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Exhibit 10.1
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is made as of this 22nd
day of November, 2000, by and among PETMED EXPRESS, INC., a Florida corporation
(the "Company"), and TRICON HOLDINGS, LLC, a Florida limited liability company
(the "Investor").
W I T N E S S E T H:
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WHEREAS, the Investor desires to subscribe for, purchase and acquire
from the Company and the Company desires to sell and issue to the Investor Ten
Million (10,000,000) shares (the "Shares") of the Company's common stock, par
value $0.001 per share (the "Common Stock") on the terms set forth herein, and a
warrant (the "Warrant") to acquire Three Million (3,000,000) shares of Common
Stock (the "Warrant Shares") on the terms set forth in the Warrant.
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES AND THE WARRANT. Upon the terms and
conditions and subject to the provisions of this Agreement, the Investor
subscribes for and agrees to purchase and acquire from the Company and the
Company agrees to sell and issue to the Investor the Shares and the Warrant, in
the manner set forth in Section 2 hereof, for the aggregate purchase price of
Two Million Dollars ($2,000,000) (the "Purchase Price").
2. CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place immediately following the execution
of this Agreement at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, P.A., or at such other time and place as the parties may agree upon.
At the Closing:
(a) the Investor shall deliver to the Company (i) Five Hundred
Thousand Dollars ($500,000) by wire transfer and (ii) a promissory note in the
amount of One Million Five Hundred Thousand Dollars ($1,500,000) substantially
in the form attached hereto as EXHIBIT A;
(b) the Company shall deliver to the Investor (i)
certificates, registered in the name(s) designated by the Investor, representing
Two Million Five Hundred Thousand (2,500,000) shares of Common Stock, (ii) a
Warrant to acquire Three Million (3,000,000) shares of Common Stock at an
exercise price of Thirty-Three Cents ($0.33) per share and (iii) copies of
certificates, registered in the name(s) designated by the Investor, representing
Seven Million Five Hundred Thousand (7,500,000) shares of Common Stock (the
original certificates which such copies of certificates represent shall be
delivered to Atlas ▇▇▇▇▇▇▇▇, P.A., as escrow agent, to be held in escrow in
accordance with the terms and conditions of that certain Escrow Agreement, by
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between the Investor, the Company and Atlas ▇▇▇▇▇▇▇▇, P.A., as escrow agent, the
form of which is attached hereto as EXHIBIT B) (such shares of Common Stock, the
"Escrow Shares"); and
(c) each party shall deliver to the other party a fully
executed original of the Escrow Agreement, the Warrant and that certain
Registration Rights Agreement by and between the Investor and the Company
relating to the Shares and the Warrant (the "Registration Rights Agreement").
The form of Warrant is attached to this Agreement as EXHIBIT C. The form of
Registration Rights Agreement is attached to this Agreement as EXHIBIT D.
During the period which any Escrow Shares are held in escrow, the Investor shall
have all of the rights of a shareholder with respect to the Escrow Shares,
including, without limitation, that the Investor shall be entitled to receive
dividends and distributions paid with respect to the Escrow Shares and that the
Investor shall be entitled to exercise full voting rights with respect to the
Escrow Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to induce
the Investor to enter into this Agreement, the Company hereby makes the
representations and warranties set forth below to the Investor.
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized and validly existing under the laws of the State
of Florida whose status is active. The Company has all requisite corporate
right, power and authority to enter into this Agreement and the Registration
Rights Agreement and to consummate the transactions contemplated hereby and
thereby. The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the failure to
so qualify would have a material adverse effect on its business or properties.
(b) AUTHORIZATION. All corporate action on the part of the
Company, and its officers, directors and shareholders necessary for (1) the
authorization, execution and delivery by the Company of this Agreement and the
Registration Rights Agreement, (2) the performance of all obligations of the
Company hereunder and thereunder, and (3) the authorization, sale and delivery
of the Shares and the Warrant has been taken. This Agreement and the
Registration Rights Agreement each constitute valid and legally binding
obligations of the Company, enforceable in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Registration Rights Agreement may be limited by applicable federal or state
securities laws.
(c) NO VIOLATION OR CONFLICT. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (1) do not and will not violate or conflict with any
provision of law or regulation, or any rule, ruling, interpretation, writ,
order,
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judgment or decree of any court or governmental or regulatory authority, or any
provision of the Articles of Incorporation or Bylaws of the Company; and (2) do
not and will not, with or without the passage of time or the giving of notice,
result in the breach of, or constitute a default, cause the acceleration of
performance or require any consent under, or result in the creation of any lien
or other encumbrance upon any property or assets of the Company pursuant to any
instrument or agreement to which the Company is a party or by which the Company
may be bound or affected, other than instruments or agreements as to which
consent shall have been obtained at or prior to the Closing, each of which
instruments or agreements is listed on SCHEDULE 3(C) hereto.
(d) CONSENT OF GOVERNMENTAL AUTHORITIES. No consent, approval
or authorization of, or registration, qualification or filing with any United
States or foreign, federal, state or local governmental or regulatory authority,
is required to be made by the Company in connection with the execution, delivery
or performance of this Agreement and the Registration Rights Agreement by the
Company, or the consummation by the Company of the transactions contemplated
hereby and thereby, other than the filing of a registration statement(s) to be
declared effective by the Securities and Exchange Commission ("SEC") as
contemplated by the Registration Rights Agreement.
(e) CORPORATE RECORDS. The stock records and minute books of
the Company (true, correct and complete copies of which the Company has
previously delivered to the Investor) fully reflect all issuances, transfers and
redemptions of the Company's capital stock, correctly show the total number of
shares of the Company's capital stock issued and outstanding on the date hereof
and contain true, correct and complete copies of the Company's Articles of
Incorporation and Bylaws, in each case as amended and currently in force. Such
minute books also contain complete and accurate records of all meetings and
other corporate actions of the board of directors, committees of the board of
directors, incorporators and shareholders of the Company from its date of
incorporation to the date hereof. All matters requiring the authorization or
approval of the board of directors, a committee of the board of directors, the
incorporators or the shareholders of the Company have been duly and validly
authorized and approved by them.
(f) CAPITALIZATION.
(1) The authorized capital stock of the Company
consists of Twenty-Five Million (25,000,000) shares of capital stock, of which:
(A) Five Million (5,000,000) shares are
designated as preferred stock, par value $0.001 per share (the "Preferred
Stock"), of which 2,500 shares of Convertible Preferred Stock are issued and
outstanding; and
(B) Twenty Million (20,000,000) shares are
designated as Common Stock, of which 6,385,010 shares are issued and outstanding
(prior to giving effect to the issuance of the Shares).
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(2) The outstanding shares of Preferred Stock, Common
Stock and warrants and options to purchase shares of Common Stock are owned by
the shareholders and warrant and option holders, respectively, in the numbers
specified in SCHEDULE 3(F)(2) hereto (prior to giving effect to the issuance of
the Shares and the Warrant). The Shares (after giving effect to the issuance of
the Shares and the Warrant) will represent approximately 43.23% of all
outstanding shares of Common Stock of the Company on a fully diluted basis. The
Shares and the Warrant Shares (after giving effect to the issuance of the Shares
and the Warrant and to the exercise of the Warrant and the issuance of the
Warrant Shares) will represent approximately 56.23% of all outstanding shares of
Common Stock of the Company on a fully diluted basis.
(3) All outstanding shares of the Company's capital
stock have been duly authorized, are validly issued and outstanding, and are
fully paid and nonassessable. No securities issued by the Company from its date
of incorporation to the date hereof were issued in violation of the securities
laws of any jurisdiction or the preemptive rights of any person or entity. There
are no dividends which have accrued or been declared but are unpaid on the
capital stock of the Company. All taxes of any nature or kind required to be
paid in connection with the issuance and any transfers of the Company's capital
stock have been paid. All authorizations required to be obtained from or
registrations required to be effected with any person or entity in connection
with the issuances of securities of the Company from the date of its
incorporation to the date hereof have been obtained or effected and all
securities of the Company have been issued and are held in accordance with the
provisions of all applicable securities and other laws, rules and regulations.
(4) Except for (a) outstanding options to purchase
1,096,500 shares of Common Stock under various stock option agreements executed
prior to the establishment of the Company's 1998 Stock Option Plan, (b)
outstanding options to purchase 2,168,000 shares of Common Stock under the
Company's 1998 Stock Option Plan, (c) outstanding warrants to purchase 470,000
shares of Common Stock, (d) 10,125 shares of Common Stock reserved for issuance
upon the conversion of the outstanding Preferred Stock and (e) 832,000 shares of
Common Stock reserved for purchase upon exercise of options to be granted in the
future under the Company's 1998 Stock Option Plan, there are (prior to giving
effect to the issuance of the Shares and the Warrant) no shares of capital stock
or other equity interests of the Company reserved for issuance and no
outstanding: (w) securities or instruments convertible into or exercisable for
any of the capital stock or other equity interests of the Company; (x) options,
warrants, subscriptions or other rights to acquire capital stock or other equity
interests of the Company; (y) debt securities with any voting rights or
convertible into securities with voting rights; or (z) commitments, agreements
or understandings of any kind, including, without limitation, shareholders'
agreement, voting agreements, voting trusts, registration rights agreements,
preemptive rights or employee benefit arrangements, relating to any capital
stock or other equity interests of the Company, or the issuance or repurchase by
the Company of (i) any capital stock or other equity interests of the Company or
(ii) any such securities or instruments convertible into or exercisable for
capital stock or other equity interests of the Company. The Company has no
outstanding stock appreciation, phantom stock rights or any similar rights.
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(5) Except as set forth on SCHEDULE 3(F)(5) hereto
and except for the Registration Rights Agreement, the Company has not granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity.
(6) All securities issued by the Company in
connection with this Agreement have been, or prior to their issuance will have
been, duly and validly authorized and, when issued and paid for in accordance
with the terms of this Agreement and the Warrant, will be duly and validly
issued, fully paid and nonassessable.
(g) SUBSIDIARIES. The Company does not own or control,
directly or indirectly, any interest in any other corporation, association or
entity, other than the Company's direct ownership of 100% of the issued and
outstanding capital stock of Southeastern Veterinary Exports, Inc., a Florida
corporation, which has no material assets or operations. The Company is not a
participant in any joint venture, partnership or similar arrangement.
(h) FINANCIAL STATEMENTS. The Company has previously delivered
to the Investor, true and complete copies of (1) the audited balance sheet of
the Company for the fiscal year ended March 31, 2000 and the related audited
statements of income, cash flows and changes in shareholders' equity of the
Company for the fiscal years ended March 31, 2000 and 1999, including any
related notes and (2) the unaudited balance sheet of the Company as of September
30, 2000 (the "Balance Sheet") and the related unaudited statements of income,
cash flows and changes in shareholders' equity for the nine month periods ended
September 30, 2000 and 1999 (collectively, the "Financial Statements"). All such
Financial Statements (1) have been prepared in accordance with Regulation S-X
promulgated by the SEC, (2) have been prepared in accordance with the books of
account and records of the Company; (3) fairly present and are true, correct and
complete statements in all material respects of the financial condition and the
results of operations of the Company at the dates and for the periods specified
in those statements; and (4) have been prepared in accordance with generally
accepted accounting principles consistently applied with prior periods (subject
in the case of interim statements, to normal non-material year end adjustments
and the absence of notes). Except as clearly disclosed in the Balance Sheet, the
Company has no liabilities, commitments or obligations of any nature whatsoever,
whether accrued, contingent or otherwise or any unrealized or anticipated losses
from any commitments, and there is no basis for assertion against the Company of
any such liability, commitment, obligation or loss, other than (1) liabilities
incurred in the ordinary course of business subsequent to September 30, 2000,
and (2) liabilities not required under generally accepted accounting principles
to be reflected in the Financial Statements, which are not material to the
financial condition or operating results of the Company.
(i) LAWS. The Company is in compliance in all material
respects with all applicable United States and foreign federal, state and local
laws, rules, regulations, rulings, interpretations, orders and decrees. Except
as set forth in SCHEDULE 3(I) hereto, the Company has not been charged with any
alleged violation or nonconformity with any United States or foreign federal,
state or local law, rule, regulation, ruling, interpretation, order or decree
and is not subject to any order, writ, injunction or decree against or affecting
the Company or its assets or business.
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(j) PERMITS. The Company has all material permits, licenses,
certificates of authority, orders and approvals of, and has made all material
filings, applications and registrations with, all United States or foreign
federal, state or local governmental or administrative agencies or authorities
or regulatory bodies or other persons or entities that are required to be
obtained, maintained or made in order to permit the Company to own its assets
and to carry on its business as presently conducted. All of the foregoing are
current, in good standing and in full force and effect, and, there is no
proceeding or action pending or, to the knowledge of the Company, threatened in
connection with the foregoing.
(k) INVESTIGATIONS; LITIGATION. Except as disclosed on
SCHEDULE 3(K) hereto, there is no investigation by any United States or foreign
federal, state or local governmental or administrative agency or authority, or
any action, suit, proceeding or claim pending or, to the knowledge of the
Company, threatened, against or adversely affecting the Company (including,
without limitation, any investigation, action or proceeding with respect to
taxes or products manufactured, sold, marketed or distributed by the Company),
or the assets or business of the Company. Except as disclosed on SCHEDULE 3(K),
neither the Company nor any director, officer, employee or agent of the Company,
in their respective capacities as such, is a party to any, and there are no
pending or, to the knowledge of the Company, threatened, legal, administrative,
arbitral or other proceedings, claims, suits, actions or governmental
investigations of any nature against the Company, or any director, officer,
employee or agent of the Company, in their respective capacities as such, or
involving any property or asset of the Company.
(l) SEC FILINGS. The Company has timely filed all forms,
reports and documents required to be filed by it with the SEC since its
incorporation including, without limitation, those forms, reports and documents
required to be filed by it pursuant to the Securities Act of 1933, as amended
(the "Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than, only with respect to its untimely filing, the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2000
(all such forms, reports and documents, including, without limitation, the Form
10-KSB, collectively, the "SEC Filings"). The Company has previously delivered
to the Investor a true and complete copy of each SEC Filing. Each of the SEC
Filings complies as to form with the applicable requirements of the SEC for such
filing. The SEC Filings, as of the dates they were respectively filed with the
SEC, did not contain any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(m) INTELLECTUAL PROPERTY. Set forth on SCHEDULE 3(M) hereto
is a list and description of all patents, copyrights, trademarks, servicemarks,
trade dress, trade secrets, logos, domain names, trade names and corporate
names, together with all derivations and combinations thereof and including all
goodwill associated therewith, and all applications, registrations, and renewals
in connection therewith (the "Intellectual Property"). The Intellectual Property
is adequate for the operation of the business of the Company as presently
conducted. The Company is the sole and exclusive owner of all right, title and
interest in and to all of the Intellectual Property and has
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the exclusive right to use and license the same, free and clear of any claim or
conflict with the rights of others. No royalties, honorariums or fees are
payable by the Company to any person or entity by reason of the ownership or use
of any of the Intellectual Property. There have been no claims made or, to the
knowledge of the Company, threatened against the Company asserting the
invalidity, abuse, misuse, or unenforceability of any of the Intellectual
Property, and to the knowledge of the Company, no grounds for any such claims
exist. The Company has not made nor threatened to make any claim of any
violation or infringement by others of its rights in the Intellectual Property,
and to the knowledge of the Company, no grounds for any such claims exist. The
Company has not received any notice that it is in conflict with or infringing
upon the asserted rights of others in connection with the Intellectual Property
and neither the use of the Intellectual Property by the Company nor the
operation of its business is infringing or has infringed upon any rights of
others. To the extent that any item constituting part of the Intellectual
Property has been registered with, filed in or issued by, as the case may be,
any government or other administrative regulatory agency or authority, such
registrations, filings or issuances are listed on SCHEDULE 3(M) hereto and were
duly made and remain in full force and effect. To the extent any of the
Intellectual Property constitutes proprietary or confidential information, the
Company has adequately safeguarded such information from disclosure.
(n) REAL PROPERTY; LEASES. SCHEDULE 3(N) hereto describes all
real estate owned or leased by the Company (the "Real Property"). All Real
Property, if owned by the Company, is owned under good and marketable title,
free and clear of all mortgages, liens, loans and encumbrances, except as
disclosed in the Financial Statements and except statutory liens for taxes not
yet due. Except as set forth on SCHEDULE 3(N) hereto, (1) all of the owned Real
Property is free from all special taxes or assessments, except those generally
applicable to other properties in the tax districts in which such Real Property
is located; (2) the Company has the exclusive right of possession of each tract
comprising such Real Property; (3) all improvements on such Real Property and
the operations therein conducted conform in all material respects to all
applicable health, fire, environmental, safety, zoning and building laws, rules
and regulations and all buildings, structures, improvements and fixtures owned,
leased or used by the Company in the conduct of its business conform in all
material respects to (or are otherwise exempt from) all applicable codes and
rules adopted by national and local associations and boards of insurance
underwriters; and (4) all such buildings, structures, improvements and fixtures
are in satisfactory operating condition and repair, normal wear and tear
excepted. All of the leases under which the Company leases any of the Real
Property (the "Leases") are valid, subsisting and in full force and effect and
neither the Company nor, to the knowledge of the Company, any other party
thereto is in material breach or default thereunder and such Leases entitle the
Company to the use and possession of the Real Property purported to be covered
thereby for the terms specified in such Leases.
(o) PERSONAL PROPERTY. Except as set forth on SCHEDULE 3(O)
hereto, the Company has good title, free and clear of all liens and other
encumbrances, to each item of machinery, equipment, furniture, fixtures and
other tangible personal property (the "Personal Property") owned by it and holds
valid leaseholds in all of the Personal Property leased by it, and all such
Personal Property leases are valid and enforceable. The Company is not in breach
of or
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default under (and no event has occurred which, with due notice or lapse of time
or both, may constitute such a breach or default under) any lease of any items
of Personal Property leased by it. All items of Personal Property owned or
leased by the Company are in good operating condition and repair, normal wear
and tear excepted. The Real Property leased by the Company and the Personal
Property, taken together, includes all assets, properties, rights and interests
necessary or desirable for the continued operation of the business of the
Company in the ordinary course and as presently conducted.
(p) RELATED-PARTY TRANSACTIONS. Except as set forth in
SCHEDULE 3(P) hereto, no employee, officer, director, or, to the knowledge of
the Company, any shareholder, agent or attorney of the Company or any affiliate
or immediate family member of any of the foregoing (1) owns, directly or
indirectly, any interest or has made any loan, advance, commitment or investment
in any person or entity which is a competitor, potential competitor, supplier or
customer of the Company; (2) owns, directly or indirectly, in whole or in part,
any property, asset or right, real, personal or mixed, tangible or intangible
(including, but not limited to, any of the Intellectual Property) which is
utilized in the operation of the business of the Company or is necessary or
desirable to the business of the Company as presently conducted or as
contemplated to be conducted; or (3) has an interest or loan, advance,
commitment or investment in or is, directly or indirectly, a party to any
contract, agreement or other arrangement or relationship pertaining or relating
to the business, operations or assets of the Company.
(q) CONTRACTS. The SEC Filings contain true, correct and
complete copies of all contracts, agreements, understandings, covenants,
commitments and other instruments of any kind, whether oral or written, express
or implied, to which the Company is a party or otherwise relating to or
affecting any of the Company's assets, properties or operations, which are
required to be filed with the SEC pursuant to the rules and regulations
promulgated by the SEC (collectively, the "Commitments"). Each Commitment is
valid, binding and enforceable against the parties thereto in accordance with
its terms, and is in full force and effect on the date hereof. The Company has
performed all obligations required to be performed to date under, is not in
default in respect of, any Commitment, and no event has occurred which, with due
notice or lapse of time or both, would constitute such a default. Except as
disclosed on SCHEDULE 3(C) hereto no consent of or notice to third parties is
required relating to any Commitment as a consequence of this Agreement or the
Registration Rights Agreement or the transactions contemplated hereby or
thereby. To the knowledge of the Company, no other party to any Commitment is in
default in respect thereof, and no event has occurred which, with due notice or
lapse of time or both, would constitute such a default. The Company is not a
party to or otherwise bound by an Commitments limiting or restraining it from
engaging or competing in any lines of business or with any person or entity.
(r) CHANGES. Since September 30, 2000, there has not been: (1)
any material adverse effect to the assets, properties, financial condition,
operating results or business of the Company (a "Material Adverse Effect"); (2)
any damage, destruction or loss, whether or not covered by insurance, resulting
in a Material Adverse Effect; (3) any waiver by the Company of a valuable right
or of a material debt owed to it; (4) any satisfaction or discharge of any lien,
claim or
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encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and in an amount that is not material to the assets,
properties, financial condition, operating results or business of the Company
(as such business is conducted); (5) any material change or amendment to a
material contract or arrangement by which the Company or any of its assets or
properties is bound or subject; (6) any sale, assignment or transfer of any
Intellectual Property or other intangible assets (other than in the ordinary
course of business); (7) receipt of notice that there has been a loss of, or
material delivery or order cancellation by, any supplier or customer of the
Company; (8) any mortgage, pledge, grant of a security interest in, or lien,
created by the Company, with respect to any of its properties or assets, except
liens for taxes not yet due or payable; (9) any loans or guarantees made by the
Company to or for the benefit of its employees, officers, directors,
shareholders, agents or attorneys or any affiliates or members of the immediate
families of any of the foregoing, other than travel advances and other advances
made in the ordinary course of its business; (10) any amendment to the Company's
Articles of Incorporation or Bylaws; (11) any issuance, sale or authorization
for issuance or sale of any of the Company's capital stock (including, without
limitation, by way of stock split or dividend) or any subscription, option,
warrant, right or convertible security, or entrance into any agreement or
commitment of any character obligating the Company to issue or sell any of the
foregoing (other than as contemplated by this Agreement and the Warrant); (12)
any declaration, setting aside for payment or other distribution in respect of
any of the Company's capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of such stock by the Company; (13) any
transaction other than in the ordinary course of business consistent with past
practices; (14) any other event or condition of any character that might
reasonably be expected to result in a Material Adverse Effect; or (15) any
agreement or commitment by the Company to do anything described in this Section
3(t).
(s) PRODUCTS; WARRANTY. The Company has no liability or
obligation and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
it giving rise to any liability or obligation, relating to any product
manufactured, marketed, distributed or sold or services provided by the Company,
or any other damages in connection therewith. Except as set forth in SCHEDULE
3(S) hereto, no product manufactured, marketed, distributed or sold or services
provided by the Company is subject to any guaranty, warranty or other indemnity.
True and correct copies of the standard terms and conditions of sale, including
any discounts or other concessions provided to customers, utilized by the
Company (containing applicable guaranty, warranty and indemnity provisions) have
been previously delivered to the Investor. Information contained in any products
provided or services made available to the Company's customers accurately
reflect in all material respects the information which it is represented to
contain.
(t) INSURANCE. The Company has in effect insurance coverage
with reputable insurers, which, in respect to amounts, types and risks insured,
is adequate for the business in which the Company is engaged, its assets,
operations and personnel. The insurance policies owned or held by the Company
are sufficient for compliance with all requirements of law, rule and regulation
and of all Commitments (as hereinafter defined). The Company has never been
refused any insurance with respect to its business or any of its assets,
operations or personnel, nor has any coverage been
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limited in any material respect by any insurance carrier to which the Company
has applied for any insurance or with which it has carried insurance since its
incorporation. SCHEDULE 3(T) hereto lists (a) each insurance policy and bond
maintained by the Company or under which any of its business, assets, products,
operations or personnel are insured and (b) areas pertaining to the business,
assets, operations or personnel of the Company with respect to which the Company
is self-insured.
(u) TAX RETURNS AND PAYMENTS. The Company has timely filed all
tax returns and reports as required by law, rule or regulation. These returns
and reports are true and correct in all material respects. The Company has
timely paid all taxes and other assessments shown thereon to be due, except
those contested by them in good faith that are listed in SCHEDULE 3(U) hereto.
The provision for taxes of the Company as shown in the Balance Sheet is adequate
for taxes due or accrued as of the date thereof.
(v) LABOR AGREEMENTS AND ACTIONS. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees of the Company. There
is no strike or other labor dispute involving the Company pending, or to the
knowledge of the Company threatened, which could reasonably be expected to
result in a Company Material Adverse Effect, nor is the Company aware of any
labor organization activity involving the Company's employees. The Company is
not aware that any of the Company's officers or key employees, or that any group
of key employees, intends to terminate their employment with the Company, nor
does the Company have a present intention to terminate the employment of any of
the foregoing.
(w) EMPLOYEE BENEFIT PLANS. Except as set forth in SCHEDULE
3(W) hereto, the Company does not have any Employee Benefit Plan as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company is in
compliance in all material respects with the requirements of ERISA with respect
to such plans.
(x) MAJOR CUSTOMERS AND SUPPLIERS. Except as set forth on
SCHEDULE 3(X) hereto, no single customer or supplier of the Company accounts for
more than five percent (5%) of the Company's revenues or shipments, products or
inventories, as the case may be. No customer or supplier of the Company which
accounts for more than five percent (5%) of the Company's revenues or shipments,
products or inventories, as the case may be, has (1) canceled, suspended or
otherwise terminated its relationship with the Company or (2) advised the
Company of its intention to cancel, suspend or terminate its relationship or to
significantly decrease its purchases from or shipments to the Company or to
materially and adversely change the terms upon which it purchases or ships or
delivers products or services to or from the Company. To the knowledge of the
Company, none of such persons or entities will cancel, suspend or terminate its
relationship with the Company or substantially decrease its purchases, sales or
volume of business because of the transactions contemplated hereby or otherwise.
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(y) COMPANY DEBT. The Company has no indebtedness for borrowed
money or other forms of indebtedness, other than as set forth on SCHEDULE 3(Y)
hereto. SCHEDULE 3(Y) hereto sets forth a description of such indebtedness,
including the maturity date, interest rate and outstanding balance and accrued
and unpaid interest as of the date hereof. All amounts reflected on SCHEDULE
3(Y) hereto can be repaid in full by the Company prior to stated maturity for
the face amount thereof, together with accrued and unpaid interest thereon, and
without incurring any prepayment penalties, yield maintenance premiums or any
material additional amounts.
(z) ACCOUNTS RECEIVABLE. All accounts receivable, unbilled
invoices and other debts reflected on the Balance Sheet and in the books and
records of the Company since September 30, 2000 as being due to the Company are
valid, bona fide and binding claims arising in the ordinary course of business,
are subject to no setoffs or counterclaims and are current and collectible in
the ordinary course of business at their recorded amounts, subject only to the
reserve for bad debts clearly set forth on the face of the Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing in accordance with past practices.
(aa) NOTICE TO QUOTATION SYSTEM. No consent, approval or
authorization of, or filing with, any securities exchange or quotation system or
any other similar entity or organization, is required to be made by the Company
in connection with the execution, delivery or performance of this Agreement and
the Registration Rights Agreement by the Company or the consummation by the
Company of the transactions contemplated hereby or thereby, and, except as
contemplated by Section 6 hereof, no consent or vote of the shareholders of the
Company is required in connection herewith or therewith.
(bb) BROKERS. No financial advisor, broker or finder, is
entitled to any broker's, finder's, investment banking or similar fees,
commissions or expenses in connection with this Agreement or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
(cc) OFFERING. Subject in part to the Investor's
representations set forth in Section 4 hereof, the offer, sale and issuance of
the Shares and the Warrant as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf has taken or will take any action that
would cause the loss of such exemption.
(dd) FULL DISCLOSURE. The Company has provided Investor with
all the information that Investor has requested for deciding whether to purchase
the Shares and the Warrant. No representation or warranty of the Company
contained in this Agreement, and none of the statements or information
concerning the Company contained in this Agreement or the Exhibits and the
Schedules hereto, contains or will contain any untrue statement of a material
fact nor will such representations, warranties, covenants or statements taken as
a whole omit a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
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4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In order to induce
the Company to enter into this Agreement, the Investor hereby makes the
representations and warranties set forth below to the Company.
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Investor is a company duly organized and validly existing under the laws of the
Isle of Man. The Investor has all requisite company right, power and authority
to enter into this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby.
(b) AUTHORIZATION. All company action on the part of the
Investor, and its officers, directors and shareholders necessary for (1) the
authorization, execution and delivery by the Investor of this Agreement and the
Registration Rights Agreement, (2) the performance of all obligations of the
Investor hereunder and thereunder and (3) the purchase of the Shares and the
Warrant has been taken. This Agreement and the Registration Rights Agreement
each constitute valid and legally binding obligations of the Investor,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Registration Rights Agreement may be
limited by applicable federal or state securities laws.
(c) ACCREDITED INVESTOR. The Investor is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act.
(d) RESTRICTED SHARES. The Investor understands that neither
the Shares nor the Warrant has been registered under the Securities Act or any
state securities laws. Consequently, neither the Shares nor the Warrant may be
sold, transferred or otherwise disposed of unless subsequently registered under
the Securities Act and applicable state securities laws or an exemption from
such registration is available. The certificate(s) representing the Shares and
the Warrant will bear restrictive legends to such effect.
(e) DISCLOSURE. The Investor has had an opportunity to obtain
information and documents relating to the Company and to ask questions of and
receive answers from representatives of the Company concerning the Company and
the Investor's investment.
(f) PURCHASE FOR INVESTMENT. The Investor is acquiring the
Shares and the Warrant solely for his own account, for investment, and not with
a view to or for the resale, assignment or distribution thereof.
(g) BROKERS. No financial advisor, broker or finder, is
entitled to any broker's, finder's, investment banking or similar fees,
commissions or expenses in connection with this Agreement or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Investor.
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(h) CONTROL. The Investor is not an "interested shareholder"
under Section 607.0901 of the Florida Business Corporation Act (as such term is
defined therein) and is not an "acquiring person or member of a group" owning
"control shares" under Section 607.0902 of the Florida Business Corporation Act
(as such terms are defined therein), in each case, as of the date of this
Agreement and prior to giving effect to the transactions contemplated by this
Agreement.
5. CONDITIONS PRECEDENT TO THE INVESTOR'S OBLIGATIONS. The obligations
of the Investor hereunder are subject to the Company, on or before the Closing,
having satisfied the following conditions:
(a) CERTAIN EMPLOYMENT AGREEMENTS. The Company shall have
executed, and shall have caused each of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇ to have executed, and delivered to the Investor, amendments to each of
the foregoing employee's respective employment agreement with the Company (the
forms of which are attached hereto as EXHIBITS E, F AND G, respectively),
pursuant to which each such employee shall have agreed to a reduction to his
annual base salary as set forth therein and shall further have agreed that such
reduction did not and does not and shall not constitute grounds for the
termination of such employee's employment agreement whether in connection with a
breach, default, event of "good cause" termination as defined therein, event of
"constructive" termination as defined therein or otherwise.
(b) CERTAIN STATE LAWS. The Board of Directors of the Company
shall have exempted the issuance and purchase of the Shares and the Warrant, and
upon the exercise of the Warrant, the issuance of the Warrant Shares, and this
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby from any applicable state "control share" or
"affiliate transaction" laws or similar laws (including Sections 607.0901 and
607.0902 under the Florida Business Corporation Act), and shall have adopted and
approved, and delivered to the Investor, written resolutions explicitly stating
the foregoing.
(c) BOARD OF DIRECTORS. The Board of Directors of the Company
shall have caused the number of directors who comprise the Board of Directors of
the Company to be fixed at five (5) directors and shall have caused the three
(3) vacancies on the Board of Directors of the Company to be filled by the three
(3) designees of the Investor, and shall have adopted and approved, and
delivered to the Investor, written resolutions explicitly stating the foregoing.
(d) EXECUTED DOCUMENTS. The Company shall have executed the
Escrow Agreement, the Warrant and the Registration Rights Agreement
substantially in the forms attached hereto as EXHIBITS B, C AND D, respectively.
(e) CONSENTS. The Company shall have obtained all consents and
approvals required to be obtained in connection with the consummation of the
transactions contemplated hereby, including, without limitation, any consents
required to be obtained in connection with those instruments and agreements
listed on SCHEDULE 3(C) hereto.
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6. INCREASE AUTHORIZED SHARES. The Company shall, as promptly as
practicable after the date hereof, take all necessary and desirable actions to
cause the number of authorized shares of capital stock of the Company to be
increased so as to be sufficient for the reservation of the Warrant Shares and,
upon the exercise of the Warrant, the issuance of the Warrant Shares as
contemplated by the Warrant.
7. REPORTING COMPANY. So long as the Investor beneficially owns any
portion of the Shares, the Warrant or the Warrant Shares, the Company shall use
its best efforts to timely file all reports required to be filed with the SEC
pursuant to the Exchange Act and the Company shall not terminate its status as a
reporting company under the Exchange Act even if such termination is permitted
under the Exchange Act.
8. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Investor from, against and in respect of, the full amount of any and all
liabilities, damages, claims, deficiencies, fines, assessments, losses, taxes,
penalties, interest, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel (collectively, the "Indemnified
Losses") arising from, in connection with, or incident to (a) any breach or
violation of any of the Company's representations, warranties, covenants or
agreements contained in this Agreement and (b) any and all actions, suits,
proceedings, demands, assessments or judgments, costs and expenses incidental to
any of the foregoing. In the Investor's sole discretion, in the event of any
breach or violation of any of the Company's representations or warranties set
forth in Section 3(f) and in lieu of the foregoing cash indemnification, the
Company shall issue and deliver to the Investor certificates representing the
number of shares of Common Stock required to cause the representations and
warranties set forth in Section 3(f) to be true and correct in all respects,
such number of shares to be adjusted for any and all stock splits, stock
dividends, reclassifications, recapitalizations and other like transactions,
whether by merger, consolidation, reorganization or otherwise. The Investor
agrees to indemnify and hold harmless the Company and its directors, officers,
employees and agents from, against and in respect of any and all Indemnified
Losses arising from, in connection with, or incident to (a) any breach or
violation of any of the Investor's representations, warranties, covenants or
agreements contained in this Agreement and (b) any and all actions, suits,
proceedings, demands, assessments or judgments, costs and expenses incidental to
any of the foregoing.
9. MISCELLANEOUS.
(a) NOTICE. Any notice, request, demand or other communication
required or permitted under this Agreement shall be in writing and shall be
delivered personally (against receipt) or sent by certified mail, return receipt
requested, postage prepaid, or sent by facsimile or prepaid overnight courier to
the parties at the names and addresses set forth below (or at such other
addresses as shall be specified by the parties by like notice). If to the
Company, then to: PetMed Express, Inc., ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, M.D., Facsimile No. 954-971-0544. If to the
Investor, then to: Tricon Holdings, LLC, ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: ____________________, Facsimile No. _________________. Such
notices,
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demands, claims and other communications shall be deemed given when actually
received, or (a) in the case of delivery by overnight service with guaranteed
next day delivery, the next day or the day designated for delivery, (b) in the
case of certified U.S. mail, five (5) days after deposit in the U.S. mail, or
(c) in the case of facsimile, the date upon which the transmitting party
received confirmation of receipt by facsimile, telephone or otherwise.
(b) FURTHER ASSURANCES. The parties will, upon reasonable
request, execute and deliver all such further assignments, endorsements and
other documents as may be necessary in order to perfect the purchase by the
Investor of the Shares and the Warrant and to consummate the transactions
contemplated by this Agreement.
(c) ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement, the
Warrant and the Registration Rights Agreement contain the entire agreement among
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings with respect thereto. This Agreement may not
be amended or modified except in a writing signed by both of the parties hereto.
Any waiver of any provision of this Agreement shall be evidenced by a writing
signed by the appropriate party. No waiver by any party of its rights under any
provision of this Agreement shall constitute a waiver of such party's rights
under such provisions at any other time or a waiver of such party's rights under
any other provision of this Agreement. No failure by any party hereto to take
any action against any breach of this Agreement or default by another party
shall constitute a waiver of the former party's right to enforce any provision
of this Agreement or to take action against such breach or default or any
subsequent breach or default by such other party.
(d) ASSIGNMENT, BINDING EFFECT; NO THIRD PARTY BENEFICIARY.
This Agreement shall not be assigned except in a writing signed by both of the
parties hereto. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, successors and permitted assigns;
however, nothing in this Agreement, expressed or implied, is intended to confer
on any other person other than the parties hereto, or their respective heirs,
successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(e) SURVIVAL. All of the representations and warranties of the
parties shall survive the Closing Date. Sections 6, 7, 8 and 9 hereof shall also
survive the Closing Date.
(f) INJUNCTIVE RELIEF. It is possible that remedies at law may
be inadequate and, therefore, the parties shall be entitled to equitable relief
including, without limitation, injunctive relief, specific performance or other
equitable remedies in addition to all other remedies provided hereunder or
available to the parties at law or in equity.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
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(h) GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Florida,
both substantive and remedial.
(i) PREVAILING PARTIES. In any action or proceeding brought to
enforce or interpret any provision of this Agreement, or where any provision
hereof is validly asserted as a defense, the prevailing party shall be entitled
to receive and the nonprevailing party shall pay upon demand reasonable
attorneys' fees and expenses for the prevailing party in addition to any other
remedy.
(j) HEADINGS. The section headings herein are included for
convenience only and are not to be deemed a part of this Agreement.
(k) SEVERABILITY. The provisions of this Agreement are
severable, and in the event that any one or more provisions are deemed illegal,
void or unenforceable, the remaining provisions shall remain in full force and
effect, and such illegal, void or unenforceable provision shall be interpreted
in a manner in which accomplishes, to the extent possible, the original purpose
of such provision.
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IN WITNESS WHEREOF, each party hereto has duly executed this Agreement
as of the date first written above.
THE COMPANY:
PETMED EXPRESS, INC., a Florida
corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇, M.D.
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇, M.D.
Title: Chief Executive Officer
THE INVESTOR:
TRICON HOLDINGS, LLC, a Florida limited
liability company
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Manager
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EXHIBIT A
FORM OF PROMISSORY NOTE
19
EXHIBIT B
FORM OF ESCROW AGREEMENT
20
EXHIBIT C
FORM OF WARRANT
21
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
22
EXHIBIT E
FORM OF AMENDMENT TO ▇▇▇▇ ▇. ▇▇▇▇▇'▇
EMPLOYMENT AGREEMENT
23
EXHIBIT F
FORM OF AMENDMENT TO ▇▇▇▇▇ ▇▇▇▇▇'▇
EMPLOYMENT AGREEMENT
24
EXHIBIT G
FORM OF AMENDMENT TO ▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇
EMPLOYMENT AGREEMENT