also execute a stock power with
respect to such shares in the form attached hereto as Exhibit D.
4. Expenses; Vacations. Employee shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company. Employee shall be entitled to thirty (30) days paid
vacation time in accordance with then regular procedures of the Company
governing executives as determined from time to time by the Company's Board of
Directors.
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) Employee is under no contractual
or other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights of
the Company hereunder; and (b) Employee is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition.
(a) The Employee agrees that during the Employment
Term he will not engage in, or otherwise directly or indirectly be employed by,
or act as a consultant, or be a director, officer, employee, owner, agent,
member or partner of, any other business or organization that is or shall then
be competing with the Company.
(b) If this Agreement is terminated pursuant to
Section 9(a), 9(c) or 9(e),
-3-
<PAGE>
Employee, for a period of six (6) months from the date of termination, shall
not, directly or indirectly, be engaged in the marketing or manufacturing of (i)
any form of pet food for cats, dogs, puppies or kittens; or (ii) any products
for cats, dogs, puppies or kittens similar to those that he worked on or had
knowledge of during the Employment Term.
(c) If this Agreement is terminated pursuant to
Section 9(b), Employee, for a period of six (6) months from the date of
termination, shall not, directly or indirectly, compete with or be engaged in
the same business as the company, or be employed by, or act as consultant, or be
a director, officer, employee, owner, agent, member or partner of, any business
or organization which, at the time of such termination, competes with or is
engaged in the same business as the Company. At the end of this period,
Employee, for a period of six (6) months thereafter, shall not, directly or
indirectly, be engaged in the marketing or manufacturing of (i) any pet food to
be given to cats, dogs, puppies or kittens; or (ii) any products for cats, dogs,
puppies or kittens similar to those that he worked on or had knowledge of during
the Employment Term.
7. Inventions; Patents; Copyrights. Any interest in patents,
patent applications, inventions, copyrights, developments, and processes ("Such
Inventions") which Employee now or hereafter during the period he is employed by
the Company under this Agreement may, directly or indirectly, own or develop
relating to the fields in which the Company may then be engaged shall belong to
the Company; and forthwith upon request of the Company, Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest
-4-
<PAGE>
in and to Such Inventions, free and clear of all liens, charges, and
encumbrances.
8. Confidential Information. All confidential information
which Employee may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible by
him to any other person, firm, or corporation during the Employment Term or any
time thereafter without the prior written consent of the Company. Employee shall
return all tangible evidence of such confidential information to the Company
prior to or at the termination of his employment.
9. Termination.
(a) Notwithstanding anything herein contained, if on
or after the date hereof and prior to the end of the Employment Term, Employee
is terminated "For Cause" (as defined below) then the Company shall have the
right to give notice of termination of Employee's services hereunder as of a
date to be specified in such notice, and this Agreement shall terminate on the
date so specified. Termination "For Cause" shall mean Employee shall (i) be
convicted of a felony crime, (ii) commit any act or omit to take any action in
bad faith and to the detriment of the Company, (iii) commit an act of moral
turpitude, (iv) commit an act of fraud against the Company, or (v) materially
breach any term of this Agreement and fail to correct such breach within ten
days after commission thereof. In the event that this Agreement is terminated
"For Cause", pursuant to Section 9(a), then Employee shall be entitled to
receive only his salary at the rate provided in Section 3 to the date on which
termination shall take effect.
-5-
<PAGE>
(b) In the event that Employee, prior to the end of
the Employment Term, is terminated by the Company other than pursuant to Section
9(a) hereof, he shall be entitled to receive six (6) months of his annual salary
at the rate provided in Section 3 (the "Severance Payment"). The Severance
Payment shall be paid by the Company in six (6) equal installments beginning
thirty (30) days after the date of termination and every thirty (30) days
thereafter until fully paid. The date of termination shall be specified in a
notice of termination to be provided by the Company.
(c) In the event that Employee shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive calendar months, then this
Agreement shall terminate upon 90 days' written notice to Employee, and no
further compensation shall be payable to Employee, except as may otherwise be
provided under any disability insurance policy.
(d) In the event that Employee shall die, then this
Agreement shall terminate on the date of Employee's death, and no further
compensation shall be payable to Employee, except as may otherwise be provided
under any insurance policy or similar instrument.
(e) The Employee may terminate this Agreement on
sixty (60) days notice. If the Employee terminates this Agreement pursuant to
this Section 9(e) he shall not be entitled to receive any Severance Payment.
(f) Nothing contained in this Section 9 shall be
deemed to limit any other
-6-
<PAGE>
right the Company may have to terminate Employee's employment hereunder upon any
ground permitted by law.
10. Merger, Etc. In the event of a future disposition of the
properties and business of the Company, as or substantially as an entirety, by
merger, consolidation, sale of assets, sale of stock, or otherwise, then the
Company may elect to assign this Agreement and all of its rights and obligations
hereunder to the acquiring or surviving corporation; and upon such assignment
Employee's rights and obligations hereunder shall continue with the same force
and effect as if such acquiring or surviving corporation had ab initio been a
party hereto in lieu and stead of InnoPet Brands Corp.
11. Survival. The covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
12. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party
-7-
<PAGE>
shall have furnished in writing in accordance with the provisions of this
Section 13). In the case of a notice to the Company, a copy of such notice
(which copy shall not constitute notice) shall be delivered to Camhy Karlinsky &
Stein LLP, 1740 Broadway, 16th Floor, New York, New York 10019, Attn. Daniel I.
DeWolf, Esq. Notice to the estate of Employee shall be sufficient if addressed
to Employee as provided in this Section 13. Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.
14. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
15. Binding Effect. Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of Employee's creditors, and
any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and those who are its assigns under
Section 10.
16. Headings. The headings in this Agreement are solely for
the convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
-8-
<PAGE>
17. Counterparts; Governing Law. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. It shall be
governed by, and construed in accordance with, the laws of the State of Florida,
without given effect to the rules governing the conflicts of laws.
18. Termination of Contract with InnoPet Inc. The Employee
acknowledges that his employment agreement with InnoPet Inc. is terminated,
except that any options (the "Options") granted thereunder to the Employee will
continue to exist and be subject to the terms of any vesting schedule contained
therein. The Employee also releases InnoPet Inc. from all liabilities and
claims, if any, under such employment agreement. The Company acknowledges that
it has no rights or claims to any of the Options.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By:_____________________________________
Name: Marc Duke
Title: CEO
________________________________________
ALBERT MASTERS
-9-
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Amount: $__________ Ft. Lauderdale, Florida
Interest Rate: 5.75% June 1, 1996
FOR VALUE RECEIVED, the undersigned, _________________________
- ------------------------------------------------------------------------------
("Maker"), promises to pay to the order of InnoPet Brands Corp. (formerly known
as InnoPet Products Corp.), a Delaware corporation ("Payee"), at One East
Broward Boulevard, Ft. Lauderdale, Florida 33301, or at such other place as
Payee may from time to time designate by written notice to Maker, in lawful
money of the United States of America, the sum of
- -------------------------------------------------------------------------------
Dollars ($____________) plus interest from the date of this Note on the unpaid
balance. All payments of principal and interest are to be made as set forth
below without setoff or counterclaim. Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to five and
three-quarters percent (5.75%) per annum.
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed. After maturity (whether by
acceleration or otherwise, and before as well as after judgments), all unpaid
principal and interest shall bear interest until it is paid at a rate equal to
the highest rate allowed by law.
Section 2. Payments.
(a) Together with each payment of principal of this Note there
shall also be due and payable and paid the amount of accrued unpaid interest on
said payment. All references herein to the unpaid portion of this Note shall be
deemed and treated as referring to and
EXH. A-1
<PAGE>
including both the then unpaid principal of this Note and the then accrued
unpaid interest thereon. The unpaid portion of the Note may be paid in dollars
or in property, including, without limitation, all or any part of the Shares, as
defined below. If the Note is paid by Shares then their value shall be equal to
their Fair Market Value, as defined herein. Fair Market Value shall mean the
average closing bid price as reported by the Nasdaq SmallCap Market (or such
other exchange or quotation system that is the then primary forum for trading
the Shares) for the five (5) trading days immediately preceding the day payment
of the Note is made by presentment of the Shares provided, however, that in no
event shall the Shares be deemed to have a Fair Market Value of less than $1.55
per share.
(b) Upon the sale of any shares of common stock (the "Shares")
of Payee issued originally by Payee to Maker against delivery to Payee of this
Note, and upon receipt by Payee of the proceeds from such sale, the Maker shall
promptly pay to Payee an amount equal to $3.20 per share sold and the then
unpaid portion of this Note shall be correspondingly reduced.
(c) The then unpaid portion of this Note shall be due and
payable on June 1, 1999. (d) Maker shall have the right to prepay the unpaid
portion of this Note in full or in part at any time, without premium or penalty.
All prepayments shall be applied first to the then accrued unpaid interest and
then to the unpaid principal.
Section 2. Security.
This Note is secured by the Shares owned by the Maker.
EXH. A-2
<PAGE>
Section 3. Recourse.
Until June 1, 1998, the obligations of the Maker under this
Note shall be recourse against the Maker. Thereafter, the obligations of the
Maker under this Note shall be non-recourse and the Payee's sole recourse for
payment of this Note shall be the Shares (or any other property then pledged as
security for repayment of the Note).
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
then unpaid portion of this Note shall become immediately due and payable, at
the election of Payee, upon the occurrence of any of the following events:
(a) any failure on the part of Maker to make any payment
hereunder when due, whether by acceleration or otherwise, and the continuation
of such failure for a period of ten (10) days after written notice thereof from
Payee;
(b) any failure on the part of Maker to keep or perform any of
the terms or provisions (other than payment) of this Note or the Stock
Subscription and Security Agreement executed herewith, or any amendments
thereof, and the continuation of such failure for more than ten (10) days after
written notice thereof from Payee.
(c) any failure on the part of Maker to pay any debt within
sixty (60) days of its due date (except where contested in good faith);
(d) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt,
EXH. A-3
<PAGE>
moratorium or similar law or statute;
(e) a proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
similar law or statute and relief is ordered against him, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof;
(f) Maker consents to or suffers the appointment of a
receiver, trustee or custodian of any substantial part of his assets that is not
vacated within thirty (30) days;
(g) any information furnished to Payee by or on behalf of
Maker shall be false or misleading in any material respect.
Section 5. Jurisdiction and Service of Process.
Maker irrevocably consents to the jurisdiction of the courts
of the State of Florida and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this Note
or a breach of this Note. Maker waives, to the full extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Note brought in the
State of Florida, and further irrevocably waives, to the full extent permitted
by law, any claim that any such action or proceeding brought in such State has
been brought in an inconvenient forum. In any such action or proceeding, Maker
waives, to the full extent permitted by law, personal service of any summons,
complaint, or other process and agrees that service thereof may be made on Maker
by certified or registered U.S. mail or by personal delivery. Within thirty (30)
days after
EXH. A-4
<PAGE>
such service, or such other time as may be mutually agreed upon in writing by
the attorneys for the parties to such action or proceeding Maker shall appear or
answer such summons, complaint, or other process. Should Maker so served fail to
appear or answer within such thirty (30)-day period or such extended period, as
the case may be, Maker shall be deemed in default and judgment may be entered by
Payee against Maker for the amount as demanded in any summons, complaint, or
other process so served.
Section 6. Waivers.
(a) Maker waives demand, presentment, protest, notice of
protest, notice of dishonor, and all other notices or demands of any kind or
nature with respect to this Note.
(b) Maker agrees that a waiver of rights under this Note shall
not be deemed to be made by Payee unless such waiver shall be in writing, duly
signed by Payee, and each such waiver, if any, shall apply only with respect to
the specific instance involved and shall in no way impair the rights of Payee or
the obligations of Maker in any other respect at any other time.
(c) Maker agrees that in the event Payee demands or accepts
partial payment of this Note, such demand or acceptance shall not be deemed to
constitute a waiver of any right to demand the entire unpaid portion of this
Note at any time in accordance with the terms of this Note.
(d) In any action or proceeding arising out of or relating to
this Note, Maker waives (to the full extent permitted by law) all right to a
trial by jury or to plead as a defense
EXH. A-5
<PAGE>
any statute of limitations or any other similar law or equitable doctrine.
Section 7. Collection Costs.
Maker will upon demand pay to Payee the amount of any and all
reasonable costs and expenses, including, without limitation, the reasonable
fees and disbursements of its counsel (whether or not suit is instituted) and of
any experts and agents, which Payee may incur in connection with the following:
(i) the enforcement of this Note; and (ii) the enforcement of payment of all
obligations of Maker by any action or participation in, or in connection with, a
case or proceeding under Chapters 7, 11, or 13 of the Bankruptcy Code, or any
successor statute thereto.
Section 8. Assignment of Note.
Maker may not assign or transfer this Note or any of its
obligations under this Note in any manner whatsoever without the prior written
consent of Payee which shall not be unreasonably withheld. The Note may be
assigned at any time by Payee . Maker agrees not to assert against any assignee
of this Note any claim or defense which Maker may have against any assignor of
this Note.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
(b) This Note shall be governed by, and construed in
accordance with, the laws
EXH. A-6
<PAGE>
of the State of Florida, without giving effect to such state's principles of
conflict of laws.
(c) Subject to Section 8, the covenants, terms, and conditions
contained in this Note apply to and bind the heirs, successors, executors,
administrators and assigns of the parties.
(d) If any provision or any word, term, clause, or other part
of any provision of this Note shall be invalid for any reason, the same shall be
ineffective, but the remainder of this Note shall not be affected and shall
remain in full force and effect.
(e) All notices, consents, or other communications provided
for in this Note or otherwise required by law shall be in writing and may be
given to or made upon the respective parties at the following mailing addresses:
Payee: InnoPet Brands Corp.
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Attention: CEO
Maker: _____________________________
_____________________________
_____________________________
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt; provided, however, that a
notice (other than a notice of a changed address) sent by certified or
registered U.S. mail, with postage prepaid, shall be presumed received not later
than three (3) business days following the date of sending.
(f) Time is of the essence under this Note.
EXH. A-7
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
(Sign)
---------------------------------
Print Name:
Print SS#:_______________________
EXH. A-8
<PAGE>
EXHIBIT B
STOCK SUBSCRIPTION AND SECURITY AGREEMENT
June 1, 1996
To: InnoPet Brands Corp.
_______________ (the "Subscriber") hereby subscribes for
___________ shares (the "Shares") of common stock, par value $.01 per share, of
InnoPet Brands Corp (the "Company").
Subscriber hereby agrees, represents, and warrants that:
(1) Subscriber is acquiring such shares for
Subscriber's own account for investment purposes only and not with a view to the
distribution or resale thereof;
(2) By virtue of its position, Subscriber has access to
the same kind of information which would be available in a registration
statement filed under the Securities Act of 1933;
(3) Subscriber is a sophisticated investor;
(4) Subscriber understands that it may not sell or
otherwise dispose of such shares in the absence of either a registration
statement under the Securities Act of 1933 or an exemption from the registration
provisions under the Securities Act of 1933; and
(5) The certificates representing such shares may
contain a legend to the effect of (4) above.
(6) Subscriber grants the Company a security interest
in the Shares to secure the repayment of a certain note (the "Note") used to
purchase the Shares. The Subscriber agrees that the Company shall hold the
Shares until the Note is paid in full, except that upon written demand of the
Subscriber, his estate or heirs to release all or any part of the Shares to
effect a sale of such Shares by the Subscriber, his estate or heirs, the Company
shall immediately deliver the number of Shares requested to be released to the
transfer agent in escrow so that such sale may occur. The Company shall have a
security interest in the proceeds of the such sale to the extent set forth in
the Note until such proceeds are applied in accordance with the terms of the
Note. If the sale does not occur the Shares shall be immediately returned to the
Company as security for the repayment of the Note. The Subscriber agrees to
execute a stock power in blank
EXH. B-1
<PAGE>
with respect to the Shares and that the Company shall also hold such stock
power.
(Sign)
----------------------------
Print Name:
SS#:
Agreed to and Accepted:
INNOPET BRANDS CORP.
- ------------------------------
Name: Marc Duke
Title: CEO
EXH. B-2
<PAGE>
EXHIBIT C
IRREVOCABLE PROXY
____________________ (the "Employee"), a stockholder of
InnoPet Brands Corp., hereby irrevocably appoints Marc Duke as proxy and
attorney-in-fact, with right of substitution, and hereby authorizes him to
represent and vote in his discretion ______________________________ shares of
common stock of InnoPet Brands Corp. owned by Employee at all shareholders
meetings, or any adjournment or adjournments thereof. This proxy is irrevocable
and shall remain in full force and effect until May 31, 1999.
Dated: June 1, 1996
(Sign)
---------------------------
Print Name:
EXH. C-1
<PAGE>
EXHIBIT D
STOCK POWER
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
INNOPET BRANDS CORP. shares of Common Stock of the INNOPET BRANDS CORP.
standing in its name on the books of said Corporation represented by
Certificate(s) No.(s). herewith, and do hereby irrevocably constitute and
appoint _________________________________________ attorney to transfer the said
stock on the books of said Corporation with full power of substitution in
the premises.
Dated: June 1, 1996
(Sign)
----------------------------------
Print Name:
EXH. D-1
<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is being made as of this 1st
day of June, 1996 between InnoPet Brands Corp. (formerly known as InnoPet
Products Corp.), a Delaware corporation (the "Company"), having its principal
offices at One East Broward Boulevard, Ft. Lauderdale, Florida, and Dr. Dana
Vaughn (the "Employee"), an individual residing at _________________________
_____________________________________________________________________.
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company as its Vice President of Research and
Development upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Nature of Employment; Term of Employment. The Company
hereby employs Employee and Employee agrees to serve the Company as its Vice
President of Research and Development upon the terms and conditions contained
herein, for a term commencing as of June 1, 1996 and continuing until the end of
business on May 31, 1999, (the "Employment Term"). This Agreement will
automatically renew for one additional term of one year if notice of termination
is not given by either party at least forty-five (45) days prior to the end of
the Employment Term.
<PAGE>
2. Duties and Powers as Employee. During the Employment Term,
Employee agrees to devote all of his full working time, energy, and efforts to
the business of the Company. The Employee's duties shall include, without
limitation, the supervision of research and development activities of the
Company and related areas of responsibility. In performance of his duties,
Employee shall be subject to the direction of the Chief Executive Officer of the
Company. Employee shall be available to travel as the needs of the business
require.
3. Compensation.
(a) As compensation for his services hereunder, the
Company shall pay Employee a salary, payable in equal semi-monthly installments,
at the annual rate of $125,000. Additionally, Employee shall participate in the
present and future employee benefit plans of the Company, including, without
limitation, all benefit plans customarily provided to senior level executives
of the Company, provided that he meets the eligibility requirements therefor.
(b) Employee shall be eligible to receive raises each year
of the Employment Term at a minimum to reflect cost of living increases, if
any, and merit raises, subject to satisfactory performance as determined by the
Board of Directors.
4. Expenses; Vacations. Employee shall be entitled to
reimbursement for reasonable travel and other out-of-pocket expenses necessarily
incurred in the performance of his duties hereunder, upon submission and
approval of written statements and bills in accordance with the then regular
procedures of the Company. Employee shall be entitled to thirty (30) days paid
vacation time per year in accordance with then regular procedures of the Company
governing executives as determined from time to time by the Company's Board of
Directors.
-2-
<PAGE>
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) Employee is under no contractual
or other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights of
the Company hereunder; and (b) Employee is under no physical or mental
disability that would hinder his performance of duties under this Agreement.
6. Non-Competition.
(a) The Employee agrees that during the Employment Term
he will not engage in, or otherwise directly or indirectly be employed by, or
act as a consultant, or be a director, officer, employee, owner, agent, member
or partner of, any other business or organization that is or shall then be
competing with the Company.
(b) If this Agreement is terminated pursuant to
Section 9(a), 9(c) or 9(e), Employee, for a period of six (6) months from the
date of termination, shall not, directly or indirectly, be engaged in the
marketing or manufacturing of (i) any form of pet food for cats, dogs, puppies
or kittens; or (ii) any products for cats, dogs, puppies or kittens similar to
those that he worked on or of which he had knowledge that the Company was
developing during the Employment Term.
(c) If this Agreement is terminated pursuant to
Section 9(b), Employee, for a period of six (6) months from the date of
termination, shall not, directly or indirectly, compete with or be engaged in
the same business as the company, or be employed by, or act as consultant, or be
a director, officer, employee, owner, agent, member or partner of, any
-3-
<PAGE>
business or organization which, at the time of such termination, competes with
or is engaged in the same business as the Company.
7. Inventions; Patents; Copyrights. Any interest in patents,
patent applications, inventions, copyrights, developments, and processes ("Such
Inventions") which Employee now or hereafter during the period he is employed by
the Company under this Agreement may, directly or indirectly, own or develop
relating to the fields in which the Company may then be engaged shall belong to
the Company; and forthwith upon request of the Company, Employee shall execute
all such assignments and other documents and take all such other action as the
Company may reasonably request in order to vest in the Company all his right,
title, and interest in and to Such Inventions, free and clear of all liens,
charges, and encumbrances.
8. Confidential Information. All confidential information
which Employee may now possess, may obtain during the Employment Term, or may
create prior to the end of the period he is employed by the Company under this
Agreement, relating to the business of the Company or of any customer or
supplier of the Company shall not be published, disclosed, or made accessible by
him to any other person, firm, or corporation during the Employment Term or any
time thereafter without the prior written consent of the Company. Employee shall
return all tangible evidence of such confidential information to the Company
prior to or at the termination of his employment.
9. Termination.
(a) Notwithstanding anything herein contained, if on or
after the date hereof and prior to the end of the Employment Term, Employee is
terminated "For Cause" (as defined below) then the Company shall have the right
-4-
<PAGE>
to give notice of termination of Employee's services hereunder as of a date to
be specified in such notice, and this Agreement shall terminate on the date so
specified. Termination "For Cause" shall mean Employee (i) has been convicted of
a felony crime, (ii) committed any act or omitted to take any action in bad
faith and to the detriment of the Company, (iii) committed an act of sexual
harassment, (iv) committed an act of fraud against the Company, or (v)
materially breached any term of this Agreement and failed to correct such breach
within ten (10) days after notice of commission thereof. In the event that this
Agreement is terminated "For Cause", pursuant to Section 9(a), then Employee
shall be entitled to receive only his salary at the rate provided in Section 3
to the date on which termination shall take effect.
(b) In the event that Employee, prior to the end of the
Employment Term, is terminated by the Company other than pursuant to Section
9(a) hereof, he shall be entitled to receive six (6) months of his annual salary
at the rate provided in Section 3 (the "Severance Payment"). The Severance
Payment shall be paid by the Company in six (6) equal installments beginning
thirty (30) days after the date of termination and every thirty (30) days
thereafter until fully paid. The date of termination shall be specified in a
notice of termination to be provided by the Company. Upon full payment of the
Severance Payment, the Company shall not have any further monetary obligations
to the Employee.
(c) In the event that Employee shall be physically or
mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of six (6) consecutive calendar months, then this
Agreement shall terminate upon 90 days' written notice to Employee, and no
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<PAGE>
further compensation shall be payable to Employee, except as may otherwise be
provided under any disability insurance policy.
(d) In the event that Employee shall die, then this
Agreement shall terminate on the date of Employee's death, and no further
compensation shall be payable to Employee, except as may otherwise be provided
under any insurance policy or similar instrument.
(e) The Employee may terminate this Agreement on sixty
(60) days notice. If the Employee terminates this Agreement pursuant to this
Section 9(e) he shall not be entitled to receive any Severance Payment.
10. Survival. The covenants, agreements, representations,
and warranties contained in or made pursuant to this Agreement shall survive
Employee's termination of employment, irrespective of any investigation made by
or on behalf of any party.
11. Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth in the
preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 12). In
the case of a notice to the Company, a copy of such notice (which copy shall not
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<PAGE>
constitute notice) shall be delivered to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attn. Daniel I. DeWolf, Esq.
Notice to the estate of Employee shall be sufficient if addressed to Employee as
provided in this Section 12. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
13. Waiver. Any waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
14. Binding Effect. Employee's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to encumbrance or the claims of Employee's creditors, and
any attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company and its successors and those who are its assigns under
Section 10.
15. Headings. The headings in this Agreement are solely for
the convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
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<PAGE>
16. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. It shall be governed by, and construed in accordance with, the laws
of the State of Florida, without given effect to the rules governing the
conflicts of laws.
17. Termination of Contract with InnoPet Inc. The Employee
acknowledges that his employment agreement with InnoPet Inc. is terminated,
except that any options (the "Options") granted thereunder to the Employee will
continue to exist and be subject to the terms of any vesting schedule contained
therein. The Employee also releases InnoPet Inc. from all liabilities and
claims, if any, under such employment agreement. The Company acknowledges that
it has no rights or claims to any of the Options. The Company shall cause
InnoPet Inc. to deliver a letter to the Employee releasing the Employee of his
obligations to InnoPet Inc.
18. Purchase of Shares
(a) Upon the execution of this Agreement and the Note,
defined below, the Employee shall purchase 86,993 shares (the "Shares") of
common stock of the Company at a purchase price of $278,378. The Shares shall be
purchased by a note (the "Note") in the form attached hereto as Exhibit A. The
Employee shall also execute a Stock Subscription and Security Agreement and a
proxy in the forms attached hereto as Exhibits B and C, respectively.
(b) The Shares shall be held by the Company as security
for the repayment of the Note. The Company shall hold the Shares until the Note
is repaid in full. The Employee shall also execute a stock power with respect
to such shares in the firm attached hereto as Exhibit D. The Company shall
release one share to the Employee upon each payment in cash or stock of $3.20
per share.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
INNOPET BRANDS CORP.
By: ___________________________________________
Name: Marc Duke
Title: CEO
_______________________________________________
DANA VAUGHN
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
Amount: $__________ Ft. Lauderdale, Florida
Interest Rate: 5.75% June 1, 1996
FOR VALUE RECEIVED, the undersigned, ________________________
_______________________________________________________________________________
("Maker"), promises to pay to the order of InnoPet Brands Corp. (formerly known
as InnoPet Products Corp.), a Delaware corporation ("Payee"), at One East
Broward Boulevard, Ft. Lauderdale, Florida 33301, or at such other place as
Payee may from time to time designate by written notice to Maker, in lawful
money of the United States of America, the sum of _____________________________
_______________________________________________________________________________
Dollars ($____________) plus interest from the date of this Note on the unpaid
balance. All payments of principal and interest are to be made as set forth
below without setoff or counterclaim. Maker further agrees as follows:
Section 1. Interest Rate.
(a) Interest shall accrue at a rate equal to five and
three-quarters percent (5.75%) per annum.
(b) Interest shall be computed on the basis of a year of 365
days for the actual number of days elapsed. After maturity (whether by
acceleration or otherwise, and before as well as after judgments), all unpaid
principal and interest shall bear interest until it is paid at a rate equal to
the highest rate allowed by law.
Section 2. Payments.
(a) Together with each payment of principal of this Note there
shall also be due and payable and paid the amount of accrued unpaid interest on
said payment. All references herein to the unpaid portion of this Note shall be
deemed and treated as referring to and including both the then unpaid principal
EXH. A-1
<PAGE>
of this Note and the then accrued unpaid interest thereon. The unpaid portion of
the Note may be paid in dollars or in property, including, without limitation,
all or any part of the Shares, as defined below. If the Note is paid by Shares
then their value shall be equal to their Fair Market Value, as defined herein.
Fair Market Value shall mean the average closing bid price as reported by the
Nasdaq SmallCap Market (or such other exchange or quotation system that is the
then primary forum for trading the Shares) for the five (5) trading days
immediately preceding the day payment of the Note is made by presentment of the
Shares provided, however, that in no event shall the Shares be deemed to have a
Fair Market Value of less than $1.55 per share.
(b) Upon the sale of any shares of common stock (the "Shares")
of Payee issued originally by Payee to Maker against delivery to Payee of this
Note, and upon receipt by Payee of the proceeds from such sale, the Maker shall
promptly pay to Payee an amount equal to $3.20 per share sold and the then
unpaid portion of this Note shall be correspondingly reduced.
(c) The then unpaid portion of this Note shall be due and
payable on June 1, 1999.
(d) Maker shall have the right to prepay the unpaid portion of
this Note in full or in part at any time, without premium or penalty. All
prepayments shall be applied first to the then accrued unpaid interest and then
to the unpaid principal.
Section 2. Security.
This Note is secured by the Shares owned by the Maker.
EXH. A-2
<PAGE>
Section 3. Recourse.
Until June 1, 1998, the obligations of the Maker under this
Note shall be recourse against the Maker. Thereafter, the obligations of the
Maker under this Note shall be non-recourse and the Payee's sole recourse for
payment of this Note shall be the Shares (or any other property then pledged as
security for repayment of the Note).
Section 4. Default.
It shall be an event of default ("Event of Default"), and the
then unpaid portion of this Note shall become immediately due and payable, at
the election of Payee, upon the occurrence of any of the following events:
(a) any failure on the part of Maker to make any payment
hereunder when due, whether by acceleration or otherwise, and the continuation
of such failure for a period of ten (10) days after written notice thereof from
Payee;
(b) any failure on the part of Maker to keep or perform any of
the terms or provisions (other than payment) of this Note or the Stock
Subscription and Security Agreement executed herewith, or any amendments
thereof, and the continuation of such failure for more than ten (10) days after
written notice thereof from Payee.
(c) any failure on the part of Maker to pay any debt within
sixty (60) days of its due date (except where contested in good faith);
EXH. A-3
<PAGE>
(d) Maker shall commence (or take any action for the purpose
of commencing) any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, moratorium or similar law or statute;
(e) a proceeding shall be commenced against Maker under any
bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or
similar law or statute and relief is ordered against him, or the proceeding is
controverted but is not dismissed within sixty (60) days after the commencement
thereof;
(f) Maker consents to or suffers the appointment of a
receiver, trustee or custodian of any substantial part of his assets that is not
vacated within thirty (30) days;
(g) any information furnished to Payee by or on behalf of
Maker shall be false or misleading in any material respect.
Section 5. Jurisdiction and Service of Process.
Maker irrevocably consents to the jurisdiction of the courts
of the State of Florida and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this Note
or a breach of this Note. Maker waives, to the full extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Note brought in the
State of Florida, and further irrevocably waives, to the full extent permitted
by law, any claim that any such action or proceeding brought in such State has
been brought in an inconvenient forum. In any such action or proceeding, Maker
waives, to the full extent permitted by law, personal service of any summons,
EXH. A-4
<PAGE>
complaint, or other process and agrees that service thereof may be made on Maker
by certified or registered U.S. mail or by personal delivery. Within thirty (30)
days after such service, or such other time as may be mutually agreed upon in
writing by the attorneys for the parties to such action or proceeding Maker
shall appear or answer such summons, complaint, or other process. Should Maker
so served fail to appear or answer within such thirty (30)-day period or such
extended period, as the case may be, Maker shall be deemed in default and
judgment may be entered by Payee against Maker for the amount as demanded in any
summons, complaint, or other process so served.
Section 6. Waivers.
(a) Maker waives demand, presentment, protest, notice of
protest, notice of dishonor, and all other notices or demands of any kind or
nature with respect to this Note.
(b) Maker agrees that a waiver of rights under this Note
shall not be deemed to be made by Payee unless such waiver shall be in writing,
duly signed by Payee, and each such waiver, if any, shall apply only with
respect to the specific instance involved and shall in no way impair the rights
of Payee or the obligations of Maker in any other respect at any other time.
(c) Maker agrees that in the event Payee demands or accepts
partial payment of this Note, such demand or acceptance shall not be deemed to
constitute a waiver of any right to demand the entire unpaid portion of this
Note at any time in accordance with the terms of this Note.
EXH. A-5
<PAGE>
(d) In any action or proceeding arising out of or relating to
this Note, Maker waives (to the full extent permitted by law) all right to a
trial by jury or to plead as a defense any statute of limitations or any other
similar law or equitable doctrine.
Section 7. Collection Costs.
Maker will upon demand pay to Payee the amount of any and all
reasonable costs and expenses, including, without limitation, the reasonable
fees and disbursements of its counsel (whether or not suit is instituted) and of
any experts and agents, which Payee may incur in connection with the following:
(i) the enforcement of this Note; and (ii) the enforcement of payment of all
obligations of Maker by any action or participation in, or in connection with, a
case or proceeding under Chapters 7, 11, or 13 of the Bankruptcy Code, or any
successor statute thereto.
Section 8. Assignment of Note.
Maker may not assign or transfer this Note or any of its
obligations under this Note in any manner whatsoever without the prior written
consent of Payee which shall not be unreasonably withheld. The Note may be
assigned at any time by Payee . Maker agrees not to assert against any assignee
of this Note any claim or defense which Maker may have against any assignor of
this Note.
Section 9. Miscellaneous.
(a) This Note may be altered only by prior written agreement
signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought. This Note may not be modified by an oral
agreement, even if supported by new consideration.
EXH. A-6
<PAGE>
(b) This Note shall be governed by, and construed in
accordance with, the laws of the State of Florida, without giving effect to such
state's principles of conflict of laws.
(c) Subject to Section 8, the covenants, terms, and conditions
contained in this Note apply to and bind the heirs, successors, executors,
administrators and assigns of the parties.
(d) If any provision or any word, term, clause, or other part
of any provision of this Note shall be invalid for any reason, the same shall be
ineffective, but the remainder of this Note shall not be affected and shall
remain in full force and effect.
(e) All notices, consents, or other communications provided
for in this Note or otherwise required by law shall be in writing and may be
given to or made upon the respective parties at the following mailing addresses:
Payee: InnoPet Brands Corp.
One East Broward Boulevard
Ft. Lauderdale, Florida 33301
Attention: CEO
Maker: _________________________________
_________________________________
_________________________________
Such addresses may be changed by notice given as provided in this subsection.
Notices shall be effective upon the date of receipt; provided, however, that a
notice (other than a notice of a changed address) sent by certified or
registered U.S. mail, with postage prepaid, shall be presumed received not later
than three (3) business days following the date of sending.
(f) Time is of the essence under this Note.
EXH. A-7
<PAGE>
IN WITNESS WHEREOF, Maker has executed this Note effective as
of the date first set forth above.
(Sign) ____________________________________
Print Name:
Print SS#: ________________________________
EXH. A-8
<PAGE>
EXHIBIT B
STOCK SUBSCRIPTION AND SECURITY AGREEMENT
June 1, 1996
To: InnoPet Brands Corp.
_______________ (the "Subscriber") hereby subscribes for
___________ shares (the "Shares") of common stock, par value $.01 per share, of
InnoPet Brands Corp (the "Company").
Subscriber hereby agrees, represents, and warrants that:
(1) Subscriber is acquiring such shares for Subscriber's
own account for investment purposes only and not with a view to the
distribution or resale thereof;
(2) By virtue of its position, Subscriber has access to
the same kind of information which would be available in a registration
statement filed under the Securities Act of 1933;
(3) Subscriber is a sophisticated investor;
(4) Subscriber understands that it may not sell or
otherwise dispose of such shares in the absence of either a registration
statement under the Securities Act of 1933 or an exemption from the registration
provisions under the Securities Act of 1933; and
(5) The certificates representing such shares may
contain a legend to the effect of (4) above.
(6) Subscriber grants the Company a security interest
in the Shares to secure the repayment of a certain note (the "Note") used to
purchase the Shares. The Subscriber agrees that the Company shall hold the
Shares until the Note is paid in full, except that upon written demand of the
Subscriber, his estate or heirs to release all or any part of the Shares to
effect a sale of such Shares by the Subscriber, his estate or heirs, the
Company shall immediately deliver the number of Shares requested to be released
to the transfer agent in escrow so that such sale may occur. The Company shall
have a security interest in the proceeds of the such sale to the extent set
forth in the Note until such proceeds are applied in accordance with the terms
of the Note. If the sale does not occur the Shares shall be immediately
returned to the Company as security for the repayment of the Note. The
EXH. B-1
<PAGE>
Subscriber agrees to execute a stock power in blank with respect to the Shares
and that the Company shall also hold such stock power.
(Sign)________________________________________
Print Name:
SS#:
Agreed to and Accepted:
INNOPET BRANDS CORP.
_________________________________
Name: Marc Duke
Title: CEO
EXH. B-2
<PAGE>
EXHIBIT C
IRREVOCABLE PROXY
____________________ (the "Employee"), a stockholder of
InnoPet Brands Corp., hereby irrevocably appoints Marc Duke as proxy and
attorney-in-fact, with right of substitution, and hereby authorizes him to
represent and vote in his discretion ______________________________ shares of
common stock of InnoPet Brands Corp. owned by Employee at all shareholders
meetings, or any adjournment or adjournments thereof. This proxy is irrevocable
and shall remain in full force and effect until May 31, 1999.
Dated: June 1, 1996
(Sign)________________________________________
Print Name:
EXH. C-1
<PAGE>
EXHIBIT D
STOCK POWER
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers unto
INNOPET BRANDS CORP. shares of Common Stock of the INNOPET BRANDS CORP.
standing in its name on the books of said Corporation represented by
Certificate(s) No.(s). herewith, and do hereby irrevocably constitute and
appoint _______________________________________________________________________
_______________________________________________________________________________
attorney to transfer the said stock on the books of said Corporation with full
power of substitution in the premises.
Dated: June 1, 1996
(Sign)________________________________________
Print Name:
EXH. D-1
<PAGE>
Exhibit 10.8
AGREEMENT made as of the 1st day of June, 1996, by and between InnoPet
Inc., a Delaware corporation ("Inc."), and InnoPet Brands Corp., a Delaware
corporation ("Brands").
WITNESSETH:
The parties to this Agreement DO HEREBY AGREE as follows:
1. Inc. has been making, and will continue to make, each of the
payments (the "Payments") required by, or pursuant to, an Agreement, dated
November 9, 1995, by and between RSP II Barnett Bank Plaza, Ltd. and The
Original Pet Drink Company (the "Agreement"). Brands agrees to, and will, pay to
Inc. monies in respective amounts equal to the respective amounts of the
Payments made by Inc. after the date hereof. Brands agrees to, and will, make
each of such Payments with reasonable promptness after being informed by Inc, of
the amount to be paid. Notwithstanding the preceding sentence, in the event that
Inc. and/or an entity (other than Brands) controlled by Inc. occupies or
otherwise uses on more than a cursory basis a material portion (as reasonably
determined) of the premises (the "Premises") which are the subject of the
Agreement, the amount of the Payments by Brands to Inc. thereafter to be made
shall be reasonably reduced.
2. For use of the furniture, fixtures, office equipment and the like
(collectively "Assets") now situated in the Premises (a list of which is annexed
hereto and made a part
<PAGE>
hereof), Brands will pay to Inc. a monthly fee equal to 1/60th of the aggregate
amount ("Assets Cost") paid by Inc. to acquire the Assets as reflected in the
books and records of Inc.
3. It is contemplated that all employees of Inc. (except Inc.'s chief
executive officer) will become the sole employees of Brands. Brands agrees to,
and will, hold Inc. harmless from and against any and all claims for
compensation made by any employee or alleged employee of Inc. for services
rendered or allegedly rendered to Inc. after the date hereof and during the term
of this Agreement. Both parties acknowledge that Inc.'s chief executive officer
will be Brands' chief executive officer and continue to hold both positions.
Neither party will receive compensation from the other party for the services
rendered by the chief executive officer.
4. To the extent that employees of Brands (the "Employees") provide
services (at the request or with the concurrence of Inc.) to or for the account
of Inc. or any subsidiary (other than Brands) of Inc., Inc. agrees to, and will,
pay Brands for such services with reasonable promptness after being informed by
Brands of the amount to be paid. Said amount to be paid by Inc. to Brands shall
be determined and be with respect to each employee of Brands providing said
services the compensation (reasonably determined by Brands) payable and paid by
Brands to such employee for the period of time spent by such employee providing
said Services to Inc.
5. Each of Brands and Inc. agrees to, and will, maintain complete and
accurate (in all material respects) books and records reflecting, inter alia,
the transactions contemplated
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<PAGE>
by this Agreement. Each of Brands and Inc. shall upon request to the other be
permitted at reasonable intervals to examine the other's books and records.
6.1 With respect to the Premises, this Agreement will terminate on June
30, 2004, at Brand's sole option, immediately upon Inc. no longer leasing the
Premises.
6.2 With respect to the Employees, either party to this Agreement may
terminate this Agreement upon at least 60 days' prior written notice to the
other which shall specify the date of termination. Such termination shall be
without prejudice to any rights or nullify any obligations under this Agreement
arising prior to its termination.
6.3 With respect to the Assets, this Agreement will terminate on April
30, 2001 or, at Brands' sole option, immediately upon Inc. no longer owning or
leasing the Assets.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement as of the date first above set forth.
INNOPET INC.
By:______________________________
INNOPET
By:______________________________
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<PAGE>
Exhibit 10.9
SUPPLY AGREEMENT
THIS AGREEMENT is entered into as of May 15th, 1996, between InnoPet Brands
Corp., a Delaware corporation ("Purchaser") and Monfort, Inc., a Delaware
corporation d/b/a Platte River By-Products ("Supplier").
WHEREAS, Supplier wishes to sell to Purchaser certain meat by-products (the
"Product") described in Exhibit A, attached hereto and incorporated herein by
reference.
WHEREAS, Purchase desires to purchase the Product, subject to compliance by
Supplier with the terms and conditions of this Agreement, as amended from time
to time throughout the term hereof (this Agreement, togther with all amendments,
addenda and exhibits hereto, is referred to herein as the "Agreement").
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Supplier hereby
agree as follows:
1. Orders.
a. During the term of the Agreement, Supplier shall enter into
specific contracts and purchase orders with Purchaser or its affiliates
(collectively, the "Purchasers") and shall stand ready to accept orders from the
Purchasers to purchase the Product at prices, in quantities, and on terms
described herein, in such contracts or purchase orders, or as negotiated between
Supplier and the Purchasers from time to time. The purpose of this Agreement is
to set forth the general terms under which Supplier will provide the Product to
the Purchaser.
b. In the event Supplier is unable to supply the Product as specified
for any reason during the term of this Agreement or should such Product become
depleted, Supplier agrees to use reasonable efforts to provide substitute
product reasonably acceptable to Purchaser at the prices, quantities, and terms
as set forth on Exhibit B attached hereto or as set forth in separate agreements
negotiated between Supplier and the Purchasers.
2. Inspection. Purchaser shall have the right to inspect, during normal
business hours and with reasonable advance notice, (a) any plant and/or
manufacturing facilities of Suppliers at which the Product is produced, (b) all
of the Supplier's facilities and equipment relating to storage and deliver of
the Product and all components thereof, and (c) the Product (prior to its
shipment to any of the Purchasers). Purchaser shall treat all of Supplier's
information as confidential and agrees that if required by Supplier, Purchaser
shall execute a confidentiality agreement in form and content reasonably
acceptable to Purchaser and Supplier.
<PAGE>
3. Product Testing. If requested by Purchaser, Supplier shall promptly
submit to Purchaser or to a product testing laboratory designated by Purchaser,
at Purchaser's sole cost and expense, in accordance with a testing schedule
established by Purchaser, samples of the product produced by Supplier or samples
of any components thereof.
4. Indemnification. Supplier agrees to defend, indemnify and hold harmless
Purchaser of and from all claims, demands, losses, damages, liabilities, and
costs from any breach of the warranty set forth in Paragraph 12, hereinafter,
except and unless any such claim, demand or loss is caused by the misconduct or
negligence of Purchaser, its agents, officers and employees. Purchaser agrees to
defend, indemnify and hold harmless Supplier of and from all claims, demands,
losses, damages, liabilities, and costs for injury to person or damage to
property arising from Purchaser's operations including, but not limited to, the
selling, handling, using, processing, mixing, packaging or transporting of any
Product sold by supllier to Purchaser, except and unless any such claim, demand,
or loss is caused by the midconduct or negligence of Supplier, its agents,
officers and employees.
5. Insurance. Supplier agrees to maintain, during the entire term of this
Agreement, a comprehensive general liability insurance policy, including product
liability coverage and contractual liability coverage, or self insurance
insuring against the liabilities assumed under this Agreement, in minimum
amounts of $1,000,000 per occurrence for damage, injury and/or death to persons
and $500,000 per occurrence for damage and/or injury to property.
6. Recall. In the event it is deemed necessary by either Purchaser and/or
Supplier to recall from any Purchaser any quantity of the Product, as a result
of failure of the Product related to the quality, fitness and/or safety of the
Product, Supplier agrees to cooperate with Purchaser to insure expeditious
recall.
7. Term. The term of this Agreement shall commence on the date hereof and
shall expire on the date established by the parties by a separate addendum
hereto, unless earlier terminated pursuant to Paragraph 11 hereof. If no date is
so established for the end of the term of this Agreement, then the Agreement
shall continue until terminated pursuant to Paragraph 11 hereof.
8. Trademarks. During the term hereof, Supplier shall not use, without the
prior written consent of an officer of Purchaser, any trademarks or service
marks of Purchaser in any manner whatsoever.
9. Confidentiality. Supplier and Purchaser acknowledge that the terms of
this Agreement and any other information provided by either party pursuant to
this Agreement may include valuable, proprietary, and confidential matter or
information relating to trade secrets, concepts, formulas, product
configurations, designs, specifications, manufacturing processes, operational
processes, equipment, suppliers,
<PAGE>
customers, employees, research developments, inventions, engineering,
marketing, merchandising, purchasing, finances, and other information for a
valuable, proprietary, and confidential nature, ("Confidential Matter") and
shall be used only pursuant to the terms and for the purposes of this
Agreement. Supplier and Purchaser shall comply with reasonably prudent
procedures designed to maintain in confidence, safeguard such Confidential
Matter, and not use such Confidential Matter except consistent with this
Agreement and use reasonable efforts to prevent disclosure to others of the
Confidential Matter. The obligations of parties under this Agreement shall not
apply to anything (a) which is known to Supplier or Purchaser at the time of
disclosure to the other party; (b) which is or becomes publicly available
through no fault of the other party; (c) which is acquired by the other party
from a third party who has the legal right to make the disclosure to it; or
(d) the disclosure of which is required by law.
10. Subsequent Product. Notwithstanding anything herein to the contrary,
the manufacture, storage, shipment and/or distribution by Supplier of any new or
modified product development by Supplier shall be controlled by Supplier unless
the Product is based upon confidential matter supplied by Purchaser.
11. Termination. Notwithstanding the provisions of Paragraph 7 hereof,
Purchase or Supplier may cancel this Agreement without cause and without penalty
upon sixty (60) days written notice to the other party. In the event of such
termination, Purchaser shall be responsible for Supplier's finished inventory
not to exceed a sixy (60) day supply.
12. Warranties. Supplier warrants that the Product, as of the date of
shipment or delivery, to be:
a. Not adulterated or misbranded within the meaning of any federal or
state law or municipal ordinace related to the Product; and
b. Not a misbranded hazardous substance within the meaning of that
term in the federal Hazardous Substances Act.
Purchaser agrees to notify the Supplier in writing within a reasonable
time to any claim for violation of any of the above-mentioned laws, giving the
name and address of the complaining party and the product concerned.
13. Notices. All notices required hereunder shall be in writing and shall
be deemed given, whether actually received or not, (a) when delivered in person,
(b) five (5) business days after such item is deposited in the United States
mail, postage prepaid, certified or registered, return receipt requested, or (c)
one (1) business day after such item is deposited with Federal Express or other
generally recognized overnight courier, shipping charges prepaid, addressed to
the appropriate party hereto at its address set out below, or at such other
address as it shall have theretofore specified by written notice delivered in
accordance herewith:
<PAGE>
Supplier Purchaser
- -------- ---------
Monfort, Inc. InnoPet Products Corp.
d/b/a Platte River By-Products 1 East Broward Blvd.
P.O. Box G Suite 1100
Greeley, CO 80632 Ft. Lauderdale, FL 33301
14. Independent Contractor. Supplier acknowledges that it is an independent
contractor and is neither an agent, partner, joint venturer nor employee of
Purchaser. Supplier shall have no authority to bind or otherwise obligate
Purchaser in any manner nor shall Supplier represent to anyone that it has a
right to do so.
15. Survival. The provisions of Paragraphs 4, 6, 9 and 12 hereof, and any
provision hereof which imposed upon Supplier an obligation after termination or
expiration of this Agreement, shall survive termination or expiration hereof and
be binding upon Supplier.
16. Governing Law. THE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF COLORADO.
17. Waiver, Modification or Amendment. Except for changes in the
Specifications which may be made by Purchaser at any time, neither this
Agreement nor any of its provisions may be waived, modified or amended except by
an instrument in writing signed by the parties hereto.
18. Entire Agreement. This Agreement, as supplemented or amended hereafter,
constitutes the entire agreement between Purchaser and Supplier and supersedes
any and all prior negotiations, understandings, and/or agreements, oral or
written, between the parties hereto with respect to the subject matter hereof.
19. Benefit of Agreement. The Agreement shall be binding upon, and shall
inure to the benefit of the parties hereto and their successors and assigns.
20. Compliance; No Waiver. The failure of Purchaser of Supplier to insist
upon strict compliance with any of the terms hereof shall not be considered to
be a waiver of any such terms nor shall it affect the right of either party to
insist upon strict compliance herewith at any time thereafter.
21. Severability. If any provision of this Agreement shall be contrary to
the laws or jurisdiction in which the same shall be sought to be enforced, the
illegality or unenforceability of any such provision shall not affect the other
terms, covenants, terms or conditions, hereof, and the remainder of the
Agreement, or the application of such
<PAGE>
illegal or unenforceable term or provision to persons or circumstances other
than those as to which this Agreement is held to be illegal or unenforceable,
shall not be affected thereby and each term and provision of this Agreement
shall be valid and enforced to the fullest extent permitted by law.
22. Compliance With Laws. Supplier shall comply with all applicable
federal, state and local laws and executive orders and regulations issued
pursuant thereto, including without limitation all laws relating to equal
employment opportunity.
IN WITNESS WHEREOF, Purchaser and Supplier have executed the Agreement on
the date or dates set forth below, to be effective as of the date first above
written.
MONFORT, INC. D/B/A PLATTE PURCHASER:
RIVER BY-PRODUCTS COMPANY
By: /s/ Roger Dreyer By: /s/ Edwin Christensen
------------------------- ------------------------------
Roger Dreyer Edwin Christensen
Title: V.P. Spec. Divs. Title:
----------------------- ------------------------------
Vice President of Manufacturing
<PAGE>
Supply Agreement
Monfort & InnoPet Inc.
Exhibit A
1. MDB Test #11
Description: 80% mechanically de-boned beef, 20% beef liver, and 20%
de-boned beef. No entrails or any other by-products are allowed with the
exception of liver and heart. Green de-naturant is not allowed. Must
comply with all USDA and state food laws.
This material should be free of foreign material of any kind. This
material will also be subject to random sampling to insure it is of high
quality and within InnoPet specifications. This product also needs to meet
all state and FDA regulations.
Product outside of specifications will be rejected.
Anti-oxidant will be supplied by InnoPet Inc.
Anti-oxidant will be added of a type and quantity requested by InnoPet.
A reasonable cost for this service will be charged.
Specifications: Percent (%)
Minimum Maximum
------- -------
Moisture 70 72
Protein 12 14
Fat 10 12
Ash 1.9 2.2
Quantity and Price: 6 to 15 million pounds per year for the next 3 years @
$.17 FOB Grand Island
Form: Frozen, palletized, nude blocks, stretch wrapped
Product released via shipping advisory. Exhibit B attached hereto, which
contains P.O. #.
Terms: $25,000 open credit line, net 14 days.
David Vinsonhaler
<PAGE>
Exhibit B
--------------
Delivery Date
--------------
INNOPET INC.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attention: Ed
Telephone: (954) 356-0036 Fax: (954) 356-0039
Shipping Advisory
Date: ___________________________ P.O. __________________________________
To: ___________________________ Ship To: ______________________________
Company: Platte River by Products Company: FS Freezer Services
Address: 1226 N. 11th Ave. Address: 455 S. 57th Avenue
Greeley, CO 80632 Phoenix, AZ 85043
Attention: David Vinsonhaler Attention:___________________________
Tel: (970) 353-2311 FAX: (970) 356-0863 Tel: (602) 936-1733 FAX:
- --------------------------------------------------------------------------------
Order Date Ship Via F.O.B. Delivery Date
- --------------------------------------------------------------------------------
UPS Ground [ ] Prepaid Grand Island, NE
[ ] Collect
- --------------------------------------------------------------------------------
Quantity Item Description Unit Cost Total Cost
- --------------------------------------------------------------------------------
6.2 million lbs. MDB Test # 11:80% mechanically .17/lb.
de-boned beef, 20% beef liver
and 20% de-boned beef. No
entrails or any other by-products
are allowed with the exception of
liver & heart. Green de-naturant is
not allowed. Must comply with all
USDA and state food laws.
Specifications: Percent (%)
Minimum Maximum
------- -------
Moisture 70 72
Protein 12 14
Fat 10 12
Ash 1.9 2.2
- --------------------------------------------------------------------------------
Terms: $25,000 open credit line, net 14 days.
- --------------------------------------------------------------------------------
SHIPPING INSTRUCTIONS
(1) Please facsimile copies of the Airway Bill or Bills of Lading upon release
of the order to the shipper, to InnoPet Inc. at (954) 356-0039. (2) Please
notify us immediately if you are unable to ship complete order by date
specified.
- --------------------------------------------------------------------------------
Company: InnoPet Inc.
____________________________________________________ _______________________
Authorized Signature Date
David Vinsonhaler 6-3-96
- ---------------------------------------------------- -----------------------
Accepted By:
____________________________________________________ _______________________
<PAGE>
2. BEEF LIVER
Description: 100% Beef Liver, without bile sacs attached. Green
de-naturant is not allowed. Must comply with all USDA and state food
laws.
This material should be free of foreign material of any kind. This
material will also be subject to random sampling to insure it is of high
quality and within InnoPet specifications. This product also needs to meet
all state and FDA regulations.
Product outside of specifications will be rejected.
Anti-oxidant will be supplied by InnoPet.
Anti-oxidant will be added of a type and quantity requested InnoPet.
A reasonable cost for this service will be charged.
Specifications: Percent (%)
Minimum Maximum
------- -------
Moisture 69 74
Protein 17 19
Fat 4 8
Ash 1.75 3.5
Quantity: Negotiated quarterly
Price: F.O.B. Greeley, CO or Grand Island, NE
Negotiated quarterly
Form: Frozen, palletized, nude blocks, stretch wrapped
Product released via shipping advisory. Exhibit B attached hereto, which
contains P.O. #.
Terms: $25,000 open credit line, net 14 days
<PAGE>
--------------
Delivery Date
--------------
INNOPET INC.
One East Broward Boulevard, Suite 1100
Fort Lauderdale, Florida 33301
Attention: Ed
Telephone: (954) 356-0036 Fax: (954) 356-0039
Shipping Advisory
Date: ___________________________ P.O. __________________________________
To: ___________________________ Ship To: ______________________________
Company: Platte River by Products Company: FS Freezer Services
Address: 1226 N. 11th Ave. Address: 455 S. 57th Avenue
Greeley, CO 80632 Phoenix, AZ 85043
Attention: David Vinsonhaler Attention:___________________________
Tel: (970) 353-2311 FAX: (970) 356-0863 Tel: (602) 936-1733 FAX:
- --------------------------------------------------------------------------------
Order Date Ship Via F.O.B. Delivery Date
- --------------------------------------------------------------------------------
UPS Ground [ ] Prepaid Greeley, CO. or
[ ] Collect Grand Island, NE
- --------------------------------------------------------------------------------
Quantity Item Description Unit Cost Total Cost
- --------------------------------------------------------------------------------
Negotiated Beef liver 100% Beef liver, Negotiated
Quarterly without bile sacs attached. Quarterly
Green de-naturant is not
allowed.
Must comply with all USDA and
state food laws.
Specification: Percent (%)
Minimum Maximum
------- -------
Moisture 69 74
Protein 17 19
Fat 4 8
Ash 1.75 3.5
- --------------------------------------------------------------------------------
Terms: $25,000 open credit line, net 14 days.
- --------------------------------------------------------------------------------
SHIPPING INSTRUCTIONS
(1) Please facsimile copies of the Airway Bill or Bills of Lading upon release
of the order to the shipper, to InnoPet Inc. at (954) 356-0039. (2) Please
notify us immediately if you are unable to ship complete order by date
specified.
- --------------------------------------------------------------------------------
Company: InnoPet Inc.
____________________________________________________ _______________________
Authorized Signature Date
____________________________________________________ _______________________
Accepted By: Date
____________________________________________________ _______________________
<PAGE>
EXHIBIT 11
INNOPET BRANDS CORP.
(A Development Stage Enterprise)
STATEMENT RE: COMPUTATION OF NET LOSS PER COMMON SHARE
INCEPTION (JANUARY 11, 1996) TO DECEMBER 31, 1996
Net Loss $(6,518,304)
=========
Weighted average common shares outstanding 1,705,486
Adjustments to reflect requirements of the Securities and
Exchange Commission SAB 83: Common stock issued to Parent
and officers and employees within the period 388,514
---------
Total weighted average common shares and equivalents 2,094,000
==========
Net loss per common share $ (3.11)
=========
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form SB-2 of our
report dated February 28, 1997 (which report contains an explanatory paragraph
that describes a condition that raises substantial doubt as to the ability of
the Company to continue as a going concern) relating to the financial statements
of InnoPet Brands Corp. appearing in such Registration Statement.
RACHLIN COHEN & HOLTZ
Fort Lauderdale, Florida
September 30, 1997
