U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
PETMEDEXPRESS.COM, INC.
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(Exact name of registrant as specified in its charter)
Florida 65-0680967
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1440 SW 29 Avenue
Pompano Beach, FL 33069
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 979-5995
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Securities to be registered pursuant to 12(b) of the Act: None
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Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.001 par value
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(Title of Class)
<PAGE>
A special note about forward-looking statements
This discussion in this registration statement regarding PetMedExpress
and its business and operations contains "forward-looking statements." These
forward-looking statements use words such as "believes," "intends," "expects,"
"may," "will," "should," "plan," "projected," "contemplates," "anticipates," or
similar statements. These statements are based on PetMedExpress' beliefs, as
well as assumptions it has used based upon information currently available to
it. Because these statements reflect PetMedExpress' current views concerning
future events, these statements involve risks, uncertainties and assumptions.
Actual future results may differ significantly from the results discussed in the
forward-looking statements. A reader, whether investing in PetMedExpress'
securities or not, should not place undue reliance on these forward-looking
statements, which apply only as of the date of this registration statement.
Information Required in Registration Statement
Item 1. Business
PetMedExpress is a leading multi-channel retailer of prescription and
non-prescription pet medications and related pet products. We offer consumers a
significant cost savings and the convenience of purchasing pet products from our
catalogs either through our web site or by calling our toll free telephone
number. We leverage our strong position as a non-veterinarian source of
prescription and non-prescription pet medications to increase our sales of
related pet products.
PetMedExpress was founded in 1996, in part, to provide pet owners with
an alternative source for pet medication. Historically, pet owners have had
limited outlets - veterinarians - from which to purchase prescription and
non-prescription pet medications. The introduction of easy to use, highly
effective heartworm medications and flea and tick products has broadened the
category from pet medications used to treat isolated or specific illnesses. Pet
owners are now also regularly purchasing pet medications such as Advantage(R)
and Frontline(R) for flea and tick control, and Heartgard (R) for protection
against heartworms.
We believe that veterinarians have been able to take advantage of their
monopolies on retail distribution to charge pet owners higher prices for pet
medications. Through the use of television and direct mail marketing, our goal
has been to educate pet owning consumers to the alternative we offer.
While pet medications have typically been a small part of a pet supply
company's total product line, we, unlike our competitors, have used pet
medications as a rapid entry vehicle into the pet supplies market. Historically,
the veterinarian has been the almost exclusive source to a pet owner for pet
medications. We have effectively utilized television advertising and modern
direct marketing techniques to educate pet owners on the savings and convenience
now available from an alternative source such as PetMedExpress.
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The seasonality of our business is due to the sales of flea and tick
products and heartworm medications being relatively stronger in the spring and
summer periods. As we expand our sales of pet accessories and gift items we also
expect to experience proportionally stronger sales of this merchandise in the
Christmas holiday period.
Our common stock is traded on the over the counter market on the OTC
Bulletin Board ("OTCBB") under the symbol "PETS". We are not a "fully reporting
company" as this term relates to the periodic reporting to the Securities and
Exchange Commission ("SEC") on forms 10-K, 10-Q, 8-K, etc., but we intend to
become "fully reporting" upon the clearance of this Form 10 Registration
Statement with the SEC. Our deadline, as imposed by the National Association of
Securities Dealers, Inc. ("NASD"), to become "fully reporting" is March 8, 2000.
If we are unable to meet this deadline our common stock will no longer be traded
on the OTCBB. This would reduce the tradeability of our common stock, and would
probably have a negative impact on its per share price. We can give no
assurances that our Form 10 Registration Statement will be declared effective by
the SEC prior to our March 8, 2000 deadline. If we do miss our NASD deadline for
becoming a "fully reporting company", we cannot predict the ultimate impact on
the trading price of our common stock.
The terms "PetMedExpress," "we," "our," and "us" refer to
PetMedExpress.com, Inc. The information contained on our web site is not part of
this registration statement.
An Overview of Our Industry
The pet products industry is a large and growing market. According to
the Pet Industry Joint Advisory Council, U.S. consumer spending on pet products
and services grew at an annual rate of approximately 9% per year between 1993
and 1997, totaling approximately $23 billion at the end of 1997. Pets have
become an increasingly important part of U.S. households, numbering over 235
million at the end of 1998, based on a survey conducted by Sloan Trends &
Solutions, Inc. Today, more than 60% of U.S. households own a pet, and 40% of
those households own more than one according to a recent American Pet Products
Manufacturers Association study.
Pet owners generally exhibit strong emotional connections to their
animals. For example, according to Sloan Trends & Solutions, Inc., over 80% of
pet owners consider their pets to be members of the family, and 67% buy their
pets holiday gifts. In addition, over 80% of pet owners surveyed by the American
Animal Hospital Association stated that in an emergency they would likely risk
their life for their pet. Because of this strong human-animal bond, we believe
pet owners, like parents, represent an attractive base of consumers who seek a
wide variety of products and information for their pets that promote their pets'
health, well being and happiness. Based upon our internal research, we estimate
that our target customer will spend at least $240 annually, per pet, on pet
medications, health care, and supplies.
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Store-based pet supply retailers have traditionally served the pet
product market in the United States; however, such retailers have not
traditionally sold prescription and non-prescription medications. These
retailers include superstores such as Petco Animal Supplies, Inc. and PetsMart,
Inc., grocery store retailers such as the Kroger Company and Safeway, Inc., mass
market retailers such as Wal Mart Stores, Inc. and Kmart Corporation, and
smaller, independent specialty pet products stores. Likewise, veterinarians have
historically held a monopoly on the distribution of prescription and
non-prescription pet medications.
While in the aggregate these channels provide consumers with a wide
selection of pet related products, and access to prescription and
non-prescription medications, we believe these traditional distribution channels
have the following limitations:
Traditional Pet Product Retailers Do Not Sell Prescription and Non
Prescription Medications. Historically, the only source for pet owners to
purchase prescription and non-prescription pet medications, including flea and
tick control products, has been veterinarians. Pet retailers, such as Petco
Animal Supplies, Inc., PetsMart, Inc. and Pets.com, Inc., do not sell
prescription and non-prescription pet medications. There is virtually no
competition among veterinarians, which results in higher prices to consumers.
Limited Geographic Coverage. The few pet retailers who do tend to offer
a broader selection of products either operate on a regional basis or only in
metropolitan areas. This leaves a significant percentage of the U.S. population
without easy access to all of the products they need for their pets. Opening
additional stores would require substantial investments in real estate and
inventory, as well as in trained personnel, for these chain stores. The high
cost of opening and maintaining additional stores further limits the ability of
retailers to serve geographic areas that are not densely populated.
Lack of One-Stop Shopping for Pet Products. The pet products retail
market is fragmented, generally requiring consumers to shop at multiple outlets
to find everything they need for their pets. For example, superstore retailers,
grocery stores and mass market retailers tend to carry a deep selection of well
known brand name pet products from leading vendors, but have fewer specialty
products. Specialty pet stores instead tend to carry a broader selection of
specialty products from smaller vendors, but usually have a limited selection of
the more well known brand name products. On a combined basis, specialty pet
stores control the largest percentage of sales in the U.S. pet product retail
market, having 20% of U.S. sales based on data published by the Pet Industry
Joint Advisory Council in 1998. This lack of one-stop shopping also applies to
other online retailers who have chosen to duplicate the traditional retail model
in terms of selection and are offering a subset of a superstore product mix.
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As a result of these factors, we believe that consumers typically find
the pet product shopping experience to be both inconvenient and unpleasant.
Shopping for pet products in retail stores can involve making trips to multiple
stores, extended searching for desired products, waiting in line to make a
purchase and carrying home heavy bags of pet food, litter or other bulk
products.
Our Business Strategy
Our objective is to become the world's leading retailer of prescription
and non-prescription pet medications and related pet products. The key
components of our strategy include:
* increasing awareness of the PetMedExpress brand name,
* continuing to increase the awareness of pet owners of the cost
benefits of purchasing prescription and non-prescription pet
medications from us,
* enhancing our customer's shopping experience,
* expansion of e-commerce through the Internet and other
channels,
* expanding our community participation through our Veterinary
Referral Program,
* developing generic, private label alternatives to more
expensive branded medications,
* developing and expanding strategic alliances and partnerships,
* increasing our product selection,
* pursuing international opportunities.
The PetMedExpress Solution
We distinguish ourselves from all other pet retailers, both brick and
mortar and online, by offering a comprehensive selection of brand name pet
products and prescription and non-prescription pet medications, all at
discounted prices. We market and sell our products through the PetMedExpress
catalog, and on the Internet through our web site. We believe that this
multi-channel approach provides us with significant marketing, sales and
operational synergies, and provides our customer with enhanced shopping
flexibility and superior customer service.
Through a combination of our membership program and our 24 hour
veterinary hotline, we offer a single source solution to all the needs of pet
owners.
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Our Product Selection
Our product line, currently geared toward dog and cat owners, provides
customers with a wide variety of selection across the most popular categories as
follows:
Dogs Cats
---- ----
Apparel Beds
Beds Books
Behavior Modification Bowls
Bones Cages & Accessories
Books Calendars
Bowls & Supplies Carriers
Calendars Catnip & Cat Grass
Carriers Collars
Chews Doors & Barriers
Collars Feeders & Waterers
Containment Flea & Pest Control
Doors & Barriers Food
Ears, Paws, etc. Furniture
Feeders & Waterers Grooming
Flea & Pest Control Harnesses
Food Health Care & Remedies
Food Containers Holiday
Grooming I.D. Tags & Belts
Hair Lifters & Rollers Leashes
Harnesses Litter
Health Care & Remedies Litter Box Supplies
Holiday Litter Boxes
Houses & Accessories New Kitten
I.D. Tags Repellents
Leashes Scratchers
New Puppy Stain & Odor
Outdoor Clean-Up Toys
Rawhide Training
Repellents Treats
Safety & First Aid Vitamins & Supplements
Stain Odor
Tie-Outs
Toys
Training
Treats & Biscuits
Videos & CDs
Vitamins & Supplements
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The following table provides a breakdown of the percentage of our total
sales contributed by each category listed during the period indicated:
<TABLE>
<CAPTION>
Six Months
Year Ended March 31, Ended
1997 1998 1999 September 30, 1999
--------------------------------------- ------------------
<S> <C> <C> <C> <C>
Prescription medications 33% 34% 28% 24%
Non-prescription
medications 60% 48% 54% 61%
Health supplements 0% 2% 3% 2%
Accessories 0% 5% 4% 3%
Memberships, shipping
charges and other 7% 11% 11% 10%
</TABLE>
The PetMedExpress Pharmacy
We operate a full-service pharmacy which is licensed by the State of
Florida, and all prescription medications are dispensed by a licensed
pharmacist. We are also licensed to dispense medications in the remaining 49
states. Our pharmacy stocks approximately 250 different prescription
medications, which includes medications most likely to be prescribed by a
veterinarian that can be administered by a pet owner. The most common prescribed
medications sold by us are prepackaged for easy application and administration,
and include heartworm tablets, antibiotics, anti-inflammatory medications and
vaccination kits.
Prescription medications cannot be dispensed without authorization from
a veterinarian, or an authorized agent in the veterinarian's office. When an
order is received, we request the customer either provide us with:
- the original prescription,
- a faxed copy of the original prescription, or
- the name and telephone number of their veterinarian.
In the absence of an original or faxed prescription from the customer,
we receive verbal authorization from the prescribing veterinarian or an
authorized agent in the veterinarian's office before shipping the medication.
There has been resistance from some veterinarians in providing
prescription information to pet owners, and a number of veterinarians have
refused to cooperate in confirming the existence of the prescription when we
contact a veterinarian on the pet owner's behalf. Florida law provides that a
veterinarian license could be in jeopardy for "failing to give the owner of a
patient, before dispensing any drug, a written prescription when requested" and
similar laws exist in other states in which we are licensed to prescribe
medications. As a function of our customer service, our sales personnel, when
necessary, will make the pet owner aware that the prescription is the property
of the pet owner and not the veterinarian.
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Veterinary Referral Program
We are planning to establish a veterinary referral program that will
refer pet owners without a veterinarian to a nearby veterinary clinic. We will
book the appointments and follow up with these clinics to assure that proper pet
health is maintained. We believe this program will enhance our relationships not
only with our customers but the veterinarians as well.
Marketing
We focus our marketing efforts on a combination of television
advertising, direct catalogue mailings, promotions, an Internet presence,
telemarketing and superior customer service to attract and retain our customers.
Television. In October 1997, we began our first televised advertising
campaign -testing different cable channels, commercial lengths and telecast
times. Our television ads typically focus on the savings available to consumers
through purchasing from PetMedExpress. The ads run either 30 or 60 seconds, are
usually purchased on a spot basis, and can run from one to five times in a 24
hour period. We advertise on The Animal Planet, the PreVue Channel and the Food
Network.
The PetMedExpress Catalog. Our PetMedExpress catalog, a full-color
seasonal catalog, is organized by category and generally features approximately
2,000 individual products. The catalog is produced by a combination of our
in-house staff of writers and production artists, and outside contract
professionals. During 1999, we distributed approximately one million catalogs,
including a separate gift and accessory catalog for the Christmas season.
The Internet. We also market our products through our web site at
www.petmedexpress.com which we have maintained since August 1997. PetMedExpress
was one of the early pet product retailers on the Internet. We believe online
retailing presents us with a significant opportunity for the marketing and sale
of our products, and will enable us to expand and diversify our existing
customer base.
The Internet has become an increasingly important medium for
communication, information exchange, and commerce. International Data
Corporation estimated that there would be approximately 196 million online users
worldwide at the end of 1999, and that this number will grow to approximately
399 million users by the end of 2002. Forrester Research estimates that online
purchases made by consumers in the United States will grow from $20 billion in
1999 to $184 billion by 2004, representing a compound annual growth rate of 56%,
and estimates that the total number of U.S. online consumers will grow from
approximately 17 million in 1999 to 49 million in 2004, representing a compound
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annual growth rate of nearly 24%. We believe this increased usage is due to a
number of factors, including a large installed base of home personal computers,
advances in the transmission speeds of personal computers and modems, easier and
less expensive access to the Internet, improvements in network security,
infrastructure and bandwidth, a broader range of online offerings, and growing
consumer awareness of the benefits of online shopping.
While less than 6% of sales are currently made on the Internet, we
believe that our products are particularly well-positioned to be marketed and
sold over the Internet. Our goal is to increase our online retail operations by
leveraging our existing catalog based business, offering a full range of
products online, including prescription and non-prescription pet medications,
and utilizing our established order fulfillment capacity. We anticipate that our
new web site will be launched in February 2000. Our goal is to expand our
Internet operations as follows:
- create and effectively implement an online advertising
strategy,
- establishing additional strategic relationships,
- continuing to enhance the technical capabilities and
presentation of our web site,
- developing value added services for members and visitors to
our site.
PetMedExpress Discount Club. In July 1997, we established the
PetMedExpress Discount Club as a way of making the PetMedExpress shopping
experience easier and more rewarding for our customers. Membership is $19.95
annually or $49.95 for a three year membership. Members are eligible for the
automatic planned replacement program where replacement medications are shipped
at pre-scheduled intervals, as specified by the member. Members are
automatically enrolled in our "Refer-A-Friend" Program where they receive a
$3.00 merchandise credit every time a referred friend or family member places an
order. Members are guaranteed the lowest prices on our products, receiving
discounts of up to 30%, and we will match any competitor's price at the time of
order.
Purchasing and fulfillment
We currently purchase most of our over 2,000 products directly from the
manufacturers, including Nestle USA, Inc., H. J. Heinz Company, Farnam
Companies, Inc. and Aspen Pet Products.
Heartgard(R), Frontline(R) and Advantage(R) are three of our best
selling products, representing in the aggregate approximately 69% of our sales
for the six months ended September 30, 1999. Merial Ltd., a multi-national
pharmaceutical company which manufactures, among other products, Heartgard(R)
heartworm medicine, and Frontline(R), a flea control spray, has refused to sell
Heartgard(R) or Frontline(R) directly to us. Likewise, Bayer Corporation,
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another multi-national pharmaceutical company, has refused to sell us
Advantage(R) flea medication. As a result of these manufacturers refusal to sell
directly to us, we are not an authorized dealer for Heartgard(R), Frontline (R)
or Advantage(R). Although we have been able to obtain a sufficient supply of
these products from wholesalers and distributors, there can be no assurance that
we will not encounter difficulties in the future, particularly in light of our
anticipated growth. In addition, since we do not always have established
relationships with manufacturers, our cost of product may be higher than if we
purchased these products directly from the manufacturer.
We have built an in-house fulfillment and distribution operation which
is used to manage the entire supply chain beginning with the placement of the
order, continuing through order processing, fulfillment and shipment of the
product to the customer. Products are shipped to our customers by United Parcel
Service and Priority Mail. We inventory our products and fulfill all customer
orders from our 50,000 square foot facility in Pompano Beach, Florida.
Our Private Label Medication
Patents for various pet medications have and will continue to expire.
Subject to further market research and funding, we will consider the production
of generic equivalents to be sold under our private label. The development and
production of generic equivalents may require approvals of the product from the
FDA, Department of Agriculture, EPA and other relevant state or federal
authorities.
Customer Service and Our Call Center
We believe that a high level of customer service and support is
critical to retaining and expanding our customer base. Our in-house customer
service team is available via phone from 9:00 am until 10:00 pm, Monday through
Friday, 9:00 AM to 6:00 pm on Saturdays and 9:00 am to 5:00 pm, Sundays, all
Eastern time, and can also be reached by e-mail or fax. This team is central to
our ability to deliver a superior customer experience, and strives to make a
personal connection with each customer.
Competition
The pet products market is intensely competitive and highly fragmented,
with no clear dominant leader in any of our market segments. Our competitors can
be divided into several groups:
* mail order suppliers of pet products, such as Foster-Smith,
Omaha Vaccine, and KV Vet Supplies,
* online stores that specialize in pet products, such as
Pets.com, Inc., Petopia.com, Inc., PetsMart.com, Inc. and
Petstore.com, Inc.,
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* superstore retailers of pet products, such as Petco Animal
Supplies, Inc., PetsMart, Inc.,
* veterinarians,
* speciality pet stores,
* mass market retailers, such as Wal Mart Stores, Kmart
Corporation, and Target Stores, Inc.
We believe that the following are principal competitive factors in our
market:
- brand recognition
- price
- production selection
- quality of Web store content
- reliability and speed of order shipment
- personalized service
- convenience
Many of our current and potential traditional competitors have longer
operating histories, larger customer or user bases, a more established online
presence, greater brand recognition, and significantly greater financial,
marketing and other resources than we do. Many of these current and potential
competitors can devote substantially more resources to web site and systems
development than we can.
We also compete with veterinarians in the sale of prescription and
non-prescription pet medications. Many pet owners are simply unaware of
PetMedExpress and the price savings usually available to them by purchasing pet
medications from us. These same pet owners may prefer the convenience of
purchasing the pet medications at the time of the veterinarian visit, or may be
fearful of offending their veterinarian by not purchasing their pets' medication
from the veterinarian. In order to effectively compete with veterinarians, we
must continue to educate pet owners of the options offered by PetMedExpress.
Government Regulation Which Affects Our Business
Dispensing prescription medicines is governed at the state level by the
Board of Pharmacy. We are subject to regulation by the State of Florida and in
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particular, are licensed by the Florida Department of Business and Professional
Regulation Board of Pharmacy and our license is valid until February 28, 2001.
We are also subject to licensing by 49 other state pharmacy boards and other
regulatory authorities. We are not aware of any facts or circumstances which
would lead us to believe such license will not be renewed by the State of
Florida or the other states in which we are licensed following the current
terms. To the extent that we are unable to maintain our license with the Florida
Board of Pharmacy as a community pharmacy, or if we do not maintain the licenses
granted by other state boards, our distribution of prescription medications to
pet owners could be severely reduced, which would have a material adverse effect
on our operations.
Various complaints were filed with the Florida Board of Pharmacy and
Florida Agency for Health Care Administration against PetMedExpress over the
course of 1997 and 1998. Those complaints, the vast majority of which were filed
by veterinarians who are in competition with us for the sale of pet prescription
products, alleged violations of the Florida Pharmacy Act related to our alleged
failure to verify prescriptions. By Order dated September 20, 1999, the Florida
Board of Pharmacy approved a settlement of (i) all pending complaints and (ii)
all future complaints relating to the alleged failure to verify prescriptions
prior to September 20, 1999, will be deemed administratively resolved. Under the
terms of the settlement, we paid the Florida Board of Pharmacy $7,671 for
expenses and costs and a fine of $32,500.
As of the date of this registration statement, we are also the subject
of additional complaints filed against us in the states of Alabama and
Louisiana.
On October 8, 1999, the Louisiana Board of Pharmacy issued an official
appearance notice summoning PetMedExpress to appear at a Louisiana Board of
Pharmacy Administrative Hearing on November 18, 1999. We are charged with
allegedly dispensing pet medications without obtaining authorization from the
veterinarian or an authorized member of the veterinarian's staff. These charges,
which we contest, were precipitated by a public complaint filed by a
veterinarian. The formal hearing has been continued to an unspecified date. The
Louisiana Board of Pharmacy has offered to settle the charges in exchange for
our consent to a $3,000 fine. We rejected their offer, and we intend to
vigorously defend against the charges.
On October 12, 1999, the Alabama State Board of Pharmacy issued to us a
statement of charges and notice of hearing. The three count statement of charges
alleges that we violated Alabama law by dispensing or refilling pet medications
without the prescription of a licensed practitioner or authorization of the
prescriber. The charges, which we contest, were precipitated by complaints filed
with the Alabama Board of Veterinary Medicine by three veterinarians. The formal
hearing on these charges, previously set for November 17, 1999, has been
continued to an unspecified date. The Alabama Board of Pharmacy has offered to
settle the charges in exchange for imposition of a $1,000 per count fine and
one-year probation and suspension of our pharmacy license in Alabama. We
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rejected the offer. We intend to continue discussions in an effort to reach a
settlement acceptable to us. Should a settlement not be reached, we intend to
vigorously defend against the charges.
Special matters related to development of generic equivalents
In connection with the proposed development of generic equivalents to
medications for which the patent has expired, we will become subject to
regulation by a number of national, state and local agencies. Of particular
importance in the United States is the FDA. It will have jurisdiction over our
business as it relates to generic equivalents, and the FDA will administer
requirements covering the testing, safety, effectiveness, approval,
manufacturing, labeling and marketing of such medication. FDA requirements
and/or reviews may increase the amount of time and money necessary to develop
and bring the product to market.
We will also become subject to the jurisdiction of various other
regulatory and enforcement departments and agencies, such as the Federal Trade
Commission and the Department of Justice in the U.S., and will be, therefore,
subject to possible administrative and legal proceedings and actions by those
organizations. Such actions may include product recalls, seizures and other
civil and criminal sanctions.
It is difficult to predict the future impact of the broad and expanding
legislative and regulatory requirements affecting us.
Intellectual Property
We conduct our business under the trade name "PetMedExpress." We have
taken steps to register and protect this mark, and believe this mark has
significant value, and is important factor in the marketing of our products. We
have also obtained the right to the Internet address www.petmedexpress.com. As
with phone numbers, we do not have and cannot acquire any property rights in an
Internet address. We do not expect to lose the ability to use the Internet
address, however, there can be no assurance in this regard and such loss would
have a material adverse effect on our financial position and results of
operations.
Employees
We currently have 95 full time employees, including:
- 55 in sales and telemarketing,
- four in accounting,
- six in our pharmacy, including two pharmacists,
- 10 warehouse, shipping and operations personnel,
- seven customer service representatives,
- six in information technologies and Internet support,
- two in purchasing,
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- three in marketing and advertising, and
- two members of senior management.
None of our employees are represented by a labor union, and we are not
governed by any collective bargaining agreements. In our opinion, we have a
satisfactory relationship with our employees.
Item 2. Financial Information
This section presents our selected financial data. You should read this
selected financial data along with the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section later in this
registration statement, as well as our financial statements and related notes
also contained later in this registration statement.
<TABLE>
<CAPTION>
Operating Data:
Six Months Ended
Fiscal Year Ended March 31, September 30,
--------------------------- ----------------------
1997 1998 1999 1998 1999
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Sales $602,191 $3,634,275 $10,311,714 $5,371,329 $8,344,961
Gross profit 251,653 1,596,399 4,665,527 2,454,941 3,724,562
Total operating
expenses 476,672 2,598,025 4,270,580 1,960,583 3,589,563
Net Income (loss) (227,517) (980,790) 470,672 568,377 42,981
Net Income (loss) available
to common shareholders (227,517) (980,790) (300,853) (203,148) 42,981
Earnings (loss) per common
share:
Basic $ (0.06) $ (0.22) $ (0.06) $ (0.04) $ 0.01
Diluted $ (0.06) $ (0.22) $ (0.06) $ (0.04) $ 0.00
Weighted average number
of common shares
outstanding:
Basic 4,009,500 4,494,054 5,333,355 4,848,165 6,328,572
Diluted 4,009,500 4,494,054 5,333,355 4,848,165 8,679,226
</TABLE>
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<TABLE>
<CAPTION>
Balance Sheet Data:
March 31, September 30,
--------------------------- -------------------
1997 1998 1999 1998 1999
----- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Current Assets $ 222,105 $1,653,806 $2,671,434 $2,271,353 $3,339,474
Total Assets 343,947 1,966,509 5,644,008 2,657,075 6,750,437
Total Liabilities 109,408 1,365,775 2,704,790 439,321 3,511,240
Working Capital 140,564 342,363 2,022,595 1,924,885 2,100,974
Stockholders' Equity 234,539 600,734 2,939,218 2,217,755 3,239,197
Capital Lease Obligations 43,012 40,362 16,527 - 249,869
Other Long Term Liabilities $ - $ 33,787 $2,049,252 $ 9,550 $2,136,950
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with our financial
statements and related notes contained later in this registration statement. The
discussion contains forward looking statements that are subject to certain
uncertainties, and our actual results of operations may differ materially from
those contained in the forward looking statements.
Overview
We were incorporated in the state of Florida in January 1996. From
inception until approximately August 1996 our operations consisted mostly of
start-up activities such as the development and refinement of a business plan
and internal procedures and obtaining the necessary licenses and permits to
dispense prescription medications in all 50 states. In the fall of 1997 we
issued our first catalog which displayed approximately 1,200 items which were
prescription and non-prescription pet medications, as well as pet accessories
and health supplements. We have now expanded our product line to approximately
2,000 of the most popular pet items and have continually refined our catalog and
catalog marketing techniques. We also market our products on our web site. While
less than 6% of our sales are currently made on the Internet, we believe our
products are well-positioned to be marketed and sold online. Our new web site,
which we believe will enable us to increase our online sales, is expected to be
launched in February 2000.
Since October 1997, we have consistently advertised our products on
national cable TV channels such as the Animal Planet and the PreVue Channel.
Results of Operations
Years Ended March 31, 1999 (fiscal 99), March 31, 1998 (fiscal 98) and March 31,
1997 (fiscal 97)
Sales
In fiscal 97 we were in operation approximately six months, and
generated $602,191 in sales of prescription and non-prescription pet
14
<PAGE>
medications. This was followed by sales of $3,634,275 in fiscal 98, our first
full year of operation, which consisted of pet accessories as well as pet
medications. Sales in fiscal 99 were $10,311,714 and again consisted of pet
accessories as well as pet medications. The increase in sales was internally
generated and we believe the increase in sales is attributable to advertising
and marketing campaigns as well as reorders from new and existing customers.
Gross Profit
Gross profit represents the difference between the sale price of an
item and its weighted average cost. Our gross margin as a percentage of sales in
fiscal 97, 98 and 99 was 42%, 44% and 45%, respectively, reflecting the impact
of volume purchasing on our product acquisition costs as our sales increased.
Operating Expenses
Operating expenses, consisting primarily of payroll, advertising
and occupancy expenses, were $476,672, $2,598,025 and $4,270,580 for fiscal 97,
98 and 99, respectively. These increases from year to year were primarily due to
increases in sales and support staff, and increased expenditures for advertising
and marketing.
Operating expenses, consisting primarily of payroll, advertising and
occupancy costs, as a percentage of sales were 79%, 71% and 41% for years 97, 98
and 99, respectively. The decline in operating expenses as a percentage of sales
is the result of the absorption of startup costs in fiscal 97 and 98, and the
effects of economies of scale as sales increased. We intend to continue to
devote significant dollars to advertising.
Income Taxes
We have had a cumulative net loss for the three year period that we
have been in business so we have not recorded any accruals for income taxes for
these periods. Also, we provided a valuation allowance against most of the
deferred income tax assets resulting from the underlying net operating loss
carryforwards.
Net Income (Loss)
We had net losses of $227,517 and $980,790 for fiscal 97 and 98,
respectively. For fiscal 99, we had net income of $470,672. Due to the $771,525
accretion for a beneficial conversion feature on preferred stock, there was a
net loss available to common stockholders of $300,853 for that year. The
accretion for beneficial conversion feature represents a non-recurring non-cash
charge that resulted from the issuance of Convertible Preferred Stock with a
common stock conversion price that was lower than our common stock market price
on the date of issuance.
15
<PAGE>
Six Months Ended September 30, 1999 and 1998
Sales
Sales increased to $8,344,961 for the six months ended September 30,
1999, which represents a 55% increase over sales of $5,371,329 for the six
months ended September 30, 1998. This increase is primarily the result of our
ability to recruit new customers through advertising, and to obtain reorders
from existing customers.
Gross Profit
Gross profit as a percentage of sales was 46% and 45% for the six
months ended September 30, 1998 and 1999, respectively. The slight decrease in
gross profit as a percentage of sales is the result of the increase in sales of
non-medication pet products as a percentage of total sales.
Operating Expenses
Operating expenses were $1,960,583 and $3,589,563 for the six month
periods ended September 30, 1998 and 1999, respectively. The $1,628,980 or 83%
increase is due to higher occupancy costs, including depreciation resulting from
our move to larger owned facilities in May 1999, and increases in advertising
and sales and support staff to enable us to sustain our sales growth. Operating
expenses as a percentage of sales were 37% and 43% for the six month periods
ended September 30, 1998 and 1999, respectively. Operating expenses increased
for the period ended September 30, 1999 as a result of a planned expansion of
PetMedExpress' infrastructure and employee base to support its growth strategy.
While there has been an increase in operating expenses for the six month period
ended September 30, 1999, we anticipate that the increase in operating expenses
as a percentage of sales should decline as sales increase.
Income Taxes
There was no income tax accrual for the six month period ended
September 30, 1998 due to the utilization of prior net operating losses to
offset taxable income for the period. For the six month period ended September
30, 1999, no tax provision was recorded since PetMedExpress anticipates no tax
expense will be incurred during fiscal 2000.
Net Income (Loss)
We had net income of $568,377 for the six months ended September 30,
1998. However, after reflecting a one-time non-cash charge of $771,525 for the
accretion for beneficial conversion feature of preferred stock in the period,
16
<PAGE>
a loss of $203,148 was available to common stockholders. For the six months
ended September 30, 1999, net income was $42,981.
Liquidity and Capital Resources
We have primarily funded our operations through the private placement of
securities. In May 1997, we raised $462,057 of net proceeds through a private
placement of common stock. In April 1998, we raised an additional $887,813 of
net proceeds from the private placement of 250,000 shares of Convertible
Preferred Stock, and in February 1999 we raised $819,167 of net proceeds from
the sale of 330,333 shares of common stock. We have financed major equipment
acquisitions with capital leases, and as of September 30, 1999, we had
outstanding lease commitments of $249,869. The acquisition of a 50,000 square
foot building in which all of our offices and operations reside was initially
financed with an unsecured loan from the father of our president and CEO in
February 1999, and was subsequently refinanced with a seven year mortgage from a
commercial bank at 7.75%. In September 1999, we obtained a working capital line
of credit from a commercial bank in the amount of 40% of our inventory value up
to $1,000,000. The line is secured by our inventory and interest is at the
bank's base lending rate plus 1%. As of September 30, 1999, we had not utilized
any of the working capital line of credit.
Our sales are primarily paid for by credit cards for which we usually
receive cash settlement in two to three banking days. This minimizes our
accounts receivables balances relative to sales levels.
We have been exploring opportunities to secure additional funding to
enable us to support our growth strategy. However, we do not have any firm
commitments for additional funding. There can be no assurances that additional
funding will be available to us, or that any such funding would be available at
terms satisfactory to us. We believe that we can continue to meet our financial
obligations and to sustain revenue growth utilizing cash generated from
operations and proceeds from equipment leases and from our working capital line
of credit for at least the next twelve months.
Seasonality
Sales are seasonal since certain flea, tick and heartworm medications
are sold in greater quantities during the spring and summer months in the
northern United States.
Year 2000 Compliance
We were aware of the issues associated with the programming code in
existing computer systems as the year 2000 approached. We reviewed all software
and hardware used internally by us in all support systems to determine whether
they were Year 2000 compliant. Our software had already been upgraded by the
manufacturer, or was recently purchased and was Year 2000 compliant. We also
17
<PAGE>
installed the suppliers' Year 2000 upgrades to our accounting systems. The only
outside vendor upon which we relied, other than utility companies and similar
businesses, was the company which provides us with access to the Internet. This
company had previously informed us that its system was Year 2000 compliant.
Since January 1, 2000 we have experienced no disruptions in our systems or those
of third parties, or other computer related problems as a result of processing
dates beyond 1999. However, we cannot say with any certainty that we will not
experience any Year 2000 problems in the future.
The costs to us to in identifying and evaluating Year 2000 compliant
issues were not material. Most of our expenses have related to the upgrades or
replacements, when necessary, of software or hardware, as well as costs
associated with time spent by our employees in the evaluation process and Year
2000 compliance matters generally. These expenses were not material to our
financial position or results of operations.
Item 3. Properties
All of our facilities, and our principal executive offices, are housed
in a 50,000 square foot building located in Pompano Beach, Florida which we own.
The building was purchased in February 1999, and carries a seven year 7.75%
mortgage with a commercial bank in the original principal amount of
$1,680,000. At November 30, 1999, the principal amount due under this mortgage
was $1,649,791. The payments are based on a 20-year amortization of the
principal, with a seven year balloon payment due in May 2006. The one story
building sits on approximately 4.37 acres located in an office and industrial
park near Interstate 95, a major north/south corridor in Florida. We believe
that current zoning for this location would allow for a 20,000 square foot
expansion of this building, if required.
Item 4. Security Ownership of Certain Beneficial Owners and Management
On December 31, 1999 there were 6,369,822 shares of our common stock issued and
6,250 shares of our Convertible Preferred Stock issued and outstanding. Each
share of Convertible Preferred Stock is convertible at the holder's option into
4.05 shares of our common stock. The following table sets forth as of December
31, 1999 information as to the common stock ownership of:
- each of our directors, executive officers,
- all executive offices and directors as a group, and
- all persons known by us who beneficially own more than 5%
of our common stock.
The following table also assumes the conversion of all 6,250 shares of our
Convertible Preferred Stock into 25,313 shares of our common stock. Unless
otherwise indicated, each person's address is 1441 SW 29 Avenue, Pompano Beach,
Florida 33069.
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<PAGE>
<TABLE>
<CAPTION>
Name of Amount and Nature Percentage
Beneficial Owner of Beneficial Ownership of Class
---------------- ----------------------- --------
<S> <C> <C>
Marc Puleo, M.D. 2,936,250 37.6%
Christopher Lloyd 1,555,250 24.2%
Gian Fulgoni 25,000 *
Edward Bottum 0 n/a
William Weaver 0 n/a
George Garrick 0 n/a
Lynda Reitzenstein 375,000 5.9%
Marpul Trust 1,496,250 23.5%
Double Diamond
Trading, Inc. 1,796,250 27.0%
All executive officers
and directors as a
group (six persons) 4,516,500 57.5%
</TABLE>
- ---------------
* less than 1%
In the preceding table:
- Marpul Trust is a trust established by Dr. Puleo under an
agreement dated September 3,1999, in which 1,496,250 shares of our common stock
owned by him were deposited, and of which he is the beneficiary. Mr. Christopher
Lloyd, one of our officers and directors, and Southpac Trust International, Inc.
are trustees.
- Dr. Puleo's holdings include:
- options held by him to purchase 300,000 shares of
common stock at $.163 per share until May 2002,
- options held by him to purchase 240,000 shares at
$1.00 per share until May 2002,
- options held by him to purchase 600,000 shares at
$1.25 per share until May 2003,
- 1,496,250 shares owned by Double Diamond Trading
Inc. over which Dr. Puleo holds voting control until
December 29, 2001, subject to a two year extension
upon the mutual consent of the parties, under a
voting proxy granted him on December 29, 1999, and
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<PAGE>
- options held by Double Diamond Trading to purchase
300,000 shares at $.367 per share until May 2002. The
stock underlying these options are included in the
voting proxy held by Dr. Puleo.
- The amount beneficially owned by Dr. Puleo excludes options to
purchase an additional 300,000 shares of our common stock at $1.25 per share
which may be earned by him under the terms of his employment agreement.
- The amount over which Mr. Lloyd has voting control includes 1,496,250
shares owned by Marpul trust of which Mr. Lloyd has shared voting power. Mr.
Lloyd's holdings exclude options to purchase a total of 270,000 shares of common
stock at prices ranging from $4.50 to $7.00 per share which have not yet vested,
as well as options to purchase 50,000 shares of our common stock at $3.50 which
have not yet vested.
- Mr. Fulgoni's holdings exclude options to purchase 60,000
shares of our common stock at $6.125 per share which have not yet vested.
- Mr. Bottum's holdings exclude options to purchase 60,000
shares of our common stock at $6.125 per share which have not yet vested.
- Mr. Weaver's holdings exclude options to purchase 60,000
shares of our common stock at $6.125 per share which have not yet vested.
- Mr. Garrick's holdings exclude options to purchase 60,000
shares of our common stock at $4.00 per share which have not yet vested.
- Ms. Reitzenstein's address is 5560 NE 33 Avenue, Fort
Lauderdale, FL 33308.
- Double Diamond Trading's holdings include options to purchase
300,000 shares of our common stock at $.367 per share until May 2002. The shares
of our common stock owned by Double Diamond Trading which are currently
outstanding, together with the shares which are issuable upon the exercise of
these options are included in the voting proxy held by Dr. Puleo. Mr. Ami
Weitzman is the sole officer, director and shareholder of Double Diamond
Trading, Inc. and its address is c/o Citco BVI Ltd., Post Office Box 662,
Roadtown, Tortola, BWI.
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<PAGE>
Item 5. Directors and Executive Officers
Directors and Executive Officers
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Positions Held
- ---- --- --------------
<S> <C> <C>
Marc Puleo, M.D. 35 Director, President, Chief Executive Officer,
Treasurer, Secretary and Director
Christopher Lloyd 33 Director and Chief Operating Officer
Gian Fulgoni 51 Director
Edward Bottum 65 Director
William Weaver 64 Director
George Garrick 46 Director
</TABLE>
Marc Puleo, M.D. has served as our president, chief executive officer,
treasurer, secretary and a member of our board of directors since our inception
in January 1996. Dr. Puleo is also the president of South Florida Anesthesia
Professionals, Fort Lauderdale, Florida since founding the company in January
1996. From June 1997 until June 1998, Dr. Puleo was vice president of Dynamic
Press, Inc., an offset printing and direct marketing company. Dr. Puleo, an
anesthesiologist, was employed with Anesthesia Professional Association, North
Ridge Medical Center and North Ridge Outpatient Surgery Center from December
1994 through December 1995. From July 1991 through June 1994, Dr. Puleo was an
anesthesia resident with the University of Illinois Hospitals and Clinics, the
Michael Reese Hospital, the Westside Veteran's Administration Hospital, the
University of Illinois Eye and Ear Infirmary, the Nathan Cummings Surgicenter,
and the University of Illinois Pain Clinic, Chicago, Illinois. Dr. Puleo
received his medical degree from the University of Illinois College of Medicine,
Chicago, Illinois in June 1990.
Christopher Lloyd has served on our board of directors since February 1998 and
as our chief operating officer since June 1999. From 1990 until joining
PetMedExpress, Mr. Lloyd was employed by Advocate Ravenswood Hospital Medical
Center, Chicago, Illinois, in a variety of senior management positions, serving
from 1996 until May 1999 as president of Ravenswood Health Enterprises and vice
president of Ravenswood Health Care Corporation where he was responsible for all
for-profit subsidiaries in an integrated hospital/ambulatory care network.
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<PAGE>
During 1988 and 1989, Mr. Lloyd was employed by St. Francis Hospital of
Evanston, Evanston, Illinois in the positions of both Administrative Fellow and
Assistant Administrator. Mr. Lloyd received a B.S. in Biology in 1986 and a M.S.
in Hospital and Healthcare Administration in 1988 from St. Louis University.
Gian Fulgoni has been a member of our board of directors since August 1999.
Since November 1998, Mr. Fulgoni has been CEO of Lancaster Enterprises, LLC, an
investment firm which develops information technology to increase target
marketing in both the traditional and e-commerce sectors. From 1986 until
November 1998, Mr. Fulgoni was CEO of Information Resources, Inc. (Nasdaq
National Market: IRIC), a market research company which pioneered the use of
scanning data in the consumer package goods industry. Mr. Fulgoni continues to
serve on Information Resource's board of directors, a position he has held since
1981. Mr. Fulgoni has been a member of the board of directors of Platinum
Technology, Inc., a software company, since 1990, and a member of the board of
directors of Yesmail.com, Inc., a leading provider of comprehensive permission
mail direct marketing solutions, since March 1999.
Edward Bottum has been a member of our board of directors since August 1999. Mr.
Bottum is the retired vice chairman of Continental Bank Corporation (1959 to
1990). Since April 1990 he has been the managing director of Chase Franklin
Corporation, a merchant bank. Mr. Bottum also serves in a number of other
positions, including as a member of the board of directors of Kellwood Co.
(NYSE: KWD), a manufacturer and marketer of apparel and related soft goods,
since 1981; trustee of The Time Horizon Funds, a mutual fund family, since July
1995; the chairman of Learning Insights, Inc., a publisher of interactive
multimedia training products, since February 1996; trustee of Pacific
Innovations Trust, a mutual fund for variable annuities, since December 1996;
trustee of Underwriters Laboratories, Inc., a product safety certification
company, since May 1997; a member of the board of directors of CNA Income
Shares, Inc. (NYSE: CNN), a closed end fixed income fund, since April 1999; and
a member of the board of directors of Alleghany Asset Management, Inc., an asset
manager, since April 1999.
William Weaver has been a member of our board of directors since August 1999.
Mr. Weaver is a senior partner of the Chicago based law firm Sachnoff & Weaver,
Ltd., and manages the corporate securities section of the firm. Mr. Weaver
joined Sachnoff & Weaver, Ltd. in 1963. Mr. Weaver has been a member of the
board of directors of USFreightways Corporation (Nasdaq National Market: USFC),
a leading provider of transportation services and innovative logistics
solutions, since 1994, and a member of the board of directors of System Software
Associates, Inc. (Nasdaq National Market: SSAX), a leading provider of
cost-effective business enterprise solutions to the industrial sector worldwide,
since December 1986. Mr. Weaver also serves on the boards of directors of
several privately-held corporations.
George Garrick has been a member of our board of directors since October 1999.
Since May 1998 Mr. Garrick has been the chairman, CEO and president of Flycast
Communications Corp. (Nasdaq National Market: FCST), a leading provider of
web-based direct response advertising solutions to advertisers. Prior to joining
22
<PAGE>
Flycast, from September 1997 until May 1998, Mr. Garrick owned and operated his
own private venture and consulting company, G2 Ventures, Inc. From April 1997
until September 1997, Mr. Garrick served as Chief Marketing Officer for
PowerAgent, Inc., an Internet media and marketing company. From March 1996 until
April 1997, Mr. Garrick founded and operated NetROI LLC, an audience measurement
software company. From November 1993 until March 1996, Mr. Garrick served as the
President and Chief Executive Officer of Information Resources, Inc.-North
America, a marketing measurement company. Other than the period from July
through October 1993, when Mr. Garrick served as President and Chief Executive
Officer of Nielsen Marketing Research U.S.A., a unit of A.C. Nielsen Co., Mr.
Garrick served Information Resources, Inc., a market measurement company, in
various capacities from 1981 until his departure in March 1996. Mr. Garrick
holds B.S. degrees in Mathematics and Engineering and an M.S. degree in
Management from Purdue University.
There is no family relationship between any of the executive officers
and directors. Each director is elected at our annual meeting of shareholders
and holds office until the next annual meeting of shareholders, or until his
successor is elected and qualified. The bylaws permit the board of directors to
fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Officers are
elected annually by the board of directors and their terms of office are at the
discretion of the board. Our officers devote full time to our business.
Committees of the board of directors
In October 1999 we established an Audit Committee of our board of
directors. The Audit Committee's duties include the following, in addition to
such other duties as may be established from time to time by the board of
directors:
- the recommendation to the entire board of directors of the
firm to be employed as our independent public accountants,
- review the scope of the audit and audit fees,
- consulting with the independent auditors with regard to the
plan of audit, the audit report and the management letter, and
- conferring with the independent auditors with regard to the
adequacy of internal accounting controls, as appropriate, out
of the presence of management.
Messrs. Fulgoni, Bottum and Weaver are the members of the Audit
Committee.
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<PAGE>
A Technology Advisory Panel formed in April 1999 to provide advice to
our board on the implementation of our online strategies, and to assist us in
establishing strategic alliances was discontinued with the expansion of our
Board of Directors.
Item 6. Executive Compensation
Summary Compensation Table
The following table provides a summary of cash and non-cash
compensation for each of the last three fiscal years ended March 31, 1999, 1998
and 1997 with respect to our following officers:
<TABLE>
<CAPTION>
Long - Term
Annual Compensation Compensation Awards
-------------------------------------------- Options
Name and Other Annual Number of All Other
Principal Position Year Salary Bonus Compensation Shares Compensation
- ------------------ ---- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marc Puleo 1999 - - - 600,000 -
1998 - - - 540,000 $251,000(a)
1997 - - - - -
</TABLE>
(a) represents the calculated value of the difference between the exercise price
and the market value on date of grant of options to purchase 300,000 shares
Option grants in last fiscal year
The following table sets forth certain information with respect to
stock options granted in fiscal 1999 to the named executive officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN YEAR ENDED MARCH 31, 1999
Individual Grants
----------------------------------------
No. of Securities % of Total Options
Underlying Granted to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date
- ---- --------------- -------------- ----- ----
<S> <C> <C> <C> <C>
Marc A. Puleo, M.D. 600,000 30.2% $1.25 May 2003
President, Chief
Executive Officer,
Director
</TABLE>
Year end option table
During the fiscal year ended March 31, 1999 none of the named executive
officers exercised any options issued by PetMedExpress. The following table sets
forth information regarding stock options held as of March 31, 1999 by the named
executive officers.
24
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN YEAR ENDED MARCH 31, 1999
AND YEAR-END OPTION VALUES
No. of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money options at
Acquired on Value March 31, 1999 March 31, 1999
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marc A. Puleo, - - 1,140,000 600,000 $5,943,500 $2,925,000
President, CEO
</TABLE>
Employment Agreements
In May 1998, we entered into a two year employment agreement with Dr.
Puleo to serve as its President and chief executive officer. Under the terms of
the employment agreement:
* Dr. Puleo received options to acquire an aggregate of 600,000
shares of our common stock, exercisable until May 2003 at $1.25 per share, as
compensation for his services to us during this period,
* On the earlier of March 31, 2003 or the fiscal year in which
we report sales of at least $20,000,000 or income from operations of at least
$2,000,000 for any fiscal year on or before the fiscal year ending March 31,
2001, Dr. Puleo will receive a performance based bonus of five year options to
purchase up to an additional 600,000 shares of our common stock at $1.25 per
share,
* Dr. Puleo can participate in any profit-sharing or retirement
plan and in other employee benefits applicable to our employees and executives,
* We can terminate the employment of Dr. Puleo either with or
without good cause. If we terminate Dr. Puleo without cause, we are obligated to
grant Dr. Puleo the performance-based options provided we should thereafter meet
the stated criteria within the fiscal year in which Dr. Puleo was terminated. To
the extent that Dr. Puleo's employment is terminated for cause, no severance
benefits shall be paid.
The employment agreement contains customary non-disclosure provisions,
as well as an 18 month non-compete following the termination of the agreement.
In June 1999, we entered into a five year employment agreement with
Christopher Lloyd, our chief operating officer. Under the terms of the
employment agreement:
* Mr. Lloyd receives an annual salary of $80,000, subject to
increase upon an annual review by our board of directors,
25
<PAGE>
* Mr. Lloyd was granted options to acquire an aggregate of
300,000 shares of our common stock, at $7.00 per share, which vest at the rate
of 50,000 options on date of grant and on each anniversary date of the
employment agreement. These options are exercisable for five years from the date
they vest,
* Mr. Lloyd was granted options to acquire an aggregate of
50,000 shares of our common stock, at $3.25 per share which vest at the rate of
25,000 shares in November 1999, and 25,000 shares in January 2000, and are
exercisable for five years from the date they vest.
* Mr. Lloyd can participate in any profit-sharing or retirement
plan and in other employee benefits applicable to our employees and executives,
* We can terminate the employment of Mr. Lloyd either upon
mutual consent or for cause. If we should terminate Mr. Lloyd, no severance
benefits shall be paid. Mr. Lloyd is also entitled to terminate the employment
agreement for "good reason." The employment agreement provides that "good
reason" includes if we should:
- remove Mr. Lloyd from, or fail to re-elect him to,
the office of chief operating officer without his
prior written consent,
- reduce his salary or materially fail to comply with
Compensation and Benefits section of the agreement,
or
- require Mr. Lloyd to be based at any office or
locations other than those located in Broward County,
Florida.
In the event of termination with good reason, Mr. Lloyd is
entitled to the balance of his salary, options and benefits under the employment
agreement.
* In the event Mr. Lloyd is terminated or a sale occurs of all
or substantially all of our assets or a merger, stock exchange or other form of
business combination occurs, the result of which being that our shareholders
immediately preceding this transaction will own, after the transaction, less
than 51% of our then issued and outstanding voting securities, on the effective
date of either the sale or the business combination all options granted to Mr.
Lloyd which have not yet vested will immediately vest and become exercisable.
* The employment agreement contains customary non-disclosure
provisions, as well as an 18 month non-compete following the termination of the
agreement.
Directors Compensation
We have adopted a compensation policy for our outside directors, which
includes:
26
<PAGE>
* options are granted upon appointment under our 1998 Stock
Option Plan to purchase 60,000 shares of our common stock,
exercisable at the fair market value on the date of grant, to
each outside director. These options vest at the rate of
15,000 options on the first, second, third and fourth annual
anniversary date of the date of grant, provided:
- that the individual remains a member of our Board of
Directors on the respective vesting date, and
- that the individual has attended (in person or by
telephonic conference call if the meeting is held via
such means) at least 75% of the meetings of the Board
of Directors during the 12 calendar months
immediately preceding the respective vesting date.
* the options also provide that in the event of a sale of all or
substantially all of our assets, or a merger, stock exchange
or other form of business combination, the result of which
being that our shareholders immediately preceding such
transaction will own, after the consummation of such business
combination, less that 51% of our than issued and outstanding
voting securities, then, in such event, on the effective date
of either the sale of all or substantially all of our assets
or a business combination, all options not previously vested
will immediately vest and become exercisable.
* directors and officers insurance coverage in an amount
reasonably acceptable to us, and
* reimbursement for all reasonable out-of-pocket expenses the
outside director incurs in attending our board of directors
meetings.
Messrs. Fulgoni, Bottum, Weaver and Garrick are currently our outside
directors. In July 1999, when they joined our board, we granted each of Messrs.
Fulgoni, Bottum and Weaver 60,000 options, exercisable at $6.125 per share, as
compensation for their board service. In September 1999, upon joining our board,
we granted Mr. Garrick 60,000 options, exercisable at $4.00 per share, as
compensation for his board service.
Members of our board of directors who are our executive officers do not
receive any additional compensation for their services to us in their capacity
as a member of our board of directors, other than coverage under our directors
and officers insurance policy.
1998 Stock Option Plan
The 1998 Stock Option Plan allows us to grant up to 3,000,000 options
to key employees, including officers, and to non-employee directors and
consultants. These options are intended to qualify either as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code, or as
nonstatutory stock options, which are options that are not intended to meet the
requirements of that section of the Internal Revenue Code.
27
<PAGE>
The plan is administered by our board of directors. Under the plan, our
board of directors has the authority to determine:
- the persons to whom options will be granted,
- the number of shares to be covered by each option,
- whether the options granted are intended to be incentive stock
options,
- the manner of exercise, and
- the time, manner and form of payment upon exercise of an
option.
Incentive stock options granted under the plan may not be granted at a
price less than the fair market value of our common stock on the date of grant
(or less than 110% of the fair market value in the case of employees holding 10%
or more of our voting stock). Nonstatutory options may be granted at an exercise
price established by our board of directors, but cannot be less than par value
per share ($.001) of our common stock. Incentive stock options granted under the
plan must expire not more than 10 years from the date of grant, and not more
than five years from the date of grant in the case of incentive options granted
to an employee who holds 10% or more of our voting stock.
As of November 30, 1999 options to purchase 2,319,400 shares of our
common stock, at exercise prices ranging from $1.25 to $7.00 per share, were
outstanding under our 1998 Stock Option Plan.
Item 7. Certain Relationships and Related Transactions
In May 1997, Dr. Puleo was granted options to purchase 300,000 shares
of our common stock exercisable at $.163 per share until May 2002. Such options
were granted as additional consideration for the initial working capital of
approximately $110,000 provided to us by Dr. Puleo.
In May 1997, we also granted options to Double Diamond Trading, Ltd., a
principal shareholder, to purchase 300,000 shares of our common stock at $.367
per share exercisable until May 2002. Such options were granted as additional
consideration for initial working capital of approximately $90,000 provided to
us by Double Diamond Trading, Ltd. Mr. Ami Weitzman is the sole officer,
director and shareholder of Double Diamond Trading, Ltd.
28
<PAGE>
In December 1998, Dr. Puleo advanced us $100,000 to be used as a
deposit on the purchase of the land and building which are now our principal
offices. The advance was repaid without interest in February 1999.
In February 1999, we borrowed $1,950,000 from the father of Dr. Puleo
to purchase the building and land we presently occupy as our principal offices.
The loan was unsecured and carried interest at 15% per annum. The note was
renewed as of March 31, 1999 for a two year period with an annual interest rate
of 15% for April 1999, and 12% thereafter. On May 30, 1999 $1,500,000 of the
note was repaid with the proceeds from a mortgage on the building and land
obtained by us from a commercial bank, and the balance was repaid in October
1999.
We have purchased printing and mailing services from a company of which
Dr. Puleo served as vice president of marketing from June 1997 until June 1998.
For the fiscal years ended March 31, 1999 and 1998, we spent approximately
$97,856 and $17,819, respectively, for these printing and mailing services. We
did not use this company's services during fiscal 1997 and discontinued their
services in late 1998. We believe the prices paid to this company were
approximately the same as or less than we would have paid from another third
party source.
Item 8. Legal Proceedings
Except as described earlier under the heading "Government Regulation
Which Affects our Business", we are not a party to any pending legal proceeding
the resolution of which, our management believes, would have a material adverse
effect on our results of operations or financial condition, nor to any other
pending legal proceedings other than ordinary, routine litigation incidental to
its business.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
Our common stock has been trading on the OTCBB under the symbol "PETS"
since September 16, 1997. The following table sets forth for the period
indicated the range of high and low closing sales prices per share of our common
stock as reported on the OTCBB.
High Low
---- ---
Fiscal 1998
Second Quarter $ 1.58 $ 1.25
Third Quarter $ 1.67 $ 1.33
Fourth Quarter $ 1.67 $ 1.25
29
<PAGE>
Fiscal 1999
First Quarter $ 3.67 $ 1.33
Second Quarter $ 3.54 $ 2.75
Third Quarter $ 4.75 $ 2.71
Fourth Quarter $ 8.125 $ 3.50
Fiscal 2000
First Quarter $ 8.75 $ 6.125
Second Quarter $ 6.875 $ 4.375
Third Quarter $ 5.00 $ 2.50
As of December 31, 1999, there were 52 holders of record of our common
stock. The closing sales price for the common stock on January 4, 2000 as
reported on the OTCBB was $3.50.
Dividend Policy
The payment of dividends, if any, on either the Convertible Preferred
Stock or our common stock is solely at the discretion of our board of directors.
We have not declared or paid any dividends on either our Convertible Preferred
Stock or our common stock, and we do not currently intend to declare or pay cash
dividends in the foreseeable future. Our board of directors, in their sole
discretion, determines the payment of dividends, if any, after taking into
account various factors, including our financial condition, results of
operations, current and anticipated cash needs and plans for expansion.
Item 10. Recent Sales of Unregistered Securities
In May 1997, we granted Dr. Puleo options to purchase 300,000 shares of
our common stock exercisable at $.163 per share until May 2002. Such options
were granted as additional consideration for the initial working capital of
approximately $110,000 provided to us by Dr. Puleo. In May 1997, we also granted
options to Double Diamond Trading, Ltd., a principal shareholder, to purchase
300,000 shares of our common stock at $.367 per share exercisable until May
2002. Such options were granted as additional consideration for initial working
capital provided to us by Double Diamond Trading, Ltd. Mr. Ami Weitzman is the
sole officer, director and shareholder of Double Diamond Trading, Ltd. Both Dr.
Puleo and Double Diamond Trading, Ltd., including Mr. Weitzman, are accredited
investors and these options were granted under an exemption from registration
under the Securities Act of 1933 in reliance on Section 4(2) of the act. These
options remain unexercised.
In May 1997, PetMedExpress sold an aggregate of 777,749 shares of its
common stock at $1.00 per share on a "best efforts" basis in a private
placement. This private placement was exempt from registration under the
Securities Act of 1933 in reliance on Sections 4(2) or 3(b) of such act, and
Rule 504 of Regulation D. This offering was made to accredited or otherwise
30
<PAGE>
qualified investors who met the suitability standards set forth in the private
offering memorandum. Investors who were not accredited investors had full access
to, or were otherwise provided with, all relevant information reasonably
necessary to evaluate PetMedExpress.
During fiscal 1998 we granted an option and a warrant to purchase an
aggregate of 540,000 shares of common stock at an average exercise price of
$1.14 per share to two unrelated entities in exchange for financial and
operational consulting services. The recipients were accredited investors, and
the securities were issued under an exemption from registration under the
Securities Act of 1933 in reliance on Section 4(2) of the act.
The option and the warrant remain unexercised.
In January 1998, PetMedExpress issued 27,000 shares of common stock to
three key employees as compensation for services. These employees were
sophisticated investors and had full access to, or were otherwise provided with,
all relevant information reasonably necessary to evaluate PetMedExpress. These
shares were returned to the Company and canceled in March 1998.
In April 1998, we sold an aggregate of 250,000 shares of our
Convertible Preferred Stock to a group of accredited or otherwise sophisticated
investors in a private placement exempt from registration under the Securities
Act of 1933 in reliance on Section 4(2) and Regulation D, Rule 505, at a sale
price of $4.00 per share on a "best efforts" basis. The sophisticated investors
had full access to, or were otherwise provided with, all relevant information
reasonably necessary to evaluate PetMedExpress. Each share of Convertible
Preferred is convertible, at the option of the holder, into 4.05 shares of
common stock. Noble International Investments, Inc., an NASD member firm, acted
as placement agent in the offering and as compensation therefore received a
commission equal to 10% of the sales made by it and a non-accountable expense
allowance equal to 3% of the sales made by it. An aggregate of 243,750 shares of
Convertible Preferred Stock were converted into common stock as of the date of
this registration statement and 6,250 shares are outstanding.
In April 1998, we issued an option to purchase an aggregate of 103,500
shares of our common stock to a group of five individuals and entities as
compensation for services rendered to PetMedExpress. The options are exercisable
at an average exercise price of $1.55 per share, and were issued under an
exemption from registration under the Securities Act of 1933 in reliance on
Section 4(2) of that act. These individuals and entities accredited or otherwise
qualified investors who had full access to, or were otherwise provided with, all
relevant information reasonably necessary to evaluate PetMedExpress.
In May 1998, PetMedExpress issued an aggregate of 9,801 shares of its
common stock to certain key employees as additional compensation for their
services to PetMedExpress. These employees were sophisticated investors and had
full access to, or were otherwise provided with, all relevant information
reasonably necessary to evaluate PetMedExpress.
31
<PAGE>
In May 1998, we also issued 6,000 shares of common stock as
compensation for legal services preformed for PetMedExpress. The recipient was
an accredited investor and the issuance was exempt from registration under the
Securities Act of 1933 in reliance on Section 4(2) of that act.
In February 1999, PetMedExpress sold an aggregate of 333,333 shares of
its common stock at $3.00 per share on a "best efforts" basis in a private
placement. This private placement was exempt from registration under the
Securities Act of 1933 in reliance on Sections 4(2) or 3(b) of such act, and
Rule 504 of Regulation D. This offering was made to accredited investors. Noble
received a selling commission equal to 10% of the gross proceeds of the
offering.
Item 11. Description of Registrant's Securities to be Registered
Our authorized capital consists of 20,000,000 shares of common stock,
par value $.001 per share, and 5,000,000 shares of preferred stock, par value
$.001 per share.
Common Stock
As of December 31, 1999 there were 6,369,822 shares of common stock
issued and held of record by approximately 52 shareholders of record. We
estimate there are in excess of 300 beneficial owners of our common stock. The
common stock is traded on the OTCBB under the symbol "PETS."
The issued and outstanding shares of common stock are fully paid and
nonassessable. Each outstanding share of common stock is entitled to one vote on
all matters submitted to a vote of the stockholders, including election of
directors. There is no cumulative voting in the election of directors. The
holders of outstanding shares of common stock are entitled to receive dividends
out of assets legally available for the payment of dividends, at a time, and in
amounts, as the board of directors may from time to time determine. The shares
of common stock are not convertible, and the holders have no preemptive or
subscription rights to purchase any securities of PetMedExpress. Upon
liquidation, dissolution or winding up of PetMedExpress, the holders of common
stock are entitled to receive pro rata the assets of PetMedExpress that are
legally available for distribution, after payment of all debts and other
liabilities.
Preferred Stock
Our board of directors is authorized, without further shareholder
approval, to issue from time to time up to an aggregate of 5,000,000 shares of
preferred stock in one or more series, and to fix or alter the designations,
rights, preferences and any qualification, limitations or restrictions of the
shares of each such series of preferred stock, including:
- the dividend rights,
32
<PAGE>
- the dividend rates,
- conversion rights,
- voting rights,
- terms of redemption (including sinking fund provisions),
- redemption price or prices,
- liquidation preferences, and
- the number of shares constituting any series or designations
of a series.
As of the date of this registration statement, a series of 250,000
shares of Convertible Preferred has been authorized by the board of directors,
of which 6,250 shares remain unconverted and outstanding. The balance of these
shares of Convertible Preferred Stock have previously been converted into shares
of our common stock as provided by their terms. Therefore, 4,993,750 shares of
preferred stock remain without designation. We have no present plans to issue
any additional shares of preferred stock.
The designations, rights and preferences of the Convertible Preferred
provide that the shares
- have full voting rights, share for share, with the then
outstanding common stock as well as any other series of
preferred stock then outstanding,
- are convertible into 4.05 shares of common stock at any time
at the option of the holder; provided, however, that the
shares of Convertible Preferred must be converted in
whole Units of 5,000 shares,
- are not redeemable,
- pay dividends at the sole discretion of the board of
directors, and
- in the event of our liquidation or winding up, carry a
liquidation preference equal to $4.00 per share, without
interest.
Options and Warrants
Options
As of November 30, 1999, in addition to the options granted under our
1998 Stock Option Plan, we have outstanding options not under the 1998 Stock
Option Plan to purchase up to an additional 1,443,000 shares of common stock,
including:
33
<PAGE>
- options granted to Dr. Puleo to purchase:
- 300,000 shares of common stock at $.163 per
share until May 2002, and
- 240,000 shares of the common stock at $1.00
per share until May 2002, and
- options granted to a non-employee principal shareholder of
PetMedExpress to purchase 300,000 shares of common stock at
$.367 per share until May 2002;
- options granted to various employees to purchase an aggregate
of 199,500 shares of common stock at prices ranging from $1.25
to $1.33 per share until July 2002; and
- options granted as compensation for services rendered to us to
purchase an aggregate of 103,500 shares of common stock at
prices ranging from $1.33 to $2.00 per share until July 2002.
This includes an option to purchase 22,500 shares at $1.33 per
share granted to an affiliate of Atlas, Pearlman, Trop &
Borkson, P.A., counsel for PetMedExpress.
Once vested, these options may be exercised from time to time by the
holders until their expiration date, and may be transferred at the discretion of
the holders. The options also contain customary anti-dilution provisions in the
event that we declare a stock split or stock dividend or that we otherwise
recapitalize PetMedExpress.
Warrants
In March 1998 we issued to Noble International Investments, Inc., a
broker-dealer who was serving as our investment bankers, a warrant to purchase
300,000 shares of common stock at $1.25 per share until May 2002. This warrant
was issued as compensation for one year of services rendered to us by Noble
under a two year investment advisory agreement which expired in March 1999.
The warrants may be exercised from time to time by the holders until
their expiration date, and may be transferred at the discretion of Noble. Noble
has transferred these warrants to three individuals, including two of its
principal shareholders. The warrants contain anti-dilution provisions in the
event:
- stock splits
- stock dividends
34
<PAGE>
- if we make a general distribution to our common shareholders,
other than as part of our dissolution or liquidation or the winding up of its
affairs, of:
* any shares of our capital stock,
* any evidence of indebtedness, or
* any of our assets (other than cash, shares of
common stock or securities convertible
into shares of common stock)
- if we offer rights or warrants to all holders of our common
stock which entitles them to subscribe to or purchase additional shares of our
common stock or securities convertible into shares of our common stock.
Item 12. Indemnification of Directors and Officers
The Florida Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Florida corporations. The Company's
Articles of Incorporation and Bylaws provide that the Company shall indemnify
its directors and officers to the fullest extent permitted by the Corporation
Act. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed 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.
Item 13. Financial Statements and Supplementary Data
Financial Statements
PetMedExpress.com, Inc.
Years ended March 31, 1997, 1998 and 1999
and six month periods ended September 30, 1999 and 1998
with Reports of Independent Auditors
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Financial Statements
Years ended March 31, 1997, 1998 and 1999 and six month
periods ended September 30, 1999 and 1998
Contents
<S> <C>
Reports of Independent Auditors.................................................................................F-1-2
Financial Statements
Balance Sheets..................................................................................................F-3-4
Statements of Operations........................................................................................F-5
Statement of Changes in Stockholders' Equity....................................................................F-6
Statements of Cash Flows........................................................................................F-7-8
Notes to Financial Statements...................................................................................F-9-21
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
PetMedExpress.com, Inc.
We have audited the accompanying balance sheet of PetMedExpress.com, Inc. as of
March 31, 1999, and the related statements of operations, stockholders' equity,
and cash flows for the year then ended. 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 auditing standards generally accepted
in the United States. 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 PetMedExpress.com, Inc. at
March 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
Ernst & Young LLP
West Palm Beach, Florida
June 23, 1999
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors
PetMedExpress, Inc.
Fort Lauderdale, Florida
We have audited the accompanying balance sheets of PetMedExpress, Inc. (the
Company) as of March 31, 1998 and 1997, and the related statements of loss,
changes in stockholders' equity and cash flows for the years then ended. 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 audits.
We conducted our audits 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 audits of the financial statements provide 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 PetMedExpress, Inc. as of March
31, 1998 and 1997, and the results of their operations, changes in stockholders'
equity and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Keefe, McCullough & Co., LLP
Fort Lauderdale, Florida
June 2, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Balance Sheets
March 31 September 30
1998 1999 1999
------------------------------------ -------------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 771,584 $ 685,749 $ 974,987
Accounts receivable, less allowance for doubtful
accounts of $5,489 and $3,849 as of March 31,
1998 and 1999, respectively and $16,849 at
September 30, 1999 (unaudited) 295,250 314,691 229,536
Inventories 468,697 1,576,713 1,939,183
Prepaid expenses and other current assets 118,275 94,281 195,768
------------------------------------- -------------------
Total current assets 1,653,806 2,671,434 3,339,474
Property and equipment, net 244,508 2,862,267 3,300,556
Other assets, net 68,195 95,170 95,270
Deferred tax asset - 15,137 15,137
------------------------------------ -------------------
Total assets $ 1,966,509 $ 5,644,008 $ 6,750,437
==================================== ===================
F-3
<PAGE>
March 31 September 30
1998 1999 1999
------------------------------------ -------------------
(Unaudited)
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 299,218 $ 438,247 $ 564,905
Current portion of capital lease obligations 19,817 9,828 114,079
Current portion of mortgage payable - - 62,926
Accrued expenses and taxes 193,118 200,764 496,590
Stock subscription deposits 799,290 - -
------------------------------------ -------------------
Total current liabilities 1,311,443 648,839 1,238,500
Deferred membership fee revenue 33,787 99,252 94,831
Capital lease obligations, less current portion 20,545 6,699 135,790
Related party note payable - 1,950,000 450,000
Mortgage payable, less current portion - - 1,592,119
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized; 6,250 convertible shares issued and
outstanding at March 31, 1999 and September 30, 1999
with a liquidation preference of $4 per share - 22,246 22,246
Common stock, $.001 par value, 20,000,000 shares
authorized; 4,787,499, 6,120,822 and 6,369,822 shares
issued and outstanding at March 31,1998 and 1999,
and September 30, 1999, respectively 4,787 6,121 6,370
Additional paid-in capital 1,804,254 3,648,486 3,905,235
Accumulated deficit (1,208,307) (737,635) (694,654)
------------------------------------ -------------------
Total stockholders' equity 600,734 2,939,218 3,239,197
------------------------------------ -------------------
Total liabilities and stockholders' equity $ 1,966,509 $ 5,644,008 $ 6,750,437
==================================== ===================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Statements of Operations
Year ended March 31 Six months ended September 30,
1997 1998 1999 1998 1999
------------------------------------------------ ---------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Sales $ 602,191 $ 3,634,275 $10,311,714 $5,371,329 $8,344,961
Cost of sales 350,538 2,037,876 5,646,187 2,916,388 4,620,399
------------------------------------------------ ---------------------------------
Gross profit 251,653 1,596,399 4,665,527 2,454,941 3,724,562
------------------------------------------------ ---------------------------------
Operating expenses:
General and administrative 432,873 2,321,025 3,306,641 1,481,317 2,510,297
Advertising 36,202 219,919 867,160 448,566 969,322
Depreciation and amortization 7,597 57,081 96,779 30,700 109,944
------------------------------------------------ ---------------------------------
Total operating expenses 476,672 2,598,025 4,270,580 1,960,583 3,589,563
------------------------------------------------ ---------------------------------
Income (loss) from operations (225,019) (1,001,626) 394,947 494,358 134,999
Other income (expense):
Interest, net (2,498) (5,934) (57,714) 4,627 (96,564)
Other, net - 26,770 133,439 69,392 4,546
------------------------------------------------ ---------------------------------
Income (loss) before provision
for income taxes (227,517) (980,790) 470,672 568,377 42,981
Provision for income taxes - - - - -
------------------------------------------------ ---------------------------------
Net income (loss) (227,517) (980,790) 470,672 568,377 42,981
Accretion for beneficial
conversion feature of
preferred stock - - 771,525 771,525 -
------------------------------------------------ ---------------------------------
Net income (loss) available to
common stockholders $ (227,517) $ (980,790) $ (300,853) $(203,148) $ 42,981
================================================ =================================
Earnings (loss) per common share:
Basic $ (0.06) $ (0.22) $ (0.06) $ (0.04) $ 0.01
================================================ =================================
Diluted $ (0.06) $ (0.22) $ (0.06) $ (0.04) $ 0.00
================================================ =================================
Weighted average number of
common shares outstanding:
Basic 4,009,500 4,494,054 5,333,355 4,848,165 6,328,572
================================================ =================================
Diluted 4,009,500 4,494,054 5,333,355 4,848,165 8,679,226
================================================ =================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Statement of Changes in Stockholders' Equity
Convertible Common
Preferred Stock Stock
-------------------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------------------
<S> <C> <C>
Balance at April 1, 1996 - $ - - $ -
Sale of common stock - - 4,009,750 4,010
Net loss - - - -
------------------------------------------------------------
Balance at March 31, 1997 - - 4,009,750 4,010
Sale of common stock - - 777,749 777
Issuance of stock options at below market price - - - -
Issuance of stock options in exchange for
services - - - -
Net loss - - - -
------------------------------------------------------------
Balance at March 31, 1998 - - 4,787,499 4,787
Sale of convertible preferred stock, net of
issuance costs 250,000 116,288 - -
Accretion for beneficial conversion feature of
preferred stock - 771,525 - -
Conversion of convertible preferred stock into
common stock (243,750) (865,567) 987,189 987
Sale of common stock, net of issuance costs - - 318,333 319
Issuance of common stock in exchange
for services - - 6,000 6
Issuance of common stock in exchange for software - - 12,000 12
Issuance of common stock in exchange for
employee services - - 9,801 10
Issuance of stock options in exchange
for services - - - -
Net income - - - -
------------------------------------------------------------
Balance at March 31, 1999 6,250 22,246 6,120,822 6,121
Exercise of stock options - - 246,000 246
Sale of common stock - - 3,000 3
Net income - - - -
------------------------------------------------------------
Balance at September 30, 1999 (Unaudited) 6,250 $ 22,246 6,369,822 $ 6,370
============================================================
(RESTUBBED TABLE)
Additional
Paid-In Accumulated
Capital Deficit Total
----------------------------------------------
Balance at April 1, 1996 $ - $ - $ -
Sale of common stock 458,047 - 462,057
Net loss - (227,517) (227,517)
----------------------------------------------
Balance at March 31, 1997 458,047 (227,517) 234,540
Sale of common stock 753,707 - 754,484
Issuance of stock options at below market price 470,100 - 470,100
Issuance of stock options in exchange for
services 122,400 - 122,400
Net loss - (980,790) (980,790)
----------------------------------------------
Balance at March 31, 1998 1,804,254 (1,208,307) 600,734
Sale of convertible preferred stock, net of
issuance costs 771,525 - 887,813
Accretion for beneficial conversion feature of
preferred stock (771,525) - -
Conversion of convertible preferred stock into
common stock 864,580 - -
Sale of common stock, net of issuance costs 782,848 - 783,167
Issuance of common stock in exchange
for services 38,794 - 38,800
Issuance of common stock in exchange for software 35,988 - 36,000
Issuance of common stock in exchange for
employee services 22,662 - 22,672
Issuance of stock options in exchange
for services 99,360 - 99,360
Net income - 470,672 470,672
----------------------------------------------
Balance at March 31, 1999 3,648,486 (737,635) 2,939,218
Exercise of stock options 247,752 - 247,998
Sale of common stock 8,997 - 9,000
Net income - 42,981 42,981
----------------------------------------------
Balance at September 30, 1999 (Unaudited) $3,905,235 $ (694,654) $3,239,197
==============================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Statements of Cash Flows
Year ended March 31 Six months ended September 30
1997 1998 1999 1998 1999
--------------------------------------------- -------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (227,517) $ (980,790) $ 470,672 $ 568,377 $ 42,981
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 7,517 54,334 87,434 27,873 94,800
Amortization 80 2,747 9,345 2,827 15,144
Amortization of deferred membership
fee revenue - - (28,652) - (21,072)
Provision for doubtful accounts - 5,489 1,640 - 13,000
Deferred tax asset - - (15,137) - -
Issuance of common stock in
exchange for services - - 38,800 38,800 -
Issuance of common stock in
exchange for employee
services - - 22,672 22,672 -
Issuance of stock options in
exchange for services - 592,500 99,360 99,360 -
Changes in operating assets and
liabilities:
Accounts receivable (7,748) (292,991) (21,081) (31,748) 72,155
Inventories (109,068) (359,629) (1,108,016) (1,177,311) (362,470)
Prepaid expenses and other
current assets (11,241) (107,034) 23,994 (35,236) (101,487)
Accounts payable 56,431 242,787 139,029 (136,002) 126,658
Accrued expenses and taxes 9,965 183,154 7,646 (31,024) 295,826
Deferred membership fee revenue - 33,787 94,117 49,516 16,651
--------------------------------------------- -------------------------------
Net cash provided by (used in) operating activities (281,581) (625,646) (178,177) (601,896) 192,186
--------------------------------------------- -------------------------------
Cash flows from investing activities
Purchases of property and equipment (73,085) (169,728) (2,669,192) (39,045) (533,089)
Other assets (5,304) (65,773) (36,321) (64,672) (15,244)
--------------------------------------------- -------------------------------
Net cash used in investing activities (78,389) (235,501) (2,705,513) (103,717) (548,333)
--------------------------------------------- -------------------------------
</TABLE>
Continued on next page.
F-7
<PAGE>
<TABLE>
<CAPTION>
PetMedExpress.com, Inc.
Statements of Cash Flows (continued)
Year ended March 31 Six months ended September 30
1997 1998 1999 1998 1999
--------------------------------------------- -------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities
Net proceeds from sale of common stock $ 462,056 $ 754,538 $ 783,167 $ - $ 9,000
Exercise of stock options - - - - 247,998
Proceeds from sale of convertible
preferred stock - - 88,523 88,521 -
Payments on capital lease obligations (8,038) (15,145) (23,835) (9,654) (9,025)
Payments on mortgage payable - - - - (24,955)
Borrowings (repayments) under
related-party note payable - - 1,950,000 - (1,500,000)
Proceeds from mortgage payable - - - - 1,680,000
Stock subscription deposits - 799,290 - - -
Proceeds from capital lease
obligations - - - - 242,367
--------------------------------------------- -------------------------------
Net cash provided by financing
activities 454,018 1,538,683 2,797,855 78,867 645,385
--------------------------------------------- -------------------------------
Net (decrease) increase in cash and
cash equivalents 94,048 677,536 (85,835) (626,746) 289,238
Cash and cash equivalents at
beginning of fiscal year - 94,048 771,584 771,584 685,749
============================================= ===============================
Cash and cash equivalents at end of
fiscal year $ 94,048 $ 771,584 $ 685,749 $ 144,838 $ 974,987
============================================= ===============================
Supplemental disclosure of cash flow
information
Cash paid for interest $ 4,498 $ 5,934 $ 57,714 $ 2,533 $ 104,286
============================================= ===============================
Cash paid for income taxes $ - $ - $ 97,000 $ - $ -
============================================= ===============================
Supplemental disclosures of noncash
financing activities
Issuance of common stock in
exchange for software $ - $ - $ 36,000 $ - $ -
============================================= ===============================
Preferred stock issued to
subscription receivable holders $ - $ - $ 799,290 $ - $ -
============================================= ===============================
</TABLE>
See accompanying notes.
F-8
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements
March 31, 1999
1. Summary of Significant Accounting Policies
Organization
PetMedExpress.com, Inc. (the Company) is a direct marketer of household pet
medications and other pet products and is located in the Ft. Lauderdale, Florida
area. The Company distributes catalogs to its customers and potential customers
and takes orders by telephone, internet and mail. Almost all of the Company's
sales are to residents of the United States.
The unaudited financial statements and information contained herein for the
periods indicated have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission and in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and notes required by generally accepted
accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the six months ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended March 31, 2000.
Revenue Recognition and Deferred Revenue
Product sales are recognized upon shipment. Deferred revenue consists of cash
collected on the sale of memberships. Membership fees are amortized to income
ratably over the membership period.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-9
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are priced at the lower of cost or market value using a weighted
average cost method.
Property and Equipment
Property and equipment are stated at cost and depreciated using an accelerated
method over the useful lives of the assets. Furniture, fixtures, equipment and
computer software are amortized over periods ranging from five to seven years.
The building is being depreciated over 25 years. Assets under capital lease
agreements are amortized over the shorter of the underlying lease agreement or
the useful life of the asset.
Advertising
The Company's advertising expense consists primarily of television advertising
and catalog production costs. Television costs are expensed as the ads are
televised and catalog costs are expensed when the related catalogs are
distributed. Advertising expense for fiscal years 1999, 1998 and 1997 was
approximately $867,160, $219,919 and $36,202, respectively.
Accounting for Stock Based Compensation
The Company accounts for employee stock options using the intrinsic value method
as prescribed by Accounting Principles Board Opinion No.25 Accounting for Stock
Issued to Employees. During fiscal 1999, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standard (SFAS) No. 123,
Accounting for Stock Based Compensation and for valuing options issued to
nonemployees.
F-10
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Significant Risks and Uncertainties - Product Supply
A multi-national pharmaceutical company which manufactures, among other
products, heartworm medication, one of the best selling products of the Company,
has refused to sell the heartworm medication directly to the Company. Therefore,
the Company must obtain its heartworm medication inventory through cooperating
wholesale sources. To the extent that the Company is unable to purchase this
product from other sources or if it can only be purchased at prices which make
its resale uncompetitive in the marketplace, it could have a materially adverse
impact on the Company's sales. However, the multi-national company's patent for
the heartworm medication expired in June 1999 and the Company, as well as a
number of other manufacturers, are planning to produce generic forms of this
medication.
Income Taxes
The Company accounts for income taxes under SFAS No. 109, Accounting for Income
Taxes. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable and accounts payable approximate fair value due to the short-term
nature of these instruments. The carrying amount of the related-party note
payable and capital lease obligations approximate fair value due to the interest
rates approximating current market rates.
Reclassification
Certain reclassifications have been made in the 1998 and 1997 financial
statements to conform to the 1999 presentation.
F-11
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
2. Property and Equipment
Major classifications of property and equipment are as follows:
<TABLE>
<CAPTION>
March 31 September 30
1998 1999 1999
------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Land $ - $ 863,758 $ 863,758
Building - 1,057,588 1,390,003
Computer software 166,555 195,221 500,121
Furniture, fixtures and equipment 76,258 128,866 531,146
Equipment and software under capital leases 63,545 63,545 259,612
Projects in process - 702,572 -
---------------------------------------------------
306,358 3,011,550 3,544,640
Less accumulated depreciation 61,850 149,283 244,084
---------------------------------------------------
$ 244,508 $2,862,267 $3,300,556
===================================================
</TABLE>
Amortization expense for equipment under capital leases was $15,637, $21,898 and
$2,553 for fiscal years 1999, 1998 and 1997, respectively. Projects in process
were completed in May 1999 with an estimated cost to complete of $65,000 at
March 31, 1999.
3. Capital Leases
The Company leases equipment under capital lease agreements with outside third
parties. Future payments under capital leases with initial terms of one year or
more consisted of the following at March 31, 1999:
Fiscal year ended March 31:
2000 $11,986
2001 2,142
2002 2,372
2003 2,627
2004 1,028
-------
20,155
Amounts representing interest 3,628
-------
16,527
Less current portion 9,828
-------
$ 6,699
=======
F-12
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
4. Stockholders' Equity
Fiscal 1999
Effective February 24, 1999, the Company declared a three for one stock split of
its common stock. All common stock and stock option data in these financial
statements have been adjusted to retroactively give effect to the stock split.
In February 1999, the Company commenced a private placement of 333,333 shares of
common stock at a price of $3.00 per share, less issuance costs of $180,832.
Issuance costs of $120,000 were satisfied as part of the offering in exchange
for 40,000 shares valued at the offering price of $3.00 per share. In addition,
as part of this offering the Company accepted computer software instead of cash
in exchange for 12,000 shares valued at the offering price of $3.00 per share.
As of March 31, 1999, 330,333 shares of this offering had been issued.
In May 1998, the Company issued 9,801 shares of common stock to certain key
employees as compensation for services. Compensation expense of $22,672 was
recorded in connection with these transactions.
In fiscal 1999, the Company issued 6,000 shares of common stock in exchange for
legal services valued at $38,800 which were performed on behalf of the Company.
The Company used the estimated value of the services performed to record the
fair value of the above transaction.
Preferred Stock
In April 1998, the Company issued 250,000 shares of its $.001 par value
preferred stock at a price of $4.00 per share, less issuance costs of $112,187.
Each share of the preferred stock is convertible into approximately 4.05 shares
of common stock at the election of the shareholder. The preferred stock was
recorded at $887,813, net of the value of the beneficial conversion feature of
$771,525. The beneficial conversion feature was computed as the difference
between
F-13
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
4. Stockholders' Equity (continued)
the closing market price of the Company's common stock ($1.75 per share) and the
conversion price of the preferred stock ($.988 per share) on the date the
preferred stock was sold. The conversion feature was immediately recognized as a
reduction to net income available to common stockholders. The shares have a
liquidation value of $4.00 per share and may pay dividends at the sole
discretion of the Company. The Company does not anticipate paying out dividends
to the preferred shareholders in the foreseeable future. Each share of preferred
stock is entitled to one vote on all matters submitted to a vote of shareholders
of the Company. As of March 31, 1999, 6,250 shares of the convertible preferred
stock remained unconverted and outstanding.
Fiscal 1998
In May 1997, the Company sold 777,749 shares of common stock for $1.00 per
share, less issuance costs of $23,265.
5. Income Taxes
The components of the income tax provision (benefit) in fiscal years 1997, 1998
and 1999 are as follows:
<TABLE>
<CAPTION>
Years ended March 31
1997 1998 1999
------------------------------------------------------
<S> <C> <C> <C>
Current $ - $ - $ 15,137
Deferred - - (15,137)
------------------------------------------------------
Total $ - $ - $ -
======================================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The fiscal 1999 income
tax provision includes the use of a net operating loss carryforward of $218,684
which was fully reserved for by a valuation allowance at March 31, 1998.
F-14
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
5. Income Taxes (continued)
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
Years ended March 31
1998 1999
------------------------------------
<S> <C> <C>
Deferred tax assets:
Depreciation $ 1,395 $ -
Allowance for bad debts - 1,448
Deferred compensation (stock options) 219,674 254,881
Amortization of intangible assets - 751
Accrued other 38,000 37,630
Net operating loss carryforward 218,684 -
------------------------------------
Deferred tax assets 477,753 294,710
Less valuation allowance (477,753) (270,380)
------------------------------------
Total deferred tax assets - 24,330
Deferred tax liabilities:
Depreciation - (9,193)
------------------------------------
Total net deferred taxes $ - $ 15,137
====================================
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:
<TABLE>
<CAPTION>
Years ended March 31
1997 1998 1999
------------------------------------------------------
<S> <C> <C> <C>
Tax at U.S. statutory rates $(79,631) $(343,277) $164,735
State income taxes, net of federal
tax benefit (7,633) (37,190) 18,673
Nondeductible items 334 1,285 7,018
Change in valuation allowance 89,288 388,465 (207,373)
Other (2,358) (9,283) 16,947
------------------------------------------------------
$ - $ - $ -
======================================================
</TABLE>
F-15
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
6. Stock Options and Warrants
Stock Options Granted to Employees
The Company established the 1998 Stock Option Plan (the Plan) effective July 31,
1998, which provides for the issuance of qualified options to officers,
directors and key employees, and nonqualified options to consultants and other
service providers. The Company has reserved 3,000,000 shares of common stock for
issuance under the Plan. The exercise prices of options issued under the Plan
must be equal to or greater than the market price of the Company's common stock
as of the date of issuance. The Company had 1,424,400 options outstanding under
the Plan at March 31, 1999. Options issued prior to July 31, 1998 are not
included in the Plan. The weighted average fair value per share of options
granted by the Company in fiscal years 1999 and 1998 was $1.03 and $.56
respectively.
A summary of the status of stock options issued by the Company as of March 31,
1999 and 1998, together with changes during the periods then ended, is presented
in the following table. There were no options issued or outstanding during the
year ended March 31, 1997.
<TABLE>
<CAPTION>
1998 1999
------------------------------------------------------------------------
Number Weighted Average Number Weighted Average
of Exercise Price of Exercise Price
Shares Per Share Shares Per Share
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period - $ - 1,410,000 $0.746
Granted 1,410,000 0.746 2,093,400 1.315
Exercised - - - -
Canceled - - 390,000 2.736
------------------------------------------------------------------------
Outstanding at end of period 1,410,000 $0.746 3,113,400 $1.222
========================================================================
Exercisable at end of period 1,410,000 $0.746 2,212,500 $0.996
========================================================================
</TABLE>
During the six months ended September 30, 1999 the Company issued 700,000
options with a weighted average exercise price of $6.434 per share.
F-16
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
6. Stock Options and Warrants (continued)
The following table sets forth additional information about stock options
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
Weighted Average
Range of Number Outstanding as Remaining Contractual Weighted Average Number Exercisable as
Exercise Prices of March 31, 1999 Life Exercise Price of March 31, 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$0.16 - $2.00 2,889,000 3.52 years $1.02 2,137,500
$2.80 - $4.50 224,400 4.49 years $3.83 75,000
------------------------ ------------------------
3,113,400 3.60 years $1.22 2,212,500
</TABLE>
The Company accounts for equity-based instruments issued or granted to employees
using the intrinsic method as prescribed under APB No. 25 Accounting for Stock
Issued to Employees (APB No. 25).
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which defines a fair value based method of accounting for stock
options or similar equity instruments. The Company has elected to adopt the
disclosure-only provisions of SFAS No. 123 in accounting for employee stock
options. Accordingly, the Company has elected to account for its stock-based
compensation plan under APB No. 25; however the Company has computed for pro
forma disclosure purposes, the value of all options granted during the fiscal
years ended March 31, 1999 and 1998, using the Black-Scholes option pricing
model as prescribed by SFAS No. 123 and the weighted average assumptions as
follows. No options were granted in fiscal 1997.
<TABLE>
<CAPTION>
Year ended March 31
1998 1999
------------------------------------
<S> <C> <C>
Risk-free interest rate 6.00% 6.00%
Expected dividend yield 0.00% 0.00%
Expected lives 1-5 1-5
Expected volatility .781 .779
</TABLE>
F-17
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
6. Stock Options and Warrants (continued)
Adjustments are made for options forfeited prior to vesting.
For purposes of pro forma disclosures, the estimated fair value of options is
amortized to expense over the options' vesting period. The Company's pro forma
information follows:
<TABLE>
<CAPTION>
Year ended March 31
1997 1998 1999
------------------------------------------------------
<S> <C> <C> <C>
Pro forma net loss $(227,517) $(1,121,471) $ (272,934)
Accretion of beneficial conversion
feature of preferred stock - - (771,525)
------------------------------------------------------
Pro forma net loss available to common
stockholders $(227,517) $(1,121,471) $(1,044,459)
======================================================
Pro forma net loss per common share
$ (.06) $ (.25) $ (.20)
======================================================
</TABLE>
Stock Options and Warrants Granted in Exchange for Services
During fiscal 1999, the Company granted options to purchase 103,500 shares of
common stock at an average exercise price of $1.55 per share in exchange for
legal and printing services and rent. These services were valued at $99,360 and
recorded as a general and administrative expense in the accompanying statements
of operations. The options vest immediately and expire in fiscal 2003.
During fiscal 1998, the Company granted options and warrants to purchase 540,000
shares of common stock at an average exercise price of $1.14 per share in
exchange for financial and operational consulting services. The options were
valued at $122,400 of which the Company recognized $55,000 in fiscal 1999 and
$67,400 in fiscal 1998 as a general and administrative expense in the
accompanying statements of operations. The options vest immediately and expire
in fiscal 2003 and 2002.
F-18
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
6. Stock Options and Warrants (continued)
Stock Options Granted at Below Market Price
In fiscal 1998, options to purchase 300,000 shares of the Company's common stock
were granted to the Company's President and CEO in exchange for services
performed on behalf of the Company. The options were granted on May 6, 1997 at
an exercise price of $0.163 per share while the market value of the common stock
at that time was estimated by the Company to be $1.00 per share. As prescribed
under APB No. 25, the Company recorded as expense the difference between the
option exercise price and the market value of the Company's common stock on the
date of grant. Such expense amounted to $251,100 and was included in general and
administrative expense in fiscal 1998. In addition, in fiscal 1998 the Company
granted 300,000 options to an outside party at an exercise price of $.367 per
share. In accordance with SFAS No. 123 the Company computed the fair value of
these options as $219,000 and recognized such amount as expense in fiscal 1998.
The above options vest immediately and expire on May 6, 2002.
7. Related Party Transactions
In February 1999, the Company borrowed $1,950,000 from the father of the
Company's President & CEO to purchase a building and land to be used as the
Company's headquarters. The loan was unsecured and carried interest at 15% per
annum. The note was renewed as of March 31, 1999 for a two year period with an
annual interest rate of 15% for April 1999, and 12%, thereafter. The note was
partially repaid on May 30, 1999, in the amount of $1,500,000 with proceeds from
a mortgage on the building and land. The Company paid interest on the note of
$52,890 during fiscal 1999.
In December 1998, the President and CEO of the Company, advanced $100,000 to the
Company to be used as a deposit on the purchase of the building and land. The
advance was repaid without interest in February 1999.
The President and CEO of the Company is the sole owner of South Florida
Anesthesia Professionals (SFAP) which rents space in the Company's facilities.
SFAP paid rent to the Company of $6,000 and $2,400 for the fiscal years ended
March 31, 1999 and 1998, respectively. SFAP did not rent space from the Company
in 1997.
During fiscal 1997, 1998 and 1999, the Company's President and CEO did not
receive a salary for services performed on behalf of the Company.
F-19
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
7. Related Party Transactions (continued)
The Company purchases printing and mailing services from Dynamic
Marketing/Press, Inc. of which the President and CEO of the Company was a vice
president of marketing from June 1997 to June 1998. Amounts paid to Dynamic
Marketing/Press, Inc. for the fiscal years ended March 31, 1999 and 1998 were
approximately $97,856 and $17,819, respectively. No amounts were paid to Dynamic
Marketing and Press, Inc. in fiscal 1997.
8. Earnings Per Share
The Company adopted SFAS No. 128, Earnings per Share, effective March 31, 1998.
In accordance with the requirements of SFAS No. 128, basic earnings per share is
computed by dividing net income by the weighted average number of shares
outstanding and diluted earnings per share reflects the dilutive effects of
stock options (as calculated utilizing the treasury stock method) and the
equivalent common shares of outstanding convertible preferred stock. Options
were not included for fiscal years 1999 and 1998 because their effect would have
been anti-dilutive. No options were outstanding during fiscal 1997.
9. Valuation and Qualifying Accounts
Activity in the Company's Valuation and Qualifying accounts consists of the
following:
<TABLE>
<CAPTION>
Year ended March 31 Six months ended September 30
1997 1998 1999 1998 1999
------------------------------------------- -----------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Balance at beginning of period $ - $ - $5,489 $ - $ 3,849
Provision for doubtful accounts - 5,489 1,640 - 13,000
Write-offs of uncollectible accounts
receivable - - (3,280) - -
------------------------------------------- -----------------------------
Balance at end of period $ - $5,489 $3,849 $ - $16,849
=========================================== =============================
</TABLE>
F-20
<PAGE>
PetMedExpress.com, Inc.
Notes to Financial Statements (continued)
9. Valuation and Qualifying Accounts (continued)
<TABLE>
<CAPTION>
Year ended March 31 Six months ended September 30
1997 1998 1999 1998 1999
---------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Valuation allowance for deferred
tax assets:
Balance at beginning of period $ - $ 89,288 $477,753 $ 89,288 $270,380
Additions 89,288 388,465 - 194,233 -
Deductions - - (207,373) - -
---------------------------------------------- -------------------------------
Balance at end of period $89,288 $477,753 $270,380 $283,521 $270,380
============================================== ===============================
</TABLE>
10. Commitments and Contingencies
During October 1999, complaints were filed against the Company by two states in
which the Company is licensed to dispense pet medications. The states have
offered to settle the complaints for de minimis amounts. The Company has
rejected these offers and intends to vigorously defend against the claims.
In December 1999, the Company agreed to issue 75,000 options to purchase shares
of its Common Stock in settlement of a lawsuit filed by a former employee.
Accordingly, the Company has accrued a liability of $140,000 at Setember 30,
1999 based upon its best estimate of the fair value of the options to be issued
in accordance with SFAS No. 123, Accounting for Stock Based Compensation. Such
amount is included in general and administration expenses in the
accompanying statement of operations.
11. Impact of Year 2000 (Unaudited)
The Year 2000 issue is the result of certain computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs that have time sensitive software may recognize a date using "00" as
the year 1900 rather than the Year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. Since January 1, 2000 we have experienced
no disruptions in our systems or those of third parties, or other computer
related problems as a result of processing dates beyond 1999. However, there
cannot be any assurances that the Company will not experience Year 2000 problems
in the future.
12. Subsequent Events
On April 30, 1999, the Company entered into a mortgage agreement with SouthTrust
Bank in the amount of $1,680,000 for the building and land which are used as the
Company's headquarters and warehouse. The mortgage is for a seven year period
with 20 year amortization and bears annual interest of 7.75%. The building and
land have been pledged as collateral for the mortgage, which is also personally
guaranteed by the President and CEO of the Company. Mortgage proceeds of
$1,500,000 were used to reduce the note due to the father of the President and
CEO (see Note 7).
F-21
<PAGE>
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Keefe, McCullough & Co. served as our independent auditor from March
1997 to March 1999. During that period there were no disagreements with Keefe,
McCullough & Co. on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. No accountants' report on
the financial statements of PetMedExpress issued by Keefe, McCullough & Co.
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles. Keefe,
McCullough & Co. continues to perform tax services and non-audit related
advisory services for us.
On April 7, 1999 we engaged Ernst & Young, LLP as our independent
auditor for the fiscal year ended March 31, 1999. The decision to change audit
firms was approved by our Board of Directors.
35
<PAGE>
Item 15. Financial Statements and Exhibits
(a) Financial Statements. The following financial statements are
filed as a part of this registration statement:
(i) Balance Sheets at March 31, 1998 and 1999 and at
September 30, 1999 (unaudited);
(ii) Statements of Operations for the years ended March
31, 1998 and 1998 and for the six months ended
September 30, 1999 (unaudited);
(iii) Statement of Changes in Stockholders' Equity for the
years ended March 31, 1998 and 1998 and for the six
months ended September 30, 1999 (unaudited);
(iv) Statements of Cash Flows for the years ended March
31, 1998 and 1998 and for the six months ended
September 30, 1999 (unaudited); and
(v) Notes to Financial Statements.
(b) Exhibits:
Exhibit
Number Description
- ------ -----------
3.1 Amended and Restated Articles of Incorporation
3.2 By-Laws
4.1 Form of Warrant issued to Noble International Investments,
Inc.
4.2 Specimen common stock certificate
10.1 Amended and Restated Employment Agreement with Marc A. Puleo
10.2 Amended and Restated Employment Agreement with Chris Lloyd
10.3 1998 Stock Option Plan
10.4 Loan and Security Agreement dated September 17, 1999 by and
between the Company and Southtrust Bank, National Association
10.5 Promissory Note for $1,000,000 from the Company to Southtrust
Bank, National Association dated September 17, 1999
10.6 Proxy from Double Diamond Trading, Inc. to Marc Puleo
10.7 Security Agreement dated September 17, 1999 by and between the
Company and Southtrust Bank, National Association
10.8 Florida Real Estate Mortgage, Assignment of Leases and Rents
and Security Agreement dated April 29, 1999 by and between the
Company and Southtrust Bank, National Association
36
<PAGE>
10.9 Mortgage Modification Agreement dated September 17, 1999 by
and between the Company, Marc A. Puleo and Southtrust Bank,
National Association
10.10 Promissory Note for $1,680,000 from the Company to Southtrust
Bank, National Association dated April 29, 1999
10.11 Promissory Note for $1,950,000 to Philip Puleo
27 Financial Data Schedule
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
PetMedExpress.com, Inc.
By: /s/ Marc A. Puleo, M.D.
---------------------------
Marc A. Puleo, M.D., Chief Executive
Officer and President
Date: January 5, 2000
38
Exhibit 3.1
STATE OF FLORIDA
Department of State
I certify the attached is a true and correct copy of the Articles of
Incorporation, as amended to date, of PETMEDEXPRESS.COM, INC., a corporation
organized under the laws of the State of Florida, as shown by the records of
this office.
The document number of this corporation is P96000010098.
Given under my
hand and the Great
Seal of the State
of Florida at
Tallahassee, the
Capitol, this the
Seventeenth day of
August, 1999
Katherine Harris
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
PetMed Express, Inc.
ARTICLE I NAME
The name of the corporation shall be: PetMed Express, Inc.
ARTICLE II PRINCIPAL OFFICE
The principal place of business and mailing address of this corporation
shall be:
PetMed Express, Inc.
5560 NE 33 Ave.
Ft. Lauderdale, FL 33308
ARTICLE III PURPOSE
The Corporation is organized for the purpose of transacting any and all
lawful business for which corporations may be incorporated under the laws of
Florida.
ARTICLE IV CAPITAL STOCK
The number of shares of stock that this corporation is authorized to
have outstanding at any one time is: 100 shares with a par value of $1.00 each.
ARTICLE V INITIAL REGISTERED AGENT AND ADDRESS
The name and address of the initial registered agent is:
Brian O'Neill
350 SW 12 Ave.
Deerfield Beach, FL 33442
<PAGE>
ARTICLE VI INITIAL BOARD OF DIRECTORS
The Corporation shall have initially two (2) directors to hold office
until the first annual meeting of shareholders and until their successors shall
have been elected and qualified, or until their earlier resignation, removal
from office or death. The number of directors may be either increased or
decreased from time to time in accordance with the Bylaws of the Corporation.
The names and addresses of the initial directors of the Corporation are:
Name Address
- ---- -------
Yali Golan 5560 NE 33 Ave.
Ft. Lauderdale, FL 33308
Mark Puleo 2400 NE 44 Ct.
Lighthouse Point, FL 33064
ARTICLE VII INCORPORATOR
The name and street address of the incorporator to these Articles of
Incorporation is:
Brian O'Neill
350 SW 12 Ave.
Deerfield, Beach, FL 33442
ARTICLE VIII AMENDMENTS
The power to amend these Articles of Incorporation in accordance with
law is reserved to the shareholders. Any right conferred upon any shareholder by
these Articles of Incorporation is subject to this reservation.
The undersigned has executed these Articles of Incorporation this 25
day of January, 1996.
/s/ Brian O'Neill
- -------------------------------
Brian O'Neill, Incorporator
<PAGE>
CERTIFICATE OF DESIGNATION
REGISTERED AGENT/REGISTERED OFFICE
Pursuant to the provisions of Section 607.0501, Florida Statutes, the
undersigned corporation, organized under the laws of the State of Florida,
submits the following statement in designating tho registered office/registered
agent, in the state of Florida.
1. The name of the corporation is:
PetMed Express, Inc.
2. The name and address of the registered agent and office is:
Brian O'Neill
350 SW 12 Ave.
Deerfield Beach, FL 33442
Signature: /s/ Brian O'Neill
----------------------------
Title: Incorporator
Date: January 25, 1996
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUTES RELATING TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATIONS OF MY POSITION AS REGISTERED AGENT.
Signature: /s/ Brian O'Neill
----------------------------
Date: January 25, 1996
<PAGE>
ARTICLES OF AMENDMENT
---------------------
TO
--
ARTICLES OF INCORPORATION
-------------------------
OF
--
PETMED EXPRESS, INC.
--------------------
Pursuant to the provisions of Section 607.1006 Florida Statutes, this
corporation adopts the following Articles of Amendments to its Articles of
Incorporation.
First: Article II of the original articles of incorporation is hereby
deleted and the following added:
ARTICLE II - PRINCIPAL OFFICE
-----------------------------
The principal place of business and mailing address of this corporation
shall be:
PetMed Express, Inc.
400 N.E. 44 Court
Lighthouse Point, Florida 33064
Second: Article IV of the original articles of incorporation is hereby
deleted and the following added:
ARTICLE IV - CAPITAL STOCK
--------------------------
The number of shares of stock that this corporation is authorized
Document Prepared By:
Gigi J. Tanghe, Esq.
13701 N.E. 1 Avenue
Miami, Florida 33161
Florida Bar No. 0062987
<PAGE>
to have outstanding at any one time is: ten million (10,000,000) shares with a
par value of $.0001 each.
Third: Article VI of the original articles of incorporation is hereby
deleted and the following added, as one person formerly listed as a director was
erroneously named and should not have been listed:
ARTICLE VI - BOARD OF DIRECTORS
-------------------------------
The Corporation shall have one (1) director to hold office until the
first annual meeting of shareholders and until their successors shall have been
elected and qualified, or until their earlier resignation, removal from office
or death. The number of directors may be either increased or decreased from time
to time in accordance with the Bylaws of the Corporation. The name and address
of the director of the Corporation is:
Name: Marc Puleo Address: 2400 N.E. 44 Court
Lighthouse Point, Florida 33064
Fourth: The foregoing amendment shall be deemed effective and adopted
January 29, 1996.
Fifth: The amendment was approved by the sole shareholder. The number
of votes cast for the amendment was sufficient for approval.
IN WITNESS WHEREOF, the sole shareholder has hereto set his hands and
seal, and caused these Articles of Amendment to be executed this 19th day of
July, 1996.
<PAGE>
SOLE SHAREHOLDER AND DIRECTOR:
/s/ Marc Puleo, M.D.
------------------------------
MARC PULEO,
Director and Sole Shareholder
STATE OF FLORIDA )
)SS
COUNTY OF PALM BEACH )
BEFORE ME, the undersigned authority, this 19th day of July , 1996,
personally appeared Marc Puleo, known to me to be the person who executed the
foregoing Articles of Amendment of PetMed Express, Inc. and acknowledged before
me that he executed the same for the purposes herein expressed, and who is [
]personally known to me or [ X ] produced FL Drivers license as identification,
and [ ] did / [ X ] did not take an oath.
WITNESS my hand and official seal in the city of Boca Raton in Palm
Beach County, Florida this 19 day of July, 1996.
/s/ Peter Feldman
--------------------
NOTARY PUBLIC
My Commission Expires:
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
PETMED EXPRESS, INC.
--------------------
The undersigned, President of Pet/Med Express, Inc., a corporation
organized under the laws of the State of Florida, hereby certifies as follows:
1. The original name of the corporation as it appears on the
Certificate of Incorporation filed with the Secretary of the State of Florida on
the 29th day of January, 1996, was PetMed Express, Inc.
2. That at a special meeting of the Board of Directors of said
corporation held on the 16th day of December, 1996, the Board of Directors
unanimously resolved that the Amendment to the Certificate of Incorporation as
contained herein be presented to the stockholders of the corporation for their
action.
3. That at a special meeting of the stockholders of said corporation
held on the 16th day of December, 1996, the stockholders of the corporation
unanimously approved the proposed Amendment to the Certificate of Incorporation
contained herein.
4. The recommended Resolution of the Board of Directors, the same being
the Amendment unanimously approved by the stockholders of said corporation, is
as follows:
RESOLVED, that the corporation's none, PetMed
Express, Inc., be changed to Fanned Express, Inc., and that
said name be used by the corporation as its corporate name,
subsequent to its filing in the office of the Secretary of
State of the State of Florida.
<PAGE>
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
signed and executed by Marc Puleo, as President this 31 day of December, 1996.
PETMED EXPRESS, INC.
By: /s/ Marc Puleo, M.D.
----------------------
President
2
<PAGE>
ARTICLES OF AMENDMENT
---------------------
TO THE
------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
FARMED EXPRESS, INC.
--------------------
Pursuant to Section 607.1006 of the Business Corporation Act of the
State of Florida, the undersigned President of FARMED EXPRESS, INC., a
corporation organized and existing under and by virtue of the Business
Corporation Act of the State of Florida, bearing document number P96000010098,
does hereby certify:
First: That pursuant to Unanimous Written Consent of the Board of
Directors of said Corporation dated April 28, 1997, the Shareholders and
Directors approved the amendment to the Corporation's Certificate of
Incorporation as follows:
Article IV of the Certificate of Incorporation of this Corporation is
amended to read in its entirety as follows:
ARTICLE IV
----------
CAPITAL STOCK
-------------
The maximum number of shares that this Corporation shall be authorized
to issue ad have outstanding at any one time shall be 20,000,000 shares of
common stock, par value $.001 per share and 5,000,000 shares of preferred stock,
par value $.001 per share.
The foregoing amendment was adopted by the Board of Directors of the
Corporation pursuant to Unanimous Written Consent of the Board of Directors, and
by the Shareholders of the Corporation dated April 28, 1997 acting unanimously
by Written Consent pursuant to Section 607.0704 of the Florida Business
Corporation Act. Therefore, the number of votes cast for the amendment to the
Corporation's Certificate of Incorporation was sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being the President of this
Corporation. has executed these Articles of Amendment as of April 28, 1997.
FARMED EXPRESS, INC.
By: /s/ Marc Puleo, M.D.
--------------------
Marc A. Puleo, M.D.
GAYLE COLEMAN, ESQ., FL BAR #857327
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
<PAGE>
ARTICLES OF MERGER
These Articles of Merger are entered Into this 5th day of May 1997, by
AND between FarMed Express, Inc., a Florida Corporation ("FMP) and PetMed
Express, Inc., a Delaware corporation ("PMD").
W I T N E S S E T H
WHEREAS, FMF has an authorized capital stock consisting of 20,000,000
shares of Common Stock, par value $.001 per share, of which 100 shares are
currently outstanding and 5,000,000 shares of Preferred Stock, par value $.001,
none of which are currently Issued or outstanding; and
WHEREAS, PMD has an authorized capital stock consisting of 10,000,000
shares of Common Stock, par value $.0001 per share, of which 8,039,500 shares
were duly issued and outstanding; and
WHEREAS, the Boards of Directors of FMF, and of PMD, respectively, deem
It advisable and generally to the advantage and welfare of their respective
corporate parties and their respective shareholders that PMD merge with FMF
under and pursuant to the provisions of Florida Business Corporation Act and the
General Corporation Low of Delaware; so that PMD shall be merged into FMF; and
WHEREAS, the respective shareholders of FMF and PMD have approved the
terms and conditions of the merger.
NOW, THEREFORE, In consideration of the promises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
1. Approval. On May 5,1997, the sole director of FMF, and on May 5,
1997, the sole director of PMD, Sub respectively and unanimously adopted and
approved these Articles of Merger by Written Consents to Action, each dated May
5, 1997. These Articles of Merger were approved in their entirety by the
shareholders of PMD and FM4'by Written Consents to Action, each dated May 5,
1997.
2. Merger. PMD shall be and hereby is merged into FMF.
3. Effective Date. These Articles of Merger shall become effective
Immediately upon compliance with the laws of the State of Florida and Delaware,
the time of such effectiveness being hereinafter called the Effective Date.
<PAGE>
4. Surviving Corporation. FMF shall survive the merger herein
contemplated and shall continue to be governed by the laws of the State of
Florida, but the separate corporate existence of PMD shall cease forthwith upon
the Effective Date.
5. Authorized Capital. The authorized capital stock of FMF following
the Effective Date shall be 20,000,000 shares of Common Stock, par value $.001
per share, and 5.000,000 shares of Preferred Stock, par value $.001 per share,
unless and until the same shall be changed in accordance with the laws of the
State of Florida.
6. Articles of Incorporation. The Articles of Incorporation of FMF
following the Effective Date unless and until the same shall be amended or
repealed in accordance with the provisions thereof, which power to amend or
repeal Is hereby expressly reserved, and all rights or powers of whatsoever
nature conferred In such Articles of Incorporation or herein upon any
shareholder or director or officer of FMF or upon any other person whomsoever
are subject to this reserve power, shall continue as the Articles of
Incorporation shall constitute the Articles of Incorporation of FMF separate and
apart from these Articles of Merger and may be separately certified as the
Articles of Incorporation of FMF.
7. Bylaws. The Bylaws of FMF shall be Bylaws of FMF as the surviving
corporation following the Effective Date unless and until the same shall be
amended or repealed in accordance with the provisions thereof.
8. Further Assurance of Title. If at any time, FMF shall consider or be
advised that any acknowledgments or assurances in law or other similar actions
are necessary or desirable in order to acknowledge or confirm in and to FMF any
right, title, or Interest of PMD held Immediately prior to the Effective Date,
PMD and ft proper officers and directors shall and will execute and deliver all
such acknowledgments or assurances in law and do all things necessary or proper
to acknowledge or confirm such right, title, or interest in FMF as shall be
necessary to carry out the purposes of these Articles of Merger, and FMF and the
proper officers and directors thereof are fully authorized to take any and all
such action in the name of PMD or otherwise.
9. Retirement of Organization Stock. Forthwith upon the Effective Date,
each of the 100 shares of the Common Stock of FMF presently issued and
outstanding shall be retired, and no shares of Common Stock or other securities
of FMF shall be issued In respect thereof.
10. Conversion of Outstanding Stock; Options.
a. Forthwith upon the Effective Date, each of the Issued and
outstanding shams of Common Stock of PMD and all rights In respect thereof shall
be converted into one (1) fully paid and nonassessable shares of Common Stock of
FMF, and each certificate nominally representing shares of Common Stock of PMD
shall for all purposes be deemed to evidence the ownership of a like number of
shares of Common Stock of
2
<PAGE>
FMF. The holders of such certificates shall not be required Immediately to
surrender the same In exchange for certificates of Common Stock of FMF but, as
certificates nominally representing shares of Common Stock of PMD, FMF will
cause to be Issued therefor certificates for such number of Common Stock of FMF.
b. Forthwith upon the Effective Date, each of the Issued and
outstanding option to purchase shares of Common Stock of PMD and all rights in
respect thereof shall be converted into a similar number of options to purchase
shares of Common Stock of FMF, for the same exercise price, exercise period and
other similar terms and conditions and each stock option agreement representing
such options shall for all purposes be deemed to evidence the similar rights to
purchase such like number of shares of Common Stock of FMF. The holders of such
stock option agreements shall not be required immediately to surrender the same
in exchange for stock option agreements to purchase shares of Common Stock of
FMF.
11. Book Entries. The merger contemplated hereby shall be treated as a
pooling of interests and as of the Effective Date entries shall be made upon the
books of FMF in accordance with the following:
(a) The assets and liability of PMD shall be recorded at the
amounts at which they are carried on the books of PMD immediately prior to the
Effective Date with appropriate adjustment to reflect the retirement of the
8,039,500 shares of Common Stock of PMD presently issued and outstanding.
(b) There shall be credited to Capital Account the aggregate
amount of the par value per share of all of the Common Stock of FMF resulting
from the conversion of the outstanding Common Shams of PMD.
(c) There shall be credited to Capital Surplus Account an
amount equal to that carried on the Capital Surplus Account of PMD immediately
prior to the Effective Date.
(d) There shall be credited to Earned Surplus Account an
amount equal to that carried on the Earned Surplus Account of PMD immediately
prior to the Effective Date.
12. Directors. The names of the first director of FMF following the
Effective Date who shall hold office from the Effective Date until their
successors shall be elected and shall qualify, are as follows:
Name Address
---- -------
Marc Puleo, M.D. 3330 N.W. 53rd Street, Suite 307
Fort Lauderdale, Florida 33309
3
<PAGE>
13. Officers. The names of the first officers of PMD following the
Effective Data and who shall hold office from the Effective Date until their
successors shall be appointed and shall quality or until they shall resign or be
removed from office, are as follows:
<TABLE>
<CAPTION>
Name Office Address
---- ------ -------
<S> <C> <C> <C>
Marc Puleo, M.D. President, Secretary, 3330 N.W. 53rd Street, Suite 307
Treasurer Fort Lauderdale, Florida 33309
</TABLE>
14. Vacancies. If, upon the Effective Date, a vacancy shall exist in
the Board of Directors or in any of the offices of FMF as the same are specified
above, such vacancy shall thereafter be filled in the manner provided by law and
the Bylaws of FMF.
15. Name Change. As soon as practicable, FMF shall change its name to
PetMed Express, Inc., a Florida corporation.
16. Amendment. These Articles of Merger cannot be altered or amended,
except pursuant to an instrument in writing signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused these Articles of
Merger to be executed by the President of each of them pursuant to authority
given by their respective Boards of Directors.
PetMed Express, Inc., FarMed Express, Inc.,
a Delaware corporation A Florida corporation
Approved by the Board of Directors Approved by the Board of Directors
and Shareholders by majority written and Shareholders by majority written
consent on May 5, 1997 Consent on May 5, 1997
By: /s/ Marc Puleo, M.D. By: /s/ Marc Puleo, M.D.
------------------------ ------------------------
Marc Puleo, M.D. Marc Puleo, M.D.
4
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
FOR
FARMED EXPRESS, INC.
Pursuant to Section 607.1006 of the Business Corporation Act of the
State of Florida, the undersigned President of FARMED EXPRESS, INC. (the
"Corporation"), a corporation organized and existing under and by virtue of the
Business Corporation Act of the State of Florida, bearing document number
P96000010098, does hereby certify:
Pursuant to the Written Consent of a majority of the sole director and
shareholders of said Corporation, the sole director and shareholders on May 7 ,
1997, approved the amendment to the Corporation's Articles of Incorporation as
follows:
Article I of the Corporation's Articles of Incorporation shall be
deleted in its entirety and substituted by the following:
ARTICLE I
NAME
Article IV of the Corporation's Articles of Incorporation shall be
deleted in its entirety and substituted by the following:
The name of the Corporation shall be: PETMED EXPRESS, INC.
ARTICLE IV
CAPITAL STOCK
The maximum number of shares that this Corporation shall be authorized
to issue and have outstanding at any one time shall be Twenty-Five Million
(25,000,000) shares which are to be divided into two classes as follows:
GAYLE COLEMAN, ESQ., FL BAR 857327
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
<PAGE>
20,000,000 shares of common stock with a par value of $.001 per share and
5,000,000 shares of preferred stock with a par value of $.001 per share.
Series of the preferred stock may be created and issued from time to
time, with such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series of preferred stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given.
All issued and outstanding shares of Common Stock of the Corporation
held by each holder of record on May 7, 1997, shall be automatically combined
at a rate of one for six (1:6). No fractional share or scrip representing a
fractional share will be issued upon the Reverse Stock Split. Fractional shares
of Common Stock will be rounded up to the next highest share.
The foregoing was adopted by the sole director and shareholders of the
Corporation pursuant to a meeting of the Sole Directors and by a majority of the
shareholders of the Common Stock of the Corporation held on the 7th day of May,
1997 pursuant to Chapter 607 of the Florida Business Corporation Act and the
Corporation's By-laws. These shares present and voted at such meeting
represented a majority of the total issued and outstanding capital stock of the
Corporation entitled to vote. Therefore, the number cast for the amendment to
the Corporation Articles of Incorporation was sufficient for approval.
IN WITNESS WHEREOF, the undersigned being the President of this
Corporation has executed these Articles of Amendment as of the 7th day of
May, 1997.
/s/ Marc Puleo, M.D.
------------------------
Marc A. Puleo, President
2
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PETMED EXPRESS, INC.
The undersigned, being a natural person competent to contract, does
hereby make, subscribe and file the Articles of Amendment to the Articles of
Incorporation of PetMed Express, Inc., a Florida corporation, pursuant to
Sections 607.0602 and 607.10025 of the Florida Business Corporation Act:
1. The name of the corporation is PetMed Express, Inc. (the "Company").
2. The next of the resolution of the Board of Directors on February 17,
1998 setting forth amendments to the designations, rights and privileges of the
Company's Convertible Preferred Stock is as follows:
WHEREAS, pursuant to Article IV of the Articles of Incorporation the
Company is authorized to issue 5,000,000 shares of preferred stock,
par value $.001 per share (the "Preferred Stock"), issuable in such
series and bearing such voting, dividend, conversion, liquidation
and other rights and preferences as the Board of Directors may
determine.
WHEREAS, the Board of Directors deems it to be in the best interest
of the Company to designate a series of such Preferred Stock,
consisting of 340,000 shares.
NOW, THEREFORE, be it resolved that the Board of Directors of the
Company be and hereby determines that 250,000 shares of Preferred
Stock are designated as Convertible Preferred Stock, with the
following designations, rights and preferences:
1. Designation and Initial Number. The series of preferred Stock
hereby classified shall be designated "Convertible Preferred Stock"
(the "Convertible Preferred Stock"). The initial number of
authorized shares of the Convertible Preferred Stock shall be
250,000 shares. Upon issuance of the shares of Convertible Preferred
Stock $4.00 per share shall be the stated capital of the Company.
2. Voting Rights. Holders of the shares of Convertible Preferred
Stock shall be entitled to full voting rights, share for share, with
the then outstanding Common Stock as well as with any other class or
series of stock of the Company which have general voting power with
the Common Stock concerning any matter being voted upon. Except as
so provided, shares of Convertible preferred Stock shall at no time
be entitled, as a series, class or
<PAGE>
otherwise, to any other or special or restrictive voting rights of
any kind whatsoever, except as then and when and to the extent
required by applicable law.
3. Conversion Privilege. Each share of Convertible Preferred Stock
is convertible into 1.35 shares of the Company's Common Stock at any
time at the option of the holder; provided, however, that shares of
Convertible Preferred Stock must be converted in units of 5,000
shares, resulting in the issuance of 6,750 shares of Common Stock.
4. Redemption. The shares of Convertible Preferred Stock are not
redeemable by the Company.
5. Dividends. The shares of Convertible Preferred Stock may pay
annual dividends out of funds legally available for the payment of
dividends in the sole discretion of the Company. There is however,
no obligation of the Company to declare dividends at any time on the
shares of Convertible Preferred Stock.
6. Liquidation. In the event of any voluntary or involuntary
dissolution or winding up of the Company, the holders of shares of
Convertible Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to
its shareholders an amount per share equal to $4.00 without
interest, and no more, before any payment shall be made to the
holders of any stock of the Company ranking junior to the
Convertible Preferred Stock. A merger of consolidation of the
Company with or into any other corporation, share exchange or sale
of conveyance of all or any part of the assets of the Company which
shall not in fact result in the liquidation of the Company and the
distribution of assets to its shareholders shall not be deemed to be
a voluntary or involuntary liquidation, dissolution or winding up of
the Company within the meaning of this Paragraph 6.
7. Transferability. The shares of convertible Preferred Stock may be
transferred at any time and from time to time at the sole option of
the holder.
BE IT FURTHER RESOLVED, that the President of the Company be and
hereby is authorized and directed to execute and file Articles of
Amendment reflecting the foregoing action and to take such other
acts or actions as he deems necessary and appropriate to effect the
foregoing.
4. The foregoing amendment was duly adopted by unanimous written
consent of the Board of Directors on February 17, 1998 and shareholders action
was not required.
2
<PAGE>
IN WITNESS WHEREOF, this Article of Amendment to the Articles of
Incorporation has been executed on the 17th day of February, 1998.
PetMed Express, Inc.
By: /s/ Marc Puleo, M.D.
--------------------------
Marc Puleo, President
3
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PETMED EXPRESS, INC.
--------------------
The undersigned, being all the Board of Directors of PetMed Express,
Inc. (hereinafter the "Corporation'), a Florida corporation, do hereby certify
and set forth:
1. The name of the corporation is PetMed Express, Inc.
2. The Articles of Incorporation of the Corporation were filed with the
Secretary of State of Florida on January 29, 1996, Document #96000010098.
3. Articles of Amendment to the Corporation's Articles of
Incorporation, as authorized by the Corporation's Board of Directors and all of
Its shareholders, (i) changing the principal office of the Corporation and (ii)
increasing the number of authorized shares of the Corporation, were filed with
the Secretary of State of Florida on July 22, 1996.
4. Articles of Amendment to the Corporation's Articles of
Incorporation, as authorized by the Corporation's Board of Directors and all of
its shareholders, changing the Corporation's name to FarMed Express, Inc. was
filed with the Secretary of State of Florida on January 3, 1997.
5. Articles of Amendment to the Corporation's Articles of
Incorporation, as authorized by the Corporation's Board of Directors and all of
its shareholders, increasing the authorized number of shares which the
Corporation shall have authority to issue at any one time to 20,000,000 shares
of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, par
value $.001 per share, were filed with the Secretary of State of Florida on May
2, 1997.
6. Articles of Merger, as authorized by the Corporation's Board of
Directors and all of its shareholders, merging PetMed Express, Inc., a Delaware
corporation, into the Corporation were filed with the Secretary of State of
Florida on May 5, 1997.
7. Articles of Amendment to the Corporation's Articles of
Incorporation, as authorized by the Corporation's Board of Directors and all of
its shareholders, (i) changing the name of the Corporation to PetMed Express,
Inc. and (ii) combing the issued and outstanding shares of Common Stock at a
rate of one for six (1:6), were filed with the Secretary of State of Florida an
May 13, 1997.
8. Articles of Amendment to the Corporation's Articles of
Incorporation, as authorized by the Corporation's Board of Directors and which
did not require action by
ROXANNE K. REILLY, ESQ. FL BAR #851450
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las 0las Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
<PAGE>
Corporation's shareholders, setting forth the designations, rights and
preferences of the Corporation's Convertible Preferred Stock were filed with the
Secretary of State of Florida on February 19, 1998.
9. The Amended and Restarted Articles of Incorporation were adopted by
the Board of Directors on July 27, 1998 and shareholder action was not required.
To effect the foregoing, the text of the Articles of Incorporation is hereby
amended and restated as herein set forth in full:
ARTICLE I.
CORPORATE NAME
--------------
The name of this Corporation shall be: PetMed Express, Inc.
ARTICLE II.
PRINCIPAL OFFICE AND MAILING ADDRESS
------------------------------------
The principal office and mailing address of the Corporation is 3350 NW
53 Street, Suite 103, Fort Lauderdale, FL 33309.
ARTICLE III.
NATURE OF CORPORATE BUSINESS AND POWERS
---------------------------------------
The Corporation Is organized for the purpose of transacting any and all
lawful business for which corporations may be incorporated under the laws of
Florida.
ARTICLE IV.
CAPITAL STOCK
-------------
The maximum number of shares that this Corporation shall be authorized
to issue and have outstanding at any one time shall be Twenty-five million
(25,000,000) shares which are to be divided Into two classes as follows:
20.000,000 shares of common stock with a per value $.001 per share, and
5,000,000 shares of preferred stock with a par value of $.001 per share.
Series of the preferred stock may be created and issued from time to
time, with such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
ROXANNE K. REILLY, ESQ. FL BAR #851450
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las 0las Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
2
<PAGE>
Issuance of such series of preferred stork as adopted by the Board of Directors
pursuant to the authority In this paragraph.
250,000 shares of preferred stock are designated as Convertible
Preferred Stock, with the following designations, rights and preferences:
1. Designation and Initial Number. The series of Preferred Stock hereby
classified shall be designated "Convertible Preferred Stock" (the "Convertible
Preferred Stock"). The Initial number of authorized shares of the Convertible
Preferred Stock shall be 250,000 shares. Upon issuance of the shares of
Convertible Preferred Stock $4.00 per share shall be the stated capital of the
Corporation.
2. Voting Rights. Holders of the shares of Convertible Preferred Stock
shall be entitled to full voting rights, share for share, with the then
outstanding Common Stock as well as with any other class or series of stock of
the Corporation which have general voting power with the Common Stock concerning
any matter being voted upon. Except as so provided, shares of Convertible
Preferred Stock shall at no time be entitled, as a series, class or otherwise,
to any other or special or restrictive voting rights of any kind whatsoever,
except as then and when and to the extent required by applicable law.
3. Conversion Privilege. Each share of Convertible Preferred Stock is
convertible into 1.35 shares of the Corporation's Common Stock at any time at
the option of the holder, provided, however, that shares of Convertible
Preferred Stock must be converted in units of 5,000 shares, resulting in the
issuance of 6,750 shares of Common Stock.
4. Redemption. The shares of Convertible Preferred Stock are not
redeemable by the Corporation.
5. Dividends. The shares of Convertible Preferred Stock may pay annual
dividends out of funds legally available for the payment of dividends in the
sole discretion of the Corporation. There is, however, no obligation of the
Corporation to declare dividends at anytime on the shares of Convertible
Preferred Stock.
6. Liquidation. In the event of any voluntary or involuntary
dissolution or winding up of the Corporation, the holders of shares of
Convertible Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its shareholders an
amount per share equal to $4.00 without interest, and no more, before any
payment shall be made to the holders of any stock of the Corporation ranking
junior to the Convertible Preferred Stock. A merger of consolidation of the
Corporation with or into any other corporation, share exchange or sale of
conveyance of
ROXANNE K. REILLY, ESQ. FL BAR #851450
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las 0las Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
3
<PAGE>
all or any part of the assets of the Corporation which shall not in fact result
in the liquidation of the Corporation and the distribution of assets of its
shareholders shall not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation within the meaning of this
Paragraph 6.
7. Transferability. The shares of Convertible Preferred Stock may be
transferred at any time and from time to time at the sole option of 'the holder.
ARTICLE V.
REGISTERED AGENT AND ADDRESS
----------------------------
The Registered Agent and the street address of the Registered Office of
this Corporation in the State of Florida shall be:
Marc A. Puleo
3360 NW 63 Street
Suite 103
Fort Lauderdale, FL 33309
ARTICLE VI.
BOARD OF DIRECTORS
------------------
The Corporation shall have two (2) directors to hold office until the
first annual meeting of shareholders and until their successors shall have been
elected and qualified, or until their earlier resignations, removal form office
or death. The number of directors may be either Increased or decreased from time
to time in accordance with the Bylaws of the Corporation.
These Amended and Restated Articles of Incorporation do not contain any
amendments which require shareholder approval and have been duly adopted by the
Corporation's Board of Directors on July 27, 1998.
IN WITNESS WHEREOF, these Amended and Restated Articles of
Incorporation of PetMed Express, Inc., a Florida corporation, has been executed
this 31st day of July, 1998.
/s/ Marc Puleo, M.D.
----------------------
Marc A. Puleo,
Director and President
ROXANNE K. REILLY, ESQ. FL BAR #851450
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las 0las Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
4
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
PETMED EXPRESS, INC.
The undersigned, being a natural person competent to contract, does
hereby make, subscribe and file this Articles of Amendment to the Articles of
Incorporation of PetMed Express, Inc., a Florida corporation, pursuant to
Section 607.1003 of the Florida Business Corporation Act:
1. The name of the corporation is PetMed Express, Inc. (the
"Corporation).
2. Article 1 of the Corporation's Articles of Incorporation shall be
deleted in its entirety and replaced with the following:
ARTICLE 1.
CORPORATE NAME
--------------
The name of this Corporation shall be: PetMedExpress.com, Inc.
3. The foregoing amendment was duly adopted by written consent of the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, and the unanimous
written consent of the Board of Directors as of March 12, 1999.
IN WITNESS WHEREOF, this Articles of Amendment to the Articles of
Incorporation have been executed this as of 15th day of March, 1999.
/s/ Marc Puleo, M.D.
------------------------------
Marc A. Puleo, M.D., President
Exhibit 3.2
BYLAWS
OF
PETMED EXPRESS, INC.
a Florida corporation
<PAGE>
INDEX
-----
PAGE
----
ARTICLE I
---------
Offices
-------
Section 1.01 Principal Office .............................................. 1
Section 1.02 Registered Office ............................................. 1
Section 1.03 Other Offices ................................................. 1
ARTICLE II
----------
Meetings of Shareholders
------------------------
Section 2.01 Annual Meeting ................................................ 1
Section 2.02 Special Meetings .............................................. 2
Section 2.03 Shareholders' List for Meeting ................................ 2
Section 2.04 Record Date ................................................... 3
Section 2.05 Notice of Meetings and Adjournment ............................ 3
Section 2.06 Waiver of Notice .............................................. 4
2
<PAGE>
ARTICLE III
-----------
Shareholder Voting
------------------
Section 3.01 Voting Group Defined .......................................... 5
Section 3.02 Quorum and Voting Requirements for
Voting Groups .................................... 5
Section 3.03 Action by Single and Multiple Voting
Groups ........................................... 6
Section 3.04 Shareholder Quorum and Voting; Greater
or Lesser Voting Requirements ..................... 6
Section 3.05 Voting for Directors; Cumulative Voting ....................... 7
Section 3.06 Voting Entitlement of Shares .................................. 7
Section 3.07 Proxies ....................................................... 9
Section 3.08 Shares Held by Nominees ....................................... 10
Section 3.09 Corporation's Acceptance of Votes ............................. 10
Section 3.10 Action by Shareholders Without Meeting ........................ 11
Section 3.11 Frequency of Solicitations for Action
by Shareholders Without a Meeting ................ 11
ARTICLE IV
----------
Board of Directors and Officers
-------------------------------
Section 4.01 Qualifications of Directors ................................... 12
Section 4.02 Number of Directors ........................................... 12
Section 4.03 Terms of Directors Generally .................................. 12
Section 4.04 Staggered Terms for Directors ................................. 13
Section 4.05 Vacancy on Board .............................................. 13
Section 4.06 Compensation of Directors ..................................... 13
3
<PAGE>
Section 4.07 Meetings ...................................................... 13
Section 4.08 Action by Directors Without a Meeting ......................... 14
Section 4.09 Notice of Meetings ............................................ 14
Section 4.10 Waiver of Notice .............................................. 14
Section 4.11 Quorum and Voting ............................................. 14
Section 4.12 Powers of the Directors ....................................... 14
Section 4.12 Committees .................................................... 15
Section 4.13 Loans to Officers, Directors and
Employees; Guaranty of Obligations ............... 16
Section 4.14 Required Officers ............................................. 16
Section 4.15 Duties of Officers ............................................ 16
Section 4.16 Resignation and Removal of Officers ........................... 16
Section 4.17 Contract Rights of Officers ................................... 17
Section 4.18 General Standards for Directors ............................... 17
Section 4.19 Director Conflicts of Interest ................................ 18
Section 4.20 Resignation of Directors ...................................... 18
ARTICLE V
---------
Indemnification of Directors, Officers,
---------------------------------------
Employees and Agents
--------------------
Section 5.01 Directors, Officers, Employees
and Agents ....................................... 19
4
<PAGE>
ARTICLE VI
----------
Office and Agent
----------------
Section 6.01 Registered Office and Registered
Agent ............................................ 24
Section 6.02 Change of Registered Office or Registered
Agent; Resignation of Registered Agent ........... 24
ARTICLE VII
-----------
Shares, Option, Dividends and Distributions
-------------------------------------------
Section 7.01 Authorized Shares ............................................. 25
Section 7.02 Terms of Class or Series Determined
by Board of Directors ............................ 26
Section 7.03 Issued and Outstanding Shares ................................. 26
Section 7.04 Issuance of Shares ............................................ 27
Section 7.05 Form and Content of Certificates .............................. 27
Section 7.06 Shares Without Certificates ................................... 28
Section 7.07 Restriction on Transfer of Shares
and Other Securities ............................. 28
Section 7.08 Shareholder's Pre-emptive Rights .............................. 29
Section 7.09 Corporation's Acquisition of its
Own Shares ....................................... 29
Section 7.10 Share Options ................................................. 29
Section 7.11 Terms and Conditions of Stock Rights
and Options ...................................... 30
Section 7.12 Share Dividends ............................................... 30
Section 7.13 Distribution to Shareholders .................................. 31
5
<PAGE>
ARTICLE VIII
------------
Amendment of Articles and Bylaws
--------------------------------
Section 8.01 Authority to Amend the Articles of
Incorporation .................................... 32
Section 8.02 Amendment by Board of Directors ............................... 32
Section 8.03 Amendment of Bylaws by Board of
Directors ........................................ 33
Section 8.04 Bylaw Increasing Quorum or Voting
Requirements for Directors ....................... 33
ARTICLE IX
----------
Records and Report
------------------
Section 9.01 Corporate Records ............................................. 34
Section 9.02 Financial Statements for Shareholders ......................... 35
Section 9.03 Other Reports to Shareholders ................................. 36
Section 9.04 Annual Report for Department of State ......................... 36
ARTICLE X
---------
Miscellaneous
-------------
Section 10.01 Definition of the "Act" ....................................... 37
Section 10.02 Application of Florida Law .................................... 37
Section 10.03 Fiscal Year ................................................... 37
Section 10.04 Conflicts with Articles of
Incorporation .................................... 37
6
<PAGE>
ARTICLE I
Offices
Section 1.01. Principal Office.
The principal office of the corporation in the State of Florida shall
be established at such places as the board of directors from time to time
determine.
Section 1.02. Registered Office.
The registered office of the corporation in the State of Florida shall
be at the office of its registered agent as stated in the articles of
incorporation or as the board of directors shall from time to time determine.
Section 1.03. Other Offices.
The corporation may have additional offices at such other places,
either within or without the State of Florida, as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Shareholders
Section 2.01. Annual Meeting.
(1) The corporation shall hold a meeting of shareholders annually, for
the election of directors and for the transaction of any proper business, at a
time stated in or fixed in accordance with a resolution of the board of
directors.
(2) Annual shareholders' meeting may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution by the
board of directors or, when not inconsistent with the board of directors'
resolution stated in the notice of the annual meeting. If no place is stated in
or fixed in accordance with these bylaws, or stated in the notice of the annual
meeting , annual meetings shall be held at the corporation's principal office.
(3) The failure to hold the annual meeting at the time stated in or
fixed in accordance with these bylaws or pursuant to the Act does not affect the
validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
7
<PAGE>
Section 2.02. Special Meeting.
(1) The corporation shall hold a special meeting of shareholders:
(a) On call of its board of directors or the person or persons
authorized to do so by the board of directors; or
(b) If the holders of not less than twenty (20%) percent of
all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date and deliver to the corporation's secretary
one or more written demands for the meeting describing the purpose or purposes
for which it is to be held.
(2) Special shareholders' meetings may be held in or out of the State
of Florida at a place stated in or fixed in accordance with a resolution of the
board of directors, or, when not inconsistent with the board of directors'
resolution, in the notice of the special meeting. If no place is stated in or
fixed in accordance with these bylaws or in the notice of the special meeting,
special meetings shall be held at the corporation's principal office.
(3) Only business within the purpose or purposes described in the
special meeting notice may be conducted at a special shareholders' meeting.
Section 2.03. Shareholders' List for Meeting.
(1) After fixing a record date for a meeting, a corporation
entitled to notice of a shareholders' meeting, in accordance with the Florida
Business Corporation Act (the "Act"), or arranged by voting group, with the
address of, and the number and class and series, if any, of shares held by,
each.
(2) The shareholders' list must be available for inspection by any
shareholder for a period of ten days prior to the meeting or such shorter time
as exists between the record date and the meeting and continuing through the
meeting at the corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office of
the corporation's transfer agent or registrar. A shareholder or his agent or
attorney is entitled on written demand to inspect the list (subject to the
requirements of Section 607.1602(3) of the Act), during regular business hours
and at his expense, during the period it is available for inspection.
(3) The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
8
<PAGE>
Section 2.04. Record Date.
(1) The board of directors may set a record date for purposes of
determining the shareholders entitled to notice of and to vote at a
shareholders' meeting; however, in no event may a record date fixed by the board
of directors be a date preceding the date upon which the resolution fixing the
record date is adopted.
(2) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to demand a special meeting is the date
the first shareholder delivers his demand to the corporation. In the event that
the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a special
meeting.
(3) If no prior action is required by the board of directors pursuant
to the Act, and, unless otherwise fixed by the board of directors, the record
date for determining shareholders entitled to take action without a meeting is
the date the first signed written consent is delivered to the corporation under
Section 607.0704 of the Act. If prior action is required by the board of
directors pursuant to the Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the board of directors adopts the resolution taking such prior action.
(4) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before the
first notice of such annual or special shareholders' meeting is delivered to
shareholders.
(5) A record date may not be more than seventy (70) days before the
meeting or action requiring a determination of shareholders.
(6) A determination of shareholders entitled to notice of or to vote at
a shareholders' meeting is effective for any adjournment of the meeting unless
the board of directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than one hundred twenty (120) days after the date
fixed for the original meeting.
Section 2.05. Notice of Meetings and Adjournment.
(1) The corporation shall notify shareholders of the date, time and
place of each annual and special shareholders' meeting no fewer than ten (10) or
more than sixty (60) days before the meeting date. Unless the Act requires
otherwise, the corporation is required to give notice only to shareholders
entitled to vote at the meeting. Notice shall be given in the manner provided in
Section 607.0141 of the Act, by or at the direction of the president, the
secretary, of the officer or persons calling the meeting. If the notice is
mailed at least thirty (30) days before the date of the meeting, it may be done
by a class of United States mail other than first class. Notwithstanding Section
607.0141, if mailed, such notice shall be deemed to be delivered when deposited
in the United Statement mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
9
<PAGE>
(2) Unless the Act or the articles of incorporation requires otherwise,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called.
(3) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(4) If an annual or special shareholders meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time or place is announced at the meeting before
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If
a new record date is or must be fixed under Section 607.0707 of the Act,
however, notice of the adjourned meeting must be given under this section to
persons who are shareholders as of the new record date who are entitled to
notice of the meeting.
(5) Notwithstanding the foregoing, no notice of a shareholders' meeting
need be given if: (a) an annual report and proxy statements for two (2)
consecutive annual meetings of shareholders, or (b) all, and at least two (2)
checks in payment of dividends or interest on securities during a 12-month
period, have been sent by first-class United States mail, addressed to the
shareholder at his address as it appears on the share transfer books of the
corporation, and returned undeliverable. The obligation of the corporation to
give notice of a shareholders' meeting to any such shareholder shall be
reinstated once the corporation has received a new address for such shareholder
for entry on its share transfer books.
Section 2.06. Waiver of Notice.
(1) A shareholder may waive any notice required by the Act, the
articles of incorporation, or bylaws before or after the date and time stated in
the notice. The waiver must be in writing, be signed by the shareholder entitled
to the notice, and be delivered to the corporation for inclusion in the minutes
or filing with the corporate records. Neither the business to be transacted at
nor the purpose of any regular or special meeting of the shareholders need be
specified in any written waiver of notice.
(2) A shareholder's attendance at a meeting: (a) Waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; or (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when it
is presented.
10
<PAGE>
ARTICLE III
Shareholder Voting
Section 3.01. Voting Group Defined.
A "voting group" means all shares of one or more classes or series that
under the articles of incorporation or the Act are entitled to vote and be
counted together collectively on a matter at a meeting of shareholders. All
shares entitled by the articles of incorporation or the Act to vote generally on
the matter are for that purpose a single voting group.
Section 3.02. Quorum and Voting Requirements for Voting Groups.
(1) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Act provides otherwise,
a majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
(2) Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(3) If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
articles of incorporation or the Act requires a greater number of affirmative
votes.
Section 3.03. Action by Single and Multiple Voting Groups.
(1) If the articles of incorporation or the Act provides for voting by
a single voting group on a matter, action on that matter is taken when voted
upon by that voting group as provided in Section 3.02 of these bylaws.
(2) If the articles of incorporation or the Act provides for voting by
two or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately as provided in
Section 3.02 of these bylaws. Action may be taken by one voting group on a
matter even though no action is taken by another voting group entitled to vote
on the matter.
Section 3.04. Shareholder Quorum and Voting Greater or Lesser Voting
Requirements.
(1) A majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of shareholders. When a
specified item of business is required to be voted on by a class or series of
stock, a majority of the shares of such class or series shall constitute a
quorum for the transaction of such item of business by that class or series.
11
<PAGE>
(2) An amendment to the articles of incorporation that changes the
quorum to a greater or lesser quorum or voting requirement must meet the same
quorum requirement and be adopted by the same vote required to take action under
the quorum and voting requirements then in effect or proposed to be adopted,
whichever is greater.
(3) If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number of
affirmative votes or voting by classes is required by the Act or the articles of
incorporation.
(4) After a quorum has been established at a shareholders~ meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
Section 3.05. Voting for Directors: No Cumulative Voting.
(1) Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
(2) Each shareholder who is entitled to vote at an election of
directors has the right to vote the number of shares owned by him for as many
persons as there are directors to be elected and for whose election he has a
right to vote. Shareholders do not have a right to cumulate their votes for
directors.
Section 3.06. Voting Entitlement of Shares.
(1) Unless the articles of incorporation or the Act provides otherwise,
each outstanding share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of shareholders. Only shares are
entitled to vote.
(2) The shares of a corporation are not entitled to vote if they are
owned, directly or indirectly, by a second corporation, domestic or foreign, and
the first corporation owns, directly or indirectly, a majority of shares
entitled to vote for directors of the second corporation.
(3) This section does not limit the power of the corporation to vote
any shares, including its own shares, held by it in a fiduciary capacity.
(4) Redeemable shares are not entitled to vote on any matter, and shall
not be deemed to be outstanding, after notice of redemption is mailed to the
holders thereof and a sum sufficient to redeem such shares has been deposited
with a bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
12
<PAGE>
(5) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the bylaws of the
corporate shareholder may prescribe or, in the absence of any applicable
provision, by such person as the board of directors of the corporate shareholder
may designate. In the absence of any such designation or in case of conflicting
designation by the corporate shareholder, the chairman of the board, the
president, any vice president, the secretary, and the treasurer of the corporate
shareholder, in that order, shall be presumed to be fully authorized to vote
such shares.
(6) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name or the name of his nominee.
(7) Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
(8) If a share or shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the corporation is given notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, then acts with respect to voting have the following effect:
(a) If only one votes, in person or in proxy, his act binds
all;
(b) If more than one vote, in person or by proxy, the act of
the majority so voting binds all;
(c) If more than one vote, in person or by proxy, but the vote
is evenly split on any particular matter, each faction is entitled to vote the
share or shares in question proportionally;
(d) If the instrument or order so filed shows that any such
tenancy is held in unequal interest, a majority or a vote evenly split for
purposes of this subsection shall be a majority or a vote evenly split in
interest;
(e) The principles of this subsection shall apply, insofar as
possible, to execution of proxies, waivers, consents, or objections and for the
purpose of ascertaining the presence of a quorum;
13
<PAGE>
(f) Subject to Section 3.08 of these bylaws, nothing herein
contained shall prevent trustees or other fiduciaries holding shares registered
in the name of a nominee from causing such shares to be voted by such nominee as
the trustee or other fiduciary may direct. Such nominee may vote shares as
directed by a trustee or their fiduciary without the necessity of transferring
the shares to the name of the trustee or other fiduciary.
Section 3.07. Proxies.
(1) A shareholder, other person entitled to vote on behalf of a
shareholder pursuant to Section 3.06 of these bylaws, or attorney in fact may
vote the shareholder's shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for him
by signing an appointment form, either personally or by his attorney in fact. An
executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, or equivalent reproduction of an
appointment form, is a sufficient appointment form.
(3) An appointment of a proxy is effective when received by the
secretary or other officer or agent authorized to tabulate votes. An appointment
is valid for up to eleven (11) months unless a longer period is expressly
provided in the appointment form.
(4) The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
(5) An appointment of a proxy is revocable by the shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Appointments coupled with an interest
include the appointment of: (a) a pledgee; (b) a person who purchased or agreed
to purchase the shares; (c) a creditor of the corporation who extended credit to
the corporation under terms requiring the appointment; (d) an employee of the
corporation whose employment contract requires the appointment; or (e) a party
to a voting agreement created in accordance with the Act.
(6) An appointment made irrevocable under this section becomes
revocable when the interest with which it is coupled is extinguished and, in a
case provided for in Subsection 5(c) or 5(d), the proxy becomes revocable three
(3) years after the date of the proxy or at the end of the period, if any,
specified herein, whichever is less, unless the period of irrevocability is
renewed from time to time by the execution of a new irrevocable proxy as
provided in this section. This does not affect the duration of a proxy under
subsection (3).
14
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(7) A transferee for value of shares subject to an irrevocable
appointment may revoke the appointment if he did not know of its existence when
he acquired the shares and the existence of the irrevocable appointment was not
noted conspicuously on the certificate representing the shares or on the
information statement for shares without certificates.
(8) Subject to Section 3.09 of these bylaws and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, a corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
(9) If an appointment form expressly provides, any proxy holder may
appoint, in writing, a substitute to act in his place.
Section 3.08. Shares Held by Nominees.
(1) The corporation may establish a procedure by which the beneficial
owner of shares that are registered in the name of a nominee is recognized by
the corporation as the shareholder. The extent of this recognition may be
determined in the procedure.
(2) The procedure may set forth (a) the types of nominees to which it
applies; (b) the rights or privileges that the corporation recognizes in a
beneficial owner; (c) the manner in which the procedure is selected by the
nominee; (d) the information that must be provided when the procedure is
selected; (e) the period for which selection of the procedure is effective; and
(f) other aspects of the rights and duties created.
Section 3.09. Corporation's Acceptance of Votes.
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent waiver, or proxy appointment and
give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if: (a) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (b) the name signed purports to be that of an
administrator, executor, guardian, personal representative, or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment; (c) the name signed purports
to be that of a receiver, trustee in bankruptcy, or assignee for the benefit of
creditors of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, or proxy appointment; (d) the name signed purports to be
that of a pledgee, beneficial owner, or attorney in fact of the
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shareholder and, if the corporation requests, evidence acceptable to the
corporation of the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver, or proxy appointment; or
(e) two or more persons are the shareholder as covenants or fiduciaries and the
name signed purports to be the name of at least one of the co-owners and the
person signing appears to be acting on behalf of all the co-owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
(4) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this section are not liable in damages to the shareholder for
the consequences of the acceptance or rejection.
(5) Corporate action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a court
of competent jurisdiction determines otherwise.
Section 3.10. Action by Shareholders Without Meeting.
(1) Action by Written Consent. Any action which is required to be or
may be taken at any annual or special meeting of the shareholders of the
corporation may be taken without a meeting, without prior notice and without a
vote, if written consents which set forth the specific corporate action (the
"Corporate Action") to be taken have been signed by the holders of outstanding
shares of common stock which possess not less than the minimum number of votes
necessary to authorize or take such Corporate Action at an annual or special
meeting of shareholders at which all outstanding shares of common stock are
represented and the other requirements contained herein and in the corporation's
articles of incorporation and Florida law are complied with.
(2) Determination of Record Date for Action by Written Consent. In
order to inform the corporation's shareholders and the investing public in
advance that a record date for action by written consent will occur and in order
that the corporation may determine the shareholders entitled to consent to
Corporate Action in writing without a meeting, the Board of Directors may fix a
record date for such action, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten (10) business days
after the date upon which the resolution fixing such record date is adopted by
the Board of Directors. Any Soliciting Party (as defined herein) who seeks to
have the shareholders authorize or take a Corporate Action by written consent
must advise the corporation by written notice (the "Solicitation Notice")
delivered to the Secretary of the corporation (the "Secretary"), which must be
delivered by certified mail, overnight courier
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or hand delivery, of the proposed Corporate Action for which written consents
will be sought and request that the Board of Directors fix a record date. The
record date for determining shareholders entitled to consent to the Corporate
Action in writing shall be fixed by the Board of Directors by resolution within
ten (10) business days after the date of delivery of the Solicitation Notice. If
the Board of Directors does not fix a record date within the ten (10) business
day-period after the date of delivery of the Solicitation Notice, and no prior
action by the Board of Directors is required by Florida law, the corporation's
articles of incorporation or these bylaws, the record date shall be the first
date on which a valid signed consent setting forth the Corporate Action is
delivered to the corporation in accordance with Florida law, the corporation's
articles of incorporation and these bylaws. If the Board of Directors does not
fix a record date within the ten (10) business day-period after the date of
delivery of the Solicitation Notice and prior action by the Board of Directors
is required by Florida law, the corporation's articles of incorporation or these
bylaws, the record date shall be at the close of business on the day on which
the Board of Directors adopts the resolution taking such prior action.
(3) Duration and Revocation of Consents. Consents to a Corporate Action
shall only be valid during the period ending sixty (60) days after the date the
first valid signed consent regarding the proposed Corporate Action is delivered
to the corporation in accordance with Florida law, the corporation's articles of
incorporation and these bylaws. Consents may be revoked by written notice to (i)
the Secretary or (ii) any other officer or agent of the corporation having
custody of the book in which proceedings of meetings of shareholders are
recorded.
(4) Retention and Duties of Inspector. Within fifteen (15) business
days after receipt of a Solicitation Notice, the Secretary shall engage a
nationally-recognized independent inspector of elections (the "Inspector") to
perform a review of any consents and revocations related to such Solicitation
Notice. The Inspector shall review all such consents and revocations, determine
whether the requisite number of valid and unrevoked consents has been obtained
to authorize or take the Corporate Action specified in the consents, and certify
such determination for entry in the records of the corporation. All costs of
retaining the Inspector shall be borne by the party which is soliciting
consents. For the purpose of permitting the Inspector to perform such review, no
action by written consent without a meeting shall be effective until such date
as the Inspector certifies to the corporation that the consents delivered to the
corporation in accordance with this Section 3.10 represent at least the minimum
number of votes that would be necessary to take the Corporate Action by written
consent.
(5) Procedures for Counting and Challenging Consents. All consents and
revocations shall be delivered to the Inspector upon receipt by the corporation
or its other designated agents. When such consents and revocations are received,
the Inspector shall review the consents and revocations and shall maintain a
count of the number of valid and unrevoked consents. As soon as practicable
after the end of the sixty (60) day period provided for in paragraph (c), the
Inspector shall issue a preliminary report to the corporation and the Soliciting
Party stating:
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(a) The number of valid and unrevoked consents;
(b) The number of valid revocations;
(c) The number of invalid consents;
(d) The number of invalid revocations; and
(e) Based on a preliminary count, whether the requisite
number of valid and unrevoked consents has been
obtained to authorize or take the Corporate Action
specified in the consents.
Unless the corporation and the Soliciting Party shall agree to a
shorter or longer period, the corporation and the Soliciting Party shall each
have forty-eight (48) hours to review the consents and revocations and to advise
the Inspector and the other party in writing whether they will challenge any of
the determinations set forth in the Inspector's preliminary report. Any such
written notice must describe with specificity the particular determinations set
forth in the preliminary report that are being challenged. Both the corporation
and the Soliciting Party may challenge any aspect of any of the consents or
revocations. If no written notice of a challenge to the preliminary report is
received by the Inspector within forty-eight (48) hours after the issuance of
the preliminary report, the preliminary report of the Inspector shall become its
final report.
If the corporation or the Soliciting Party or both deliver timely
written notice of a challenge to the preliminary report, the Inspector shall
hold a meeting as promptly as possible to allow the challenging party or parties
to present its or their challenges to any consents and/or revocations. The
Inspector shall adopt such reasonable procedures to be used at such meeting as
it deems necessary in its sole discretion. Representatives and counsel of the
corporation and the Soliciting Party may be present at such meeting. In such
meeting each challenging party (if there are two) and its counsel will be given
an opportunity to present documentation to support its position. The other party
will be given an opportunity to respond to a challenging party's presentation if
it so desires. A transcript of the meeting shall be recorded by a certified
court reporter and will be available for inspection by all parties. Following
completion of this meeting and a review of its results, the Inspector shall as
promptly as possible issue its final report to the corporation and the
Soliciting Party containing its final determinations plus any changes in the
preliminary totals as a result of any challenges and a certification of whether
the requisite number of valid and unrevoked consents was obtained to authorize
or take the Corporate Action specified in the consents. Nothing contained in
this paragraph shall in any way be construed to suggest or imply that the
corporation or any shareholder shall not be entitled to contest the validity of
any consent or revocation thereof or to take any other action (including,
without limitation, the commencement, prosecution or defense of any litigation
with respect thereto).
For purposes of determining the identity of the party which is
soliciting written consents, and to ensure that the limitations contained in
this Section are complied with, "Soliciting Party" shall include (x) any person
who directly or indirectly is the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act
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of 1934, as amended (the "Exchange Act")) of shares of common stock of the
corporation and who delivers a Solicitation Notice to the corporation or on
whose behalf a Solicitation Notice is delivered to the corporation by the record
holder of such shares, (y) any corporation, partnership or other business entity
which such person and/or his affiliates control (as both terms are defined in
Rule 12b-2 promulgated under the Exchange Act), and (z) any group (within the
meaning of Section 13(d)(3) of the Exchange Act) of which such person is a
member.
(6) Notice of Result. Notice of any Corporate Action taken without a
meeting shall be given to those shareholders who have not consented in writing
to such Corporate Action or who were not entitled to vote on the Corporate
Action within five (5) business days after the date on which such Corporate
Action becomes effective.
Section 3.11. Frequency of Solicitations for Action by Shareholders Without a
Meeting.
Notwithstanding any other provision of these bylaws or Florida law, a
Soliciting Party may only solicit (as such term is defined for purposes of
Section 14(a) of the Exchange Act and the regulations thereunder) written
consents from shareholders for any Corporate Action one (1) time during each
fiscal year of the corporation. The corporation shall not (a) provide a
shareholder list or any other shareholder information to a Soliciting Party, (b)
set a record date pursuant to a Solicitation Notice (and no record date shall be
set in accordance with the next to last sentence of Section 3.10(2) of these
bylaws), or (c) have any obligation to mail any materials for or on behalf of
such Soliciting Party for any consent solicitation made by such Soliciting Party
which has already solicited written consents regarding the same or substantially
similar Corporate Action(s) (as determined by the Board of Directors in its
reasonable discretion) within the corporation's then-current fiscal year;
provided, however, that a Soliciting Party may solicit written consents twice in
such fiscal year if the corporation has not conducted an annual meeting of
shareholders within sixteen (16) months prior to the date that the Soliciting
Party delivers its Solicitation Notice for the second consent solicitation. For
purposes of this Section 3.11, all parties contained in the definition of
"Soliciting Party" in Section 3.10(5) of these bylaws shall be considered to be
the same Soliciting Party for purposes of determining whether a consent
solicitation can be made during the fiscal year.
ARTICLE IV
Board of Directors and Officers
Section 4.01. Qualifications of Directors.
Directors must be natural persons who are 18 years of age or older but
need not be residents of the State of Florida or shareholders of the
corporation.
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Section 4.02. Number of Directors.
(1) The board of directors shall consist of not less than three (3) nor
more than eleven (11) individuals.
(2) The number of directors may be increased or decreased from time to
time by amendment to these bylaws by a majority of the directors or by a vote of
sixty-seven percent (67%) of the shares entitled to vote. If the terms of the
directors are staggered under Section 4.04 of these bylaws, any increase or
decrease in the number of directors shall be allocated proportionately among the
classes. Any decrease in the number of directors shall not prematurely shorten
the term of any incumbent director.
(3) Directors are elected at the first annual shareholders~ meeting and
at each annual meeting thereafter unless their terms are staggered under Section
4.04 of these bylaws.
Section 4.03. Terms of Directors Generally.
(1) The terms of the initial directors of the corporation expire at the
first shareholders' meeting at which directors are elected.
(2) The terms of all other directors expire at the next annual
shareholders' meeting following their election unless their terms are staggered
under Section 4.04 of these bylaws.
(3) A decrease in the number of directors does not shorten an incumbent
director's term.
(4) The term of a director elected to fill a vacancy expires at the
next shareholders' meeting at which directors are elected.
(5) Despite the expiration of a director's term, the director shall
continue to serve until that director's successor is elected and qualified or
until there is a decrease in the number of directors.
Section 4.04. Staggered Terms for Directors.
The directors of the corporation may, by the articles of incorporation,
or by amendment to these bylaws adopted by a vote of the directors, be divided
into one, two or three classes with the number of directors in each class being
as nearly equal as possible; the term of office of those of the first class to
expire at the annual meeting next ensuing; of the second class one year
thereafter; at the third class two years thereafter; and at each annual election
held after such classification and election, directors shall be chosen for a
full term, as the case may be, to succeed those whose terms expire. If the
directors have staggered terms, then any increase or decrease in the number of
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directors shall be so apportioned among the classes as to make all classes as
nearly equal in number as possible.
Section 4.06. Vacancy on Board.
(1) Whenever a vacancy occurs on a board of directors, including a
vacancy resulting from an increase in the number of directors, it may be filled
by the affirmative vote of a majority of the remaining directors.
(2) A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
(3) A director chosen as a result of this Section 4.06 or Section 4.02
shall hold such office until the next election of the class for which such
director has been chosen and until their successors shall be elected and
qualified.
Section 4.07. Compensation of Directors.
The board of directors may fix the compensation of directors.
Section 4.08. Meetings.
(1) The board of directors may hold regular or special meetings in or
out of the State of Florida.
(2) A majority of the directors present, whether or not a quorum
exists, may adjourn any meeting of the board of directors to another time and
place. Notice of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless the time and place
of the adjourned meeting are announced at the time of the adjournment, to the
other directors.
(3) Meetings of the board of directors may be called by the chairman of
the board or by the president.
(4) The board of directors may permit any or all directors to
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.
Section 4.09. Action by Directors Without a Meeting.
(1) Action required or permitted by the Act to be taken at a board of
directors' meeting or committee meeting may be taken without a meeting if the
action is taken by all
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members of the board or of the committee. The action must be evidenced by one or
more written consents describing the action taken and signed by each director or
committee member.
(2) Action taken under this section is effective when the last director
signs the consent, unless the consent specifies a different effective date.
(3) A consent signed under this section has the effect of a meeting
vote and may be described as such in any document.
Section 4.10. Notice of Meetings.
Regular and special meetings of the board of directors may be held
without notice of the date, time, place, or purpose of the meeting.
Section 4.11. Waiver of Notice.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting or promptly upon
arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
Section 4.12. Quorum and Voting.
(1) A quorum of a board of directors consists of a majority of the
number of directors prescribed by the articles of incorporation or these bylaws.
(2) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the board of directors.
(3) A director of the corporation who is present at a meeting of the
board of directors or a committee of the board of directors when corporate
action is taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly
upon his arrival) to holding it or transacting specified business at the
meeting; or
(b) He votes against or abstains from the action taken.
Section 4.13. Powers of the Directors.
In furtherance, and not in limitation of the powers conferred to the
Directors by statute, the Board of directors is expressly authorized as follows:
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(1) To make and alter the Bylaws of this corporation.
(2) To authorize and to cause to be executed mortgages and liens upon
the real and personal property of the corporation.
(3) To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose, or to abolish any
such reserve in the manner in which it was created.
(4) From time to time to determine whether and to what extent, at what
time and place, and under what conditions and regulations the accounts and books
of this corporation, or any of them, shall be open to inspection of any
stockholder; and no stockholder shall have any right to inspect any account,
book, or document of this corporation except as conferred by statute or by the
bylaws or as authorized by a resolution of the stockholders or board of
directors.
Section 4.13. Committees.
(1) The board of directors, by resolution adopted by a majority of the
full board of directors, may designate from among its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution and by these bylaws, shall have and may exercise all the
authority of the board of directors, except that no such committee shall have
the authority to:
(a) Approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders.
(b) Fill vacancies on the board of directors or any committee
thereof.
(c) Adopt, amend, or repeal these bylaws.
(d) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors.
(e) Authorize or approve the issuance or sale or contract for
the sale of shares, or determine the designation and relative rights,
preferences, and limitations of a voting group except that the board of
directors may authorize a committee (or a senior executive officer of the
corporation) to do so within limits specifically prescribed by the board of
directors.
(2) The sections of these bylaws which govern meetings, notice and
waiver of notice, and quorum and voting requirements of the board of directors
apply to committees and their members as well.
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(3) Each committee must have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted in
accordance herewith, may designate one or more directors as alternate members of
any such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
(4) Neither the designation of any such committee, the delegation
thereto of authority, nor action by such committee pursuant to such authority
shall alone constitute compliance by any member of the board of directors not a
member of the committee in question with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
Section 4.14. Loans to Officers. Directors, and Employees; Guaranty of
Obligations.
The corporation may lend money to, guaranty any obligation of, or
otherwise assist any officer, director, or employee of the corporation or of a
subsidiary, whenever, in the judgment of the board of directors, such loan,
guaranty, or assistance may reasonably be expected to benefit the corporation.
The loan, guaranty, or other assistance may be with or without interest and may
be unsecured or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section shall be deemed to deny, limit, or restrict the powers
of guaranty or warranty of any corporation at common law or under any statute.
Loans, guaranties, or other types of assistance are subject to section 4.20.
Section 4.15. Required Officers.
(1) The corporation shall have such officers as the board of directors
may appoint from time
(2) A duly appointed officer may appoint one or more assistant
officers.
(3) The board of directors shall delegate to one of the officers
responsibility for preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the corporation.
(4) The same individual may simultaneously hold more than one office in
the corporation.
Section 4.16. Duties of Officers.
Each officer has the authority and shall perform the duties set forth
in a resolution or resolutions of the board of directors or by direction of any
officer authorized by the board of directors to prescribe the duties of other
officers.
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Section 4.17. Resignation and Removal of Officers.
(1) An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date if the board of
directors provides that the successor does not take office until the effective
date.
(2) The board of directors may remove any officer at any time with or
without cause. Any assistant officer, if appointed by another officer, may
likewise be removed by the board of directors or by the officer which appointed
him in accordance with these bylaws.
Section 4.18. Contract Rights of Officers.
The appointment of an officer does not itself create contract rights.
Section 4.19. General Standards for Directors.
(1) A director shall discharge his duties as a director, including his
duties as a member of a committee:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like
position would exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best
interests of the corporation.
(2) In discharging his duties, a director is entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the persons' professional or
expert competence; or
(c) A committee of the board of directors of which he is not a
member if the director reasonably believes the committee
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(3) In discharging his duties, a director may consider such factors as
the director deems relevant, including the long-term prospects and interests of
the corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
(4) A director is not acting in good faith if he has knowledge
concerning the matter in question that makes reliance otherwise permitted by
subsection (2) unwarranted.
(5) A director is not liable for any action taken as a director, or any
failure to take any action, if he performed the duties of his office in
compliance with this section.
Section 4.19. Director Conflicts of Interest.
No contract or other transaction between a corporation and one or more
interested directors shall be either void or voidable because of such
relationship or interest, because such director or directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or because his or their votes
are counted for such purpose, if:
(1) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves or ratifies the
contract or transactions by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors;
(2) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at the meeting of the board of directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
For the purpose of paragraph (2) above, a conflict of interest
transaction is authorized, approved or ratified if it receives the vote of a
majority of the shares entitled to be counted under this subsection. Shares
owned by or voted under the control of a director who has a relationship or
interest in the conflict of interest transaction may not be counted in a vote of
shareholders to determine whether to authorize, approve or ratify a conflict of
interest transaction under paragraph (2). The vote of those shares, however, is
counted in determining whether the transaction is approved under other sections
of the Act. A majority of the shares, whether or not present, that are
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entitled to be counted in a vote on the transaction under this subsection
constitutes a quorum for the purpose of taking action under this section.
Section 4.20. Resignation of Directors.
A director may resign at any time by delivering written notice to the
board of directors or its chairman or to the corporation.
A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date, the board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date.
ARTICLE V
Indemnification of Directors, Officers,
Employees and Agents
Section 5.01. Directors. Officers. Employees and Agents.
(1) The corporation shall indemnify any director or executive officer
who was or is a party to any proceeding (other than an action by, or in the
right of, the corporation), by reason of the fact that he is or was a director
or executive officer of the corporation against liability incurred in connection
with such proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the director or executive officer did not act in good faith and
in a manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The corporation shall have power to indemnify any person who was or
is a party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was an employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against liability incurred in connection
with such proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best
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interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(3) The corporation shall indemnify any person, who was or is a party
to any proceeding by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or executive
officer of the corporation, against expenses and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the estimated expense of
litigating the proceeding to conclusion, actually and reasonably incurred in
connection with the defense or settlement of such proceeding, including any
appeal thereof. Such indemnification shall be authorized if such director or
executive officer acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, except that no
indemnification shall be made under this subsection in respect of any claim,
issue, or matter as to which such director or executive officer shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such director or executive officer is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(4) The corporation shall have power to indemnify any person, who was
or is a party to any proceeding by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he is or was an employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(5) To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsections (1) or (2), or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith.
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(6) Any indemnification under subsections (1), (2), (3) and (4) unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (1) or (2),
(3) and (4). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(1) Selected by the board of directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
(2) If a quorum of the directors cannot be obtained
for paragraph (a) and the committee cannot be designed under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(7) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (6)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(8) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the board of directors deems appropriate.
(9) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and the corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or
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otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. However, indemnification or
advancement of expenses shall not be made to or on behalf of any director,
officer, employee, or agent if a judgment or other final adjudication
establishes that his actions, or omissions to act, were material to the cause of
action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee,
or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Section 607.0834 under the Act are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(10) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(11) Notwithstanding the failure of the corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (5), in which case the court shall
also order the corporation to pay that person reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (9); or
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(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2), subsection
(3), subsection (4) or subsection (9).
(12) For purposes of this section, the term "corporation~ includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(13) For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation~
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation~' describes the actions of a person who acts in good faith and in a
manner he reasonably believes to be in the best interests of the participants
and beneficiaries of an employee benefit plan.
(14) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out
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of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this section.
ARTICLE VI
Office and Agent
Section 6.01. Registered Office and Registered Agent.
(1) The corporation shall have and continuously maintain in the State
of Florida:
(a) A registered office which may be the same as its place of
business; and
(b) A registered agent, who, may be either:
(1) An individual who resides in the State of Florida
whose business office is identical with such registered office; or
(2) Another corporation or not-for-profit corporation
as defined in Chapter 617 of the Act, authorized to transact business or conduct
its affairs in the State of Florida, having a business office identical with the
registered office; or
(3) A foreign corporation or not-for-profit foreign
corporation authorized pursuant to chapter 607 or chapter 617 of the Act to
transact business or conduct its affairs in the State of Florida, having a
business office identical with the registered office.
Section 6.02. Change of Registered Office or Registered Agent: Resignation of
Registered Agent.
(1) The corporation may change its registered office or its registered
agent upon filing with the Department of State of the State of Florida a
statement of change setting forth:
(a) The name of the corporation;
(b) The street address of its current registered office;
(c) If the current registered office is to be changed, the
street address of the new registered office;
(d) The name of its current registered agent;
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(e) If its current registered agent is to be changed, the name
of the new registered agent and the new agent's written consent (either on the
statement or attached to it) to the appointment;
(f) That the street address of its registered office and the
street address of the business office of its registered agent, as changed, will
be identical;
(g) That such change was authorized by resolution duly adopted
by its board of directors or by an officer of the corporation so authorized by
the board of directors.
ARTICLE VII
Shares, Options, Dividends and Distributions
Section 7.01. Authorized Shares.
(1) The articles of incorporation prescribe the classes of shares and
the number of shares of each class that the corporation is authorized to issue,
as well as a distinguishing designation for each class, and prior to the
issuance of shares of a class the preferences, limitations, and relative rights
of that class must be described in the articles of incorporation.
(2) The articles of incorporation must authorize:
(a) One or more classes of shares that together have unlimited
voting rights, and
(b) One or more classes of shares (which may be the same class
or classes as those with voting rights) that together are entitled to receive
the net assets of the corporation upon dissolution.
(3) The articles of incorporation may authorize one or more classes of
shares that have special, conditional, or limited voting rights, or no rights,
or no right to vote, except to the extent prohibited by the Act;
(a) Are redeemable or convertible as specified in the articles
of incorporation;
(b) Entitle the holders to distributions calculated in any
manner, including dividends that may be cumulative, noncumulative, or partially
cumulative;
(c) Have preference over any other class of shares with
respect to distributions, including dividends and distributions upon the
dissolution of the corporation.
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(4) Shares which are entitled to preference in the distribution of
dividends or assets shall not be designated as common shares. Shares which are
not entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
Section 7.02. Terms of Class or Series Determined by Board of Directors.
(1) If the articles of incorporation so provide, the board of directors
may determine, in whole or part, the preferences, limitations, and relative
rights (within the limits set forth in Section 7.01) of:
(a) Any class of shares before the issuance of any shares of
that class, or
(b) One or more series within a class before the issuance of
any shares of that series.
(2) Each series of a class must be given a distinguishing designation.
(3) All shares of a series must have preferences, limitations, and
relative rights identical with those of other shares of the same series and,
except to the extent otherwise provided in the description of the series, of
those of other series of the same class.
(4) Before issuing any shares of a class or series created under this
section, the corporation must deliver to the Department of State of the State of
Florida for filing articles of amendment, which are effective without
shareholder action, in accordance with Section 607.0602 of the Act.
Section 7.03. Issued and Outstanding Shares.
(1) A corporation may issue the number of shares of each class or
series authorized by the articles of incorporation. Shares that are issued are
outstanding shares until they are reacquired, redeemed, converted, or canceled.
(2) The reacquisition, redemption, or conversion of outstanding shares
is subject to the limitations of subsection (3) and to Section 607.06401 of the
Act.
(3) At all times that shares of the corporation are outstanding, one or
more shares that together have unlimited voting rights and one or more shares
that together are entitled to receive the net assets of the corporation upon
dissolution must be outstanding.
Section 7.04. Issuance of Shares.
(1) The board of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including
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cash, promissory notes, services performed, promises to perform services
evidenced by a written contract, or other securities of the corporation.
(2) Before the corporation issues shares, the board of directors must
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and non-assessable. When it
cannot be determined that outstanding shares are fully paid and non-assessable,
there shall be a conclusive presumption that such shares are fully paid and
non-assessable if the board of directors makes a good faith determination that
there is no substantial evidence that the full consideration for such shares has
not been paid.
(3) When the corporation receives the consideration for which the board
of directors authorized the issuance of shares, the shares issued therefor are
fully paid and non-assessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
(4) The corporation may place in escrow shares issued for a contract
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against their purchase price, until the services are performed,
the note is paid, or the benefits received. If the services are not performed,
the shares escrowed or restricted and the distributions credited may be canceled
in whole or part.
Section 7.05. Form and Content of Certificates.
(1) Shares may but need not be represented by certificates. Unless the
Act or another statute expressly provides otherwise, the rights and obligations
of shareholders are identical whether or not their shares are represented by
certificates.
(2) At a minimum, each share certificate must state on its face:
(a) The name of the issuing corporation and that the
corporation is organized under the laws of the State of Florida;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the
series, if any, the certificate represents.
(3) If the shares being issued are of different classes of shares or
different series within a class, the designations, relative rights, preferences,
and limitations applicable to each class and the variations in rights,
preferences, and limitations determined for each
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series (and the authority of the board of directors to determine variations for
future series) must be summarized on the front or back of each certificate.
Alternatively, each certificate may state conspicuously on its front or back
that the corporation will furnish the shareholder a full statement of this
information on request and without charge.
(4) Each share certificate:
(a) Must be signed (either manually or in facsimile) by an
officer or officers designated by the board of directors, and
(b) May bear the corporate seal or its facsimile.
(5) If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(6) Nothing in this section may be construed to invalidate any share
certificate validly issued and outstanding under the Act on July 1, 1990.
Section 7.06. Shares Without Certificates.
(1) The board of directors of the corporation may authorize the issue
of some or all of the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
(2) Within a reasonable time after the issue or transfer of shares
without certificates, the corporation shall send the shareholder a written
statement of the information required on certificates by the Act.
Section 7.07. Restriction on Transfer of Shares and Other Securities.
(1) The articles of incorporation, these bylaws, an agreement among
shareholders, or an agreement between shareholders and the corporation may
impose restrictions on the transfer or registration of transfer of shares of the
corporation. A restriction does not affect shares issued before the restriction
was adopted unless the holders of such shares are parties to the restriction
agreement or voted in favor of the restriction.
(2) A restriction on the transfer or registration of transfer of shares
is valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this section, and effected in compliance with the
provisions of the Act, including having a proper purpose as referred to in the
Act.
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Section 7.08. Shareholder's Pre-emptive Rights.
The shareholders of the corporation do not have a pre-emptive right to
acquire the corporation's unissued shares.
Section 7.09. Corporation's Acquisition of its Own Shares.
(1) The corporation may acquire its own shares, and, unless otherwise
provided in the articles of incorporation or except as provided in subsection
(4), shares so acquired constitute authorized but unissued shares of the same
class but undesignated as to series.
(2) If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation.
(3) Articles of amendment may be adopted by the board of directors
without shareholder action, shall be delivered to the Department of State of the
State of Florida for filing, and shall set forth the information required by
Section 607.0631 of the Act.
(4) Shares of the corporation in existence on June 30, 1990, which are
treasury shares under Section 607.004(18), Florida Statutes (1987), shall be
issued, but not outstanding, until canceled or disposed of by the corporation.
Section 7.10. Share Options.
(1) Unless the articles of incorporation provide otherwise, the
corporation may issue rights, options, or warrants for the purchase of shares of
the corporation. The board of directors shall determine the terms upon which the
rights, options, or warrants are issued, their form and content, and the
consideration for which the shares are to be issued.
(2) The terms and conditions of stock rights and options which are
created and issued by the corporation, or its successor, and which entitle the
holders thereof to purchase from the corporation shares of any class or classes,
whether authorized by unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions, or conditions that preclude or limit the exercise, transfer,
receipt, or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified number
or percentage of the outstanding common shares or other securities of the
corporation, or any transferee or transferees of any such person or persons, or
that invalidate or void such rights or options held by any such person or
persons or any such transferee or transferees.
Section 7.11. Terms and Conditions of Stock Rights and Options.
The terms and conditions of the stock rights and options which are
created and issued by the corporation [or its successor], and which entitle the
holders thereof to purchase from the corporation shares of any class or classes,
whether authorized but unissued shares, treasury shares, or shares to be
purchased or acquired by the
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corporation, may include, without limitation, restrictions or conditions that
preclude or limit the exercise, transfer, receipt or holding of such rights or
options by any person or persons, including any person or persons owning or
offering to acquire a specified number or percentage of the outstanding common
shares or other securities of the corporation, or any transferee or transferees
of any such person or persons, or that invalidate or void such rights or options
held by any such person or persons or any such transferee or transferees.
Section 7.12. Share Dividends.
(1) Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
(2) Shares of one class or series may not be issued as a share dividend
in respect of shares of another class or series unless:
(a) The articles of incorporation so authorize,
(b) A majority of the votes entitled to be cast by the class
or series to be issued approves the issue, or
(c) There are no outstanding shares of the class or series to
be issued.
(3) If the board of directors does not fix the record date for
determining shareholders entitled to a share dividend, it is the date of the
board of directors authorizes the share dividend.
Section 7.13. Distributions to Shareholders.
(1) The board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitations in subsection (3).
(2) If the board of directors does not fix the record date for
determining shareholders entitled to a distribution (other than one involving a
purchase, redemption, or other acquisition of the corporation's shares), it is
the date the board of directors authorizes the distribution.
(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they
become due in the usual course of business; or
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(b) The corporation's total assets would be less than the sum
of its total liabilities plus (unless the articles of incorporation permit
otherwise) the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution.
(4) The board of directors may base a determination that a distribution
is not prohibited under subsection (3) either on financial statements prepared
on the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation, each
such distribution shall be identified as a distribution based upon a current
valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
(5) Except as provided in subsection (7), the effect of a distribution
under subsection (3) is measured;
(a) In the case of distribution by purchase, redemption, or
other acquisition of the corporation's shares, as of the earlier of:
1. The date money or other property is transferred or
debt incurred by the corporation, or
2. The date the shareholder ceases to be a
shareholder with respect to the acquired shares;
(b) In the case of any other distribution of indebtedness, as
of the date the indebtedness is distributed;
(c) In all other cases, as of:
1. The date the distribution is authorized if the
payment occurs within one hundred twenty (120) days after the date of
authorization, or
2. The date the payment is made if it occurs more
than one hundred twenty (120) days after the date of authorization.
(6) A corporation's indebtedness to a shareholder incurred by reason of
a distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general, unsecured creditors except to the
extent subordinated by agreement.
(7) Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations under
subsection
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(3) if its terms provide that payment of principal and interest are made only if
and to the extent that payment of a distribution to shareholders could then be
made under this section. If the indebtedness is issued as a distribution, each
payment of principal or interest is treated as a distribution, the effect of
which is measured on the date the payment is actually made.
ARTICLE VIII
Amendment of Articles and Bylaws
Section 8.01. Authority to Amend the Articles of Incorporation.
(1) The corporation may amend its articles of incorporation at any time
to add or change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment.
(2) A shareholder of the corporation does not have a vested property
right resulting from any provision in the articles of incorporation, including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the corporation.
Section 8.02. Amendment by Board of Directors.
The corporation's board of directors may adopt one or more amendments
to the corporation's articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at
a time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the Department of
State of the State of Florida;
(4) To delete any other information contained in the articles of
incorporation that is solely of historical interest;
(5) To change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the corporation has
only shares of that class outstanding;
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(6) To delete the authorization for a class or series of shares
authorized pursuant to Section 607.0602 of the Act, if no shares of such class
or series have been issued;
(7) To change the corporate name by substituting the word
"corporation," "incorporated," or "company," or the abbreviation "corp.,"
"Inc.," or "Co.," for a similar word or abbreviation in the name, or by adding,
deleting, or changing a geographical attribution for the name; or
(8) To make any other change expressly permitted by the Act to be made
without shareholder action.
Section 8.03. Amendment of Bylaws by Board of Directors.
The corporation's board of directors may amend or repeal the
corporation's bylaws unless the Act reserves the power to amend a particular
bylaw provision exclusively to the shareholders.
Section 8.04. Bylaw Increasing Quorum or Voting Requirements for Directors.
(1) A bylaw that fixes a greater quorum or voting requirement for the
board of directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the
shareholders;
(b) If originally adopted by the board of directors, either by
the shareholders or by the board of directors.
(2) A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the board of directors may provide that it may
be amended or repealed only by a specified vote of either the shareholders or
the board of directors.
(3) Action by the board of directors under paragraph (l)(b) to adopt or
amend a bylaw that changes the quorum or voting requirement for the board of
directors must meet the same quorum requirement and be adopted by the same vote
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
ARTICLE IX
Records and Reports
Section 9.01. Corporate Records.
(1) The corporation shall keep as permanent records minutes of all
meetings of its shareholders and board of directors, a record of all actions
taken by the shareholders
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or board of directors without a meeting, and a record of all actions taken by a
committee of the board of directors in place of the board of directors on behalf
of the corporation.
(2) The corporation shall maintain accurate accounting records.
(3) The corporation or its agent shall maintain a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(4) The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records:
(a) Its articles or restated articles of incorporation and all
amendments to them currently in effect;
(b) Its bylaws or restated bylaws and all amendments to them
currently in effect;
(c) Resolutions adopted by the board of directors creating one
or more classes or series of shares and finding their relative rights,
preferences, and limitations, if shares issued pursuant to those resolutions are
outstanding;
(d) The minutes of all shareholders' meetings and records of
all action taken by shareholders without a meeting for the past three years;
(e) Written communications to all shareholders generally or
all shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years;
(f) A list of the names and business street addresses of its
current directors and off
(g) Its most recent annual report delivered to the Department
of State of the State of Florida.
Section 9.02. Financial Statements for Shareholders.
(1) Unless modified by resolution of the shareholders within 120 days
of the close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income statement
for that year, and a statement of cash flows for that
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year. If financial statements are prepared for the corporation on the basis of
generally-accepted accounting principles, the annual financial statements must
also be prepared on that basis.
(2) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating his reasonable belief whether the statements were
prepared on the basis of generally-accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements prepared for
the preceding year.
(3) The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the corporation
to prepare its financial statements, if for reasons beyond the corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the corporation shall mail him the latest annual financial
statements.
Section 9.03. Other Reports to Shareholders.
(1) If the corporation indemnifies or advances expenses to any
director, officer, employee or agent otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
(2) If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
Section 9.04. Annual Report for Department of State.
(1) The corporation shall deliver to the Department of State of the
State of Florida for filing a sworn annual report on such forms as the
Department of State of the
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State of Florida prescribes that sets forth the information prescribed by
section 607.1622 of the Act.
(2) Proof to the satisfaction of the Department of State of the State
of Florida on or before July 1 of each calendar year that such report was
deposited in the United States mail in a sealed envelope, properly addressed
with postage prepaid, shall be deemed in compliance with this requirement.
(3) Each report shall be executed by the corporation by an officer or
director or, if the corporation is in the hands of a receiver or trustee, shall
be executed on behalf of the corporation by such receiver or trustee, and the
signing thereof shall have the same legal effect as if made under oath, without
the necessity of appending such oath thereto.
(4) Information in the annual report must be current as of the date the
annual report is executed on behalf of the corporation.
(5) Any corporation failing to file an annual report which complies
with the requirements of this section shall not be permitted to maintain or
defend any action in any court of this state until such report is filed and all
fees and taxes due under the Act are paid and shall be subject to dissolution or
cancellation of its certificate of authority to do business as provided in the
Act.
ARTICLE X
Miscellaneous
Section 10.01. Definition of the "Act."
All references contained herein to the "Act" or to sections of the
"Act" shall be deemed to be in reference to the Florida Business Corporation
Act.
Section 10.02. Application of Florida Law.
Whenever any provision of these bylaws is inconsistent with any
provision of the Florida Business Corporation Act, Statutes 607, as they may be
amended from time to time, then in such instance Florida law shall prevail.
Section 10.03. Fiscal Year.
The fiscal year of the corporation shall be determined by resolution of
the board of directors.
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Section 10.04. Conflicts with Articles of Incorporation.
In the event that any provision contained in these bylaws conflicts
with any provision of the corporation's articles of incorporation, as amended
from time to time, the provisions of the articles of incorporation shall prevail
and be given full force and effect, to the full extent permissible under the
Act.
Section 10.05. Partial Invalidity.
If any provision of these bylaws shall, for any reason, be held by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of these bylaws, and these bylaws shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
Exhibit 4.1
VOID AFTER 5:00 P.M., MIAMI, FLORIDA TIME, ON MARCH 19, 2003.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE.
THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, UNLESS ANY SUCH TRANSACTION IS
REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER SAID ACT IS AVAILABLE, AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
TO SUCH EFFECT, WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY.
PETMED EXPRESS, INC.
COMMON STOCK PURCHASE WARRANT
1. Number and Price of Shares of Common Stock Subject to Common Stock
Purchase Warrant. Subject to the terms and conditions hereinafter set forth,
Wayne Horne (the "Holder"), is entitled to purchase from PetMed Express, Inc., a
Florida corporation (the "Company"), at any time and from time to time during
the period from March 20, 1998 (the "Commencement Date") until 5:00 p.m., Miami,
Florida Time, on March 19, 2003 (the "Expiration Date"), at which time this
Common Stock Purchase Warrant (the "Warrant") shall expire and become void, an
aggregate of 42,500 shares (the "Warrant Shares") of the Company's common stock,
$.001 par value per share (the "Common Stock"), which number of Warrant Shares
is subject to adjustment from time to time, as described below, upon payment
therefor of the exercise price $3.75 per Warrant Share in lawful funds of the
United States of America, such amounts (the "Basic Exercise Price") being
subject to adjustment in the circumstances set forth herein below. This
applicable Basic Exercise Price, until such adjustment is made and, thereafter,
as adjusted from time to time, is called the "Exercise Price."
2. Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time from and after the Commencement Date and on or before the
Expiration Date, provided however, if such Expiration Date is a day on which
Federal or State chartered banking institutions located in the State of Florida
are authorized by law to close, then the Expiration Date shall be deemed to be
the next succeeding day which shall not be such a day, by presentation and
surrender to the Company at its principal office, or at the office of any
transfer agent for the Warrants ("Transfer Agent"), designated by the Company,
of this Warrant accompanied by the form of election to purchase on the last page
hereof signed by the Holder and upon payment of the Exercise Price for the
Warrant Shares purchased thereby, by cashier's check or by wire transfer of
immediately available funds. Notwithstanding anything contained herein to the
contrary, the Exercise Price for the
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Warrant may be satisfied by the delivery of an unexercised portion of this
Warrant to the Company or the Transfer Agent for cancellation having a market
value, as determined by the spread as of the date of Common Stock underlying
this Warrant, equal to the aggregate Exercise Price of the portion of this
Warrant desired to be then exercised. If this Warrant is exercised in part only,
the Company or Transfer Agent shall, promptly after presentation of this Warrant
upon such exercise, execute and deliver a new Warrant, dated the date hereof,
evidencing the rights of the Holder to purchase the balance of the Warrant
Shares purchasable hereunder upon the same terms and conditions herein set
forth. This Warrant shall be deemed to have been exercised immediately prior to
the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the Warrant Shares or other securities
issuable upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As promptly as
practicable, the Company shall issue and deliver to the person or persons
entitled to receive the same a certificate or certificates for the number of
full Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a share as provided below.
3. Registration Rights.
3.1 If, at any time prior to the Expiration Date, the Holders of a
majority of the Warrant Shares shall give notice to the Company requesting that
the Company file with the U.S. Securities and Exchange Commission (the
"Commission") a Registration Statement relating to the Warrant Shares, the
Company shall promptly give written notice of such proposed Registration
Statement to the Holders of such Warrants or Warrant Shares, and to any
subsequent permissible transferee of any of the Warrants or Warrant Shares (at
the address of such persons appearing on the books of the Company or its
transfer agent) which notice shall offer to include the Warrant Shares in the
requested Registration Statement. The Company shall, as expeditiously as
possible, file and use its best efforts to cause to become effective under the
Securities Act of 1933, as amended (the "Securities Act"), the Registration
Statement covering such of the Warrant Shares as the Company has been requested
to register for disposition by the Holders thereof, to the extent required to
permit the public sale or other public disposition thereof by the Holders. The
Company shall cause the Registration Statement to remain effective for a period
of at least nine months from the effective date of the Registration Statement or
such earlier date as all of the Warrant Shares have been sold or the Warrants
expire (the "Effective Period").
3.2 In addition, if at any time prior to the Expiration Date the
Company shall prepare and file one or more registration statements under the
Securities Act, with respect to a public offering of equity or debt securities
of the Company, or of any such securities of the Company held by its security
holders, the Company will include in any such registration statement such
information as is required, and such number of Warrant Shares held by the
Holders thereof or their respective designees or transferees as may be requested
by them, to permit a public offering of the Warrant Shares so requested;
provided, however, that if, in the written opinion of the Company's managing
underwriter,
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if any, for such offering, the inclusion of the Warrant Shares requested to be
registered, when added to the securities being registered by the Company or the
selling security holder(s), would exceed the maximum amount of the Company's
securities that can be marketed without otherwise materially and adversely
affecting the entire offering, then the Company may exclude from such offering
that portion of the Warrant Shares requested to be so registered, so that the
total number of securities to be registered is within the maximum number of
shares that, in the opinion of the managing underwriter, may be marketed without
otherwise materially and adversely affecting the entire offering, provided that
at least a pro rata amount of the securities that otherwise were proposed to be
registered for other shareholders is also excluded. The Company shall bear all
fees and expenses incurred by it in connection with the preparation and filing
of such registration statement other than fees and expenses of Holders' counsel,
if any. In the event of such a proposed registration, the Company shall furnish
the then Holders of Warrant Shares with not less than thirty (30) days' written
notice prior to the proposed date of filing of such registration statement. Such
notice shall continue to be given by the Company to Holders of Warrant Shares,
with respect to subsequent registration statements or post-effective amendments
filed by the Company, until such time as all of the Warrant Shares have been
registered or may be sold without registration under the Securities Act or
applicable state securities laws and regulations, and without limitation as to
volume, pursuant to Rule 144 of the Securities Act. The holders of Warrant
Shares shall exercise the rights provided for in this Subsection 3.3 by giving
written notice to the Company, within twenty (20) days of receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause the Registration Statement to remain effective for a period of at
least nine months from the effective date of the Registration Statement or such
earlier date as all of the Warrant Shares have been sold or the Warrants expire.
3.3 Notwithstanding anything contained herein to the contrary, the
Holders may not demand registration of the Warrant Shares if re-sale of the
Warrant Shares is already covered by an effective Registration Statement or if
the Warrant Shares may otherwise be sold without registration under the
Securities Act or applicable state securities laws and regulations and without
limitation as to volume pursuant to Rule 144 of the Securities Act.
3.4 The Company shall bear all expenses incurred in the preparation
and filing of such registration statements or post-effective amendment (and
related state registrations, to the extent permitted by applicable law) and the
furnishing of copies of the preliminary and final prospectus thereof to the
Holders, other than expenses of the Holders' counsel, and other than sales
commissions incurred by the then Holders with respect to the sale of such
securities.
4. Reservation of Common Stock. The Company covenants that, during the
period this Warrant is exercisable, the Company will reserve from its authorized
and unissued Common Stock a sufficient number of shares of Common Stock to
provide for the issuance of the Warrant Shares upon the exercise of this
Warrant. The Company agrees that its issuance of this Warrant shall constitute
full authority to its officers who are
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charged with the duty of executing stock certificates to execute and issue the
necessary certificates for Warrant Shares upon the exercise of this Warrant.
5. No Shareholder Rights. This Warrant, as such, shall not entitle the
Holder to any rights of a shareholder of the Company, until the Holder has
exercised this Warrant in accordance with Section 2 hereof.
6. Adjustment of Exercise Price and Number of Warrant Shares.
6.1 The number and kind of securities issuable upon the exercise of
this Warrant shall be subject to adjustment from time to time, and the Company
agrees to provide notice upon the happening of certain events, as follows:
a. If the Company is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or smaller
number of shares of Common Stock, the number of shares of Common Stock for which
this Warrant may be exercised shall be increased or reduced, as of the record
date for such recapitalization, in the same proportion as the increase or
decrease in the outstanding shares of Common Stock, and the Exercise Price shall
be adjusted so that the aggregate amount payable for the purchase of all of the
Warrant Shares issuable hereunder immediately after the record date for such
recapitalization shall equal the aggregate amount so payable immediately before
such record date.
b. If the Company declares a dividend on its Common Stock
payable in shares of its Common Stock or securities convertible into shares of
its Common Stock, the number of shares of Common Stock for which this Warrant
may be exercised shall be increased as of the record date for determining which
holders of Common Stock shall be entitled to receive such dividend, in
proportion to the increase in the number of outstanding shares of Common Stock
(and shares of Common Stock issuable upon conversion of all such securities
convertible into shares of Common Stock) as a result of such dividend, and the
Exercise Price shall be adjusted so that the aggregate amount payable for the
purchase of all the Warrant Shares issuable hereunder immediately after the
record date for such dividend shall equal the aggregate amount so payable
immediately before such record date.
c. If the Company effects a general distribution to holders of
its Common Stock, other than as part of the Company's dissolution or liquidation
or the winding up of its affairs, of any shares of its capital stock, any
evidence of indebtedness or any of its assets (other than cash, shares of Common
Stock or securities convertible into shares of Common Stock), the Company shall
give written notice to the Holder of any such general distribution at least
fifteen (15) days prior to the proposed record date in order to permit the
Holder to exercise this Warrant on or before the record date. There shall be no
adjustment in the number of shares of Common Stock for which this Warrant may be
exercised, or in the Exercise Price, by virtue of any such general distribution,
except as otherwise provided herein.
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d. If the Company offers rights or warrants (other than the
Warrant) to all holders of its Common Stock which entitle them to subscribe to
or purchase additional shares of Common Stock or securities convertible into
shares of Common Stock, the Company shall give written notice of any such
proposed offering to the Holder at least fifteen (15) days prior to the proposed
record date in order to permit the Holder to exercise this Warrant on or before
such record date.
e. In the event an adjustment in the Exercise Price or the
number of Warrant Shares issuable hereunder is made under subsection a. or b.
above, and such an event does not occur, then any adjustments in the Exercise
Price or number of Warrant Shares issuable upon exercise of this Warrant that
were made in accordance with such subsection a. or b. shall be readjusted to the
Exercise Price and number of Warrant Shares as were in effect immediately prior
to the record date for such an event.
f. If and whenever the Company issues or sells, or in accordance
with Subsection 6.1 is deemed to have issued or sold, any shares of its Common
Stock for a consideration per share less than the Exercise Price in effect
immediately prior to the time of such issuance or sale (except for the issuance
or deemed issuance of securities in a transaction described in paragraph g. of
this Subsection 6.1), then immediately upon such issuance or sale the Exercise
Price will be reduced to an Exercise Price determined by multiplying the
Exercise Price in effect immediately prior to the issuance or sale by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding prior to the issuance or sale plus (ii) the number of
Warrant Shares issuable hereunder that the maximum aggregate amount of
consideration receivable by the Company upon such issuance or sale would
purchase at the Exercise Price in effect immediately prior to the issuance or
sale, and the denominator of which shall be the number of shares of Common Stock
deemed outstanding, as hereinafter determined, immediately after such issuance
or sale.
g. The following securities or transactions shall be excluded
from the operation of paragraph f. of this Subsection 6.1:
(i) The existence and any exercise of any option, convertible
promissory note, warrant, or other right to purchase Common Stock, that is
outstanding on the date hereof; and
(ii) Any grant or exercise of options for Common Stock
granted under the Company's stock option plans, in existence as of the date
hereof, provided said grant or exercise is not effectuated as a result of any
amendment to such plans subsequent to the date hereof, with an exercise price
equal to at least the fair market value of the shares of Common Stock on the
date of grant. As used herein, the term "fair market value" shall mean the
closing bid price, or, if not available, the highest bid price, of the shares of
Common Stock as quoted on a national securities exchange, or in the
over-the-counter market as reported by Nasdaq or, if not available, by the
National Quotation Bureau, Incorporated, as the case may be (or, if there is no
bid price on a
5
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particular day, then the closing bid price or, if not available, the highest bid
price on the nearest trading date before that day and for which such prices are
available), and if the shares of Common Stock are not listed on such an exchange
or traded in such a market on such particular day, then the fair market value
per share shall be determined by mutual agreement of the Board of Directors and
the Holders by taking into consideration all relevant factors, including, but
not limited to, the Company's net worth, prospective earning power and dividend
paying capacity.
h. If the Company in any manner grants any rights or options to
subscribe for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options being
herein called "Rights" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), and the price per share for which
Common Stock is issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities is less than the Exercise Price in
effect immediately prior to the time of the granting of such Rights, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Rights or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Rights will be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of this Section, the "price per share for which Common
Stock is issuable upon exercise of such Rights or upon conversion or exchange of
such Convertible Securities" will be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for the
granting of such Rights, plus the minimum aggregate amount of additional
consideration payable to the Company upon exercise of all such Rights, plus, in
the case of Rights that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof' by (ii) the total maximum number of shares of Common Stock then
issuable upon the exercise of such Rights or upon the conversion or exchange of
all Convertible Securities issuable upon the exercise of such Rights. Except as
otherwise provided in Subsections j. and k. below, no adjustment of the Exercise
Price will be made when Convertible Securities are actually issued upon the
exercise of such Rights or when Common Stock is actually issued upon the
exercise of such Rights or the conversion or exchange of such Convertible
Securities.
i. If the Company in any manner issues or sells any Convertible
Securities, and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Exercise Price in effect immediately
prior to the time of such issuance or sale, then the maximum number of shares of
Common Stock then issuable upon conversion or exchange of all such Convertible
Securities will be deemed to be outstanding and to have been issued and sold by
the Company for such price per share, as determined below. For the purposes of
this Section, the "price per share for which Common Stock is issuable upon such
conversion or exchange" will be determined by dividing (i) the total amount
received or receivable by the Company as consideration for the issuance or sale
of such Convertible Securities, plus the minimum aggregate amount
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<PAGE>
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common Stock
then issuable upon the conversion or exchange of all such Convertible
Securities. Except as otherwise provided in Subsections j. and k. below, no
adjustment of the Exercise Price will be made when Common Stock is actually
issued upon the conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Convertible Securities for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Exercise Price will be made by reason of such issuance
or sale.
j. If the purchase price provided for in any Rights, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock changes at any time (other
than under or by reason of provisions that are designed to protect against
dilution of the type set forth in this Section 6 and are no more favorable to
the holders of such Rights or Convertible Securities than this Section 6 would
have been if this Section 6 were included in such Rights or Convertible
Securities), then the Exercise Price in effect at the time of such change will
be re-adjusted to the Exercise Price that would have been in effect at such time
had such Rights or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration, or changed conversion rate, as
the case may be, at the time initially granted, issued, or sold; and such
adjustment of the Exercise Price will be made whether the result thereof is to
increase or reduce the Exercise Price then in effect under this Warrant,
provided that no such adjustment shall increase the Exercise Price above the
initial Exercise Price hereof and that such adjustments shall be made by the
Board of Directors of the Company, who shall promptly provide notice of the new
Exercise Price to the Holder.
k. Upon the expiration of any Right, or the termination of any
right to convert or exchange any Convertible Security, without the exercise of
such Right, or the conversion of such Convertible Security, the Exercise Price
then in effect hereunder will be adjusted to the Exercise Price that would have
been in effect at the time of such expiration or termination had such Right or
Convertible Security never been issued, but such subsequent adjustment shall not
affect the number of shares of Common Stock issued upon any exercise of this
Warrant prior to the date such adjustment is made.
l. If any shares of Common Stock, Rights, or Convertible
Securities are issued or sold or deemed to have been issued or sold for
consideration that includes cash, then the amount of cash consideration actually
received by the Company will be deemed to be the cash portion thereof. If any
shares of Common Stock, Rights, or Convertible Securities are issued or sold or
deemed to have been issued or sold for a consideration part or all of which is
other than cash, then the amount of the consideration other than cash received
by the Company will be the fair value of such consideration as determined by the
Board of Directors of the Company, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
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will be the market value thereof as of the date of receipt. If any shares of
Common Stock, Rights, or Convertible Securities are issued in connection with
any merger or consolidation in which the Company is the surviving corporation,
then the amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Rights, or Convertible Securities, as the
case may be.
m. If any Right is issued in connection with the issuance or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Right by the
parties thereto, the Right will be deemed to have been issued without
consideration.
n. The number of shares of Common Stock deemed outstanding at
any given time
shall include the number of shares of Common Stock outstanding, as adjusted as
provided herein, but shall not include shares owned or held by or for the
account of the Company, and the disposition of any shares so owned or held will
be considered an issuance or sale of Common Stock hereunder.
o. No adjustment of the Exercise Price shall be made if the
amount of such adjustment would be less than one cent per Warrant Share, but in
such case any adjustment that otherwise would be required to be made shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment that, together with any adjustment or adjustments so
carried forward, shall amount to not less than one cent per Warrant Share.
6.2 In the event of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or from no
par value to par value, or from par value to no par value, or as a result of a
subdivision or combination) or in the event of any consolidation or merger of
the Company with another entity at any time prior to the expiration of this
Warrant other than a share exchange, merger or other business combination in
which the Company is the surviving entity, the Holder shall have the right to
exercise this Warrant. Upon such exercise, the Holder shall have the right to
receive the same kind and number of shares of capital stock and other
securities, cash or other property as would have been distributed to the Holder
upon such reorganization, reclassification, consolidation or merger. The Holder
shall pay upon such exercise the Exercise Price that otherwise would have been
payable pursuant to the terms of this Warrant. If any such reorganization,
reclassification, consolidation or merger results in a cash distribution in
excess of the then applicable Exercise Price, the Holder may, at the Holder's
option, exercise this Warrant without making payment of the Exercise Price, and
in such case the Company shall, upon distribution to the Holder, consider the
Exercise Price to have been paid in full, and in making settlement to the
Holder, shall deduct an amount equal to the Exercise Price from the amount
payable to the Holder. In the event of any such reorganization, merger or
consolidation, the corporation formed by such reorganization, consolidation or
merger or the corporation which shall have acquired the assets of the Company
shall execute and deliver a supplement hereto to the foregoing
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effect, which supplement shall also provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in the
Warrant.
6.3 If the Company shall, at any time before the expiration of this
Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the
right to exercise this Warrant. The Company shall give Holder notice of such
action and the Holder shall have fifteen (15) days from receipt of such notice
to exercise this Warrant. Upon such exercise the Holder shall have the right to
receive, in lieu of the shares of Common Stock of the Company that the Holder
otherwise would have been entitled to receive, the same kind and amount of
assets as would have been issued, distributed or paid to the Holder upon any
such dissolution, liquidation or winding up with respect to such stock
receivable upon exercise of this Warrant on the date for determining those
entitled to receive any such distribution. If any such dissolution, liquidation
or winding up results in any cash distribution in excess of the Exercise Price
provided by this Warrant, the Holder may, at the Holder's option, exercise this
Warrant without making payment of the Exercise Price and, in such case, the
Company shall, upon distribution to the Holder, consider the Exercise Price to
have been paid in full and, in making settlement to the Holder, shall deduct an
amount equal to the Exercise Price from the amount payable to the Holder.
6.4 Upon each adjustment of the Exercise Price pursuant to Section 6
hereof, the Holder shall thereafter (until another such adjustment) be entitled
to purchase, at the adjusted Exercise Price in effect on the date this Warrant
is exercised, the number of Warrant Shares, calculated to the nearest number of
Warrant Shares, determined by (a) multiplying the number of Warrant Shares
purchasable hereunder immediately prior to the adjustment of the Exercise Price
by the Exercise Price in effect immediately prior to such adjustment, and (b)
dividing the product so obtained by the adjusted Exercise Price in effect on the
date of such exercise. The provisions of Section 9 shall apply, however, so that
no fractional share of Common Stock or fractional Warrant shall be issued upon
exercise of this Warrant.
6.5 The Company may retain a firm of independent public accounts of
recognized standing (who may be any such firm regularly employed by the Company)
to make any computation required under this Section 6, and a certificate signed
by such firm shall be conclusive evidence of the correctness of any computation
made under this Section 6.
7. Notice to Holder. So long as this Warrant shall be outstanding (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of capital stock or securities convertible into capital stock or any
similar rights or (c) if there shall be any capital reorganization of the
Company in which the Company is not the surviving entity, recapitalization of
the capital stock of the Company, consolidation or merger of the Company with or
into another corporation where the Company is not the surviving entity, sale,
lease or other transfer of all or substantially all of the property and assets
of the
9
<PAGE>
Company, or voluntary or involuntary dissolution, liquidation or winding up of
the Company, then in such event, the Company shall cause to be mailed by
registered or certified mail to the Holder, at least fifteen (15) days prior to
the relevant date described below (or such shorter period as is reasonably
possible if fifteen (15) days is not reasonably possible), a notice containing a
description of the proposed action and stating the date or expected date on
which a record of the Company's shareholders is to be taken for the purpose of
any such dividend, distribution of rights, reorganization, recapitalization,
consolidation, merger, sale, lease, transfer, dissolution, liquidation or
winding up is to take place and the date or expected date, if any is to be
fixed, as of which the holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such event.
8. Certificate of Adjustment. Whenever the Exercise Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the Holder of this Warrant a
certificate of an officer of the Company setting forth the nature of such
adjustment and a brief statement of the facts requiring such adjustment.
9. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any subscription hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
10. Transfer or Loss of Warrant.
10.1 All or any part of this Warrant may be transferred to any of
the shareholders, directors, officers, employees or partners of the Holder or
any successor upon the delivery of this Warrant as specified in Section 2 hereof
accompanied by a certificate from the Holder that each of the transferees have
such status with the Holder. Except as provided in the preceding sentence, prior
to any proposed transfer of this Warrant or the Warrant Shares received on the
exercise of this Warrant (the "Securities"), unless there is in effect a
registration statement under the Securities Act, covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall, if
the Company so requests, be accompanied by an unqualified written opinion of
legal counsel who shall be reasonably satisfactory to the Company addressed to
the Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Securities may be
effected without registration under the Securities Act, whereupon the Holder of
the Securities shall be entitled to transfer the Securities in accordance with
the terms of the notice delivered by the Holder to the Company. Each certificate
evidencing the Securities transferred as above provided shall
10
<PAGE>
not bear such restrictive legends if in the opinion of counsel for the Company
such legends are not required in order to establish compliance with any
provisions of the Securities Act.
10.2 Upon receipt by the Company of evidence satisfactory to it of
loss, theft, destruction or mutilation of this Warrant and, in the case of loss,
theft or destruction, of reasonably satisfactory indemnification, or, in the
case of mutilation, upon surrender of this Warrant, the Company will execute and
deliver, or instruct the Transfer Agent to execute and deliver, a new Warrant of
like tenor and date and any such lost, stolen or destroyed Warrant thereupon
shall become void.
11. Notices. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or five days after
mailing by registered or certified mail, postage prepaid, to the Holder at Boca
Corporate Plaza, 1801 Clint Moore Road, Suite 110, Boca Raton, Florida 33487.
Notices or other communications to the Company shall be deemed to have been
sufficiently given if delivered by hand or five days after mailing if mailed by
registered or certified mail postage prepaid, to the Company at 3350 N.W. 53rd
Street, Suite 103, Fort Lauderdale, Florida 33309. A party may change the
address to which notice shall be given by notice pursuant to this Section 11.
12. Entire Agreement and Modification. The Company and the Holder of
this Warrant hereby represent and warrant that this Warrant is intended to and
does contain and embody all of the understandings and agreements, both written
and oral, of the parties hereto with respect to the subject matter of this
Warrant, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Warrant shall be in any way invalidated, impaired or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Warrant shall be effective only if made in writing and executed with the same
formality of this Warrant.
13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Florida, without application of the
principles of conflicts of laws.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
20th day of March, 1998.
PETMED EXPRESS, INC., a Florida corporation
By:_____________________________________
Name:__________________________________
Title:____________________________________
<PAGE>
ELECTION TO PURCHASE
TO: PetMed Express, Inc.
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Common Stock Purchase Warrant to purchase __________________
shares of Common Stock issuable upon the exercise of such Warrants and requests
that certificates for such shares be issued in the name of:
-----------------------------------------------------------
(Please insert social security or other identifying number)
-----------------------------------------------------------
(Please print name and address)
The undersigned also represents and warrants that the representations
and warranties made in Section 3 of the Subscription Agreement dated
_________________, 1998 by and between PETMED EXPRESS, INC., the undersigned and
remain accurate and in full force and effect as of the date hereof.
Dated: ____________________, 19___ __________________________________
(Signature must conform in all respects
to name of holder as specified on the face
of the Warrant)
Exhibit 4.2
SPECIMEN COMMON STOCK CERTIFICATE (FRONT)
- --------------------------------------------------------------------------------
Number PAR VALUE $.001 Shares
- --------------------- ---------
PETMEDEXPRESS.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
THIS CERTIFIES THAT CUSIP 716392 10 6
SPECIMEN
is the owner of
Fully Paid and Non-Assessable Shares of Common Stock of
PetMedExpress.com, Inc. transferable only on the books of the Corporation by the
holder hereof in person or by a duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until countersigned
and registered by the Transfer Agent and Registrar.
Countersigned:
Florida Atlantic Stock Transfer, Inc.
7130 Nob Hill Road
Tamarac, FL 33321 Transfer agent
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
CORPORATE SEAL
SPECIMEN
/s/ Signature
------------------------------
President
SPECIMEN COMMON STOCK CERTIFICATE (REVERSE)
<PAGE>
- --------------------------------------------------------------------------------
PETMEDEXPRESS.COM, INC.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT--
_______ Custodian__________
(cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT ENT - as joint tenants with right of Act___________________________
survivorship and not as tenant (State)
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,_______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------------------(PLEASE PRINT OR TYPEWRITE
NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)-----------Shares of the
common stock represented by the within certificate and do hereby irrevocably
constitute and appoint--------------------------------------------Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated -----------------------------
- --------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS AGREEMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED: -------------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17 Ad-15.
Exhibit 10.1
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
"Agreement") is made and entered into as of the 1st day of May, 1998 (the
"Effective Date"), between PetMed Express, Inc., a Florida corporation, whose
principal place of business is 3350 N.W. 53rd Street, Fort Lauderdale, Florida
33309 and any of its successors or affiliated companies (collectively (the
"Company") and Marc A. Puleo, M.D., an individual whose address is 2400 N.E.
44th Court, Lighthouse Point, FL 33064 (the "Executive").
RECITALS
A. The Company is a Florida corporation and is principally engaged in
the business of marketing, distributing and selling prescription and
non-prescription medications and pet-related products for household pets (the
"Business").
B. The Company presently employs the Executive and desires to continue
to employ the Executive and the Executive desires to continue in the employ of
the Company.
C. The Company has established a valuable reputation and goodwill in
its business, with expertise in all aspects of the Business.
D. The Executive, by virtue of the Executive's employment with the
Company has become familiar with and possessed with the manner, methods, trade
secrets and other confidential information pertaining to the Company's business,
including the Company's client base.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement,
the Executive shall serve as President and Chief Executive Officer of the
Company and shall have general executive operating supervision over the
property, business and affairs of the Company, its subsidiaries and divisions,
subject to the guidelines and direction of the Board of Directors of the
Company. It is further the intention of the parties that at all times during the
"Term," as hereinafter defined, of the Agreement, the Executive shall serve as
<PAGE>
a member of the Board of Directors of the Company and in accordance with the
Bylaws of the Company.
b. Time Devoted. Throughout the term of the Agreement, the Executive
shall devote substantially all of the Executive's business time and attention to
the business and affairs of the Company consistent with the Executive's senior
executive position with the Company, except for reasonable vacations and except
for illness or incapacity, but nothing in the Agreement shall preclude the
Executive from engaging in personal business including as a member of the board
of directors of related companies, charitable and community affairs, provided
that such activities do not interfere with the regular performance of the
Executive's duties and responsibilities under this Agreement.
c. Additional Responsibilities of Executive. Executive agrees to be
bound by the Executive's Guidelines, if applicable, a copy of which has been
provided to the Company (or to the extent that such Guidelines have not yet been
formulated, at such time as such Guidelines are adopted by the Company).
4. Term. The Term of employment hereunder will commence on the date as
set forth above and terminate two (2) years from the Effective Date, and such
term shall automatically be extended for each successive year thereafter unless
(1) the parties mutually agree in writing to alter or amend the terms of the
Agreement; or (2) one or both of the parties exercises their right, pursuant to
Section 6 herein, to terminate this employment relationship.
5. Compensation and Benefits.
a. Base Compensation. For all services rendered by the Executive
pursuant to the terms of this Agreement and in consideration of the execution of
this Agreement by the Executive, the Company shall grant the Executive as of the
Effective Date of this Agreement options under the Company's to be adopted 1998
Stock Option Plan to purchase up to two hundred thousand (200,000) shares of
Common Stock of the Company, pursuant to the form of Option Agreement attached
hereto as Exhibit A and incorporated herein by such reference, which such
options shall be exercisable for a period of five (5) years from the date of
grant at an exercise price of $3.75 per share, being the closing price of the
Company's Common Stock on March 20, 1998 as reported on the OTC Bulletin Board,
which such date is the date on which the parties agreed to the binding terms of
this Agreement.
b. Performance-based Bonus. On the earlier of (i) the fiscal year
ending on or before March 31, 2001 if the Company should report (a) Revenues (as
hereinafter defined) of at least twenty million dollars ($20,000,000); or (b)
Income From Operations (as hereinafter defined) of at least two million dollars
($2,000,000); or (ii) March 31, 2003, the Executive shall be entitled to a
performance based bonus of options to purchase up to an additional two hundred
thousand (200,000) shares of Common Stock of the Company. Such options, which
shall be exercisable for a period of five (5) years from the date of grant
2
<PAGE>
at an exercise price of $3.75 per share, shall be granted under the Company's to
be adopted 1998 Stock Option Plan. For the purposes of this Agreement,
"Revenues" shall mean the total gross revenues of the Company from all sources
and "Income From Operations" shall mean the Revenues less the cost of the
Revenues and all selling, general and administrative expenses as reflected on
the Company's audited financial statements for the periods therein. The audited
financial statements of the Company, accompanied by the accountant's report of
the Company's then principal independent accountants for such fiscal year, shall
be conclusive as to the determination of the satisfaction of the aforedescribed
performance based criteria. In the event the Company should meet such
performance based criteria, the options shall be granted to the Executive on the
date the audited financial statements are issued by the Company's principal
independent accountants.
c. Executive Benefits. The Executive shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to executives and/or other salaried employees, at the
Executive's sole option, including, but not limited to, pension and other
retirement plans, group life insurance, hospitalization, surgical and major
medical coverage, sick leave, compensation continuation, vacation and holidays,
cellular telephone and all related costs and expenses, long-term disability, and
other fringe benefits.
d. Vacation. During each fiscal year of the Company, the Executive
shall be entitled to five (5) weeks of vacation time and to utilize such
vacation as the Executive shall determine; provided, however, that the Executive
shall evidence reasonable judgment with regard to appropriate vacation
scheduling.
e. Business Expense Reimbursement. During the Term of employment,
the Executive shall be entitled to receive proper reimbursement for all
reasonable, out-of-pocket expenses incurred by the Executive (in accordance with
the policies and procedures established by the Company for its senior executive
officers) in performing services hereunder, provided the Executive properly
accounts therefor.
f. Automobile Expense. The Company shall provide the Executive with
an automobile of Executive's choice. The Company shall also be responsible for
all expenses in connection with such automobile including, but not limited to,
maintenance, insurance and gas.
6. Termination.
a. Death. In the event of the death of the Executive during the Term
of the Agreement, compensation shall be paid to the Executive's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Executive for a period of six (6) months from and
after the date of death. Other death benefits will be determined in accordance
with the terms of the Company's benefit programs and plans.
3
<PAGE>
b. Disability.
(1) In the event of the Executive's disability, as hereinafter
defined, the Executive shall be entitled to compensation in accordance with the
Company's disability compensation practice for senior executives, including any
separate arrangement or policy covering the Executive, but in all events the
Executive shall continue to receive the Executive's compensation for a period,
at the annual rate in effect immediately prior to the commencement of
disability, of not less than 180 days from the date on which the disability has
been deemed to occur as hereinafter provided below. Any amounts provided for in
this Section 6b shall not be offset by other long-term disability benefits
provided to the Executive by the Company.
(2) "Disability," for the purposes of this Agreement, shall be
deemed to have occurred in the event (A) the Executive is unable by reason of
sickness or accident, to perform the Executive's duties under this Agreement for
an aggregate of 180 days in any 12-month period; or (B) the Executive has a
guardian of the person or estate appointed by a court of competent jurisdiction.
Termination due to disability shall be deemed to have occurred upon the first
day of the month following the determination of disability as defined in the
preceding sentence.
Anything herein to the contrary notwithstanding, if, following a
termination of employment hereunder due to disability as provided in the
preceding paragraph, the Executive becomes re-employed, whether as an Executive
or a consultant, any compensation, annual incentive payments or other benefits
earned by the Executive from such employment shall not be offset against any
compensation continuation due to the Executive hereunder commencing with the
date of re-employment.
c. Termination by the Company for Cause.
(1) Nothing herein shall prevent the Company from terminating
Executive for "Cause," as hereinafter defined. The Executive shall continue to
receive compensation only for the period ending with the date of such
termination as provided in this Section 6c. Any rights and benefits the
Executive may have in respect of any other compensation shall be determined in
accordance with the terms of such other compensation arrangements or such plans
or programs.
(2) "Cause" shall mean (A) committing or participating in an
injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (C) engaging
in a criminal enterprise involving moral turpitude; (D) an act or acts (i)
during the Term, constituting a felony under the laws of the United States or
any state thereof; or (ii) if applicable, loss of any state or federal license
required for the Executive to perform the Executive's material duties or
responsibilities for the
4
<PAGE>
Company; or (E) any assignment of this Agreement in violation of Section 14 of
this Agreement;
(3) Notwithstanding anything else contained in this Agreement, this
Agreement will not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a notice of termination stating
that the Executive committed one of the types of conduct set forth in Section 6c
of this Agreement and specifying the particulars thereof and the Executive shall
be given a thirty (30) day period to cure such conduct set forth in Section
6c(2).
d. Termination by the Company Other than for Cause.
(1) The foregoing notwithstanding, the Company may terminate the
Executive's employment for whatever reason it deems appropriate; provided,
however, that in the event such termination is not based on Cause, as provided
in Section 6c above, the Company may terminate this Agreement upon giving three
(3) months' prior written notice. During such three (3) month period, the
Executive shall continue to perform the Executive's duties pursuant to this
Agreement, and the Company shall continue to compensate the Executive in
accordance with this Agreement. At the expiration of such three (3) month
period, the Executive will be entitled to continued Executive Benefits and
Automobile Expense to be paid by the Company for the balance of the Term of this
Agreement or any renewal thereof pursuant to Section 4 hereof. In the event the
Company should meet the performance based criteria set forth in Section 5b
hereof for the fiscal year ending immediately after a termination of the
Executive pursuant to this Section 6d(1), the Executive shall be entitled to
receive such performance based bonus pursuant to the terms set forth in such
Section 5b.
(2) In the event that the Executive's employment with the Company is
terminated pursuant to this Section 6d, Section 6f or Section 6g, Section 7a of
this Agreement and all references thereto shall be inapplicable as to the
Executive and the Company.
e. Voluntary Termination. In the event the Executive terminates the
Executive's employment on the Executive's own volition (except as provided in
Section 6f and/or Section 6g) prior to the expiration of the Term of this
Agreement, including any renewals thereof, such termination shall constitute a
voluntary termination and in such event the Executive shall be limited to the
same rights and benefits as provided in connection with a termination for Cause
as provided in Section 6c.
f. Constructive Termination of Employment. A termination by the
Company without Cause under Section 6d shall be deemed to have occurred upon the
occurrence of one or more of the following events without the express written
consent of the Executive:
5
<PAGE>
(1) a significant change in the nature or scope of the authorities,
powers, functions, duties or responsibilities attached to Executive's position
as described in Section 3; or
(2) a material breach of the Agreement by the Company; or
(3) a material reduction of the Executive's benefits under any
employee benefit plan, program or arrangement (for Executive individually or as
part of a group) of the Company as then in effect or as in effect on the
Effective Date of the Agreement, which reduction shall not be effectuated for
similarly situated employees of the Company; or
(4) failure by a successor company to assume the obligations under
the Agreement.
Anything herein to the contrary notwithstanding, the Executive shall give
written notice to the Board of Directors of the Company that the Executive
believes an event has occurred which would result in a Constructive Termination
of the Executive's employment under this Section 6f, which written notice shall
specify the particular act or acts, on the basis of which the Executive intends
to so terminate the Executive's employment, and the Company shall then be given
the opportunity, within fifteen (15) days of its receipt of such notice to cure
said event; provided, however, there shall be no period permitted to cure a
second occurrence of the same event and in no event will there be a required
period to cure following the occurrence of two events as described in this
Section 6f.
g. Termination Following a Change of Control.
(1) In the event that a "Change in Control," as hereinafter defined,
of the Company shall occur at any time during the Term hereof, the Executive
shall have the right to terminate the Executive's employment under this
Agreement upon thirty (30) days written notice given at any time within one (1)
year after the occurrence of such event, and such termination of the Executive's
employment with the Company pursuant to this Section 6g(1), then, in any such
event, such termination shall be deemed to be a Termination by the Company Other
than for Cause and the Executive shall be entitled to such Compensation and
Benefits as set forth in Subsection 6d of this Agreement.
(2) For purposes of this Agreement, a "Change in Control" of the
Company shall mean a change in control (A) as set forth in Section 280G of the
Internal Revenue Code; or (B) of a nature that would be required to be reported
in response to Item 1 of the current report on Form 8K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as:
(A) any "person", other than the Executive, (as such term is used
in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial
6
<PAGE>
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the
Company's outstanding securities then having the right to vote at
elections of directors; or,
(B) the individuals who at the commencement date of the Agreement
constitute the Board of Directors cease for any reason to constitute
a majority thereof unless the election, or nomination for election,
of each new director was approved by a vote of at least two thirds of
the directors then in office who were directors at the commencement
of the Agreement; or
(C) there is a failure to elect three or more (or such number of
directors as would constitute a majority of the Board of Directors)
candidates nominated by management of the Company to the Board of
Directors; or
(D) the business of the Company for which the Executive's
services are principally performed is disposed of by the Company
pursuant to a partial or complete liquidation of the Company, a sale
of assets (including stock of a subsidiary of the Company) or
otherwise.
Anything herein to the contrary notwithstanding, this Section 6g(2) will not
apply where the Executive gives the Executive's explicit written waiver stating
that for the purposes of this Section 6g(2), a Change in Control shall not be
deemed to have occurred. The Executive's participation in any negotiations or
other matters in relation to a Change in Control shall in no way constitute such
a waiver which can only be given by an explicit written waiver as provided in
the preceding sentence.
An "Attempted Change in Control" shall be deemed to have occurred if
any substantial attempt, accompanied by significant work efforts and
expenditures of money, is made to accomplish a Change in Control, as described
in subparagraphs (A), (B), (C) or (D) above whether or not such attempt is made
with the approval of a majority of the then current members of the Board of
Directors.
(3) In the event that, within twelve (12) months of any Change in
Control of the Company or any Attempted Change in Control of the Company, the
Company terminates the employment of the Executive under this Agreement, for any
reason other than for Cause as defined in Section 6c, or the Executive's
employment is constructively terminated as defined in Section 6g(4), then, in
any such event, such termination shall be deemed to be a Termination by the
Company Other than for Cause and the Executive shall be entitled to such
Compensation and Benefits as set forth in Subsection 6d of this Agreement.
(4) For purposes of this Section 6g, the Executive's employment
shall be deemed constructively terminated in the event one or more of the
following events occurs without the express written consent of the Executive:
7
<PAGE>
(A) Significant change in the nature or scope of the authorities,
powers, functions, duties or responsibilities attached to
Executive's position as described in Section 3; or
(B) Material breach of the Agreement by the Company; or
(C) Material reduction of the Executive's benefits under any
employee benefit plan, program or arrangement (for Executive
individually or as part of a group) of the Company as then in effect
or as in effect on the effective date of the Agreement, which
reduction shall not be effectuated for similarly situated employees
of the Company; or
(D) Failure by a successor company to assume the obligations
under the Agreement; or
(E) Change in the Executive's principal office to a location
outside the Palm Beach-Broward County, Florida area.
(5) Anything in this Section 6g to the contrary notwithstanding, in
no event will any action or non-action by the Executive at any time prior to the
first anniversary date of the applicable Change in Control or Attempted Change
in Control (including any action or non-action prior to the effective date of
this Agreement) be deemed consent to any of the events described in this Section
6g.
(6) Anything herein to the contrary notwithstanding, in the event
the circumstances giving rise to an Attempted Change in Control are included in
those circumstances giving rise to an actual Change in Control the twelve (12)
month period under this Section 6 will be deemed to have recommenced on the date
the actual Change in Control occurred.
7. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. Except as set forth in Section 6d(2) of
this Agreement, the Executive acknowledges and recognizes the highly competitive
nature of the Company's business and the goodwill, continued patronage, and
specifically the names and addresses of the Company's Clients (as hereinafter
defined) constitute a substantial asset of the Company having been acquired
through considerable time, money and effort. Accordingly, in consideration of
the execution of this Agreement, the Executive agrees to the following:
(1) That during the Restricted Period (as hereinafter defined) and
within the Restricted Area (as hereinafter defined), the Executive will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined), whether as an officer,
director, proprietor, employer, partner, independent contractor, investor (other
than as a holder solely as an investment of less
8
<PAGE>
than one percent (1%) of the outstanding capital stock of a publicly traded
corporation), consultant, advisor, agent or otherwise.
(2) That during the Restricted Period and within the Restricted
Area, the Executive will not, directly or indirectly, compete with the Company
by soliciting, inducing or influencing any of the Company's clients which have a
business relationship with the Company at the time during the Restricted Period
to discontinue or reduce the extent of such relationship with the Company.
(3) That during the Restricted Period and within the Restricted
Area, the Executive will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause or permit any business which competes directly or indirectly
with the Business Activities of the Company (the "Competitive Business") to
employ or seek to employ for any Competitive Business any person who is then (or
was at any time within six (6) months prior to the date Executive or the
Competitive Business employs or seeks to employ such person) employed by the
Company.
(4) That during the Restricted Period the Executive will not
interfere with, or disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
customer, employee or agent of the Company.
b. Non-Disclosure of Information. The Executive acknowledges that
the Company's trade secrets, private or secret processes, methods and ideas, as
they exist from time to time, customer lists and information concerning the
Company's products, services, training methods, development, technical
information, marketing activities and procedures, credit and financial data
concerning the Company and/or the Company's Clients, and (the "Proprietary
Information") are valuable, special and unique assets of the Company, access to
and knowledge of which are essential to the performance of the Executive
hereunder. In light of the highly competitive nature of the industry in which
the Company's business is conducted, the Executive agrees that all Proprietary
Information, heretofore or in the future obtained by the Executive as a result
of the Executive's association with the Company shall be considered
confidential.
In recognition of this fact, the Executive agrees that the Executive,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Executive's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Executive is legally required to disclose such Proprietary Information.
Documents (as hereinafter defined) prepared by the Executive or that come into
the Executive's possession during the Executive's association with the Company
are and remain the property of the Company, and when this Agreement
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terminates, such Documents shall be returned to the Company at the Company's
principal place of business, as provided in the Notice provision (Section 10) of
this Agreement.
c. Documents. "Documents" shall mean all original written, recorded,
or graphic matters whatsoever, and any and all copies thereof, including, but
not limited to: papers; books; records; tangible things; correspondence;
communications; telex messages; memoranda; work-papers; reports; affidavits;
statements; summaries; analyses; evaluations; client records and information;
agreements; agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists; client lists;
statistical records; training manuals; computer printouts; books of account,
records and invoices reflecting business operations; all things similar to any
of the foregoing however denominated. In all cases where originals are not
available, the term "Documents" shall also mean identical copies of original
documents or non-identical copies thereof.
d. Company's Clients. The "Company's Clients" shall be deemed to be
any persons, partnerships, corporations, professional associations or other
organizations for whom the Company has performed Business Activities.
e. Restrictive Period. The "Restrictive Period" shall be deemed to
be eighteen (18) months following termination of this Agreement, except as set
forth in Section 6g(2) of this Agreement.
f. Restricted Area. The Restricted Area shall be deemed to mean
within Broward County, Dade County, Monroe County and Palm Beach County, Florida
and within any other county of any state in which the Company is providing
service at the time of termination.
g. Business Activities. "Business Activities" shall be deemed to
include any business activities concerning marketing, distributing and selling
prescription and non-prescription medications and pet related products provided
by the Company and any additional activities which the Company or any of its
affiliates may engage in during the term of this Agreement.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7a and b are essential elements of this Agreement, and
that but for the agreement by the Executive to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Executive shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Executive.
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i. Survival After Termination of Agreement. Notwithstanding anything
to the contrary contained in this Agreement, the covenants in Sections 7a and b
shall survive the termination of this Agreement and the Executive's employment
with the Company.
j. Remedies.
(1) The Executive acknowledges and agrees that the Company's remedy
at law for a breach or threatened breach of any of the provisions of Section 7a
or b herein would be inadequate and the breach shall be per se deemed as causing
irreparable harm to the Company. In recognition of this fact, in the event of a
breach by the Executive of any of the provisions of Section 7a or b, the
Executive agrees that, in addition to any remedy at law available to the
Company, including, but not limited to monetary damages, all rights of the
Executive to payment or otherwise under this Agreement and all amounts then or
thereafter due to the Executive from the Company under this Agreement may be
terminated and the Company, without posting any bond, shall be entitled to
obtain, and the Executive agrees not to oppose the Company's request for
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available to the Company.
(2) The Executive acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 7a or b and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8. Indemnification. The Executive shall continue to be covered by the
Articles of Incorporation and/or the Bylaws of the Company with respect to
matters occurring on or prior to the date of termination of the Executive's
employment with the Company, subject to all the provisions of Florida and
Federal law and the Articles of Incorporation and Bylaws of the Company then in
effect. Such reasonable expenses, including attorneys' fees, that may be covered
by the Articles of Incorporation and/or Bylaws of the Company shall be paid by
the Company on a current basis in accordance with such provision, the Company's
Articles of Incorporation and Florida law. To the extent that any such payments
by the Company pursuant to the Company's Articles of Incorporation and/or Bylaws
may be subject to repayment by the Executive pursuant to the provisions of the
Company's Articles of Incorporation or Bylaws, or pursuant to Florida or Federal
law, such repayment shall be due and payable by the Executive to the Company
within twelve (12) months after the termination of all proceedings, if any,
which relate to such repayment and to the Company's affairs for the period prior
to the date of termination of the Executive's employment with the Company and as
to which Executive has been covered by such applicable provisions.
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9. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the Executive's
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
10. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Executive to
the Executive's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate.
11. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Executive but shall be assignable by
the Company in connection with the sale, transfer or other disposition of its
business or to any of the Company's affiliates controlled by or under common
control with the Company.
15. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into
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in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida. Anything in this Agreement to
the contrary notwithstanding, the Executive shall conduct the Executive's
business in a lawful manner and faithfully comply with applicable laws or
regulations of the state, city or other political subdivision in which the
Executive is located.
16. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
17. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18. Survival. Any termination of this Agreement shall not, however,
affect the ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
19. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
20. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
21. Venue. Company and Executive acknowledge and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 15th Judicial Circuit (or its successor) in and for Palm Beach
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
22. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date set
forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
PETMED EXPRESS, INC.
__________________________ By: /s/ Christopher Lloyd
-------------------------------------
Christopher Lloyd, Chief Operating
Officer
Witness: THE EXECUTIVE
___________________________ /s/ Marc A. Puleo, M.D.
-------------------------------------
Marc A. Puleo, M.D.
14
Exhibit 10.2
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into with an effective date of June 1, 1999 (the "Effective Date"),
between PetMedExpress.com, Inc., a Florida corporation, whose principal place of
business is 3350 N.W. 53rd Street, Fort Lauderdale, Florida 33309 (the
"Company") and Christopher Lloyd, an individual whose address is 2901-H Wolcott,
Chicago, Illinois 60657 (the "Executive").
RECITALS
WHEREAS, the Company is a Florida corporation and is principally
engaged in the business of marketing, distributing and selling prescription and
non-prescription pet medications and pet-related products for household pets
(the "Business").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to be employed by the Company.
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, with expertise in all aspects of the Business.
WHEREAS, the Executive, by virtue of the Executive's employment with
the Company, will become familiar with and possessed with the manner, methods,
trade secrets and other confidential information pertaining to the Company's
business, including the Company's client base.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Executive do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement,
the Executive shall serve as Chief Operating Officer of the Company and shall
have such responsibilities and duties as are customarily undertaken by
individuals in similar positions.
b. Time Devoted. Throughout the Term of the Agreement, the Executive
shall devote substantially all of the Executive's business time and attention to
the business and affairs of the Company consistent with the Executive's position
with the Company, except for reasonable vacations, illness or incapacity.
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4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and on the fifth anniversary of the Effective
Date, and may be extended for additional one (1) year periods (each a "Renewal
Term") by written notice given by the Company to the Executive at least 60 days
before the expiration of the Term or the Renewal Term, as the case may be,
unless this Agreement shall have been terminated pursuant to Section 6 of this
Agreement.
5. Compensation and Benefits.
a. Salary. The Executive shall be paid a base salary, payable in
accordance with the Company's policies from time to time for senior executives,
at an annual rate of Eighty Thousand Dollars ($80,000), subject to increase from
time to time upon the review and determination of the Board of Directors, which
review shall be conducted no less frequent than annually.
b. Incentive Compensation. The Executive may be entitled to receive
certain incentive compensation from time to time based upon performance criteria
to be mutually agreed upon by the Executive and the Company.
c. Options.
i. The Executive shall be granted 300,000 incentive stock
options (the "Options") to purchase shares of the Company's Common Stock at an
exercise price of $7.00 per share, being the fair market value of the Company's
Common Stock on the trading day immediately preceding the date which the parties
hereto reached an agreement concerning Executive's employment by the Company,
giving effect to the subsequent forward split of the Company's Common Stock.
Such Options are granted under the Company's 1998 Stock Option Plan and pursuant
to the form of Option attached hereto as Exhibit A and incorporated herein by
such reference. The Options shall be exercisable from the date of vesting and
shall vest, subject to the continued employment of the Executive, (i) 50,000
Options on the date of this Agreement, (ii) 50,000 Options on the first
anniversary of the Effective Date of this Agreement , (iii) 50,000 Options on
the second anniversary of the Effective Date of this Agreement, (iv) 50,000
Options on the third anniversary of the Effective Date of this Agreement, (v)
50,000 Options on the fourth anniversary of the Effective Date of this
Agreement, and (vi) the remaining 50,000 options on the fifth anniversary of the
Effective Date of this Agreement. The Options shall expire five (5) years from
the date of vesting.
ii. In the event of a termination of Executive and (i) a sale of
all or substantially all of the assets of the Company; or (ii) a merger, stock
exchange or other form of business combination (the "Business Combination") the
result of which being that the shareholders of the Company immediately preceding
such transaction will own, after the consummation of such Business Combination,
less that 51% of the then issued and outstanding voting securities of the
Company, then, in such event, on the effective date of either the sale of all or
substantially all of the Company's assets or a Business
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Combination, all Options not theretofore vested shall immediately vest and
become exercisable.
iii. In addition to the Options set forth in Section 5c(i)
hereof, on the earlier of (i) the fiscal year ending March 31, 2001 if the
Company should report (a) Revenues (as hereinafter defined) of at least
Forty-Three Million Dollars ($43,000,000); or (b) Income From Operations (as
hereinafter defined) of at least Five Million Dollars ($5,000,000); or (ii)
March 31, 2004, the Executive shall be entitled to a incentive options to
purchase up to an additional thirty thousand (30,000) shares of Common Stock of
the Company. Such options, which shall be exercisable for a period of five (5)
years from the date of grant at an exercise price of the lower of Fair Market
Value or $15.00 per share, shall be granted under the Company's 1998 Stock
Option Plan. In the event the Company makes any acquisitions of existing
businesses, then this paragraph shall be null and void, and thereafter the
Company and Executive will mutually decide upon revised options to be granted
pursuant to this paragraph. For the purposes of this Agreement, "Revenues" shall
mean the total gross revenues of the Company from all sources and "Income From
Operations" shall mean the Revenues less the cost of the Revenues and all
selling, general and administrative expenses as reflected on the Company's
audited financial statements for the periods therein. The audited financial
statements of the Company, accompanied by the accountant's report of the
Company's then principal independent accountants for such fiscal year, shall be
conclusive as to the determination of the satisfaction of the aforedescribed
performance based criteria. In the event the Company should meet such
performance based criteria, the options shall be granted to the Executive on the
date the audited financial statements are issued by the Company's principal
independent accountants.
iv. For the purposes of this Agreement, "Fair Market Value"
shall be equal to the closing price of the Company's Common Stock as reported on
the OTC Bulletin Board or the primary exchange on which the Company's Common
Stock shall be quoted.
d. Executive Benefits. The Executive shall be entitled to
participate in all benefit programs of the Company currently existing or
hereafter made available to executive and/or salaried employees including, but
not limited to, stock option plans, pension and other retirement plans, group
life insurance, hospitalization, surgical and major medical coverage, sick
leave, salary continuation, vacation and holidays, long-term disability, and
other fringe benefits. Until the Company shall have established, and the
Executive has become eligible for coverage under, health insurance coverage for
its employees, the Company shall, within thirty (30) days of payment by the
Executive, reimburse the Executive for all premiums paid by the Executive for
the lesser of (a) the cost to the Executive to continue his current medical,
dental and vision insurance under COBRA and his current long term disability
insurance policy, or (b) the cost to Executive to secure individual medical,
dental and vision insurance and long term disability insurance providing
benefits comparable to those available under Executive's current medical,
dental, vision and long term disability coverage.
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e. Vacation. During each fiscal year of the Company, the Executive
shall be entitled to such amount of vacation as determined by the Board of
Directors consistent with the Executive's position and length of service to the
Company.
f. Business Expense Reimbursement. During the Term of employment,
the Executive shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Executive (in accordance with
the policies and procedures established by the Company) in performing services
hereunder, provided the Executive properly accounts therefor.
6. Consequences of Termination of Employment.
a. Disability. In the event of the Executive's disability, the
Company may terminate this Agreement and the Executive shall be entitled to
compensation in accordance with the Company's disability compensation practice
for its senior officers. "Disability," for the purposes of this Agreement, shall
be deemed to have occurred in the event (A) the Executive is unable by reason of
sickness or accident, to perform his duties under this Agreement for an
aggregate of 90 days in any 12-month period or 45 consecutive days, or (B) the
Executive has a guardian of the person or estate appointed by a court of
competent jurisdiction. Termination due to disability shall be deemed to have
occurred upon the first day of the month following the determination of
disability as defined in the preceding sentence.
b. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from terminating the
Executive for "Cause," as hereinafter defined. The Executive shall continue to
receive salary only for the period ending with the date of such termination as
provided in this Section 6b. Any rights and benefits the Executive may have in
respect of any other compensation shall be determined in accordance with the
terms of such other compensation arrangements or such plans or programs.
ii. "Cause" shall mean (A) committing or participating in an
injurious act of fraud, gross neglect, material misrepresentation, embezzlement
or dishonesty against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (C) engaging
in a criminal enterprise involving moral turpitude; (D) conviction of an act or
acts constituting a felony under the laws of the United States or any state
thereof; or (E) if applicable, loss of any state or federal license required for
the Executive to perform the Executive's material duties or responsibilities for
the Company; or (F) any assignment of this Agreement by the Executive in
violation of Section 14 of this Agreement.
iii. Notwithstanding anything else contained in this Agreement,
this Agreement will not be deemed to have been terminated for Cause unless and
until there
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shall have been delivered to the Executive a notice of termination stating that
the Executive committed one of the types of conduct set forth in this Section 6b
contained in this Agreement and specifying the particulars thereof.
c. Voluntary Termination. Notwithstanding anything contained herein
to the contrary, this Agreement may be terminated (i) at any time upon the
mutual written consent of the Company and the Executive; or (ii) by either party
upon giving 90 days' prior written notice to the other party. During such 90 day
period, the Executive shall continue to perform the Executive's duties pursuant
to this Agreement, and the Company shall continue to compensate the Executive in
accordance with this Agreement.
d. Death. In the event of the death of the Executive during the Term
of the Agreement, compensation shall be paid to the Executive's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Executive for a period of six (6) months from and
after the date of death. Other death benefits will be determined in accordance
with the terms of the Company's benefit programs and plans.
e. Termination for "Good Reason". The Executive may terminate his
employment under this Agreement for "Good Reason." For purposes of this Section
6e, the Executive shall have "Good Reason" to terminate his employment at any
time during the term of this Agreement upon thirty (30) days prior written
notice to the Company if the Company (i) removes the Executive from or fails to
re-elect the Executive to the office of Chief Operating Officer of the Company
without the Executive's prior written consent, (ii) reduces his salary or
materially fails to comply with Section 5 of this Agreement, or (iii) requires
the Executive to be based at any office or locations of the Company other than
those located in Broward County, Florida. In the event of such a termination,
the Executive shall be entitled to the balance of his salary payable pursuant to
Section 5a hereof, the Options pursuant to Section 5c hereof and the executive
benefits pursuant to Section 5d hereof.
7. Covenant Not to Compete and Non-Disclosure of Information.
a. Covenant Not to Compete. The Executive acknowledges and
recognizes the highly competitive nature of the Company's business and that the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial asset of the
Company having been acquired through considerable time, money and effort.
Accordingly, in consideration of the execution of this Agreement, the Executive
agrees to the following:
i. That during the Restricted Period (as hereinafter defined) and
within the Restricted Area (as hereinafter defined), the Executive will not,
individually or in conjunction with others, directly or indirectly, engage in
any Business Activities (as hereinafter defined), whether as an officer,
director, proprietor, employer, partner, independent contractor, investor (other
than as a holder solely as an investment of less
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than one (1%) percent of the outstanding capital stock of a publicly traded
corporation), consultant, advisor, agent or otherwise.
ii. That during the Restricted Period and within the Restricted
Area, the Executive will not, directly or indirectly, compete with the Company
by soliciting, inducing or influencing any of the Company's Clients which have a
business relationship with the Company during the Restricted Period to
discontinue or reduce the extent of such relationship with the Company.
iii. That during the Restricted Period and within the Restricted
Area, the Executive will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to discontinue such
employment or agency relationship with the Company, or (B) employ or seek to
employ, or cause any business which competes directly or indirectly with the
Business Activities of the Company (the "Competitive Business") to employ or
seek to employ for any Competitive Business any person who is then (or was at
any time within six (6) months prior to the date Executive or the Competitive
Business employs or seeks to employ such person) employed by the Company.
b. Non-Disclosure of Information. The Executive acknowledges that
the Company's trade secrets, private or secret processes, methods and ideas, as
they exist from time to time, customer lists and information concerning the
Company's products, services, training methods, development, technical
information, marketing activities and procedures, credit and financial data
concerning the Company and/or the Company's Clients (the "Proprietary
Information") are valuable, special and unique assets of the Company, access to
and knowledge of which are essential to the performance of the Executive
hereunder. In light of the highly competitive nature of the industry in which
the Company's business is conducted, the Executive agrees that all Proprietary
Information, heretofore or in the future obtained by the Executive as a result
of the Executive's association with the Company shall be considered
confidential.
In recognition of this fact, the Executive agrees that the Executive,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Executive's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Executive is legally required to disclose such Proprietary Information.
Documents (as hereinafter defined) prepared by the Executive or that come into
the Executive's possession during the Executive's association with the Company
are and remain the property of the Company, and when this Agreement terminates,
such Documents shall be returned to the Company at the Company's principal place
of business, as provided in the Notices provision (Section 10) of this
Agreement.
c. Documents. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever relating to the business conducted by
the Company, and any
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and all copies thereof, including, but not limited to: papers; books; records;
tangible things; correspondence; communications; telex messages; memoranda;
work-papers; reports; affidavits; statements; summaries; analyses; evaluations;
client records and information; agreements; agendas; advertisements;
instructions; charges; manuals; brochures; publications; directories; industry
lists; schedules; price lists; client lists; statistical records; training
manuals; computer printouts; books of account, records and invoices reflecting
business operations; all things similar to any of the foregoing however
denominated. In all cases where originals are not available, the term
"Documents" shall also mean identical copies of original documents or
non-identical copies thereof.
d. Company's Clients. The "Company's Clients" shall be deemed to be
any persons, partnerships, corporations, professional associations or other
organizations for whom the Company has performed Business Activities.
e. Restrictive Period. The "Restrictive Period" shall be deemed to
be eighteen (18) months following termination of this Agreement.
f. Restricted Area. The Restricted Area shall be deemed to mean
within Broward County, Miami-Dade County, Monroe County and Palm Beach County,
Florida and within any other county of any state in which the Company is
providing service at the time of termination.
g. Business Activities. "Business Activities" shall be deemed to
include the Business, any business activities concerning marketing, distributing
and selling prescription and non-prescription pet medications and pet related
products provided by the Company and any additional activities which the Company
or any of its affiliates may be engaged in at the time of termination.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7a and 7b are essential elements of this Agreement, and
that but for the agreement by the Executive to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Executive shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship between the parties shall not
constitute a defense to the enforcement of such covenants against the Executive.
i. Survival After Termination of Agreement. Notwithstanding anything
to the contrary contained in this Agreement, the covenants in Sections 7a and 7b
shall survive the termination of this Agreement and the Executive's employment
with the Company.
j. Remedies. The Executive acknowledges and agrees that the
Company's remedy at law for a breach or threatened breach of any of the
provisions of
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Section 7a or 7b herein would be inadequate and the breach shall be per se
deemed as causing irreparable harm to the Company. In recognition of this fact,
in the event of a breach or threatened breach by the Executive of any of the
provisions of Section 7a or 7b, the Executive agrees that, in addition to any
remedy at law available to the Company including, but not limited to, monetary
damages, and the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available to the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach.
8. Indemnification.
a. The Company hereby acknowledges that the position of Chief
Operating Officer is an executive officer position within the meaning of the
Company's By-laws. The Executive shall be entitled to indemnification for his
acts or omissions in his capacity as Chief Operating Officer of the Company to
the fullest extent permitted by current or future Florida law (but only to the
extent such future law provides for broader indemnification rights than
permitted prior to the enactment thereof), including the provisions thereof
relating to the advancement of expenses. In addition to the foregoing, the
Company agrees that it shall, at all times during the term of this Agreement,
maintain director and officer liability insurance, with the Executive as a named
insured, in an amount that is reasonable for companies of a size and engaged in
a business comparable to the Company. In no event shall the Company maintain
director and officer liability insurance with coverage limits that are less than
those the Company currently has in place.
b. After the termination of this Agreement, the Executive shall
continue to be entitled to indemnification of the Company (including the
advancement of expenses) with respect to matters occurring on or prior to the
date of termination of the Executive's employment with the Company to the
fullest extent provided under current or future Florida law (but the extent such
future law provides for broader indemnification rights than permitted prior to
the enactment thereof), including the provisions thereof relating to the
advancement of expenses. Such reasonable expenses, including attorneys' fees,
that may be shall be paid by the Company on a current basis in accordance with
such advance under such current or future Florida law. To the extent that any
such payments by the Company pursuant to the Company's Articles of Incorporation
and/or Bylaws may be subject to repayment by the Executive pursuant to the
provisions of such Florida law, such repayment shall be due and payable by the
Executive to the Company within twelve (12) months after the termination of all
proceedings, if any, which relate to such repayment.
c. The provisions of this Section 8 shall inure to the benefit of
the heirs, legal representatives and estate of the Executive.
9. Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive or the Executive's
estate or
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<PAGE>
beneficiaries shall be subject to the withholding of such amounts, if any,
relating to tax and other payroll deductions as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other arrangements
pursuant to which it is satisfied that such tax and other payroll obligations
will be satisfied in a manner complying with applicable law or regulation.
10. Notices. Any notice required or permitted to be given under the
terms of this Agreement shall be sufficient if in writing and if sent postage
prepaid by registered or certified mail, return receipt requested; by overnight
delivery; by courier; or by confirmed telecopy, in the case of the Executive to
the Executive's last place of business or residence as shown on the records of
the Company, or in the case of the Company to its principal office as set forth
in the first paragraph of this Agreement, or at such other place as it may
designate. Any notices shall be deemed given upon receipt thereof.
11. Waiver. Unless agreed in writing, the failure of either party, at
any time, to require performance by the other of any provisions hereunder shall
not affect its right thereafter to enforce the same, nor shall a waiver by
either party of any breach of any provision hereof be taken or held to be a
waiver of any other preceding or succeeding breach of any term or provision of
this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
12. Completeness and Modification. This Agreement constitutes the
entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
14. Binding Effect/Assignment. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and assigns. This
Agreement shall not be assignable by the Executive or the Company, except that
it shall be assigned by the Company in connection with the sale, transfer or
other disposition of its business.
15. Governing Law. This Agreement shall become valid when executed and
accepted by Company. The parties agree that it shall be deemed made and entered
into in the State of Florida and shall be governed and construed under and in
accordance with the laws of the State of Florida, without regard to the
conflicts of laws and principle thereof. Anything in this Agreement to the
contrary notwithstanding, the Executive shall conduct the
9
<PAGE>
Executive's business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political subdivision in which
the Executive is located.
16. Further Assurances. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary to carry out
the intent and purposes of this Agreement.
17. Headings. The headings of the sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
19. Severability. The invalidity or unenforceability, in whole or in
part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phase or word or of any provision of this Agreement
shall not affect the validity or enforceability of the remaining portions
thereof.
20. Enforcement. Should it become necessary for any party to institute
legal action to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
21. Venue. Company and Executive acknowledges and agree that the U.S.
District for the Southern District of Florida, or if such court lacks
jurisdiction, the 17th Judicial Circuit (or its successor) in and for Broward
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
22. Construction. This Agreement shall be construed within the fair
meaning of each of its terms and not against the party drafting the document.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of date
set forth in the first paragraph of this Agreement.
Witness: THE COMPANY:
PETMEDEXPRESS.COM, INC.
- --------------------------- By: /s/ Marc A. Puleo, M.D.
------------------------------
Marc A. Puleo, M.D., President
Witness: THE EXECUTIVE
- --------------------------- /s/ Christopher Lloyd
----------------------------------
Christopher Lloyd
Exhibit 10.3
PETMED EXPRESS, INC.
1998 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the provisions
hereinafter set forth in this stock option plan, the name of which is the PETMED
EXPRESS, INC. 1998 STOCK OPTION PLAN (the "Plan"), the Board of Directors (the
"Board") or, the Compensation Committee (the "Stock Option Committee") of PetMed
Express, Inc.. (the "Corporation") is hereby authorized to issue from time to
time on the Corporation's behalf to any one or more Eligible Persons, as
hereinafter defined, options to acquire shares of the Corporation's $.001 par
value common stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is
authorized to issue Incentive Stock Options ("ISOs") which meet the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
which options are hereinafter referred to collectively as ISOs, or singularly as
an ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. The Board or the Stock Option Committee is also authorized to issue "Reload
Options" in accordance with Paragraph 9 herein, which options are hereinafter
referred to collectively as Reload Options, or singularly as a Reload Option.
Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs, NSOs and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may
be purchased pursuant to the exercise of Options shall be 1,000,000 shares. Of
this amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such
<PAGE>
corporate event and not disposed of anything the holder received as a result of
the corporate event. The number of shares of Common Stock subject to this Plan
(and not subject to outstanding Option grants) shall not subsequently be
affected by any forward or reverse stock splits or recapitalizations undertaken
by the Company.
4. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any
individual who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant of the Corporation or any subsidiary of the Corporation.
5. Grant of Options. The Board or the Stock Option Committee has the
right to issue the Options established by this Plan to Eligible Persons. The
Board or the Stock Option Committee shall follow the procedures prescribed for
it elsewhere in this Plan. A grant of Options shall be set forth in a writing
signed on behalf of the Corporation or by a majority of the members of the Stock
Option Committee. The writing shall identify whether the Option being granted is
an ISO, an NSO or Reload Option and shall set forth the terms which govern the
Option. The terms shall be determined by the Board or the Stock Option
Committee, and may include, among other terms, the number of shares of Stock
that may be acquired pursuant to the exercise of the Options, when the Options
may be exercised, the period for which the Option is granted and including the
expiration date, the effect on the Options if the Eligible Person terminates
employment, whether the Eligible Person may deliver shares of Stock or other
consideration to pay for the shares of Stock to be purchased by the exercise of
the Option, and such other terms and conditions whether or not specifically
provided for under the terms hereinafter set forth. However, no term shall be
set forth in the writing which is specifically inconsistent with any of the
terms of this Plan. The terms of an Option granted to an Eligible Person may
differ from the terms of an Option granted to another Eligible Person, and may
differ from the terms of an earlier Option granted to the same Eligible Person.
6. Option Price. The option price per share shall be determined by the
Board or the Stock Option Committee at the time any Option is granted, and shall
be not less than (i) in the case of an ISO, the fair market value, (ii) in the
case of an ISO granted to a 10% or greater stockholder, 110% of the fair market
value, or (iii) in the case of an NSO, not less than the par value thereof, as
determined by the Board or the Stock Option Committee. Fair market value as used
herein shall be:
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and low sales prices of Stock
on such exchange or
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<PAGE>
over-the-counter market on which such shares shall be traded on that date, or if
such exchange or over-the-counter market is closed or if no shares shall have
traded on such date, on the last preceding date on which such shares shall have
traded.
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized appraiser as
selected by the Board or the Stock Option Committee.
7. Purchase of Shares. An Option shall be exercised by the tender to
the Corporation of the full purchase price of the Stock with respect to which
the Option is exercised and written notice of the exercise. The purchase price
of the Stock shall be in United States dollars, payable in cash, check,
Promissory Note secured by the Shares issued through exercise of the related
Options, or in property, Corporation stock, or other consideration if so
permitted by the Board or the Stock Option Committee in accordance with the
discretion granted in Paragraph 5 hereof, having a value equal to such purchase
price. The Corporation shall not be required to issue or deliver any
certificates for shares of Stock purchased upon the exercise of an Option prior
to (i) if requested by the Corporation, the filing with the Corporation by the
Eligible Person of a representation in writing that it is the Eligible Person's
then present intention to acquire the Stock being purchased for investment and
not for resale, and/or (ii) the completion of any registration or other
qualification of such shares under any government regulatory body, which the
Corporation shall determine to be necessary or advisable.
8. Grant of Reload Options. In granting an Option under this Plan, the
Board or the Stock Option Committee may include a Reload Option provision
therein, subject to the provisions set forth in Paragraphs 19 and 20 herein. A
Reload Option provision provides that if the Eligible Person pays the exercise
price of shares of Stock to be purchased by the exercise of an ISO, NSO or
another Reload Option (the "Original Option") by delivering to the Corporation
shares of Stock already owned by the Eligible Person (the "Tendered Shares"),
the Eligible Person shall receive a Reload Option which shall be a new Option to
purchase shares of Stock equal in number to the tendered shares. The terms of
any Reload Option shall be determined by the Board or the Stock Option Committee
consistent with the provisions of this Plan.
9. Stock Option Committee. The Stock Option Committee may be appointed
from time to time by the Corporation's Board of Directors. The Board may from
time to time remove members from or add members to the Stock Option Committee.
The Stock Option Committee shall be constituted so as to permit the Plan to
comply in all respects with the provisions set forth in Paragraph 9 herein. The
members of the Stock Option Committee may elect one of its members as its
chairman. The Stock Option Committee shall hold its meetings at such times and
places as its chairman shall determine. A majority of the Stock Option
Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or
3
<PAGE>
similar communications equipment by means of which all members participating in
the meeting can hear each other. Participation in a meeting in that manner will
constitute presence in person at the meeting. Any decision or determination
reduced to writing and signed by all members of the Stock Option Committee will
be effective as if it had been made by a majority vote of all members of the
Stock Option Committee at a meeting which is duly called and held.
10. Administration of Plan. In addition to granting Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 19 and 20
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
11. Provisions Applicable to ISOs. The following provisions shall apply
to all ISOs granted by the Board or the Stock Option Committee and are
incorporated by reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from , 1998,
the date that this Plan was originally adopted by the Corporation's Board of
Directors.
(b) An ISO may not be exercised after the expiration of ten (10)
years from the date the ISO is granted.
(c) The option price may not be less than the fair market value of
the Stock at the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110% of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.
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<PAGE>
(f) The aggregate fair market value (determined at the time the ISO
is granted) of the Stock with respect to which the ISO is first exercisable by
the Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.
(g) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the Corporation on May , 1998, by
virtue of its approval by the Corporation's Board of Directors and the approval
by the majority of the stockholders of the Corporation.
12. Determination of Fair Market Value. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO.
13. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such exercise
it is his or her then present intention to acquire the shares of Stock for
investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be defined to exclude distribution by will
or under the laws of descent and distribution. Prior to issuing any shares of
Stock pursuant to the exercise of an Option, the Corporation shall take such
steps as it deems necessary to satisfy any withholding tax obligations imposed
upon it by any level of government.
14. Exercise in the Event of Death of Termination or Employment.
(a) Except as may otherwise be provided under the terms of the
Option, if an optionee shall die (i) while an employee of the Corporation or a
Subsidiary or (ii) within three months after termination of his employment with
the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one
5
<PAGE>
year after the optionee's death, whichever date is earlier, or in the event of
termination of employment because of retirement or otherwise, not later than the
expiration date specified in Paragraph 5 hereof or one year after the optionee's
death, whichever date is earlier.
(b) Except as may otherwise be provided under the terms of the
Option, if an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability and such optionee has not died within the
following three months, he may exercise his Options, to the extent that he shall
have been entitled to do so at the date of the termination of his employment, at
any time, or from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or one year after termination of employment, whichever
date is earlier.
(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans if any, or with the consent of the Board or the Stock Option
Committee or involuntarily other than by termination for cause, and such
optionee has not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from to time, but not later than
the expiration date specified in Paragraph 5 hereof or 30 days after termination
of employment, whichever date is earlier. For purposes of this Paragraph 14,
termination for cause shall mean; (i) termination of employment for cause as
defined in the optionee's Employment Agreement or (ii) in the absence of an
Employment Agreement for the optionee, termination of employment by reason of
the optionee's commission of a felony, fraud or willful misconduct which has
resulted, or is likely to result, in substantial and material damage to the
Corporation or a Subsidiary, all as the Board or the Stock Option Committee in
its sole discretion may determine.
(d) If an optionee's employment shall terminate for any reason other
than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment absent
specific provisions in the optionee's Option Agreement.
15. Corporate Events. In the event of the proposed dissolution or
liquidation of the Corporation, a proposed sale of all or substantially all of
the assets of the Corporation, a merger or tender for the Corporation's shares
of Common Stock the Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed by the Board of
Directors; provided that not less than 30 days written notice of the date so
fixed shall be given to each Eligible Person holding an Option, and each such
Eligible Person shall have the right, during the period of 30 days preceding
such termination, to exercise his Option as to all or any part of the shares of
Stock covered thereby, including shares of Stock as to which such Option would
not otherwise be exercisable. Nothing set forth herein shall extend the term set
for purchasing the shares of Stock set forth in the Option.
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<PAGE>
16. No Guarantee of Employment. Nothing in this Plan or in any writing
granting an Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
17. Nontransferability. Except as may be provided under the terms of
any Option; no Option granted under the Plan shall be transferable other than by
will or by the laws of descent and distribution. During the lifetime of the
optionee, an Option shall be exercisable only by him.
18. No Rights as Stockholder. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.
19. Amendment and Discontinuance of Plan. The Corporation's Board of
Directors may amend, suspend or discontinue this Plan at any time; however, no
such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in Paragraphs 18, 19 and 20.
20. Compliance with Rule 16b-3. This Plan is intended to comply in all
respects with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are subject to Section 16 of
the Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
21. Compliance with Code. The aspects of this Plan on ISOs is intended
to comply in every respect with Section 422 of the Code and the regulations
promulgated thereunder. In the event any future statute or regulation shall
modify the existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any Option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes
7
<PAGE>
effective shall also be deemed to incorporate by reference such modification and
no notice of such modification need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
22. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Corporation to sell
and deliver Stock under such options, shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required. The Corporation shall not be required
to issue or deliver any certificates for shares of Stock prior to (a) the
listing of such shares on any stock exchange or over-the-counter market on which
the Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
23. Disposition of Shares. In the event any share of Stock acquired by
an exercise of an Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
24. Name. The Plan shall be known as the "PetMed Express, Inc. 1998
Stock Option Plan."
25. Notices. Any notice hereunder shall be in writing and sent by
certified mail, return receipt requested or by facsimile transmission (with
electronic or written confirmation of receipt) and when addressed to the
Corporation shall be sent to it at its office, 3350 NW 53 Street, Fort
Lauderdale, Florida 33309 and when addressed to the Board of Directors shall be
sent to it at 3350 NW 53 Street, Fort Lauderdale, Florida 33309 subject to the
right of either party to designate at any time hereafter in writing some other
address, facsimile number or person to whose attention such notice shall be
sent.
26. Headings. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Plan nor shall they affect its meaning,
construction or effect.
27. Effective Date. This Plan was adopted by the Board of Directors of
the Corporation on , 1998. The effective date of the Plan shall be the same
date.
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Dated as of ___________________, 1998.
PetMed Express, Inc.
By:______________________________
Marc A. Puleo, M.D., President
9
<PAGE>
[NSO GRANT FORM]
PETMED EXPRESS, INC.
3350 NW 53 Street
Fort Lauderdale, Florida 33309
Date: __________
- ------------------
- ------------------
- ------------------
Dear __________:
The Board of Directors of PetMed Express, Inc. (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the PetMed Express,
Inc. 1998 Stock Option Plan (the "Plan"). This letter will describe the Option
granted to you. Attached to this letter is a copy of the Plan. The terms of the
Plan also set forth provisions governing the Option granted to you. Therefore,
in addition to reading this letter you should also read the Plan. Your signature
on this letter is an acknowledgment to us that you have read and understand the
Plan and that you agree to abide by its terms. All terms not defined in this
letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an NSO. Please see in particular
Section 11 of the Plan.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
(a) __________, 199_, being __________ years from the date of grant
pursuant to the provisions of Section 2 of this Agreement; or
<PAGE>
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not been
registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
Marc A. Puleo, M.D., President
AGREED AND ACCEPTED:
- -------------------------
2
<PAGE>
[ALTERNATIVE NSO GRANT FORM]
OPTION TO PURCHASE
COMMON STOCK
OF
PetMed Express, Inc.
This is to certify that __________________ ("Optionee") is entitled,
subject to the terms and conditions hereinafter set forth, to purchase
___________ shares of Common Stock, par value $.001 per share (the "Common
Shares"), of PetMed Express, Inc., a Florida corporation (the "Company"), from
the Company at the price per share and on the terms set forth herein and to
receive a certificate for the Common Shares so purchased on presentation and
surrender to the Company with the subscription form attached, duly executed and
accompanied by payment of the purchase price of each share purchased either in
cash or by certified or bank cashier's check or other check payable to the order
of the Company.
The purchase rights represented by this Option are exercisable
commencing on the date hereof through and including ___________________ at a
price per Common Share of $_____.
The purchase rights represented by this Option are exercisable at the
option of the registered owner hereof in whole at any time, or in part from time
to time, within the period specified; provided, however, that such purchase
rights shall not be exercisable with respect to a fraction of a Common Share. In
case of the purchase of less than all the Common Shares purchasable under this
Option, the company shall cancel this Option on surrender hereof and shall
execute and deliver a new Option of like tenor and date for the balance of the
Common Shares purchasable hereunder.
The Company agrees at all times to reserve or hold available a
sufficient number of Common Shares to cover the number of shares issuable on
exercise of this and all other Options of like tenor then outstanding.
This Option shall not entitle the holder hereof to any voting rights or
other rights as a stockholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Option or the interest represented
hereby or the Common Shares purchasable hereunder until or unless, and except to
the extent that, this Option shall be exercised.
<PAGE>
In the event that the outstanding Common Shares hereafter are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
other reorganization, recapitalization, reclassification, combination of shares,
stock split-up or stock dividend:
(a) The aggregate number and kind of Common Shares subject to this
Option shall be adjusted appropriately;
(b) Rights under this Option, both as to the number of subject
Common Shares and the Option price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is involved,
this Option shall terminate, but the registered owner of this Option shall have
the right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise the Option in whole or in part to the extent that it
shall not have been exercised.
The Optionee shall have the right to exercise all or a portion of this
Option as follows:
(a) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and by
paying the exercise price by check or wire transfer to the Company as to the
number of Common Shares as to which the Option is being exercised (the "Exercise
Amount") and receiving in exchange therefor the number of Common Shares equal to
the Exercise Amount; and/or
(b) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and
receiving in exchange therefor the number of Common Shares equal to the product
of the Exercise Amount multiplied by a fraction, the numerator of which is the
market price less the exercise price and the denominator of which is such market
price. The market price shall be equal to the average closing price of the
Common Shares for the five trading days preceding the notice of exercise; and/or
(c) At any time and from time to time on or prior to the expiration
date, by surrendering at the principal office of the Company this Option and by
surrendering Common Shares of the Company valued at the market price, as
determined above, and receiving in exchange therefor the number of Common Shares
equal to the Exercise Amount.
(d) The Optionee may use one or more of the methods of exercise
outlined above when exercising this Option.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
2
<PAGE>
The Option and all rights hereunder shall not be transferable otherwise
than by will or the laws of descent and distribution.
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Option or any potion thereof
prior to fulfillment of all the following conditions:
(a) The completion of any required registration or other
qualification of such shares under any federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) The obtaining of any approval or other clearance from any
federal or state government agency which is necessary;
(c) The obtaining from the registered owner of the Option a
representation in writing, as required, that the owner is acquiring such Common
Shares for the owner's own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof, if the Options
and the related shares have not been registered under the Securities Act of
1933, as amended (the "Act"); and
(d) The placing on the certificate, as required, of an appropriate
legend and the issuance of stop transfer instructions in connection therewith if
this Option and the related shares have not been registered under the Act to the
following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE
AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION
PERTAINING TO SUCH SECURITIES AND PURSUANT TO A REPRESENTATION BY THE
SECURITY HOLDER NAMED HEREON THAT SAID SECURITIES HAVE BEEN ACQUIRED
FOR PURPOSES OF INVESTMENT AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF REGISTRATION. FURTHERMORE, NO
OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS TO TAKE PLACE WITHOUT
THE PRIOR WRITTEN APPROVAL OF COUNSEL OF THE ISSUER BEING AFFIXED TO
THIS CERTIFICATE. THE TRANSFER AGENT HAS BEEN ORDERED TO EXECUTE
TRANSFERS OF THIS CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE
INSTRUCTIONS."
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by the signature of its duly authorized officer.
PetMed Express, Inc.
By:_____________________________
Its: President
Dated:
4
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the
rights to purchase Common Shares evidenced by the within
Option.)
PetMed Express, Inc.
3350 NW 53 Street
Fort Lauderdale, Florida 33309
The undersigned hereby irrevocably subscribes for ____________ Common
Shares pursuant to and in accordance with the terms and conditions of this
Option, and herewith makes payment of $________ therefor, and requests that a
certificate for such Common Shares be issued in the name of the undersigned and
be delivered to the undersigned at the address stated below, and if such number
of shares shall not be all of the shares purchasable hereunder, that a new
Option of like tenor for the balance of the remaining Common Shares purchasable
hereunder shall be delivered to the undersigned at the address stated below.
Dated:___________________ Signed:____________________________________
Address: __________________________________
__________________________________
__________________________________
5
<PAGE>
[ISO GRANT FORM]
Date: ________________
PetMed Express, Inc.
3350 NW 53 Street
Fort Lauderdale, Florida 33309
- ---------------
- ---------------
- ---------------
Dear _______________:
The Board of Directors of PetMed Express, Inc. (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the PetMed Express,
Inc. 1998 Stock Option Plan (the "Plan"). This letter will describe the Option
granted to you. Attached to this letter is a copy of the Plan. The terms of the
Plan also set forth provisions governing the Option granted to you. Therefore,
in addition to reading this letter you should also read the Plan. Your signature
on this letter is an acknowledgment to us that you have read and under-stand the
Plan and that you agree to abide by its terms. All terms not defined in this
letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an ISO. Please see in particular
Section 11 of the Plan.
2. Rights and Privileges. Subject to the conditions hereinafter set
forth, we grant you the right to purchase __________ shares of Stock at
$__________ per share, the current fair market value of a share of Stock.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
(a) _____________, 199___, being __________ years from the date of
grant pursuant to the provisions of Section 2 of this Agreement; or
6
<PAGE>
(b) The expiration of thirty (30) days following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not been
registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
Marc A. Puleo, President
AGREED AND ACCEPTED:
- -------------------------
7
<PAGE>
[NSO GRANT FORM
WITH RELOAD OPTIONS]
PetMed Express, Inc.
3350 NW 53 Street
Fort Lauderdale, Florida 33309
Date: __________
- ---------------------
- ---------------------
- ---------------------
Dear __________:
The Board of Directors of PetMed Express, Inc. (the "Corporation") is
pleased to award you an Option pursuant to the provisions of the PetMed Express,
Inc. 1998 Stock Option Plan (the "Plan"). This letter will describe the Option
granted to you. Attached to this letter is a copy of the Plan. The terms of the
Plan also set forth provisions governing the Option granted to you. Therefore,
in addition to reading this letter you should also read the Plan. Your signature
on this letter is an acknowledgment to us that you have read and understand the
Plan and that you agree to abide by its terms. All terms not defined in this
letter shall have the same meaning as in the Plan.
1. Type of Option. You are granted an NSO. Please see in particular
Section 11 of the Plan. --------------
2. Rights and Privileges.
(a) Subject to the conditions hereinafter set forth, we grant you
the right to purchase __________ shares of Stock at $__________ per share.
(b) In addition to the Option granted hereby (the "Underlying
Option"), the Corporation will grant you a reload option (the "Reload Option")
as hereinafter provided. A Reload Option is hereby granted to you if you acquire
shares of Stock pursuant to the exercise of the Underlying Option and pay for
such shares of Stock with shares of Common Stock of the Corporation already
owned by you (the "Tendered Shares"). The Reload Option grants you the right to
purchase shares of Stock equal in number to the number of Tendered Shares. The
date on which the Tendered Shares are tendered to the Corporation in full or
partial payment of the purchase price for the shares of Stock acquired pursuant
to the exercise of the Underlying Option is the Reload Grant Date. The exercise
price of the Reload Option is the fair market value of the Tendered Shares on
the Reload
<PAGE>
Grant Date. The fair market value of the Tendered Shares shall be the low
closing bid price per share of the Corporation's Common Stock on the Reload
Grant Date. The Reload Option shall vest equally over a period of __________
(___) years, commencing on the first anniversary of the Reload Grant Date, and
on each anniversary of the Reload Grant Date thereafter; however, no Reload
Option shall vest in any calendar year if it would allow you to purchase for the
first time in that calendar year shares of Stock with a fair market value in
excess of $100,000, taking into account ISOs previously granted to you. The
Reload Option shall expire on the earlier of (i) __________ (___) years from the
Reload Grant Date, or (ii) in accordance with Paragraph 5(b), or (iii) in
accordance with Paragraph 5(c) as set forth herein. If vesting of the Reload
Option is deferred, then the Reload Option shall vest in the next calendar year,
subject, however, to the deferral of vesting previously provided. Except as
provided herein the Reload Option is subject to all of the other terms and
provisions of this Agreement governing Options.
3. Time of Exercise. The Option may be exercised at any time and from
time to time beginning when the right to purchase the shares of Stock accrues
and ending when they terminate as provided in Section 5 of this letter.
4. Method of Exercise. The Options shall be exercised by written notice
to the Chairman of the Board of Directors at the Corporation's principal place
of business. The notice shall set forth the number of shares of Stock to be
acquired and shall contain a check payable to the Corporation in full payment
for the Stock or that number of already owned shares of Stock equal in value to
the total Exercise Price of the Option. We shall make delivery of the shares of
Stock subject to the conditions described in Section 13 of the Plan.
5. Termination of Option. To the extent not exercised, the Option shall
terminate upon the first to occur of the following dates:
(a) __________, 199_, being __________ years from the date of grant
pursuant to the provisions of Section 2 of this Agreement; or
(b) The expiration of three months following the date your
employment terminates with the Corporation and any of its subsidiaries included
in the Plan for any reason, other than by reason of death or permanent
disability. As used herein, "permanent disability" means your inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months; or
(c) The expiration of 12 months following the date your employment
terminates with the Corporation and any of its subsidiaries included in the
Plan, if such employment termination occurs by reason of your death or by reason
of your permanent disability (as defined above).
2
<PAGE>
6. Securities Laws.
The Option and the shares of Stock underlying the Option have not been
registered under the Securities Act of 1933, as amended (the "Act"). The
Corporation has no obligations to ever register the Option or the shares of
Stock underlying the Option. All shares of Stock acquired upon the exercise of
the Option shall be "restricted securities" as that term is defined in Rule 144
promulgated under the Act. The certificate representing the shares shall bear an
appropriate legend restricting their transfer. Such shares cannot be sold,
transferred, assigned or otherwise hypothecated without registration under the
Act or unless a valid exemption from registration is then available under
applicable federal and state securities laws and the Corporation has been
furnished with an opinion of counsel satisfactory in form and substance to the
Corporation that such registration is not required.
7. Binding Effect. The rights and obligations described in this letter
shall inure to the benefit of and be binding upon both of us, and our respective
heirs, personal representatives, successors and assigns.
8. Date of Grant. The Option shall be treated as having been granted to
you on the date of this letter even though you may sign it at a later date.
Very truly yours,
By:_______________________________
Marc A. Puleo, President
AGREED AND ACCEPTED:
- -------------------------
3
Exhibit 10.4
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT made this 17th day of September, 1999, by and between
PETMEDEXPRESS.COM, INC., a Florida corporation (the "Borrower"), and SOUTHTRUST
BANK, NATIONAL ASSOCIATION, with its principal office in Birmingham, Alabama
(the "Bank").
RECITALS:
The Borrower has requested Bank to make available to Borrower a line of
credit aggregating up to One Million Dollars ($1,000,000) ("Loan"), and the Bank
is willing to make such credit facility available to the Borrower on the terms
and conditions hereinafter set forth and secured as provided in this Agreement.
NOW, THEREFORE, the Borrower and the Bank agree as follows:
ARTICLE 1
DEFINED TERMS; GENERAL MATTERS
1.1 Defined Terms. As used in this Loan and Security Agreement, the
following terms shall have the following meanings:
Account Debtor - any Person who is or may become obligated
under or on account of an Account.
Affiliate - any director or officer of Borrower or any Person
who, directly, indirectly or beneficially, owns five percent (5%) or more of the
capital stock of Borrower or any member of the immediate family of any such
officer, director or stockholder, or any corporation or other entity which is
controlled by, controls, or is under common control with the Borrower,
including, without limitation, the Guarantor.
Aggregate Loan Values - the lesser of (i) the sum of One
Million Dollars ($1,000,000); or (ii) the sum of the Loan Value of Accounts, and
the Loan Value of Inventory.
Agreement - this Loan and Security Agreement.
Applicable Laws - all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant or Loan Document in question,
including, but not limited to, all applicable common law and equitable
principles; all provisions of all applicable state and federal constitutions,
1
<PAGE>
statutes, rules, regulations and order of governmental bodies; and all orders,
judgements and decrees of all courts and arbitrators.
Average Monthly Loan Balance - the amount obtained by adding
the unpaid balance of the Loan owing by Borrower to Bank at the end of each day
for each day during the month in question and by dividing such sum by the number
of days in such month.
Bank - SouthTrust Bank, National Association.
Base Rate - the rate of interest designated by the Bank
periodically as its Base Rate. The Base Rate is not necessarily the lowest
interest rate charged by the Bank.
Borrower - PETMEDEXPRESS.COM, INC., a Florida corporation.
Borrower's Report - the certificate or report of Borrower
referred to in Section 2.1(c) of this Agreement.
Business Day - a day, other than Saturday, Sunday, or days on
which national banks located in Miami, Florida, are authorized by law to close.
Capital Expenditures - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise and the
principal portion of payments with respect to Capitalized Lease Obligations.
Capitalized Lease Obligations - any Debt represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Debt shall be
the capitalized amount of such obligations determined in accordance with GAAP.
Closing Date - the date of this Agreement. The Closing Date is
not necessarily the date of initial funding of the Loan and the execution and
delivery of this Agreement and acceptance hereof shall not be deemed a waiver by
Bank of any of the conditions to lending set forth in Article 3 hereof.
Collateral - collectively, the Borrower's Inventory, the other
property and interests described in Section 8.1 hereof and elsewhere in the Loan
Documents, and the proceeds and products of each, as the case may be.
2
<PAGE>
Collected Balance - the book balance in a bank account, minus
the aggregate amount of all checks and other items of payment in the process of
collection, said amount to be computed in accordance with the Bank's standard
practices.
3
<PAGE>
Commitment Period - shall mean that period during which Bank
is obligated to make advances under the Loan hereunder, as provided in Section
2.1 hereof. The Commitment Period shall commence upon satisfaction of the
conditions to lending set forth in Article 3 and shall continue until one (1)
year from the date hereof, unless sooner terminated according to the provisions
hereof.
Current Assets - at any date means the amount at which all of
the current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP except that
amounts due from Affiliates and Subsidiaries and investments in Affiliates and
Subsidiaries shall be excluded.
Current Liabilities - at any date means the amount at which
all of the current liabilities of a Person would be properly classified as
current liabilities on a balance sheet at such date in accordance with GAAP.
Debt - the sum of (i) indebtedness for borrowed money or for
the deferred purchase price of property or services, (ii) Capitalized Lease
Obligations, (iii) all other items which in accordance with GAAP would be
included in determining total liabilities as shown on a balance sheet of a
Person as at the date as of which Debt is to be determined.
Debt Service Coverage - a ratio in which the initial number is
the sum of the net income (after provision for federal and state taxes and
excluding any extraordinary income) of Borrower calculated based upon the 12
month period preceding the applicable date plus the interest expenses of the
Borrower for said period, plus the sum of non-cash expenses or allowances for
the Borrower for such period (including, without limitation, amortization or
write-down of intangible assets, depreciation, depletion, and deferred taxes and
expenses), and the second number is the sum of the current portion of the
long-term Debt of the Borrower as of the applicable date plus the interest
expenses of Borrower for the 12 month period preceding the applicable date.
Default Rate - the rate of interest provided in the Promissory
Note(s) at which the indebtedness represented thereby is to bear interest after
default by Borrower or the occurrence of an Event of Default, or if no such rate
is mentioned, a rate of interest equal to five percent (5%) in excess of the
rate that would otherwise be applicable, calculated daily and computed on the
actual days elapsed over a year of three hundred sixty (360) days (unless
reference to a 365 or a 366-day year is necessary in order not to exceed the
highest rate permitted by Applicable Law), said rate to change as and when the
Base Rate changes. Where the term "Default Rate" is applied to any indebtedness
or obligation other than that represented by a Promissory Note, it shall mean a
rate of interest equal to five percent (5%) in excess of the Base Rate
calculated in accordance with the preceding sentence.
4
<PAGE>
Eligible Inventory - Inventory valued at the lesser of cost or
current market value, all of which Inventory is, at any given time, (a) not
damaged or defective in any way; (b) not sold or segregated for sale and
reflected as an Account of Borrower; (c) not consigned Inventory; (d) not
inventory-in-transit or located in a place other than at the locations listed in
Section 5.10 of this Agreement; (e) not work-in-process Inventory; (f) not
constituting packaging materials and supplies; (g) not Inventory evidenced by
negotiable warehouse receipts or by non-negotiable warehouse receipts or
documents of title which have not been issued in the name of Bank; (h) not
subject to a document of title such as a warehouse receipt or bill of lading;
and (i) not Inventory deemed ineligible by Bank in its sole discretion.
Environmental Regulations - all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to the environment or to public health, safety and
environmental matters, or petroleum products, or radon radiation, or oil or
hazardous substances, including, but not limited to, the Resource Conversation
and Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Toxic Substances Control Act, the Clean Water Act,
the Clean Air Act, the River and Harbor Act, the Water Pollution Control Act,
the Marine Protection Research and Sanctuaries Act, the Deep-Water Port Act, the
Safe Drinking Water Act, the Superfund Amendments and Reauthorization Act of
1986, the Federal Insecticide, Fungicide and Rodenticide Act, the Mineral Lands
and Leasing Act, the Surface Mining Control and Reclamation Act, the Oil
Pollution Act of 1990, state and federal superlien and environmental cleanup
programs and laws, U.S. Department Transportation regulations, laws regulating
hazardous, radioactive and toxic materials and underground petroleum products
storage tanks, and all similar state, federal and local laws and regulations.
ERISA - the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated thereunder.
Event of Default - any one of the events enumerated in Section
10.1 hereof.
Fixed Charge Coverage - a fraction in which the numerator is
the sum of the net income of the Borrower (after provision for federal and state
taxes) for the 12 month period preceding the applicable date plus the interest,
lease and rental expenses of the Borrower for said period plus the sum of
non-cash expenses or allowances for such period (including, without limitation,
amortization or write down of intangible assets, the net addition or net
decrease in the loan loss reserves for customer Accounts, depreciation,
depletion, and deferred taxes and expenses) and the denominator is the sum of
the current portion of the long term Debt of Borrower as of the applicable date
plus the interest, lease and rental expenses for the 12 month period preceding
the applicable date.
5
<PAGE>
GAAP - generally accepted accounting principles in the United
States of America in effect from time to time consistently applied.
Guarantor - MARC A. PULEO.
Inventory - all inventory of whatever kind or nature of
Borrower, now owned or hereafter acquired by Borrower, and wherever located,
including, without limitation, all goods held for sale or lease or furnished or
to be furnished under contracts, and any raw materials, goods in transit, work
in process or finished goods, supplies, returned or repossessed goods, together
with all goods and materials used or consumed in Borrower's business.
Ledger Balance - the balance reflected on the books of the
Bank of the amounts deposited in the Special Collection Account as further
described in Section 4.2 of this Agreement.
Lien - any interest in property (real, personal or mixed, and
tangible or intangible) securing an obligation owed to, or a claim by, a Person
other than the owner of the property, whether such interest is based on the
common law, statute or contract, and including, but not limited to, the security
interest, security title or Lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes. The
term "Lien" shall include covenants, conditions, restrictions, leases and other
encumbrances affecting any property. For the purpose of this Agreement, Borrower
shall be deemed to be the owner of any property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the property has been retained by or vested in some other Person for
security purposes.
Loan or Loans - the loan in principal amounts of up to One
Million Dollars ($1,000,000) with respect to the Loan advanced by the Bank to
the Borrower from time to time and evidenced by the Note(s) described in Section
2.1 of this Agreement (and any substitutions therefor, extensions thereof, or
renewal thereof).
Loan Account - the loan account established on the books of
Bank pursuant to Section 2.1 hereof.
Loan Documents - this Agreement, the Note, the guaranty
agreements of Guarantor, and each and every mortgage, deed of trust, guarantee,
reimbursement agreement, credit agreement, loan agreement, note, security
agreement, financing statement or other instrument executed and delivered to
evidence the Loans or any other Obligation, to constitute collateral for the
Loan or any other Obligation, or to evidence security for the Loans or any other
Obligation, and any and all other agreements, instruments, and documents
heretofore, now or hereafter, executed by Borrower and delivered to Bank in
respect to the transactions contemplated by this Agreement.
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Loan Value of Inventory - an amount which is not more than
forty percent (40%) of Borrower's Eligible Inventory.
Maximum Rate - the maximum non-usurious rate of interest
permitted by Applicable Law that any time, or from time to time, may be
contracted for, taken, reserved, charged or received on the Debt in question or,
to the extent permitted by Applicable Law, under such Applicable Laws that may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than Applicable Laws now allow. Notwithstanding any other provision hereof,
the Maximum Rate shall be calculated on a daily basis (computed on the actual
number of days elapsed over a year of 365 or 366 days, as the case may be).
Multiemployer Plan - has the meaning set forth in Section
4001(a)(3) of ERISA.
Note(s) - each promissory note executed and delivered by
Borrower to Bank evidencing all or part of the Loans, as further described
hereinafter.
Obligations - all Loans and all other advances, debts,
liabilities, obligations, covenants and duties owing, arising, due or payable
from Borrower to Bank of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under this
Agreement or any of the other Loan Documents or otherwise, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however evidenced or acquired. The term includes, without limitation, all
interest, charges, expenses, fees, attorneys' fees and any other sums chargeable
to Borrower under any of the Loan Documents and all rights Bank may at any time
or times have to reimbursement in connection with any letter of credit or
guaranty issued for Borrower's benefit.
Overadvance - an advance by Bank hereunder or under any Note
when an Overadvance Condition exists or would result from the making of such
advance.
Overadvance Condition -at any date, a condition such that
the outstanding principal amount of the Loan on such date exceeds the Aggregate
Loan Values on such date.
Permitted Liens - any Lien of a kind specified in Section 7.2
of this Agreement.
Person - an individual, partnership, corporation, joint stock
company, firm, land trust, business trust, limited liability company, limited
liability partnership, unincorporated organization, or other business entity, or
a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
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Prohibited Transaction - any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986.
Reportable Event - any of the events set forth in Section
4043(b) of ERISA.
Solvent - as to any Person, means such Person (i) owns
property, real, personal, and mixed, whose aggregate fair saleable value is
greater than the amount required to pay all of such Person's Debt (including
contingent debts), and (ii) is able to pay all of its Debt as such Debt matures
and (iii) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage.
Special Collection Account - the bank account referred to in
Section 4.2 of this Agreement.
Subordinated Debt - the Debt of the Borrower owed to the
Guarantor or to any Affiliate which is fully subordinated to the Loan (including
principal, interest, and agreed charges) in a manner satisfactory to the Bank
(which may be either according to its terms or by separate agreement) and which
Debt arises from the Borrower's actual receipt of cash and not from "in kind" or
non cash consideration.
Subsidiary - any corporate entity or partnership, or other
business entity, controlling interest of which is owned by the Borrower.
Tangible Net Worth - the aggregate of the (a) par or stated
value of all outstanding capital stock; (b) capital surplus; and (c) retained
earnings, less (x) any surplus resulting from any write-up of assets subsequent
to the date of this Agreement; (y) the book value of all intangible assets of
Borrower, including, without limitation, any goodwill (including any amount,
however, designated, representing the excess of the purchase price paid for
assets or stock acquired over the value assigned thereto on the books of
Borrower), noncompetition agreement, consulting agreement, patents, trademarks,
trade names and copyrights, and (z) the amount paid for any treasury stock
reflected as a reduction of the capital surplus or retained earnings accounts.
1.2 Accounting Terms. All accounting terms used herein shall be
construed in accordance with GAAP.
1.3 Interpretation. The terms "herein", "hereof", and "hereunder", and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronouns used shall be deemed
to cover all genders. Whenever the singular or plural number is used herein, it
shall equally include the other. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references
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to any instruments or agreements, including, without limitation, references to
any of the Loan Documents shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof.
1.4 Uniform Commercial Code. All other terms contained in this
Agreement shall, unless otherwise defined herein or unless the context otherwise
indicates, have the meanings provided for by the Uniform Commercial Code of the
State of Florida.
ARTICLE 2
THE LOAN
2.1 The Loan.
(a) Subject to all terms set forth herein but only during the
Commitment Period and for so long as no Event of Default exists, Bank agrees,
from time to time and on the terms hereinafter set forth, to loan to Borrower,
when requested by Borrower, principal amounts aggregating up to the lesser of
(i) One Million Dollars ($1,000,000), pursuant to the Loan; or (ii) the
Aggregate Loan Values as determined by the Bank from the periodic reports
submitted by Borrower to the Bank. Within the aforesaid limits, the Borrower may
borrow, make payments, and reborrow under this Agreement, subject to the
provisions hereof.
(b) The obligation to repay the Loan shall be evidenced by one
or more notes payable to the order of the Bank and maturing upon the earlier to
occur of an Event of Default or the expiration of the Commitment Period. Amounts
due under the note(s) and otherwise under this Agreement and under the Loan
Documents shall be reflected in the Loan Account.
(c) Borrower shall submit a Borrower's Report in the form
attached hereto as Exhibit "A" (or in such other form as may be furnished by
Bank from time to time) on the date of this Agreement and at least monthly
thereafter during the term of this Agreement, which shall be delivered within
fifteen (15) days following the end of each month. Bank may, in its sole
discretion, require that each advance made under the Loan be effected by
Borrower's submitting (and the Bank's receiving) a Borrower's Report at least
one (1) banking day prior to the date Borrower desires the advance to be made.
Bank shall, if all the terms and provisions of this Agreement have been met,
including, without limitation, the absence of an Event of Default hereunder,
make such advances. Each such Borrower's Report shall be signed by an officer or
employee of Borrower authorized by Borrower to execute such reports, whose
name(s) shall be included in a certificate furnished to the Bank.
(d) At its discretion, Bank may make advances to Borrower
under the Loan without specific request by automatic advance based on
availability in accordance with procedures established by Bank. In addition, as
an accommodation to Borrower, Bank may permit telephonic
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requests for loans and electronic transmittal of instructions, authorizations,
agreements or reports to Bank by Borrower. Unless Borrower specifically directs
Bank in writing not to accept or act upon telephonic or electronic
communications from Borrower, Bank shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of Bank's honoring of any
requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to Bank telephonically or electronically
and purporting to have been sent to Bank by Borrower and Bank shall have no duty
to verify the origin of any such communication or the authority of the person
sending it.
(e) If the outstanding principal amount of the Loan at any
time exceeds the lesser of One Million Dollars ($1,000,000) or the Aggregate
Loan Values as reflected on the Borrower's Report, the Borrower shall
immediately pay the Bank an amount equal to such excess as a payment on the
principal amount of the Loan. Without limiting the foregoing, which provision
may be enforced by Bank at any time and which provision, as well as the other
provisions hereof, may not under any circumstance be waived or altered by a
course of dealing or otherwise, insofar as Borrower may request and Bank may be
willing in its sole and absolute discretion to make Overadvances, Bank shall
enter such Overadvances as debits in the Loan Account. All Overadvances shall be
payable on demand, shall be secured by the Collateral and shall bear interest as
provided in this Agreement for Loans generally. Bank may in its sole discretion
honor any request (or deemed request) for an advance even though an Overadvance
Condition then exists, or would exist with the making of such advance, and
without regard to the existence of, and without waiving, any default or Event of
Default.
(f) Each borrowing under the Loan shall be effected by
crediting the amount thereof to the regular checking account of Borrower
maintained with the Bank or with another bank approved by the Bank.
(g) The principal amount of the Loan outstanding from time to
time hereunder shall bear interest at the per annum rate set forth in the Note.
Interest shall be paid to Bank on the amount of the Loan outstanding and shall
be payable monthly in arrears on the fifth (5th) day of each month beginning
with the month following the date hereof and continuing on the same day of each
month thereafter until the maturity date of each Note. Interest shall be
calculated based on a three hundred sixty (360)-day year (i.e., computed on the
actual number of days elapsed over a year of 360 days unless reference to a 365
or a 366-day year is necessary in order not to exceed the highest rate permitted
by Applicable Law). From and after the occurrence of an Event of Default, the
principal amount of the Loan outstanding from time to time shall, subject to the
provisions of the following subsection, bear interest at the Default Rate.
(h) Borrower acknowledges and agrees that the provisions
herein and in the Note relating to the Default Rate represent a fair and
reasonable estimate by Borrower and Bank of a fair average compensation for the
loss that may be sustained by Bank due to the failure of Borrower to
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make timely payments with respect to the Obligations and for the cost and
expenses that may be incurred by Bank by reason of the occurrence of an Event of
Default, the parties recognizing that the damages caused by such extra
administrative expenses and loss of the use of funds is impracticable or
extremely difficult to ascertain or estimate. Interest at the Default Rate based
upon monetary defaults shall be paid without prejudice to the rights of Bank to
collect any other amounts provided to be paid hereunder.
2.2 Loan Account. Bank shall enter disbursements hereunder or under the
Note as debits to the Loan Account and shall also record in the Loan Account all
payments made by Borrower and all proceeds of Collateral which are finally paid
to Bank, and may record therein, in accordance with customary accounting
practice, all charges and expenses properly chargeable to Borrower hereunder.
2.3 Prepayment. Borrower shall have the right to prepay the
indebtedness represented by the Note pursuant to the terms and provisions of the
Note.
2.4 Term. This Agreement shall remain in force and effect until the
Loan and the Obligations, and any renewals or extensions, and all interest
thereon and costs provided for herein with regard to either of them have been
indefeasibly paid or satisfied in full and until the Bank has no further
obligation to advance funds to the Borrower hereunder. Subject to the foregoing
sentence, Borrower shall have the right to terminate this Agreement prior to
expiration of the Commitment Period upon payment of all outstanding principal,
accrued interest and other charges owing under the terms of this Agreement. The
indemnities provided for in Article 11 shall survive the payment in full of the
Loan and the Obligations and the termination of this Agreement.
2.5 Use of Proceeds. Borrower shall use the proceeds of the Loan to
provide operating capital and no other purpose.
2.6 Payments. All sums paid to the Bank by Borrower hereunder shall be
paid directly to the Bank in immediately available funds no later than 2:00 p.m.
Miami, Florida, time on the date on which payment is due, except if such date is
not a Business Day such payment shall then be due on the first Business Day
after such date, but interest shall continue to accrue until the date payment is
received. Any payment received after 2:00 p.m. Miami, Florida, time shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
The Bank shall send Borrower statements of all amounts due hereunder, which
statements shall be considered correct and conclusively binding on the Borrower
unless the Borrower notifies the Bank to the contrary within ten (10) days of
its receipt of any statement which it deems to be incorrect. The Bank may, in
its sole discretion, (a) charge against any deposit account of the Borrower all
or any part of any amount due hereunder, including, without limitation, the fees
and expenses of the Bank to be paid by Borrower as provided for in Sections 12.1
through 12.3 of this Agreement, any advances made by Bank to protect the
Collateral, and any commitment or servicing fee due the Bank, and (b) advance to
Borrower, and charge to the Loan,
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a sum sufficient each month to pay all interest accrued on the Loan and fees and
expenses due under this Agreement, including, without limitation, the fees and
expenses of the Bank to be paid by Borrower as provided for in Sections 12.1
through 12.3 of this Agreement, any advances made by Bank to protect the
Collateral, and any commitment or servicing fee due the Bank, during or for the
immediately preceding month or any month prior. Borrower shall be deemed to have
requested an advance under the Loan upon the occurrence of an overdraft in any
of Borrower's checking accounts maintained with the Bank or another bank owned
by SouthTrust Corporation.
2.7 Application of Payments. Borrower irrevocably waives the right to
direct the application of any and all payments and collections at any time or
times hereafter received by Bank from or on behalf of Borrower or from any of
the Collateral, and Borrower does hereby irrevocably agree that Bank shall have
the continuing exclusive right to apply such payments and collections received
at any time or times hereafter by Bank or its agent against the Obligations, in
such manner as Bank may deem advisable, notwithstanding any entry by Bank upon
any of its books and records. If as the result of collections of Accounts or for
any other reason, a credit balance exists in the Loan Account, such credit
balance shall not accrue interest in favor of Borrower but shall be available to
Borrower at any time or times for so long as no Event of Default exists.
ARTICLE 3
CONDITIONS OF LENDING
Bank shall not be obligated to make the Loan, or any advance under the
Loan, unless at the time thereof the following conditions shall have been met:
3.1 Corporate Proceedings. All proper corporate proceedings shall have
been taken by Borrower to authorize this Agreement and the transactions
contemplated hereby.
3.2 Documentation. All instruments and proceedings in connection with
the transactions contemplated by this Agreement shall be satisfactory in form
and substance to Bank, and Bank shall have received on the date of this
Agreement copies of all documents, including records of corporate proceedings,
which it may have requested in connection therewith, including, without
limitation, certified copies of resolutions adopted by the Board of Directors of
the Borrower, certificates of good standing, and certified copies of the
Articles of Incorporation and By-Laws, and all amendments thereto, of the
Borrower.
3.3 Loan Documents. Bank shall have received executed copies of all
instruments evidencing security for the Loans and copies of the insurance
policies and related certificates of insurance referred to in Sections 6.1 and
9.6 of this Agreement.
3.4 No Default. No event shall have occurred or be continuing which
constitutes an Event of Default or which would constitute an Event of Default
with the giving of notice or the lapse of
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time or both; and neither the business nor assets nor the condition, financial
or otherwise, of Borrower shall have been adversely affected in any material
manner as the result of any fire, explosion, accident, strike, riot,
condemnation, act of God, or any other event or development.
3.5 Reports. Bank shall have received all reports and information from
Borrower called for under the Agreement as and when due.
3.6 Payment of Fees. Payment by Borrower of all fees and expenses
required by this Agreement.
3.7 Opinion of Counsel. Bank shall have received on the date of this
Agreement an opinion from counsel to Borrower satisfactory to Bank.
3.8 Incumbency Certificate. Bank shall have received an incumbency
certificate, dated as of the date of this Loan Agreement, executed by the
Secretary or Assistant Secretary of Borrower, which shall identify by name and
title and bear the signature of the officer of such Borrower authorized to sign
this Loan Agreement and the Note on behalf of the Borrower. The Bank shall be
entitled to rely upon such incumbency certificate in completing the transactions
contemplated herein or in any Loan Document and in all its other dealings with
Borrower.
3.9 Consents. Bank shall have received consents and agreements of the
landlords of each of the premises leased by Borrower on which the Collateral is
located as provided in Section 4.1 hereof, all in form satisfactory to Bank.
3.10 Lien Search. Bank shall have received a report from the Uniform
Commercial Code Division of the Florida Secretary of State indicating that there
are no Liens against that portion of the Collateral constituting personal
property except Permitted Liens.
3.11 Disbursement Authorization. Borrower shall have delivered to Bank
such disbursement authorizations, draw requests, and other documents and
writings as Bank shall have requested evidencing Borrower's request for
disbursement of funds.
3.12 Additional Documents. Bank shall have received such additional
legal opinions, certificates, proceedings, instruments and other documents as
the Bank or its counsel may reasonably request to evidence (i) compliance by the
Borrower with legal requirements, (ii) the truth and accuracy, as of the date of
this agreement, of the representations of the Borrower contained herein, and
(iii) the due performance or satisfaction by the Borrower, at or prior to the
date hereof, of all agreements required to be performed and all conditions
required to be satisfied by the Borrower pursuant hereto, including, without
limitation, all such matters as are listed on preliminary closing checklist
issued by Lender and furnished to Borrower.
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ARTICLE 4
SECURITY FOR LOAN AND SPECIAL COLLECTION ACCOUNT
4.1 Security. The Loan, the Note, and the Obligations shall be secured
by each of the following:
(a) A first priority security interest in Borrower's Inventory
and other properties and interests as provided for in Section 8.1, 8.1.0(6) and
other parts of Article 8 hereof;
(b) A first priority mortgage and security interest on that
certain real property and the improvements (including related fixtures,
equipment systems apparatus, building materials and components and other
personal property, and all rents, leases, proceeds, appurtenances and other
rights or benefits pertaining to the real property) located at 1441 S.W. 29th
Avenue, Pompano Beach, Florida.
(c) The unconditional guarantee of Guarantor.
The Borrower agrees to execute and deliver, or cause
the execution and delivery of, such security agreements, deeds of trust,
mortgages, assignments, guaranties, consents, subordination agreements, and
financing statements as may be required by Bank to evidence such security, all
in form satisfactory to Bank, as well as such consents and agreements of the
landlords of each of the premises leased by Borrower on which the Collateral is
located, all in form satisfactory to Bank.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND GENERAL COVENANTS
Borrower represents, warrants and covenants to and with Bank, which
representations, warranties and covenants shall survive until the Obligations
are indefeasibly satisfied in full, that:
5.1 Organization and Qualification. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida has the corporate power to own its properties and to carry on its
business as now being conducted; and is duly qualified to do business and is in
good standing in every jurisdiction in which the character of the properties
owned by it or in which the transaction of its business makes its qualification
necessary.
5.2 Corporate Power and Authorization. Borrower has full power and
authority to enter into this Agreement, to borrow hereunder, to execute and
deliver the Note and the other Loan Documents and to incur the obligations
provided for herein, all of which have been authorized by all proper and
necessary corporate action.
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5.3 Enforceability. This Agreement and each of the other Loan Documents
constitute, and each Note when executed and delivered for value received will
constitute, a valid and legally binding obligation of Borrower enforceable in
accordance with their respective terms and will not violate, conflict with, or
constitute any default under any law, government regulation, Borrower's Articles
of Incorporation or By-Laws, or any other agreement or instrument binding upon
Borrower.
5.4 Pending Actions. Borrower is not a defendant, or a plaintiff
against whom a counterclaim or cross claim has been asserted, in any civil or
criminal action, suit or litigation, and no action or investigation is pending
or, so far as Borrower's officers and directors know, threatened before or by
any court or administrative agency which might result in any material adverse
change in the financial condition, operations or prospects of Borrower.
5.5 Financial Statements. The financial statements of Borrower dated
__________, 19___ (December 31, 1998, if not filled in), heretofore delivered to
Bank and all other financial statements and reports furnished by Borrower to
Bank are complete and correct and fairly present the financial condition of
Borrower and the results of its operations and transactions as of the dates and
for the periods referred to and have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved. There are no
liabilities, direct or indirect, fixed or contingent, of Borrower as of the date
of such financial statements which are not reflected therein or in the notes
thereto. Neither said financial statements nor any other financial statements,
reports, and information furnished by Borrower to Bank contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
Borrower has failed to disclose to Bank in writing which materially affects
adversely or, so far as Borrower can now foresee, will materially affect
adversely the Collateral, business, prospects, profits or condition (financial
or otherwise) of Borrower or the ability of Borrower to perform this agreement.
5.6 Title to Properties. Borrower has good and marketable title to all
of its assets, other than the Collateral, subject to no Lien, mortgage, pledge,
encumbrance, or charge of any kind except inchoate Liens arising by operation of
law for obligations which are not yet due and except for Permitted Liens.
Borrower enjoys peaceable and undisturbed possession under all leases under
which it is operating, and none of such leases contain any provisions which may
materially and adversely affect or impair the operations of the Borrower, and
all of such leases are valid and subsisting and in full force and effect.
5.7 Pension Plans. Except as set forth on Exhibit "E", Borrower has not
established and is not a party to any Plan or to any stock option or deferred
compensation plan or contract for the benefit of its employees or officers, any
pension, profit sharing or retirement plan, stock redemption agreement, or any
other agreement or arrangement with any officer, director or stockholder,
members of their families, or trusts for their benefit. Borrower is in
compliance with all applicable
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provisions of ERISA. Neither Borrower nor any of its Subsidiaries has received
any notice to the effect that it is not in full compliance with any of the
requirements of ERISA and the regulations promulgated thereunder. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower, including, but not limited to, any Reportable Event or
Prohibited Transaction, exists in connection with any Plan. Neither Borrower nor
any of its Subsidiaries has any withdrawal liability in connection with a
Multiemployer Plan.
5.8 Taxes. Borrower has filed all federal, state and local tax returns
which are required to be filed and has paid, or made adequate provision for the
payment of, all taxes which have or may become due pursuant to said returns or
to assessments received by Borrower, including, without limitation, all
applicable federal, state, and local employee withholding taxes.
5.9 Title to Collateral. Except for Permitted Liens, Borrower is, or as
to Collateral to be acquired after the date hereof will be, the sole owner of
the Collateral free from any adverse Liens, security interests or other
encumbrances. Borrower shall defend the Collateral against all claims and
demands of all other parties who at any time claim any interest in the
Collateral.
5.10 Place of Business. Borrower's chief executive office is located at
1441 S.W. 49th Avenue, Pompano Beach, Florida 33066. The Inventory and other
Collateral is and shall be located only at the locations listed on Exhibit "D"
to this Agreement. Except as indicated on said exhibit, the real estate
constituting each said location is owned by Borrower. With respect to locations
not owned by Borrower, said exhibit sets forth the name and address of each
landlord, the location of the property, and the remaining term of the lease.
Borrower has separately furnished to Bank true and correct copies of the lease
agreements for each said parcel.
5.11 Full Disclosure. All information furnished by Borrower to the Bank
concerning the Borrower, its financial condition, the Collateral, or otherwise
for the purpose of obtaining credit or an extension of credit, is, or will be at
the time the same is furnished, accurate and correct in all material respects
and complete insofar as completeness may be necessary to give the Bank a true
and accurate knowledge of the subject matter.
5.12 Borrower's Name. Other than the change from PetMed Express, Inc.,
Borrower has not changed its name or been known by any other name within the
last five (5) years, nor has it been the surviving corporation in a merger
effected within the last five (5) years. Borrower does not now use nor has it
ever used any trade or fictitious name in the conduct of its business.
5.13 Existing Debt. Borrower is not in default with respect to any of
its existing Debt or with respect to any material agreement to which Borrower is
a party.
5.14 Insolvency. Borrower is now and, after giving effect to the
transactions contemplated hereby, at all times will be, Solvent.
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5.15 Subsidiaries. Borrower has no Subsidiaries.
5.16 Environmental Matters. Borrower is in compliance with all
Environmental Regulations and with all other federal, state and local laws and
regulations relating to the environment and pollution, including such laws and
regulations regulating hazardous, radioactive and toxic materials and
underground petroleum products storage tanks. No assessment, notice of (primary
or secondary) liability or notice of financial responsibility, and no notice of
any action, claim, investigation, proceeding, or inquiry to determine such
liability or responsibility, or the amount thereof, or to impose civil penalties
has been received by Borrower, and there are no facts, conditions or
circumstances known to Borrower which could result in any investigation or
inquiry if all such facts, conditions, and circumstances, if any, were fully
disclosed to the applicable governmental authority. Borrower has paid any
environmental excise taxes due and payable, including without limitation, those
imposed pursuant to Sections 4611, 4661, or 4681 of the Internal Revenue Code of
1986, as amended from time to time. Borrower has not obtained and is not
required to obtain any permits, licenses, or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures or
equipment in connection with its business by reason of any Environmental
Regulations. No oil, toxic or hazardous substances or solid wastes have been
disposed of or released by Borrower in connection with the operation of its
business and Borrower will not dispose of or release oil, toxic or hazardous
substances or solid wastes at any time in its operation of its business (the
terms "hazardous substance" and "release" shall have the meanings specified in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), and the terms "solid waste" and "disposal,"
"dispose" or "disposed" shall have the meanings specified in the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), except that if such
acts are amended to broaden the meanings thereof, the broader meaning shall
apply herein).
5.17 This space is intentionally left blank.
5.18 Inventory. All Inventory has been produced, and during the term
hereof will be produced, in compliance with the requirements of the Federal Fair
Labor Standards Act. No Inventory is now, nor shall any Inventory at any time or
times hereafter be, stored with a bailee, warehouseman or similar party without
Bank's prior written consent and, if Bank gives such consent, Borrower will
concurrently therewith cause any such bailee, warehouseman, or similar party to
issue and deliver to Bank, in form and substance acceptable to Bank, warehouse
receipts therefor in Bank's name. No Inventory is or will be consigned to any
Person without Bank's prior written consent, and, if such consent is given,
Borrower shall, prior to the delivery of any Inventory on consignment, (i)
provide Bank with all consignment agreements to be used in connection with any
consigned inventory, all of which shall be acceptable to Bank, (ii) prepare,
execute and file appropriate financing statements with respect to any such
consigned inventory, showing Bank as assignee, (iii) conduct a search of all
filings made against the consignee in all jurisdictions in which any
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consigned Inventory is to be located and deliver to Bank copies of the results
of all such searches,(iv) notify, in writing, all the creditors of the consignee
which are or may be holders of Liens in the Inventory to be consigned that
Borrower expects to deliver certain inventory to the consignee, all of which
inventory shall be described in such notice by item or type, and (v) do all such
other things and acts as may be necessary or desirable to fully perfect on a
first priority basis Bank's security interest in said Inventory.
5.19 Labor Relations. Neither Borrower nor any of its Subsidiaries is a
party to any collective bargaining agreement, and there are no material
grievances, disputes or controversies with any union or any other organization
of Borrower's employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
5.20 Trade Relations. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower and any customer or any group of customers whose
purchases individually or in the aggregate are material to the business of
Borrower, or with any material supplier, and there exists no present condition
or state of facts or circumstances which would materially affect adversely
Borrower or prevent Borrower from conducting such business after the
consummation of the transaction contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted.
5.21 Partnerships. Borrower is not a partner or joint venturer with any
other Person or a participant in any business enterprise other than its own for
which it is generally liable, nor does Borrower have any contingent liabilities
of any description other than as indicated in the financial statements
heretofore delivered to Bank.
5.22 Surety Obligations. Borrower is not obligated as guarantor, surety
or indemnitor under any indemnity, guaranty, surety or similar bond or other
contract issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
5.23 No Approval. No authorization or approval or other action by, and
no notice to or filing with, any federal, state, or local government body,
agency, or authority is required for the due execution, delivery, and
performance by Borrower of this Agreement, the Note, or the Loan Documents.
5.24 Racketeering. Borrower is not engaged in any activity that might
constitute a pattern of racketeering activity or in any other conduct that might
subject all or a material portion of Borrower's assets to forfeiture.
5.25 Patents, Trademarks, Copyrights and Licenses. Borrower owns or
possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present
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and planned future conduct of its business without any known conflict with the
rights of others. All patents, trademarks, service marks, trade names,
copyrights, licenses and other similar rights owned or used by Borrower are
listed on Exhibit "F" attached hereto and made a part hereof. Where said patents
are not owned outright by Borrower, said exhibit lists the owner thereof and
identifies the license or other agreement pursuant to which they are used by
Borrower.
5.26 Representations True. No representation or warranty by the
Borrower contained herein or in any certificate or other document furnished by
the Borrower pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
ARTICLE 6
GENERAL COVENANTS
Borrower agrees and covenants that until the Obligations have been
indefeasibly paid in full and until the Bank has no further obligation to make
advances under the Loan, Borrower shall:
6.1 Insurance. Maintain insurance with insurance companies satisfactory
to Bank on such of its properties, in such amounts and against such risks as is
customarily maintained in similar businesses operating in the same vicinity, and
shall file with Bank upon request, from time to time, a detailed list of the
insurance then in effect, stating the names of the insurance companies, the
amounts and rates of the insurance, dates of expiration thereof, and the
properties and risks covered thereby, and, within ten (10) days after notice in
writing from Bank, shall obtain such additional insurance as Bank may reasonably
request. All such policies shall name the Bank as a named insured and provide
that any losses payable thereunder shall (pursuant to loss payable clauses, in
form and content acceptable to the Bank, to be attached to each policy) be
payable to the Bank, and provide that the insurance provided thereby, as to the
interest of the Bank, shall not be invalidated by any act or neglect of the
Borrower, nor by the commencing of any proceedings by or against the Borrower in
bankruptcy, insolvency, receivership or any other proceedings for the relief of
a debtor, nor by any foreclosure, repossession or other proceedings relating to
the property insured, nor by any occupation of such property or the use of such
property for purposes more hazardous than permitted in the policy. Borrower
hereby assigns to the Bank all right to receive proceeds, directs any insurer to
pay all proceeds directly to the Bank, and authorizes the Bank to endorse any
check or draft for such proceeds and apply the same toward satisfaction of the
Obligations. The Borrower shall furnish to the Bank insurance certificates, in
form and substance satisfactory to the Bank, evidencing compliance by it with
the terms of this Section and, upon the request of the Bank at any time, the
Borrower shall furnish the Bank with photostatic copies of the policies required
by the terms of this Section. The Borrower will cause each insurer under each of
the policies to agree (either by endorsement upon such policy or by letter
addressed to the Bank) to give the Bank at least ten (10) days prior written
notice of the cancellation of such policies in whole or in part or the lapse of
any coverage thereunder. Borrower agrees that it will not take any action or
fail to take any action which
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action or inaction would result in the invalidation of any insurance policy
required hereunder. At least ten (10) days prior to the date the premiums on
each such policy or policies shall become due and payable, the Borrower shall
furnish to the Bank evidence of the payment of such premiums. Borrower shall
furnish to the Bank such evidence of insurance as Bank may require.
6.2 Corporate Existence; Qualification. Maintain its corporate
existence and, in each jurisdiction in which the character of the property owned
by it or in which the transaction of its business makes its qualification
necessary, maintain good standing.
6.3 Taxes. During each fiscal year, accrue all current tax liabilities
of all kinds, all required withholding of income taxes of employees, all
required old age and unemployment contributions, all required payments to
employee benefit plans, and pay the same when they become due.
6.4 Compliance with Laws. Comply with all Applicable Laws, including,
without limitation, Environmental Regulations, and pay all taxes, assessments,
charges, claims for labor, supplies, rent, and other obligations. Specifically,
Borrower shall pay when due all taxes and assessments upon the Collateral, this
Agreement, the Note, or any Loan Document, including, without limitation, any
stamp taxes or intangibles taxes imposed by virtue of the transactions outlined
herein.
6.5 Annual Financial Statements. (i) Within sixty (60) days after the
close of each fiscal year, furnish Bank with annual company-prepared financial
statements of Borrower; and (ii) within one hundred twenty (120) days after the
close of each fiscal year furnish Bank with annual audited financial statements
consisting of balance sheets, operating statements and such other statements as
Bank may reasonably request, for the period(s) involved, prepared in accordance
with GAAP consistently applied for the period involved and for the preceding
fiscal year and certified as correct by independent certified public accountants
acceptable to the Bank. At the time of furnishing said financial statements,
Borrower shall furnish Bank with (a) a certificate from the President and the
chief financial officer of Borrower stating that they have reviewed this
Agreement and the affairs of the Borrower and that to the best of their
knowledge and belief they are unaware of the occurrence of an event which
constitutes an Event of Default hereunder or which would constitute such an
Event of Default with the giving of notice or the lapse of time or both, and, if
so, stating the facts with respect thereto, said certificate to be in the form
of Exhibit "G" hereto, and (b) a letter from such independent certified public
accountants stating that the Bank may rely on such financial statements and
their opinion with respect thereto. All such financial statements shall be on
both a consolidated and a consolidating basis for each entity constituting
Borrower.
6.6 Interim Financial Statements. Within forty-five (45) days after the
close of each calendar quarter, furnish Bank with unaudited quarterly and
year-to-date financial statements of Borrower, consisting of balance sheets and
operating statements and a listing of all contingent liabilities of the Borrower
for the periods involved and such other statements as Bank may request, prepared
in accordance with GAAP applied on a basis consistent with the financial
statement(s) previously
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furnished to Bank, taken from the books and records of Borrower, and certified
as correct by the chief financial officer of Borrower. At the time of furnishing
such financial statements, Borrower shall furnish Bank with a certificate from
the President or chief financial officer of Borrower stating that he has
reviewed this Agreement and the affairs of the Borrower and that to the best of
his knowledge and belief he is unaware of the occurrence of an event which
constitutes an Event of Default hereunder or which would constitute such an
Event of Default with the giving of notice or the lapse of time or both, and if
so, stating the facts with respect thereto. Said certificate shall further
confirm that Borrower was at the time of issuance of said financial statement
and has at all times since been Solvent. All such financial statements shall be
on both a consolidated basis and a consolidating basis for each entity
constituting Borrower. Unless otherwise specified by Bank, said certificate
shall be in the form of Exhibit "G" hereto. In addition, Borrower shall furnish
to Bank within ten (10) days after the same are filed: (i) all federal and state
tax returns and informational reports; and (ii) Borrower's 10Q and 10K.
6.7 Visits and Inspections. Permit persons designated by Bank to
inspect any and all of the property and corporate and financial books and
records of Borrower and to discuss its affairs with its officers and employees
at such reasonable times as Bank shall request and furnish Bank with such
miscellaneous information as it may request.
6.8 Payments on Note. Duly and punctually pay the principal and
interest on the Note, in accordance with the terms of this Agreement and of the
Note, and pay all other Debt of Borrower reflected on the financial statements
delivered to Bank and referred to in Section VARIABLE( Ref459545921 ~ hereof and
all other Debt incurred after the date hereof in accordance with the terms of
such Debt, it being understood, however, that this Section shall not be deemed
to permit any Debt in violation of the provisions of Sections 7.1 and 7.2
hereof.
6.9 Conduct of Business. Conduct its business as now conducted and do
all things necessary to preserve, renew and keep in full force and effect its
rights, privileges and franchises necessary to continue its business.
6.10 Maintenance of Properties. Keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needed and proper repairs, renewals, replacements, additions, and
improvements thereto and comply with the provisions of all leases to which it is
a party or under which it occupies property so as to prevent any loss or
forfeiture thereof or thereunder.
6.11 Additional Documents. Join the Bank in executing any security
agreements, assignments, consents, financing statements or other instruments, in
form satisfactory to the Bank, as the Bank may from time to time request in
connection with the Collateral and the other security for the Loan referred to
in Section VARIABLE( Ref459545983 ~ hereof.
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6.12 Notice to Bank. Immediately notify the Bank of (i) any event
causing a loss or depreciation in value of the Collateral in excess of Ten
Thousand Dollars ($10,000) in the aggregate and the amount of such loss or
depreciation, (ii) if Borrower becomes aware of the occurrence of any Event of
Default or of any fact, condition or event that, with the giving of notice or
passage of time, or both, could become an Event of Default or of the failure of
the Borrower to observe any of its undertakings hereunder, or (iii) any lawsuit
involving Borrower which could result in liability in excess of Twenty-Five
Thousand Dollars ($25,000) in the aggregate.
6.13 Collateral Reports. Furnish to Bank at least monthly within
fifteen (15) days following the end of each month, a detailed inventory report,
all in form and substance, and containing such detail and information, as Bank
shall request, and furnish to Bank copies of all physical inventory listings
when prepared by Borrower.
6.14 Subordination of Debt. Provide Bank with a debt subordination
agreement, in form and substance satisfactory to Bank, executed by Borrower and
any Person who is an officer, director, shareholder or Affiliate of Borrower to
whom Borrower is or hereafter becomes indebted, subordinating in right of
payment and claim all of Debt owed by Borrower to any said Person and any future
advances thereon to the full and final payment of the Obligations.
6.15 Collection of Accounts. Diligently pursue collection of all
Accounts and other amounts due Borrower by others, including Affiliates of
Borrower.
6.16 Landlord and Storage Agreements. Provide Bank with copies of all
agreements between Borrower and any landlord or warehouseman which owns any
premises at which any inventory or other Collateral may, from time to time, be
kept.
6.17 Auditors; Insurance Representatives and Agents. Furnish the Bank
with a copy of each letter written to the Borrower by its independent certified
public accountant concerning internal controls and management review immediately
upon receipt of same and any comments made by the Borrower with respect thereto
and permit Bank to communicate directly with said accountants and with
Borrower's insurance representatives and agents regarding the financial affairs
and condition of Borrower, the books and records of Borrower, and insurance
matters pertaining to Borrower's business.
6.18 ERISA Compliance. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in ERISA
with respect to each Plan; (ii) promptly after the filing thereof, furnish to
Bank copies of an annual report required to be filed pursuant to ERISA in
connection with each Plan and any other employee benefit plan of it and its
Affiliates; (iii) notify Bank as soon as practicable of any Reportable Event and
of any additional act or condition arising in connection with any Plan which
Borrower believes might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the
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appropriate United States district court of a trustee to administer the Plan;
and (iv) furnish to Bank, promptly upon Bank's request therefor, such additional
information concerning any Plan or any other such employee benefit plan as may
be reasonably requested.
6.19 Bank Accounts. Maintain its principal bank accounts with the Bank
or another bank designated by the Bank.
6.20 Business Records. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions.
6.21 Financial Covenants. Maintain at all times that this Agreement is
in effect the following: (i) a minimum working capital of at least Two Million
Dollars ($2,000,000.00); (ii) a ratio of Bank Debt to Adjusted Net Worth of not
more than 2.0:1; and (iii) Fixed Charge Coverage of not less than 3.0:1
ARTICLE 7
NEGATIVE COVENANTS
Until the Obligations have been indefeasibly repaid and satisfied in
full and until the Bank has no further obligation to make advances under the
Loan, without the prior written consent of Bank (which consent shall be in the
Bank's sole discretion, acting reasonably), the Borrower shall not:
7.1 Indebtedness. Except as permitted or contemplated by this
Agreement, create, incur, assume or suffer to exist any Debt or obligation for
money borrowed, or guarantee, or endorse, or otherwise be or become contingently
liable in connection with the obligations of any Person (including, without
limitation, any Affiliate), except
7.1.1 Indebtedness for taxes not at the time due and payable
or which are being actively contested in good faith by appropriate proceedings
and against which reserves deemed adequate by Bank have been established by
Borrower, but only if the non-payment of such taxes being contested does not
result in a Lien upon any property of Borrower that has priority over the Lien
held by Bank;
7.1.2 Contingent liabilities arising out of the endorsement of
negotiable instruments in the ordinary course of collection or similar
transactions in the ordinary course of business;
7.1.3 Accounts payable to trade creditors which are not aged
more than one hundred twenty (120) days from billing date and current operating
expenses (other than for borrowed money) which are not more than sixty (60) days
past due, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are actively being contested in good
faith
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and by appropriate and lawful proceedings and Borrower shall have set aside such
reserves, if any, with respect thereto as have been recommended by independent
public accountants;
7.1.4 Debt to third parties for purchase money borrowing
incurred in connection with the purchase of capital assets used in the business
of Borrower not to exceed One Hundred Thousand Dollars ($100,000.00) during any
fiscal year of Borrower; and
7.1.5 Debt for money borrowed from the Bank.
7.2 Liens and Security Interests. Create, incur, assume, or suffer to
exist any mortgage, security deed, deed of trust, security interest, pledge,
encumbrance, Lien or charge of any kind (including charges on property purchased
under conditional sales or other title-retention agreements) on any of its
property or assets, now owned or hereafter acquired, except for the following
(all of which are referred to herein as "Permitted Liens"):
10.1.1 Liens for taxes not yet due or which are being
contested in good faith by appropriate proceeding and against which reserves
deemed adequate by Bank have been set up (excluding any Lien imposed pursuant to
any of the provisions of ERISA);
10.1.2 Other Liens, charges and encumbrances incidental to the
conduct of its business or the ownership of its property and assets and created
by operation of law;
10.1.3 Purchase money Liens and encumbrances created to secure
the indebtedness permitted by Section VARIABLE( Ref459607378 ~ hereof;
10.1.4 Liens, charges and encumbrances in favor of the Bank;
and
10.1.5 Liens, charges and encumbrances reflected on Exhibit
"C" to this Agreement.
7.3 Dividends and Distributions. Declare any dividends on any shares of
any class of its capital stock, or apply any of its property or assets to the
purchase, redemption or other retirement of, or set apart any sum for the
payment of any dividends on, or for the purchase, retirement of, or make any
other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of the Borrower; provided, however, that
during such time as Borrower maintains an effective election to be taxed under
the provisions of Chapter "S" of the Internal Revenue Code of 1978, as amended,
Borrower shall be entitled to distribute to its shareholders in each year an
amount not to exceed that portion of the federal income tax liability incurred
by each said shareholder on income tax returns for the prior year which resulted
from its holdings of shares in Borrower.
7.4 Affiliate Transactions. Purchase, acquire or lease property from,
or sell, transfer or lease
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any inventory, materials, goods, equipment, assets, rights or property to, any
Affiliate of Borrower, except in the ordinary course of Borrower's business and
under terms and conditions which would apply if disinterested parties were
involved.
7.5 Financing Statements. Permit any financing statement (except Bank's
financing statements) to be on file with respect to the Collateral.
7.6 Location of Collateral. Change the locations at which the
Collateral is maintained; change the name, identity, or corporate structure of
Borrower; adopt or make use of any fictitious or trade name not disclosed
elsewhere in this Agreement; or change the location of its chief executive
office.
7.7 Destruction of Collateral. Waste or destroy the Collateral or use
it in violation of any statute or ordinance.
7.8 Merger or Consolidation. Enter into any merger or consolidation or
acquire all or substantially all of the assets of any Person; or sell, lease, or
otherwise dispose of any of its assets in an aggregate amount exceeding Two
Hundred Fifty Thousand Dollars ($250,000.00) during any fiscal year, except
sales in the ordinary course of its business without the prior written consent
of the Bank, which consent shall not be unreasonably withheld.
7.9 Loans or Advances. Make loans or make advances or pay any
management or similar fees to any Person.
7.10 Capital Expenditures. Make any Capital Expenditures in any fiscal
year exceeding a total of Two Hundred Fifty Thousand Dollars ($250,000.00) in
the aggregate.
7.11 Acquisitions. Purchase or acquire the obligations or stock of or
any other interest in any Person, except direct obligations of the United States
of America or certificates of deposit or other investments issued by the Bank or
by any bank designated in writing by the Bank.
7.12 Prepayment of Debt. Prepay any Debt in excess of $50,000 in the
aggregate except Debt to the Bank; provided, however, the Borrower may take
ordinary trade discounts on purchases made in the ordinary course of business.
7.13 Lease Transactions. Enter into any sale and lease-back
arrangement, either directly or indirectly.
7.14 Amendments. Amend any instrument evidencing a Permitted Lien or
the indebtedness secured thereby.
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7.15 Salaries. Increase the salary and fringe benefits of any officer
or director or shareholder or any Affiliate of any officer or director or
shareholder of Borrower by more than twenty-five (25%) in any fiscal year from
the amount paid in the previous fiscal year.
7.16 Deposit of Funds. This space is intentionally left blank.
7.17 Adverse Transactions. Enter into any transaction, or permit any
Subsidiary to enter into any transaction, which materially and adversely affects
or may materially and adversely affect the Collateral or Borrower's ability to
repay the Obligations or permit or agree to any material extension, compromise
or settlement or make any change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto, other than
discounts and allowances in the ordinary course of business.
7.18 Subsidiary Acquisitions. Hereafter create any Subsidiary and
divest itself of any material assets by transferring them to any Subsidiary.
7.19 Subsidiary Divestitures. Transfer, sell, pledge, encumber or
otherwise assign any shares of stock or other interest in any Subsidiary or
permit any Subsidiary to sell or otherwise dispose of all of substantially all
of its assets.
7.20 Partnerships or Joint Ventures. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
7.21 Subordinated Debt. Make any payment (principal or interest) with
respect to Subordinated Debt, or with respect to any Debt that would be
Subordinated Debt but for the absence of a subordination agreement in effect
with respect thereto, except that Borrower shall be entitled to make payments
with respect to such Debt to the extent provided in any subordination agreement
in effect with respect thereto, but only during such time as no default or Event
of Default exists hereunder.
ARTICLE 8
GRANT OF SECURITY INTEREST.
8.1 Security Interest. As security for the payment of the Loan and
including any extensions or renewals or changes in form of the Loan, any
Overadvances, and any other Debt of Borrower to the Bank, and all costs and
expenses of collection thereof, including, without limitation, attorneys' fees,
Borrower hereby assigns to Bank and grants to Bank a security interest in and
Lien upon the following:
(a) All of Borrower's Inventory;
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(b) All of proceeds and products, as the case may be, of
Borrower's Inventory.
(c) All monies and other property of any kind, real, personal,
or mixed, and tangible or intangible, now or at any time or times hereafter, in
the possession or under the control of Bank or a bailee of Bank;
(d) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (a) through (c) above, including,
without limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral;
(e) All books and records (including, without limitation,
customer lists, credit files, magnetic, digital and laser tapes and disks,
electronic and computer storage media, computer programs, print-outs, and other
computer materials and records) of Borrower pertaining to any of VARIABLE(
Ref459607841 ~ through VARIABLE( Ref459607857 ~ above.
(f) Mortgage upon that certain real property, and all
Improvements thereon, located at 1441 S.W. 29th Avenue, Pompano Beach, Florida.
8.2 Sale of Inventory. Until the occurrence of an Event of Default
hereunder or until expiration of the Commitment Period, whichever occurs first,
Borrower may use and dispose of the Inventory in the ordinary course of business
where such is not inconsistent with this Agreement, provided that the ordinary
course of business does not include a transfer in partial or total satisfaction
of Debt nor a transfer (other than a sale on terms and conditions which would
apply if disinterested parties were involved) to an Affiliate of Borrower.
8.3 This space is intentionally left blank.
8.4 This space is intentionally left blank.
8.5 This space is intentionally left blank.
8.6 This space is intentionally left blank.
8.7 This space is intentionally left blank.
8.8 Lease of Records. Borrower hereby leases to the Bank, and the Bank
hires from Borrower, for a term which shall be effective so long as the Loans or
other Obligations secured hereby are owing to the Bank by Borrower and until the
Bank has no further obligation under the Agreement, all of Borrower's present
and future computer printouts, magnetic, digital and laser tapes and disks,
computer and electronic storage media, computer software programs, trial balance
records, ledgers and cabinets in which they are located, reflected or
maintained, in any
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way relating to the Collateral, and all present and future supporting evidence
and documents relating thereto in the form of written applications, credit
information, account cards, payment records, trial balances, correspondence,
delivery receipts, certificates and the like, as well as the past and current
information stored in computer software programs for and on Borrower's behalf by
third parties. Borrower, if requested by Bank, agrees to legend all of the
foregoing to indicate the lease thereof to the Bank. If an Event of Default
occurs, then, in addition to all of the other rights and remedies of the Bank
herein, the Bank will have the right forthwith or at any time thereafter to
remove from Borrower's premises all of the foregoing and keep and retain the
same in Bank's possession until the Loans and other Obligations secured hereby
shall have been fully paid and discharged and the Bank has no further obligation
under the Agreement. The provisions of this Section shall not be deemed to
diminish or contravene the security interest of the Bank in the Borrower's
General Intangibles or in the property, materials, and interests described in
this Section but shall be deemed to be in addition to any rights the Bank may
have with respect to the Borrower's grant of a security interest in its General
Intangibles to the Bank.
8.9 License of Rights. Bank is hereby granted a license or other right
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks and advertising matter or any
property of a similar nature as it pertains to the Collateral, in advertising
for sale and in selling any Collateral, and Borrower's rights under all licenses
and all franchise agreements shall inure to Bank's benefit.
8.10 Attorney-in-Fact. Following an Event of Default, Borrower
irrevocably designates, makes, constitutes and appoints Bank (and all Persons
designated by Bank) as Borrower's true and lawful attorney (and agent-in-fact)
and Bank, or Bank's agent, may, without notice to Borrower and in either
Borrower's or Bank's name, but at the cost and expense of Borrower:
10.1.1 At such time or times hereafter as Bank or said agent,
in its sole discretion, may determine, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Bank or under
Bank's control; and
10.1.2 At such time or times as Bank or its agent in its sole
discretion may determine: (i) this space is intentionally left blank; (ii)
settle, adjust, compromise, discharge or release any of the Collateral; (iii)
sell or collect any of the other Collateral upon such terms, and for such
amounts and at such time or times as Bank deems advisable; (iv) take possession,
in any manner, of any item of payment or proceeds relating to any Collateral and
apply the same to the Obligations; (v) prepare, file and sign Borrower's name to
a proof of claim in bankruptcy or similar document against any Collateral or to
any notice of lien, assignment or satisfaction of lien or similar document in
connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery
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thereof to such address as Bank may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Bank or any other bank on account of the
Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Inventory and any other Collateral; (ix) this space
is intentionally left blank; (x) use the information recorded on or contained in
any data processing equipment and computer hardware and software relating to the
Inventory, and any other Collateral and to which Borrower has access; (xi) make
and adjust claims under policies of insurance; and (xii) for and in the name of
Borrower to give instructions and direct any bank or financial institution in
which proceeds of the Collateral are deposited to turn over said proceeds to
Bank; and (xiii) do all other acts and things necessary, in Bank's
determination, to fulfill Borrower's obligations under this Agreement.
ARTICLE 9
ADDITIONAL REPRESENTATIONS, COVENANTS, AND
AGREEMENTS RELATING TO COLLATERAL
9.1 This space is intentionally left blank.
9.2 This space is intentionally left blank.
9.3 Affirmation of Representations. Each request for a loan or advance
made by Borrower pursuant to this Agreement or any of the other Loan Documents
shall constitute (i) an automatic representation and warranty by Borrower to
Bank that there does not then exist any default or Event of Default and (ii) a
reaffirmation as of the date of said request that all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents
are true in all material respects except for any changes in the nature of
Borrower's business or operations that would render the information contained in
any exhibit attached hereto either inaccurate or incomplete, so long as Bank has
consented to such changes or such changes are expressly permitted by this
Agreement.
9.4 Waivers. Borrower hereby releases and waives any and all actions,
claims, causes of action, demands and suits which it may ever have against the
Bank as a result of any possession, collection, settlement, compromise or sale
by Bank of any of the Collateral upon the occurrence of an Event of Default
hereunder, notwithstanding the effect of such possession, collection,
settlement, compromise or sale upon the business of Borrower. Said waiver shall
include all causes of action and claims which may result from the exercise of
the power of attorney conferred upon Bank in Section 8.10. The failure at any
time or times hereafter to require strict performance by Borrower of any of the
provisions, warranties, terms and conditions contained in this Agreement or any
other agreement, document or instrument now or hereafter executed by Borrower,
and delivered to the Bank, shall not waive, affect, or diminish any right of the
Bank thereafter to demand strict
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compliance and performance therewith and with respect to any other provisions,
warranties, terms and conditions contained in such agreements, documents or
instruments, and any waiver of default shall not waive or affect any other
default, whether prior or subsequent thereto, and whether the same are of a
different type. None of the warranties, conditions, provisions and terms
contained in the Agreement or any other agreement, document or instrument now or
hereafter executed by Borrower and delivered to the Bank shall be deemed to have
been waived by any act or knowledge of the Bank, its agents, representatives,
officers or employees, but only by an instrument in writing signed by an officer
of the Bank and directed to the Borrower specifying such waiver.
9.5 Discharge of Taxes and Liens. At its option, the Bank may discharge
taxes, Liens, security interests or other encumbrances at any time levied or
placed on the Collateral and may pay for the maintenance and preservation of the
Collateral. Borrower agrees to reimburse the Bank, on demand, for any payment
made or expense incurred by Bank pursuant to the foregoing authorization,
including, without limitation, attorney's fees.
9.6 Insurance. Without limiting any other provision hereof, Borrower
will keep the Collateral insured in amounts equal to its full insurable value,
with companies, and against such risks as may be satisfactory to the Bank.
Borrower will pay the costs of all such insurance and deliver policies
evidencing such insurance to the Bank with mortgagee loss payable clauses in
favor of the Bank. Borrower hereby assigns to the Bank all right to receive
proceeds, directs any insurer to pay all proceeds directly to the Bank, and
authorizes the Bank to endorse any check or draft for such proceeds and apply
the same toward satisfaction of the Loans and other Obligations secured hereby.
9.7 Complete Records; Inspection Rights. Borrower will at all times
keep accurate and complete records of the Collateral, and the Bank or its agents
shall have the right to call at Borrower's place or places of business at
intervals to be determined by Bank, upon reasonable notice and during Borrower's
regular business hours, and without hindrance or delay, to inspect and examine
the Inventory and the Equipment and to inspect, audit, check, and make abstracts
from the books, records, journals, orders, receipts, computer printouts,
correspondence and other data relating to the Collateral or to any other
transactions between the parties hereto. If requested by Bank, Borrower agrees
to make its books, records, journals, orders, receipts, computer printouts,
correspondence, and other data relating to the Collateral available at the
Bank's main office for inspection, audit and checking by the Bank or its agents.
9.8 U.C.C. Financing Statement. The Borrower agrees that a carbon,
photographic or other reproduction of this Agreement or of a signed financing
statement with respect to the Collateral shall be sufficient as a financing
statement and may be filed as such by the Bank.
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ARTICLE 10
EVENTS OF DEFAULT; CERTAIN REMEDIES
10.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:
10.1.1 Payment Default. If Borrower shall fail to make any
payment of any installment of principal or interest on the Note when and as the
same shall become due and payable, whether at stated maturity, upon expiration
of the Commitment Period, by declaration, upon acceleration, or otherwise; or
10.1.2 Fees and Expenses. If Borrower shall fail to pay when
due any expense, fee or charge provided for in this Agreement and such failure
shall continue for a period of ten (10) days; or
10.1.3 Other Defaults. If Borrower shall fail for a period of
fifteen (15) days to perform, keep, or observe any covenant, agreement or
provision of any of the following Sections of this Agreement: 6.4, 6.9, 6.10,
6.11, 6.14, 6.17, 6.18, 6.20, and 6.21; or if Borrower shall fail or neglect to
perform, keep or observe, or shall default with respect to, any other covenant,
agreement or provision contained in this Agreement (other than a covenant,
agreement or provision a default in the performance of which is dealt with
specifically elsewhere in this Section 10.1); or
10.1.4 Representations False. If any warranty, representation,
or other statement made or furnished to Bank by or on behalf of Borrower or any
Guarantor or in any of the Loan Documents proves to be false or misleading in
any material respect when made or furnished; or
10.1.5 Financial Difficulties. If the Borrower shall be
involved in financial difficulties as evidenced -
(a) by its admission in writing of its inability to
pay its debts generally as they become due or of its ceasing to be Solvent;
(b) by its filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the U.S. Bankruptcy
Code (as now or in the future amended) or any similar law regarding debtors
rights and remedies or an admission seeking the relief therein provided;
(c) by its making a general assignment for the
benefit of its creditors;
(d) by its consenting to the appointment of a
receiver for all or a substantial part of its property;
(e) by its being adjudicated a bankrupt;
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(f) by the entry of a court order appointing a
receiver or trustee for all or a substantial part of its property without its
consent, which order shall not be vacated, set aside or stayed within ninety
(90) days from the date of entry; or
(g) by the assumption of custody or sequestration by
a court of competent jurisdiction of all or substantially all of its property,
which custody or sequestration shall not be suspended or terminated within sixty
(60) days from its inception; or
10.1.6 ERISA. If a Reportable Event shall occur which Bank, in
its sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower is in "default" (as defined in Section 4219(C) (5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
Borrower's complete or partial withdrawal from such Plan; or
10.1.7 Cancellation of Guaranty. If the cancellation,
termination or limitation of any guaranty of Borrower's obligations under this
Agreement or the Loans shall occur, or if any such guarantor shall be in default
under or breach the terms of any guaranty agreement between the Bank and such
guarantor; or if any such guarantor should die; or if any subordination
agreement executed by any creditor of Borrower or of any such guarantor in favor
of the Bank should be canceled, terminated, or breached; or if any Guarantor's
financial condition as represented in the last personal financial statement
delivered to and received by Bank is substantially impaired; or
10.1.8 Default on Other Obligations. If Borrower shall default
in payment of more than Ten Thousand Dollars ($10,000.00) in the aggregate due
on any Debt of Borrower to others or if Borrower or any Guarantor shall default
under any loan or security agreement with others or under any material lease
involving a payment of more than Two Thousand Five Hundred ($2,500) in the
aggregate and any such default shall not be cured within thirty (30) days after
written notice to Borrower or Guarantor from Bank or any holder; or
10.1.9 Judgments. If a final judgment for the payment of money
in excess of Ten Thousand Dollars ($10,000.00) in the aggregate shall be
rendered against the Borrower and the same shall remain undischarged for a
period of thirty (30) days during which execution shall not be effectively
stayed, unless such judgment is fully covered by collectible insurance; or
10.1.10 Actions. If Borrower or any Guarantor shall be
criminally indicted or convicted under any law that could lead to a forfeiture
of any property of the Borrower or such Guarantor; or
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10.1.11 Uninsured Losses; Unauthorized Dispositions. Any
material loss, theft, damage or destruction not fully covered by insurance (as
required by this Agreement and subject to such deductibles as Bank shall have
agreed to in writing), or sale, lease or encumbrance of any of the Collateral or
the making of any levy, seizure, or attachment thereof or thereon except in all
cases as may be specifically permitted by other provisions of this Agreement; or
10.1.12 Adverse Changes. There shall occur any material
adverse change in the financial condition or business prospects of Borrower or
any Guarantor; or
10.1.13 Collateral. If a creditor of Borrower shall obtain
possession of any of the Collateral by any legal means; or
10.1.14 Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of Borrower for a period which
significantly affects Borrower's capacity to continue its business, on a
profitable basis; or Borrower shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by Borrower which is necessary to the
continued or lawful operation of its business; or Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower leases, uses or occupies
any of its properties shall be canceled or terminated prior to the expiration of
its stated term; or any part of the Collateral shall be taken through
condemnation or the value of such properties shall be impaired through
condemnation; or
10.1.15 Bank Insecurity. Bank shall reasonably and in good
faith deem itself insecure; or
10.1.16 Change in Control. If any of the present executive
officers of Borrower should resign or be removed or if there occurs a transfer,
assignment, sale, pledge or hypothecation of the stock of the Borrower whereby
Marc A. Puleo does not own and control at least fifteen percent (15%) of the
stock of the Borrower; or
10.1.17 Life Insurance Policy. If the premiums are not paid on
any life insurance policy required to be maintained by the Borrower hereunder or
such life insurance policy is otherwise canceled or terminated or if the
assignment thereof to the Bank is terminated in any manner; or
10.1.18 Subordination Agreements. If a breach or default shall
occur with respect to any subordination agreement executed by any creditor of
Borrower (including any Affiliate), or if any said agreement shall otherwise
terminate or cease to have legal effect; or
10.1.19 Other Documents. If a default or event of default or
breach occurs
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under any Loan Document (other than the breaches enumerated in Sections
VARIABLE( Ref459608503 ~ through VARIABLE( Ref459608520 ~), or under or with
respect to any of the Obligations, or under any other note, evidence of
indebtedness, loan agreement, security agreement, guaranty, pledge, mortgage,
assignment, or security document executed by Borrower and delivered to the Bank.
10.1.20 Cross-Default. A default by the Borrower or the
Guarantor under any agreement between Borrower and/or Guarantor and Bank shall
constitute a default under the Loan and a default under the Loan shall
constitute a default under any other agreement between Borrower and Guarantor.
Without limiting the generality of the foregoing, a default under the term loan
in the original principal amount of One Million Six Hundred Eighty Thousand
Dollars ($1,680,000.00) between Borrower and Bank ("Term Loan") shall constitute
a default by the Borrower hereunder and a default hereunder shall constitute a
default under the Term Loan.
10.1.21 If Marc Puleo, M.D. fails to remain actively involved
in the senior management of Borrower and the Borrower has not provided a
substitute satisfactory to the Bank within ninety (90) days, as determined in
the Bank's sole discretion.
The Borrower agrees that default under any Loan Document shall
constitute default with respect to all Loan Documents and vice versa.
10.2 Remedies. Upon or at any time after the occurrence of any one or
more of the foregoing Events of Default, Bank or the holder of the Note(s) may
at its option (i) proceed to protect and enforce its rights by suit in equity,
action at law and/or the appropriate proceeding either for specific performance
of any covenant or condition contained in the Note(s) or in any Loan Document,
(ii) terminate the Commitment Period and cease disbursing advances the Loan,
and/or (iii) declare the unpaid balance of the Loan and Note(s) together with
all accrued interest to be forthwith due and payable, and thereupon such balance
shall become so due and payable without presentation, protest or further demand
or notice of any kind, all of which are hereby expressly waived.
Without limiting the foregoing, upon the occurrence of any
Event of Default, and at any time thereafter, Bank shall have the rights and
remedies of a secured party under the Uniform Commercial Code in addition to the
rights and remedies provided herein or in any other instrument or paper executed
by Borrower. The Bank may require the Borrower to assemble the Equipment and the
Inventory and to make the same available to the Bank at a place to be designated
by the Bank which is reasonably convenient to both parties. Unless the
Collateral is perishable or threatens to decline speedily in value, or is of a
style customarily sold on a recognized market, the Bank will give Borrower
reasonable notice of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to the Borrower at least five (5)
days before the time of such sale or disposition. The
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Borrower shall pay the Bank on demand any and all expenses, including legal
expenses and reasonable attorneys' fees, incurred or paid by the Bank in
protecting or enforcing the Loans and all other Obligations secured hereby and
other rights of the Bank hereunder, including its right to take possession of
the Collateral.
The Bank shall not be liable for failure to collect the
Accounts or to enforce any contract rights or for any action or omission on the
part of the Bank, its officers, agents and employees, except willful misconduct.
No remedy herein conferred upon, or reserved to, the Bank is intended to be
exclusive of any other remedy or remedies, including those of any note or other
evidence of Debt held by the Bank, and each and every remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or
hereafter existing in law or in equity. Exercise or omission to exercise any
right of the Bank shall not affect any subsequent right of the Bank to exercise
the same.
Borrower waives notice prior to Bank's taking possession or
control of any of the Collateral or any bond or security that might be required
by any court prior to allowing Bank to exercise any of Bank's remedies,
including, without limitation, the issuance of an immediate writ of possession.
The Borrower agrees that the Bank may apply the net proceeds
received from the Collateral among the Loans and the Obligations toward
satisfaction of the same in its sole discretion. Any such proceeds remaining
after satisfaction in full of the Loans, the Obligations, and the other
obligations and liabilities of the Borrower to the Bank shall be distributed as
required by Applicable Laws.
10.3 Right of Set-Off. Upon and after the occurrence of any Event of
Default, Bank may, and is hereby authorized by Borrower, at any time and from
time to time, to the fullest extent permitted by Applicable Laws, and without
advance notice to Borrower (any such notice being expressly waived by Borrower),
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by Bank to, or for the credit or the account of, Borrower against any or
all of the Loans and Obligations and other liabilities and obligations of
Borrower now or hereafter existing whether or not such obligations have matured
and irrespective of whether Bank has exercised any other rights that it has or
may have with respect to such Loans and Obligations and other liabilities and
obligations, including, without limitation, any acceleration rights. The
aforesaid right of set-off may be exercised by Bank against Borrower or against
any trustee in bankruptcy, debtor in possession, assignee for the benefit of the
creditors, receiver, or execution, judgment or attachment creditor of Borrower,
notwithstanding the fact that such right of set-off shall not have been
exercised by Bank prior to the making, filing or issuance, or service upon Bank
of, or of notice of, any such petition; assignment for the benefit of creditors;
appointment or application for the appointment of a receiver; or issuance of
execution, subpoena, order or warrant. Bank agrees to notify Borrower after any
such set-off and
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application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of Bank under this Section
are in addition to the other rights and remedies (including, without limitation,
other rights of setoff) which Bank may have.
10.4 Cross Default. So long as there are no amounts outstanding under
the Loan, then an Event of Default under this Agreement shall not constitute a
default under any other loan between Borrower and Bank; provided, however, if
there is an Event of Default hereunder: (i) Bank shall have no obligation to
make any additional advances under the Loan; and (ii) if there are any amounts
outstanding under the Loan, then an Event of Default under this Agreement shall
constitute a default under any other loan between Borrower and Bank.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification. Borrower agrees to defend, indemnify and hold
harmless the Bank, its directors, officers, employees, accountants, attorneys,
and agents, (the "Indemnitees") from and against any and all claims, demands,
judgments, damages, actions, causes of action, injuries, orders, penalties,
costs and expenses (including attorneys' fees and costs of court) of any kind
whatsoever arising out of or relating to any breach or default by Borrower or
any other Person (including any Guarantor) under this Agreement or any Loan
Document or the failure of Borrower to observe, perform or discharge Borrower's
duties hereunder or thereunder. Without limiting the generality of the
foregoing, Borrower's obligation to indemnify Bank shall include indemnity from
any and all claims, demands, judgments, damages, actions, causes of action,
injuries, orders, penalties, costs and expenses arising out of or in connection
with the activities of the Borrower, its predecessors in interest, third parties
who have trespassed on Borrower's property, or parties in a contractual
relationship with Borrower, whether or not occasioned wholly or in part by any
condition, accident or event caused by an act or omission of the Indemnitees,
which: (a) arise out of the actual, alleged or threatened discharge, dispersal,
release, storage, treatment, generation, disposal, or escape of radioactive
materials, radioactivity, pollutants or other toxic or hazardous substances,
including any solid, liquid, gaseous, or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste
(including materials to be recycled, reconditioned or reclaimed); or (b)
actually or allegedly arise out of the use, specification, or inclusion of any
product, material, or process containing chemicals or radioactive material, the
failure to detect the existence or proportion of chemicals or radioactive
material in the soil, air, surface water or groundwater, or the performance or
failure to perform the abatement of any pollution source or the replacement or
removal of any soil, water, surface water, or groundwater containing chemicals
or radioactive material; or (C) arises out of or relates to breach by Borrower
of any of the provisions of Section 5.16 hereof relating to Environmental
Regulations. In addition, Borrower will indemnify and hold Bank harmless from
and against any liability, claim, cost or expense incurred by Bank or imposed
against Bank for any stamp tax, intangible tax, or other tax, fee or charge
imposed by any governmental entity arising out of or relating to the Note(s) or
this Agreement or the transactions anticipated herein.
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ARTICLE 12
COSTS AND EXPENSES; MISCELLANEOUS
12.1 Costs of Preparation; Brokers Fees. Borrower shall bear all
expenses of the Bank in connection with the Loans and with the investigation,
review and approval of this transaction, the preparation of the Agreement and
the Loan Documents, and the issuance and delivery of the Note(s) to Bank and
also in connection with any amendment or modification thereto, and the
administration thereof, including, without limitation, (i) all legal fees,
expenses and disbursements and other actual third-party expense reimbursements
incurred or sustained by Bank in connection with this transaction, (ii) all
travel, appraisal, audit, search and filing fees incurred or sustained by Bank
in connection with this transaction or the administration of the Loans; (iii)
all recording and filing fees, intangibles taxes, documentary and revenue
stamps, other taxes or other expenses and charges payable in connection with
this Agreement, the Note or any Loan Document and (iv) all costs, expenses,
(including fees and expenses of outside consultants), related to the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby and/or periodic audits and
appraisals performed by Bank. The Borrower agrees to indemnify and save Bank
harmless against all broker's and finder's fees, if any.
12.2 Other Costs and Expenses. If, at any time or times hereafter,
whether before or after the occurrence of an Event of Default, the Bank employs
counsel to advise or provide other representation with respect to this Agreement
or any Loan Document, or to collect the balance of the Loans, or to take any
action in or with respect to any suit or proceeding relating to this Agreement
or any of the Loan Documents, or to protect, collect, or liquidate the
Collateral or to attempt to enforce any security interest or Lien granted to the
Bank by Borrower; then in any such events, all of the reasonable attorneys' fees
arising from such services, and any expenses, costs and charges relating
thereto, shall constitute additional obligations of Borrower payable on demand
of the Bank.
12.3 Legal Counsel. Borrower acknowledges and agrees that legal counsel
to Bank does not represent Borrower as Borrower's attorney, that Borrower has
retained (or has had an opportunity to retain) counsel of its own choice and has
not and will not rely upon any advice from Bank's counsel. In no event shall
Borrower's reimbursement of expenses pursuant to this Agreement (even if
effected by payment directly by Borrower to Bank's counsel) be deemed to
establish any attorney-client relationship between Borrower and Bank's counsel.
12.4 Audit Fees. During the term of this Agreement, Borrower shall pay
Bank a field examination fee for each examination performed at any of Borrower's
places of business by Bank's field examination staff. The foregoing examination
shall not be conducted more frequently than semi-annually unless an Event of
Default shall exist.
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12.5 No Waiver. No waiver of any Event of Default hereunder, and no
waiver of any default or Event of Default under any other Loan Document shall
extend to or shall affect any subsequent or other then existing default or shall
impair any rights, remedies or powers of Bank. No delay or omission of Bank or
any subsequent holder of the Note to exercise any right, remedy, power or
privilege hereunder after the occurrence of such default or Event of Default
shall be construed as a waiver of any such default, or acquiescence therein.
12.6 Headings. Except for the definitions set forth in VARIABLE(
Ref459547155 ~, the headings of the articles, sections, paragraphs and
subdivisions of this Agreement are for convenience of reference only, are not to
be considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof.
12.7 Marshaling of Assets; Payments Set Aside. Bank shall be under no
obligation to marshal any assets or securities in favor of Borrower or any
Guarantor or any other Person or against or in payment of any or all of the
Obligations. To the extent that sum credited against the Obligations is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
12.8 Survival of Covenants. All covenants, agreements, representations
and warranties made herein and in certificates or reports delivered pursuant
hereto shall be deemed to have been material and relied on by Bank,
notwithstanding any investigation made by or on behalf of Bank, and shall
survive the execution and delivery to Bank of any Note or Loan Document.
12.9 Addresses. Any notice or demand which by any provision of this
Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes by (i) being delivered in person
to the party to whom the notice or demand is directed or (ii) by being sent as
first class mail, postage prepaid, in either event to the following address: If
to Borrower, 1441 S.W. 49th Avenue, Pompano Beach, Florida 33066; or if any
other address shall at any time be designated by Borrower in writing to the
holders of record of the Note at the time of such designation to such other
address; and if to Bank, One East Broward Boulevard, Fort Lauderdale, Florida,
Attention: Susan King; or if any other address shall at any time be designated
in writing to Borrower, to such other address. Notwithstanding the foregoing, no
notice shall be effective as to Bank until actually received by Bank. Any
written notice that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice is actually received by
the noticed party.
12.10 Venue and Jurisdiction. Borrower agrees that any legal action
brought by the Bank
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to collect the Loans or any Obligation or to assert any claim against Borrower
under any Loan Document, or any part thereof, may be brought in any court in
Broward County, Florida, waives its right to object to any such action on
grounds it is brought in the improper venue, and irrevocably consents that any
legal action or proceeding against it under, arising out of, or in any manner
relating to the Loans, the Obligations, or any Loan Document may be brought in
the Circuit Court of Broward County, Florida or in any other Circuit Court of
the State of Florida or in the U.S. District Court for the Southern District of
Florida. Borrower, by the execution of this Agreement, expressly and irrevocably
assents and submits to the personal jurisdiction of any such court in any such
action or proceeding. Borrower consents to the service of process relating to
any such action or proceeding by mail to the address set forth in this
Agreement.
12.11 Continuing Obligation; Benefits. This Agreement, and each and
every provision hereof, is a continuing obligation and shall (i) be binding upon
the Borrower and the Bank, their successors and assigns, and (ii) inure to the
benefit of and be enforceable by the Borrower and Bank and their successors and
assigns; provided, that the Borrower may not assign all or any part of this
Agreement without the prior written consent of Bank, which consent may be
granted or withheld in the sole discretion of Bank.
12.12 Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida; provided,
however, that if any of the Collateral shall be located in any jurisdiction
other than Florida, the laws of such jurisdiction shall govern the method,
manner and procedure for foreclosure of Bank's lien upon such Collateral and the
enforcement of Bank's other remedies in respect of such Collateral to the extent
that the laws of such jurisdiction are different from or inconsistent with the
laws of Florida.
12.13 Standard of Review. Any document, writing or instrument required
or permitted to be delivered to Bank under this Agreement shall be deemed
satisfactory only if approved by Bank in the exercise of its sole discretion,
and any act or approval permitted to be done by Bank under this Agreement shall
be in Bank's sole discretion. Where in this Agreement reference is made to
Bank's "discretion", or "sole discretion", said reference shall mean that with
respect to the matter so designated, Bank shall have the absolute right to make
decision with respect thereto and shall not be subject to any standard of good
faith, fair dealing, reasonableness, or any other standard implied by any court
or imposed by law, it being the intention of the parties that the decision of
the Bank with respect to said matter shall be absolutely final and binding.
12.14 Participation. Borrower acknowledges that Bank may, at its
option, sell participation interests in the Loans to participating banks. The
amounts of any such participations shall be determined solely by the Bank.
Borrower agrees with each present and future participant in the Loans, the names
and addresses of which will be furnished to Borrower, that if an Event of
Default should occur, each present and future participant shall have all of the
rights and remedies of Bank with respect to any deposit due from any participant
to Borrower. The execution by a participant
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of a participation agreement with Bank, and the execution by Borrower of this
Agreement, regardless of the order of execution, shall evidence an agreement
between Borrower and said participant in accordance with the terms of this
Section.
12.15 Miscellaneous. This Agreement and the instruments and agreements
referred to herein or called for hereby supersede and incorporate all
representations, promises, and statements, oral or written, made by the Bank in
connection with the Loans. This Agreement may not be varied, altered, or amended
except by a written instrument executed by an authorized officer of the Bank.
This Agreement may be executed in any number of counterparts, each of which,
when executed and delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument. Any provision in this Agreement
which may be unenforceable or invalid under any law shall be ineffective to the
extent of such unenforceability or invalidity without affecting the
enforceability or validity of any other provisions hereof.
12.16 Joint and Several Liability. All obligations of each Person named
as Borrower shall be joint and several obligations of all such Persons. Each
representation, warranty and covenant shall be deemed true and/or complied with,
as the case may be, only (i) if true or complied with respect to each separate
entity constituting a Borrower taken on its own without reference to the other
Borrower entities, and (ii) if true or complied with respect to all entities
constituting Borrower taken as a whole.
12.17 General Waivers. To the fullest extent permitted by Applicable
Law, Borrower waives (i) presentment, demand and protest and notice of
presentment, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Bank on which Borrower may in any way be liable; (ii) notice prior
to Bank's taking possession or control of any of the Collateral or any bond or
security which might be required by any court prior to allowing Bank to exercise
any of Bank's remedies, including the issuance of an immediate writ of
possession; (iii) the benefit of all valuation, appraisement and exemption laws;
(iv) any right Borrower may have upon payment in full of the Obligations to
require Bank to terminate its security interest in the Collateral until the
execution by Borrower of an agreement indemnifying Bank from any loss or damage
Bank may incur as the result of dishonored checks or other items of payment
received by Bank from Borrower or any Account Debtor and applied to the
Obligations; and (v) notice of Bank's acceptance hereof or of any Loan Document.
12.18 Maximum Interest. Regardless of any provision contained in this
Agreement or any of the Loan Documents, in no event shall the aggregate of all
amounts that are contracted for, charged or collected pursuant to the terms of
this Agreement, the Note or any of the Loan Documents, and that are deemed
interest under Applicable Law, exceed the Maximum Rate. No provision of this
Agreement or in any of the Loan Documents or the exercise by Bank of any right
hereunder or under any Loan Document or the prepayment by Borrower of any of the
Obligations
40
<PAGE>
or the occurrence of any contingency whatsoever, shall entitle Bank to charge or
receive, or to require Borrower to pay, interest or any amounts deemed interest
by Applicable Law (such amounts being referred to herein collectively as
"Interest") in excess of the Maximum Rate, and all provisions hereof or in any
Loan Document which may purport to require Borrower to pay Interest exceeding
the Maximum Rate shall be without binding force or effect to the extent only of
the excess of Interest over such Maximum Rate. Any Interest charged or received
in excess of the Maximum Rate ("Excess"), shall be conclusively presumed to be
the result of an accident and bona fide error, and shall, to the extent received
by Bank, at the option of Bank, either be applied to reduce the principal amount
of the Obligations or returned to Borrower. The right to accelerate the maturity
of any of the Obligations does not include the right to accelerate unaccrued
interest, and no such interest will be collected by Bank. All monies paid to
Bank hereunder or under any of the Loan Documents shall be subject to any rebate
of unearned interest as and to the extent required by Applicable Law. By the
execution of this Agreement, Borrower covenants that (i) the credit or return of
any Excess shall constitute the acceptance by Borrower of such Excess, and (ii)
Borrower shall not seek or pursue any other remedy, legal or equitable, against
Bank, based in whole or in part upon contracting for, charging or receiving any
Interest in excess of the Maximum Rate. For the purpose of determining whether
or not any Excess has been contracted for, charged or received by Bank, all
interest at any time contracted for, charged or received from Borrower in
connection with this Agreement shall, to the extent permitted by Applicable Law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of the Obligations. Borrower and Bank shall, to the maximum extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as Interest; and (ii) exclude voluntary
prepayments and the effects thereof. The provisions of this Section shall be
deemed to be incorporated into the Note and each Loan Document (whether or not
any provision of this Section is referred to therein).
12.19 Year 2000 Compliance. The Borrower has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its Subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have Material Adverse Effect.
12.20 Waiver of Right to Trial by Jury. Borrower and Bank hereby waive
any right to trial by jury on any claim, counterclaim, setoff, demand, action or
cause of action (a) arising out of or in any way pertaining or relating to this
Agreement, the Note, the Loan Documents, or any other
41
<PAGE>
instrument, document or agreement executed or delivered in connection with this
agreement; or (b) in any way connected with or pertaining or related to or
incidental to any dealings of the parties hereto with respect to this agreement,
the Note, the Loan Documents, or any other instrument, document or agreement
executed or delivered in connection herewith or in connection with the
transactions related thereto or contemplated thereby or the exercise of either
party's rights and remedies thereunder, in all of the foregoing cases whether
now existing or hereafter arising, and whether sounding in contract, tort or
otherwise. Borrower and Bank agree that either or both of them may file a copy
of this paragraph with any court as written evidence of the knowing, voluntary
and bargained agreement between the parties irrevocably to waive trial by jury,
and that any dispute or controversy whatsoever between them shall instead be
tried in a court of competent jurisdiction by a judge sitting without a jury.
IN WITNESS WHEREOF, each of the Borrower and the Bank has caused this
instrument to be executed by its duly authorized officer and the Borrower has
caused its seal to be affixed as of the date first above written.
BORROWER:
PETMEDEXPRESS.COM, INC.,
a Florida corporation
By: /s/ Marc Puleo, M.D. (SEAL)
Name: Marc Puleo
Attest: Title: Pres/CEO
BANK:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
By: /s/ Susan King
Name: Susan King
Title: Vice President
42
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by Marc
Puleo, the President of PETMEDEXPRESS.COM, INC., a Florida corporation, freely
and voluntarily under authority duly vested in him/her by said corporation and
that the seal affixed thereto is the true corporate seal of said corporation.
He/She is personally known to me or who has produced ______________________ as
identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 17th day of September, 1999.
/s Kenneth P. Wurtenberger
Notary Public
------------------------------------------------
Typed, printed or stamped name of Notary Public
My Commission Expires:
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by Susan
King, the Vice President of SOUTHTRUST BANK, National Association, a national
banking association, freely and voluntarily under authority duly vested in
him/her by said banking association. He/She is personally known to me or who has
produced ______________________ as identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 17th day of September, 1999.
/s/ Kenneth P. Wurtenberger
------------------------------------------------
Notary Public
Typed, printed or stamped name of Notary Public
My Commission Expires:
43
<PAGE>
EXHIBIT "A"
BORROWER'S REPORT
45
<PAGE>
EXHIBIT B
BLANK
46
<PAGE>
EXHIBIT "C"
LIENS AND ENCUMBRANCES
NONE
47
<PAGE>
EXHIBIT "D"
COLLATERAL LOCATIONS AND OWNERSHIP INFORMATION
Location Name and Address of Landlord
-------- ----------------------------
48
<PAGE>
EXHIBIT "E"
PENSION PLANS
NONE
49
<PAGE>
EXHIBIT "F"
INTELLECTUAL PROPERTY RIGHTS
50
<PAGE>
EXHIBIT "G"
COMPLIANCE CERTIFICATE
SouthTrust Bank, National Association
One East Broward Boulevard
Fort Lauderdale, Florida 33301
Date of Report: , 1999
For Month or Quarter Ended: , 1999
The undersigned officer(s) of _______________________________ (the
"Borrower"), do hereby certify to you as follows:
(1) We have reviewed the provisions of the Loan and Security Agreement
between Borrower and you, dated as of , 1999 (the "Loan Agreement"), and
we have caused to be made under our supervision a review of the activities of
Borrower during the above-referenced period with a view toward determining
whether Borrower has kept, observed, performed, and fulfilled all of its
obligations under the Loan Agreement. Capitalized terms used herein but not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement. To the best of our knowledge, Borrower has kept, observed, performed,
and fulfilled each and every undertaking contained in the Loan Agreement and is
not at this time in default in the observance or performance of any of the terms
or conditions of the Loan Agreement, and no Event of Default has occurred and is
continuing, and no event has occurred and is continuing that, with the giving of
notice or the passage of time or both, would be an Event of Default, except as
follows: . Without limiting the generality of the foregoing, Borrower is
Solvent as of the date hereof.
(2) We further certify to you that no material adverse change has
occurred in either the financial condition or the business of Borrower since the
date of the Loan Agreement and that all representations and warranties set forth
within the Loan Agreement are true as of the date hereof.
(3) During the period noted above, Borrower has not changed its name,
its place of business, principal executive office, or has been surviving
corporation in a merger, nor has it changed the places where the Collateral is
located.
Executed this ____ day of ___________________, 1999.
Print Name:
ON BEHALF OF:
("Borrower")
Exhibit 10.5
Borrower's Taxpayer
Identification No. 65-0680967
PROMISSORY NOTE
$1,000,000.00 9-17, 1999
----
Fort Lauderdale, Florida
FOR VALUE RECEIVED, PETMEDEXPRESS.COM, INC., a Florida corporation
(sometimes hereinafter referred to as the "undersigned" or the "Borrower"),
promises to pay to the order of SOUTHTRUST BANK, NATIONAL ASSOCIATION or any
subsequent holder of this note ("Bank" or "Lender") at its principal offices
located at P.O. Box 460, Boynton Beach, Florida 33425-0460 (or at such other
place or places as Bank may designate) the principal sum of ONE MILLION DOLLARS
($1,000,000) or so much thereof as may be from time to time outstanding,
together with interest thereon on the principal amount from time to time
outstanding. Interest shall be computed on the actual number of days elapsed and
an assumed year of 360 days. Borrower and all endorsers, sureties, guarantors
and any other persons liable or to become liable with respect to the loan
evidenced by this Note (the "Loan") are each included in the term "Obligors" as
used in this Note. Said principal and interest shall be payable in lawful money
of the United States, on the dates and in the amounts specified below, to wit:
1. Interest. This Note shall bear interest at a variable rate (computed
on the basis of a 360-day year and calculated based upon the actual number of
days elapsed) equal to the Bank's Base Rate plus one percent (1%) per annum
("Rate"). In no event shall said rate of interest exceed the maximum annual rate
of interest permitted under Florida Law or Federal Law in the event Federal Law
preempts Florida Law or is otherwise applicable.
2. Said principal and interest shall be payable in lawful money of the
United States, on the dates and in the amounts specified below, to wit:
(a) Payments of interest only on the outstanding principal
balance under this Note shall be due and payable on the fifth (5th) day of the
month following the date hereof and on the same day of each successive month
thereafter until the Maturity Date.
(b) The outstanding principal balance together with accrued
and unpaid interest hereunder shall be due and payable one (1) year following
the date hereof ("Maturity Date").
3. Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then
1
<PAGE>
the aforedescribed late charge shall be payable if the payment is not received
by the last Business Day within said fifteen (15) day period.
4. This Note may be prepaid in whole or in part at any time without
penalty. No prepayment shall affect the requirement of the Borrower to make the
regular monthly payments of principal and interest.
5. Borrower shall pay all amounts owing under this Note in full when
due without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
6. If default be made in the payment of any sums payable pursuant to
the terms of this Note following a grace period of ten (10) days (which shall
not require the giving of any notice), or if default or other event causing the
acceleration of this Note occur under the Florida Real Estate Mortgage and
Security Agreement securing this Note (the "Mortgage"), or any other instrument
or document executed in connection with the Loan (this Note, the Mortgage and
all such instruments and documents, including, without limitation, any
guaranties, agreements, mortgages, security agreements, assignments and other
documents securing this Note, are referred to in this Note as the "Loan
Documents") (an "Event of Default"), then or at any time thereafter at the
option of Bank, the whole of the principal sum then remaining unpaid hereunder,
together with all interest accrued thereon and all other sums owing under the
Loan Documents, shall immediately become due and payable without notice and Bank
shall be entitled to pursue any and all rights and remedies provided by
applicable law and/or under the terms of this Note or any other Loan Document,
all of which shall be cumulative and may be exercised successively or
concurrently. Upon the occurrence and during the continuation of any Event of
Default, Bank, at its option, may at any time declare any or all other
liabilities of any Obligor to Bank immediately due and payable (notwithstanding
any contrary provisions thereof) without demand or notice of any kind. In
addition, Bank shall have the right to set off any and all sums owed to any
Obligor by Bank in any capacity (whether or not then due) against the Loan
and/or against any other liabilities of any Obligor to Bank. A default under the
Loan and Security Agreement between the Borrower and the Bank dated even date
herewith shall constitute an Event of Default.
7. From and after an Event of Default, and regardless of whether the
Bank also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) twenty-five percent (25%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
2
<PAGE>
8. In no event shall any agreed or actual exaction charged, reserved or
taken as an advance or forbearance by Bank as consideration for the Loan exceed
the limits (if any) imposed or provided by the law applicable from time to time
to the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. If the
floating rate of interest based on the Base Rate should increase above such
maximum interest rate permitted by applicable law (if any), then notwithstanding
any contrary provision in this Note or any other Loan Document and without
necessity of further agreement or notice by Bank or any Obligor, the unpaid
principal balance of the Loan shall thereupon bear interest at such maximum
lawful rate. If the floating interest should thereafter decrease below such
maximum lawful rate, the Loan shall nevertheless continue to bear interest at
such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. Pursuant to Florida Statutes, Section 687.12, the
interest rate charged is authorized by Florida Statutes, Chapter 665.
9. The Obligors hereby severally: (a) waive demand, presentment,
protest, notice of dishonor, suit against or joinder of any other person, and
all other requirements necessary to charge or hold any Obligor liable with
respect to the Loan; (b) waive any right to immunity from any such action or
proceeding and waive any immunity or exemption of any property, wherever
located, from garnishment, levy, execution, seizure or attachment prior to or in
execution of judgment, or sale under execution or other process for the
collection of debts; (c) waive any right to interpose any set-off or
non-compulsory counterclaim or to plead laches or any statute of limitations as
a defense in any such action or proceeding and waive (to the extent lawfully
waivable) all provisions and requirements of law for the benefit of any Obligor
now or hereafter in force; (d) submit to the jurisdiction of the state and
federal courts in the State of Florida for purposes of any such action or
proceeding; (e) agree that the venue of any such action or proceeding may be
laid in Broward County, Florida (in addition to any county in which any
collateral for the Loan is located), and waive any claim that the same is an
inconvenient forum; (f) stipulate that service of process in any such action or
proceeding shall be properly made if mailed by any form of registered or
certified mail (airmail if international), postage prepaid, to the address then
registered in Bank's records for the
3
<PAGE>
Obligor(s) so served, and that any process so served shall be effective ten (10)
days after mailing; and (g) agree that the death or mental or physical
incapacity of any Obligor who is a natural person, or the dissolution or merger
or consolidation or termination of the existence of any Obligor that is a
business entity (or if any person controlling such Obligor shall take any action
authorizing or leading to the same), shall at Bank's option, which option may be
exercised then or at any time thereafter, result in the Loan being then due and
payable in full. No provision of this Note shall limit Bank's right to serve
legal process in any other manner permitted by law or to bring any such action
or proceeding in any other competent jurisdiction. The Obligors hereby severally
consent and agree that, at any time and from time to time without notice, (i)
Bank and the owners(s) of any collateral then securing the Loan may agree to
release, increase, change, substitute or exchange all or any part of such
collateral, and (ii) Bank and any person(s) then primarily liable for the Loan
may agree to renew, extend or compromise the Loan in whole or in part or to
modify the terms of the Loan in any respect whatsoever; no such release,
increase, change, substitution, exchange, renewal, extension, compromise or
modification shall release or affect in any way the liability of any Obligor,
and the Obligors hereby severally waive any and all defenses and claims
whatsoever based thereon. Until Bank receives all sums due under this Note and
all other Loan Documents in immediately available funds, no Obligor shall be
released from liability with respect to the Loan unless Bank expressly releases
such Obligor in a writing signed by Bank, and Bank's release of any Obligor(s)
shall not release any other person liable with respect to the Loan.
10. The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including attorney's fees, whether or
not involving litigation and/or appellate, administrative or Bankruptcy
proceedings. The Obligors jointly and severally agree to pay any documentary
stamp taxes, intangibles taxes or other taxes (except for federal or Florida
franchise or income taxes based on Bank's net income) which may now or hereafter
apply to this Note or the Loan or any security therefor, and the Obligors
jointly and severally agree to indemnify and hold Bank harmless from and against
any liability, costs, attorney's fees, penalties, interest or expenses relating
to any such taxes, as and when the same may be incurred. The Obligors jointly
and severally agree to pay on demand, and to indemnify and hold Bank harmless
from and against, any and all present or future taxes, levies, imposts,
deductions, charges and withholdings imposed in connection with the Loan by the
laws or governmental authorities of any jurisdiction other than the State of
Florida or the United States of America, and all payments to Bank under this
Note shall be made free and clear thereof and without deduction therefor.
11. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida, except that federal law shall
govern to the extent that it may permit Bank to charge, from time to time,
interest on the Loan at a rate higher than may be permissible under applicable
Florida law.
12. Any provision of this Note which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability
4
<PAGE>
without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction. To the extent
that the Obligors may lawfully waive any law that would otherwise invalidate any
provision of this Note, each of them hereby waives the same, to the end that
this Note shall be valid and binding and enforceable against each of them in
accordance with all its terms.
13. If this Note is signed by more than one person, then the term
"Borrower" as used in this Note shall refer to all such persons jointly and
severally, and all promises, agreements, covenants waivers, consents,
representations, warranties and other provisions in this Note are made by and
shall be binding upon each and every undersigned person, jointly and severally.
The term "Bank" shall be deemed to include any subsequent holder(s) of this
Note. Whenever used in this Note, the term "person" means any individual, firm,
corporation, trust or other organization or association or other enterprise or
any governmental or political subdivision, agency, department or instrumentality
thereof. Whenever used in this Note, words in the singular include the plural,
words in the plural include the singular, and pronouns of any gender include the
other genders, all as may be appropriate. The "Base Rate" is a base reference
rate of interest adopted by SouthTrust Bank, National Association as a general
benchmark from which SouthTrust Bank, National Association determines the
floating interest rates chargeable on various loans to borrowers with varying
degrees of creditworthiness, and Borrower acknowledges and agrees that Bank has
made no representations whatsoever that the "Base Rate" is the interest rate
actually offered by SouthTrust Bank, National Association to borrowers of any
particular creditworthiness.
14. Time shall be of the essence with respect to the terms of this
Note. This Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default under this Note, Bank may apply
such payments in any order of priority determined by Bank in its exclusive
judgment. For purposes of determining interest accruing under this Note,
principal shall be deemed outstanding on the date payment is credited by Bank.
If any payment required to be made pursuant to this Note is not received on the
due date, Bank shall have the right, at its election, to charge any of
Borrower's accounts at Bank with the amount of such payment. Except as otherwise
required by the provisions of this Note or any other Loan Document, any notice
required to be given to any Obligor shall be deemed sufficient if made
personally or if mailed, postage prepaid, to such Obligor's address as it
appears in this Note (or, if none appears, to any address for such Obligor then
registered in Bank's records). Bank may grant participations in all or any
portion of, and may assign all or any part of Bank's rights under, this Note.
Bank may disclose to any such participant or assignee any and all information
held by or known to Bank at any time with respect to any Obligor. If Borrower or
any other Obligor is a partnership, then all general partners thereof shall be
liable jointly and severally for all obligations under this Note and for all
other covenants, agreements, undertakings and obligations of Borrower in
connection with the Loan, notwithstanding any contrary
5
<PAGE>
provision of the partnership laws of the State of Florida. All of the terms of
this Note shall inure to the benefit of Bank and its successors and assigns and
shall be binding upon each and every one of the Obligors and their respective
heirs, executors, administrators, personal representatives, successors and
assigns, jointly and severally.
15. The Mortgage encumbers real and personal property located in
Broward County, Florida, and is intended to be recorded amongst the Public
Records of said County.
16. BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF EITHER PARTY. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
WITNESS the due execution hereof as of the date first above written.
PETMEDEXPRESS.COM, INC., a Florida
corporation
By: /s/ Marc Puleo, M.D. (SEAL)
---------------------------------
Print Name: Marc Puleo
---------------------
Title: President/CEO
--------------------------
DOCUMENTARY STAMPS IN THE AMOUNT OF $3,500.00 HAVE BEEN PAID UPON AND AFFIXED TO
THE MORTGAGE SECURING THIS PROMISSORY NOTE.
Exhibit 10.6
IRREVOCABLE PROXY
The undersigned stockholder of PetMed Express, Inc., a Florida
corporation (the "Corporation"), being the record and beneficial owner of Four
Hundred Ninety-Eight Thousand Seven Hundred and Fifty (498,750) shares of Common
Stock (the "Shares") and options (the "Options") to purchase an additional One
Hundred Thousand (100,000) shares of Common Stock (collectively, the
"Securities") of the Corporation hereby irrevocably designates and appoints Marc
A. Puleo, M.D., of the City of Fort Lauderdale, State of Florida, to be its
proxy to attend stockholders' meetings of the Corporation, with full power to
vote and act for it, in its name and place, in the same manner, to the same
extent and with the same effect as through it might vote were duly authorized
representatives of the undersigned present at said meetings, granting to the
said Marc A. Puleo, M.D. the full power of substitution and revocation, subject
to the limitations and restrictions set forth below.
This Proxy is IRREVOCABLE for a three (3) year period commencing on the
date hereof. Prior to the expiration of such three (3) year period, the term of
this Proxy may be extended for an additional two (2) years by addendum hereto
upon the mutual consent of the undersigned stockholder and Marc A. Puleo, M.D.
If for any reason this Proxy shall be deemed invalid, in whole or in
part, then in lieu of the Proxy provided to the said Marc A. Puleo, M.D. to vote
the undersigned's Shares, and any shares issuable upon the exercise of the
Option, subject to the conditions hereof, the undersigned agrees that the right
to vote the Shares, and any shares issuable upon the exercise of the Option,
shall be allocated or voted in proportion to the votes cast by all of the
stockholders of the Corporation with respect to the transaction or matter
submitted to the stockholders of the Corporation. By way of example, in the
event the vote cast by the other stockholders of the Corporation participating
in such transaction are voted 75% in favor of the transaction and 25% are voted
in opposition thereto, the undersigned will be deemed to have voted 75% of its
voting interest in favor and 25% of its voting interest against the matter or
transaction at hand.
DATED: December 29, 1998.
Double Diamond Trading, Ltd., a British Virgin Islands
corporation
By: /s/ Ami Weitzman
---------------------------------------------------
Ami Weitzman, Sole Shareholder
[attestation]
/s/ Adam Terris
- ------------------------
Exhibit 10.7
Security Agreement
<TABLE>
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<S> <C>
Bank/Secured Party: Debtor(s)/Pledgor(s):
SouthTrust Bank, National Association PETMEDEXPRESS.COM, INC.
One East Broward Boulevard 1441 SW 49th Avenue
Fort Lauderdale, FL 33301 Pompano Beach, FL 33066
(Street address including county) (Name and street address, including county)
====================================================================================================================================
Debtor/Pledgor is: [ ] Individual [X] Corporation [ ] Partnership [ ] Other__________________________________________
Address is Debtor's/Pledgor's: [ ] Residence [ ] Place of Business [X] Chief Executive Office if more than
one place of business
Collateral (hereinafter defined) is located at: [X] Debtor's/Pledgor's address shown above [ ] the following
address:__________________________________________________________________________________________________
====================================================================================================================================
</TABLE>
[This Security Agreement ("Agreement") contains some provisions preceded by
boxes. If a box is marked, the provision applies to this transaction. If it is
not marked, the provision does not apply to this transaction.]
1. Security Interest. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor (hereinafter referred
to as "Debtor") assigns and grants to Bank (also known as "Secured Party"), a
security interest and lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter defined).
2. Collateral. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral"):
A. Types of Collateral (check as applicable)
[ ] Accounts: Any and all accounts and other rights of Debtor to the payment for
goods sold or leased or for services rendered whether or not earned by
performance, including, without limitation, contract rights, book debts, checks,
notes, drafts, instruments, chattel paper, acceptances, and any and all amounts
due to Debtor from a factor or other forms of obligations and receivables, now
existing or hereafter arising.
[X] Inventory:
[X] Blanket Lien: Any and all of Debtor's goods held as inventory, or
[ ] Specific Inventory: Limited to any and all of Debtor's goods held
as inventory which are specifically described in the space below, whether now
owned or hereafter acquired, including without limitation, any and all such
goods held for sale or lease or being processed for sale or lease in Debtor's
business, as now or hereafter conducted, including all materials, goods and work
in process, finished goods and other tangible property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
Debtor's business, along with all documents (including documents of title)
covering such inventory including the following (attach schedule if necessary):
_______________________________________________________________________________
_______________________________________________________________________________
[ ] Equipment:
[ ] Blanket Lien: Any and all of Debtor's goods held as equipment, or
[ ] Specific Equipment: Limited to any and all of Debtor's goods held
as equipment which are specifically described in the space below, including,
without limitation, all machinery, tools, dies, furnishings, or fixtures,
wherever located, whether now owned or hereafter acquired, together with all
increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith including
the following (attach schedule if necessary):
- -------------------------------------------------------------------------------
_______________________________________________________________________________
<PAGE>
[ ] Fixtures:
[ ] Blanket Lien: Any and all of Debtor's goods held as fixtures, or
[ ] Specific Fixtures: Limited to any and all of Debtor's goods held as fixtures
which are specifically described in the space below, whether now existing or
hereafter acquired. These goods are or will become fixtures on the following
described real estate in _________________________County, _____________________
[State], owned by: ___________________________________________ [name of owner]
more particularly described as follows: _______________________________________
[insert legal description (or attach schedule) of property, not street address],
including the following (attach schedule if necessary):
_______________________________________________________________________________
[ ] Instruments and/or Investment Documents:
[ ] Blanket Lien: Any and all of Debtor's instruments, documents, and
other writings of any type, or
[ ] Specific Instruments and/or Investment Documents: Limited to any and
all of Debtor's instruments, documents, and other writings of any type which are
specifically described in the space below, which evidence a right to the payment
of money and which are of a type that is transferred in the ordinary course of
business by delivery with any necessary indorsement or assignment, whether now
owned or hereafter acquired, including, without limitation, negotiable
instruments, promissory notes, and documents of title owned or to be owned by
Debtor, certificates of deposit, and all liens, security agreements, leases and
other contracts securing or otherwise relating to any of said instruments or
documents including the following (attach schedule if necessary):
_______________________________________________________________________________
_______________________________________________________________________________
[ ] General Intangibles:
[ ] Blanket Lien: Any and all of Debtor's general intangible property,
or
[ ] Specific General Intangibles: Limited to any and all of Debtor's
general intangible property which is specifically described in the space below,
whether now owned or hereafter acquired by Debtor or used in Debtor's business
currently or hereafter, including, without limitation, all patents, trademarks,
service marks, trade secrets, copyrights and exclusive licenses (whether issued
or pending), literary rights, contract rights and all documents, applications,
materials and other matters related thereto, all inventions, all manufacturing,
engineering and production plans, drawings, specifications, processes and
systems, all trade names, goodwill and all chattel paper, documents and
instruments relating to such general intangibles including the following (attach
schedule if necessary): ________________________________________________________
_______________________________________________________________________________
[ ] Other:
_______________________________________________________________________________
_______________________________________________________________________________
B. Substitutions, Proceeds and Related Items. Any and all substitutes and
replacements for, accessions, attachments and other additions to, tools, parts
and equipment now or hereafter added to or used in connection with, and all cash
or non-cash proceeds and products of, the Collateral (including, without
limitation, all income, benefits and property receivable, received or
distributed which results from any of the Collateral, such as dividends payable
or distributable in cash, property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation, returned premiums,
interest, premium and principal payments; redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any securities
in the Collateral); any and all choses in action and causes of action of Debtor,
whether now existing or hereafter arising, relating directly or indirectly to
the Collateral (whether arising in contract, tort or otherwise and whether or
not currently in litigation); all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper, whether now
existing or hereafter arising directly or indirectly from or related to the
Collateral; all warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to the Collateral;
all of Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer systems, computer disks, computer programs, source
codes and object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data and other
information pertaining directly or indirectly to the Collateral from third
parties, whether now existing or hereafter arising; and all returned, refused,
stopped in transit, or repossessed Collateral, any of which, if received by
Debtor, upon request shall be delivered immediately to Bank.
C. Balances and Other Property. The balance of every deposit account of
Debtor maintained with Bank and any other claim of Debtor against Bank, now or
hereafter existing, liquidated or unliquidated, and all money, instruments,
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securities, documents, chattel paper, credits, claims, demands, income, and any
other property, rights and interests of Debtor which at any time shall come into
the possession or custody or under the control of Bank or any of its agents or
affiliates for any purpose, and the proceeds of any thereof. Bank shall be
deemed to have possession of any of the Collateral in transit to or set apart
for it or any of its agents or affiliates.
3. Description of Obligation(s). The following obligations ("Obligation" or
"Obligations") are secured by this Agreement: (a) All debts, obligations,
liabilities and agreements of Debtor to Bank, now or hereafter existing, arising
directly or indirectly between Debtor and Bank whether absolute or contingent,
joint or several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) All costs
incurred by Bank to obtain, preserve, perfect and enforce this Agreement and
maintain, preserve, collect and realize upon the Collateral; (c) All debt,
obligations and liabilities of ________________________________________________
to Bank of the kinds described in this Item 3., now existing or hereafter
arising; (d) All other costs and attorney's fees incurred by Bank, for which
Debtor is obligated to reimburse Bank in accordance with the terms of the Loan
Documents (hereinafter defined), together with interest at the maximum rate
allowed by law, or if none, 25% per annum; (e) All amounts which may be owed to
Bank pursuant to all other Loan Documents executed between Bank and any other
Debtor; and (f) all obligations of the Debtor in favor of the Bank (or Bank's
affiliate) now or hereafter existing under any interest rate or commodity swap,
cap, floor, collar, or any combination thereof, or option with respect to these
or similar transactions, for the purpose of hedging Debtor's exposure to
fluctuations in interest rates or commodity prices. If Debtor is not the obligor
of the Obligation, and in the event any amount paid to Bank on any Obligation is
subsequently recovered from Bank in or as a result of any bankruptcy, insolvency
or fraudulent conveyance proceeding, Debtor shall be liable to Bank for the
amounts so recovered up to the fair market value of the Collateral whether or
not the Collateral has been released or the security interest terminated. In the
event the Collateral has been released or the security interest terminated, the
fair market value of the Collateral shall be determined, at Bank's option, as of
the date the Collateral was released, the security interest terminated, or said
amounts were recovered.
4. Debtor's Warranties. Debtor hereby represents and warrants to Bank as
follows:
A. Financing Statements. Except as may be noted by schedule attached hereto
and incorporated herein by reference, no financing statement covering the
Collateral is or will be on file in any public office, except the financing
statements relating to this security interest, and no security interest, other
than the one herein created, has attached or been perfected in the Collateral or
any part thereof.
B. Ownership. Debtor owns, or will use the proceeds of any loans by Bank to
become the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
C. Fixtures and Accessions. None of the Collateral is affixed to real estate
or is an accession to any goods, or will become a fixture or accession, except
as expressly set out herein.
D. Claims of Debtors on the Collateral. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
E. Environmental Compliance. The conduct of Debtor's business operations and
the condition of Debtor's property does not and will not violate any federal
laws, rules or ordinances for environmental protection, regulations of the
Environmental Protection Agency and any applicable local or state law, rule,
regulation or rule of common law and any judicial interpretation thereof
relating primarily to the environment or any materials defined as hazardous
materials or substances under any local, state or federal environmental laws,
rules or regulations, and petroleum, petroleum products, oil and asbestos
("Hazardous Materials").
F. Power and Authority. Debtor has full power and authority to make this
Agreement, and all necessary consents and approvals of any persons, entities,
governmental or regulatory authorities and securities exchanges have been
obtained to effectuate the validity of this Agreement.
5. Debtor's Covenants. Until full payment and performance of all of the
Obligation and termination or expiration of any obligation or commitment of Bank
to make advances or loans to Debtor, unless Bank otherwise consents in writing:
A. Obligation and This Agreement. Debtor shall perform all of its agreements
herein and in any other agreements between it and Bank.
B. Ownership and Maintenance of the Collateral. Debtor shall keep all
tangible Collateral in good condition. Debtor shall defend the Collateral
against all claims and demands of all persons at any time claiming any interest
therein adverse to Bank. Debtor shall keep the Collateral free from all liens
and security interests except those for taxes not yet due and the security
interest hereby created.
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C. Insurance. Debtor shall insure the Collateral with companies acceptable to
Bank. Such insurance shall be in an amount not less than the fair market value
of the Collateral and shall be against such casualties, with such deductible
amounts as Bank shall approve. All insurance policies shall be written for the
benefit of Debtor and Bank as their interests may appear, payable to Bank as
loss payee, or in other form satisfactory to Bank, and such policies or
certificates evidencing the same shall be furnished to Bank. All policies of
insurance shall provide for written notice to Bank at least thirty (30) days
prior to cancellation. Risk of loss or damage is Debtor's to the extent of any
deficiency in any effective insurance coverage.
D. Bank's Costs. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce the security interest created by this Agreement,
collect the Obligation, and preserve, defend, enforce and collect the
Collateral, including but not limited to taxes, assessments, insurance premiums,
repairs, rent, storage costs and expenses of sales, legal expenses, reasonable
attorney's fees and other fees or expenses for which Debtor is obligated to
reimburse Bank in accordance with the terms of the Loan Documents. Whether the
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on the Collateral, and pay for insurance of the Collateral, and such payments
shall be a part of the Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. Information and Inspection. Debtor shall (i) promptly furnish Bank any
information with respect to the Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever located,
and to inspect and copy, or furnish Bank or its representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) promptly
furnish Bank or its representatives such information as Bank may request to
identify the Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
the Collateral.
F. Additional Documents. Debtor shall sign and deliver any papers deemed
necessary or desirable in the judgment of Bank to obtain, maintain, and perfect
the security interest hereunder and to enable Bank to comply with any federal or
state law in order to obtain or perfect Bank's interest in the Collateral or to
obtain proceeds of the Collateral.
G. Parties Liable on the Collateral. Debtor shall preserve the liability of
all obligors on any Collateral, shall preserve the priority of all security
therefor, and shall deliver to Bank the original certificates of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
H. Records of the Collateral. Debtor at all times shall maintain accurate
books and records covering the Collateral. Debtor immediately will mark all
books and records with an entry showing the absolute assignment of all
Collateral to Bank, and Bank is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
I. Disposition of the Collateral. If disposition of any Collateral gives rise
to an account, chattel paper or instrument, Debtor immediately shall notify
Bank, and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed of
by Debtor in any manner without the prior written consent of Bank, except the
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
J. Accounts. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties and shall not be evidenced by
any instrument or chattel paper.
K. Notice/Location of the Collateral. Debtor shall give Bank written notice
of each office of Debtor in which records of Debtor pertaining to accounts held
as Collateral are kept, and each location at which the Collateral is or will be
kept, and of any change of any such location. If no such notice is given, all
records of Debtor pertaining to the Collateral and all Collateral of Debtor are
and shall be kept at the address marked by Debtor above.
L. Change of Name/Status and Notice of Changes. Without the written consent
of Bank, Debtor shall not change its name, change its corporate status, use any
trade name or engage in any business not reasonably related to its business as
presently conducted. Debtor shall notify Bank immediately of (i) any material
change in the Collateral, (ii) a change in Debtor's residence or location, (iii)
a change in any matter warranted or represented by Debtor in this Agreement, or
in any of the Loan Documents or furnished to Bank pursuant to this Agreement,
and (iv) the occurrence of an Event of Default (hereinafter defined).
M. Use and Removal of the Collateral. Debtor shall not use the Collateral
illegally. Debtor shall not, unless previously indicated as a fixture, permit
the Collateral to be affixed to real or personal property without the prior
written consent
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of Bank. Debtor shall not permit any of the Collateral to be removed from the
locations specified herein without the prior written consent of Bank, except for
the sale of inventory in the ordinary course of business.
N. Possession of the Collateral. Debtor shall deliver all investment
securities and other instruments, documents and chattel paper which are part of
the Collateral and in Debtor's possession to Bank immediately, or if hereafter
acquired, immediately following acquisition, appropriately indorsed to Bank's
order, or with appropriate, duly executed powers. Debtor waives presentment,
notice of acceleration, demand, notice of dishonor, protest, and all other
notices with respect thereto.
O. Consumer Credit. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this covenant.
P. Power of Attorney. Debtor appoints Bank and any officer thereof as
Debtor's attorney-in-fact with full power in Debtor's name and behalf to do
every act which Debtor is obligated to do or may be required to do hereunder;
however, nothing in this paragraph shall be construed to obligate Bank to take
any action hereunder nor shall Bank be liable to Debtor for failure to take any
action hereunder. This appointment shall be deemed a power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor.
Q. Waivers by Debtor. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligation; waives presentment, demand, notice of dishonor, and protest;
waives notice of the amount of the Obligation outstanding at any time, notice of
any change in financial condition of any person liable for the Obligation or any
part thereof, notice of any Event of Default, and all other notices respecting
the Obligation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, extended or renewed one or more times by Bank in its
discretion, without notice to Debtor. Debtor waives any right to require that
any action be brought against any other person or to require that resort be had
to any other security or to any balance of any deposit account. Debtor further
waives any right of subrogation or to enforce any right of action against any
other Debtor until the Obligation is paid in full.
R. Other Parties and Other Collateral. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this Agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim for
personal judgment against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing or
otherwise realizing upon the Collateral. Debtor waives any right to the benefit
of or to require or control application of any other security or proceeds
thereof, and agrees that Bank shall have no duty or obligation to Debtor to
apply to the Obligation any such other security or proceeds thereof.
S. Collection and Segregation of Accounts and Right to Notify. Bank hereby
authorizes Debtor to collect the Collateral, subject to the direction and
control of Bank, but Bank may, without cause or notice, curtail or terminate
said authority at any time. Upon notice by Bank, whether oral or in writing, to
Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and
other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon an
express trust for Bank until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are secured
hereby as Bank may in its sole discretion elect. At the sole election of Bank,
any portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to Debtor. At
any time, whether Debtor is or is not in default hereunder, Bank may notify
persons obligated on any Collateral to make payments directly to Bank and Bank
may take control of all proceeds of any Collateral. Until Bank elects to
exercise such rights, Debtor, as agent of Bank, shall collect and enforce all
payments owed on the Collateral.
T. Compliance with State and Federal Laws. Debtor will maintain its
existence, good standing and qualification to do business, where required, and
comply with all laws, regulations and governmental requirements, including
without limitation, environmental laws applicable to it or any of its property,
business operations and transactions.
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U. Environmental Covenants. Debtor shall immediately advise Bank in writing
of (i) any and all enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted, completed or threatened pursuant
to any applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting Debtor's business operations; and
(ii) all claims made or threatened by any third party against Debtor relating to
damages, contribution, cost recovery, compensation, loss or injury resulting
from any Hazardous Materials. Debtor shall immediately notify Bank of any
remedial action taken by Debtor with respect to Debtor's business operations.
Debtor will not use or permit any other party to use any Hazardous Materials at
any of Debtor's places of business or at any other property owned by Debtor
except such materials as are incidental to Debtor's normal course of business,
maintenance and repairs and which are handled in compliance with all applicable
environmental laws. Debtor agrees to permit Bank, its agents, contractors and
employees to enter and inspect any of Debtor's places of business or any other
property of Debtor at any reasonable times upon three (3) days prior notice for
the purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that Debtor is complying with this covenant
and Debtor shall reimburse Bank on demand for the costs of any such
environmental investigation and audit. Debtor shall provide Bank, its agents,
contractors, employees and representatives with access to and copies of any and
all data and documents relating to or dealing with any Hazardous Materials used,
generated, manufactured, stored or disposed of by Debtor's business operations
within five (5) days of the request therefor.
6. Rights and Powers of Bank.
A. General. Bank, after default, without liability to Debtor may: obtain from
any person information regarding Debtor or Debtor's business, which information
any such person also may furnish without liability to Debtor; require Debtor to
give possession or control of any Collateral to Bank; indorse as Debtor's agent
any instruments, documents or chattel paper in the Collateral or representing
proceeds of the Collateral; contact account debtors directly to verify
information furnished by Debtor; take control of proceeds, including stock
received as dividends or by reason of stock splits; release the Collateral in
its possession to any Debtor, temporarily or otherwise; require additional
Collateral; reject as unsatisfactory any property hereafter offered by Debtor as
Collateral; set standards from time to time to govern what may be used as after
acquired Collateral; designate, from time to time, a certain percent of the
Collateral as the loan value and require Debtor to maintain the Obligation at or
below such figure; take control of funds generated by the Collateral, such as
cash dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligation and exercise all other rights which an owner
of such Collateral may exercise, except the right to vote or dispose of the
Collateral before an Event of Default; at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; and
demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Bank may determine. Bank shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of Bank, its
officers, agents or employees, except for its or their own willful misconduct or
gross negligence. The foregoing rights and powers of Bank will be in addition
to, and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Bank's option (i) protect only Bank and not provide any
remuneration or protection for Debtor directly and (ii) provide coverage only
after the Obligation has been declared due as herein provided. The premiums for
any such insurance purchased by Bank shall be a part of the Obligation and shall
bear interest as provided in 3(d) hereof.
B. Convertible Collateral. Bank may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
7. Default.
A. Event of Default. An event of default ("Event of Default") shall occur if:
(i) there is a loss, theft, damage or destruction of any material portion of the
Collateral for which there is no insurance coverage or for which, in the opinion
of Bank, there is insufficient insurance coverage; (ii) Debtor or any other
obligor on all or part of the Obligation shall fail to timely and properly pay
or observe, keep or perform any term, covenant, agreement or condition in this
Agreement or in any other agreement between Debtor and Bank or between Bank and
any other obligor on the Obligation, including, but not limited to, any other
note or instrument, loan agreement, security agreement, deed of trust, mortgage,
promissory note, guaranty, certificate, assignment, instrument, document or
other agreement concerning or related to the Obligation (collectively, the "Loan
Documents"); (iii) Debtor or such other obligor shall fail to timely and
properly pay or observe, keep or perform any term, covenant, agreement or
condition in any agreement between such party and any affiliate or subsidiary of
Bank; (iv) Debtor or such other obligor shall fail to timely and properly pay or
observe, keep or perform any term, covenant, agreement or condition in any lease
agreement between such party and any lessor pertaining to premises at which any
Collateral is located or stored; or (v) Debtor or such other obligor abandons
any leased premises at which any Collateral is located or stored and the
Collateral is either moved without the prior written consent of Bank or the
Collateral remains at the abandoned premises.
B. Rights and Remedies. If any Event of Default shall occur, then, in each
and every such case, Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment, or protest; notice of intent to
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accelerate all or any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required under this Agreement,
any other Loan Document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies at Bank's option:
i. Acceleration. The Obligation shall, at Bank's option, become
immediately due and payable, and the obligation, if any, of Bank to permit
further borrowings under the Obligation shall at Bank's option immediately cease
and terminate.
ii. Possession and Collection of the Collateral. At its option: (a) take
possession or control of, store, lease, operate, manage, sell, or instruct any
Agent or Broker to sell or otherwise dispose of, all or any part of the
Collateral; (b) notify all parties under any account or contract right forming
all or any part of the Collateral to make any payments otherwise due to Debtor
directly to Bank; (c) in Bank's own name, or in the name of Debtor, demand,
collect, receive, sue for, and give receipts and releases for, any and all
amounts due under such accounts and contract rights; (d) indorse as the agent of
Debtor any check, note, chattel paper, documents, or instruments forming all or
any part of the Collateral; (e) make formal application for transfer to Bank (or
to any assignee of Bank or to any purchaser of any of the Collateral) of all of
Debtor's permits, licenses, approvals, agreements, and the like relating to the
Collateral or to Debtor's business; (f) take any other action which Bank deems
necessary or desirable to protect and realize upon its security interest in the
Collateral; and (g) in addition to the foregoing, and not in substitution
therefor, exercise any one or more of the rights and remedies exercisable by
Bank under any other provision of this Agreement, under any of the other Loan
Documents, or as provided by applicable law (including, without limitation, the
Uniform Commercial Code as in effect in Florida (hereinafter referred to as the
"UCC")). In taking possession of the Collateral Bank may enter Debtor's premises
and otherwise proceed without legal process, if this can be done without breach
of the peace. Debtor shall, upon Bank's demand, promptly make the Collateral or
other security available to Bank at a place designated by Bank, which place
shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Bank's willful and malicious
act. Bank shall have no duty to take any action to preserve or collect the
Collateral.
iii. Receiver. Obtain the appointment of a receiver for all or any of the
Collateral, Debtor hereby consenting to the appointment of such a receiver and
agreeing not to oppose any such appointment.
iv. Right of Set Off. Without notice or demand to Debtor, set off and
apply against any and all of the Obligation any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by Bank or any of Bank's agents or affiliates to or for
the credit of the account of Debtor or any guarantor or indorser of Debtor's
Obligation.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Bank for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligation shall be applied to the Obligation in such order and in such manner
as Bank in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any and all
obligations and liabilities arising out of or related to the timing or manner of
any such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities law,
Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. General.
A. Parties Bound. Bank's rights hereunder shall inure to the benefit of its
successors and assigns. In the event of any assignment or transfer by Bank of
any of the Obligation or the Collateral, Bank thereafter shall be fully
discharged from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. Waiver. No delay of Bank in exercising any power or right shall operate as
a waiver thereof; nor shall any single or partial exercise of any power or
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<PAGE>
right preclude other or further exercise thereof or the exercise of any other
power or right. No waiver by Bank of any right hereunder or of any default by
Debtor shall be binding upon Bank unless in writing, and no failure by Bank to
exercise any power or right hereunder or waiver of any default by Debtor shall
operate as a waiver of any other or further exercise of such right or power or
of any further default. Each right, power and remedy of Bank as provided for
herein or in any of the Loan Documents, or which shall now or hereafter exist at
law or in equity or by statute or otherwise, shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by Bank of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by Bank
of any or all other such rights, powers or remedies.
C. Agreement Continuing. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this Agreement.
D. Definitions. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Agreement; if UCC definitions conflict,
Article 9 definitions apply.
E. Notices. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action (or if the UCC elsewhere specifies
a longer period, such longer period) to the address of Debtor given above, or to
such other address as any party may designate by written notice to the other
party. Each notice, request and demand shall be deemed given or made, if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. Mail, first class postage prepaid, or if sent by any other means, upon
delivery.
F. Modifications. No provision hereof shall be modified or limited except by
a written agreement expressly referring hereto and to the provisions so modified
or limited and signed by Debtor and Bank. The provisions of this Agreement shall
not be modified or limited by course of conduct or usage of trade.
G. Applicable Law and Partial Invalidity. This Agreement has been delivered
in the State of Florida and shall be construed in accordance with the laws of
that State. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement. The invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
H. Financing Statement. To the extent permitted by applicable law, a carbon,
photographic or other reproduction of this Agreement or any financing statement
covering the Collateral shall be sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
i. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT OR
DOCUMENT OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY
WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S.
WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL
SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND
FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
ii. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE
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<PAGE>
AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE
A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF BANK HERETO (A)
TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. BANK MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
J. Controlling Document. To the extent that this Security Agreement conflicts
with or is in any way incompatible with any other Loan Document concerning the
Obligation, any promissory note shall control over any other document, and if
such note does not address an issue, then each other document shall control to
the extent that it deals most specifically with an issue.
K. Execution Under Seal. This Agreement is being executed under seal by
Debtor(s).
L. Additional Provisions. See Schedule "N/A" attached hereto and incorporated
hereunder for all purposes.
M. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
<TABLE>
<S> <C>
Bank/Secured Party: Corporate or Partnership Debtor/Pledgor:
SouthTrust Bank, National Association PETMEDEXPRESS.COM, INC.
By: /s/ Susan King By: /s/ Marc Puleo, M.D. (Seal)
----------------------------------- ------------------------------------
Name: Susan King Name: Marc Puleo
--------------------------------- ----------------------------------
Title: Vice President Title: President/CEO
-------------------------------- ---------------------------------
----------------------------------------
Attest (If Applicable)
(Corporate seal)
</TABLE>
9
Exhibit 10.8
This Instrument Prepared By and
To Be Returned To:
Mark K. Somerstein, Esq.
Ruden, McClosky, Smith,
Schuster & Russell, P.A.
P.O. Box 1900
Fort Lauderdale, FL 33302
FLORIDA REAL ESTATE MORTGAGE, ASSIGNMENT OF
LEASES AND RENTS AND SECURITY AGREEMENT
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
(the "Mortgage") is made and entered into as of the 29th day of April, 1999, by
PETMEDEXPRESS.COM, INC., a Florida corporation (the "Mortgagor"), whose address
is 3350 N.W. 53rd Street, Fort Lauderdale, Florida 33309, and SOUTHTRUST BANK,
NATIONAL ASSOCIATION (the "Mortgagee"), whose address is P.O. Box 460, Boynton
Beach, Florida 33425-0460.
W I T N E S S E T H:
WHEREAS, Mortgagor is justly and lawfully indebted to Mortgagee in the
sum of ONE MILLION SIX HUNDRED EIGHTY THOUSAND DOLLARS ($1,680,000) (the
"Loan"), as evidenced by a promissory note executed by Mortgagor in the original
principal amount of $1,680,000 payable to the order of Mortgagee, bearing the
same date as this Mortgage (the "Note"); and
WHEREAS, Mortgagor and all makers, endorsers, sureties, guarantors,
accommodation parties and all persons liable or to become liable with respect to
the Loan are each included in the term "Obligor" as used in this Mortgage;
NOW, THEREFORE, to secure the payment of the Loan and such future or
additional advances as may be made by Mortgagee, at its option and for any
purpose, to Mortgagor or Mortgagor's permitted successor(s) in title, provided
that all those advances are to be made within twenty (20) years from the date of
this Mortgage (the total amount of indebtedness secured by this Mortgage may
decrease or increase from time to time, but the total unpaid balance so secured
at any one time shall not exceed twice the original principal amount of the
Loan, plus interest and any disbursements made for the payment of taxes, levies
or insurance on the property covered by the lien
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of this Mortgage with interest on those disbursements), and to secure the full
and faithful performance of the covenants and agreements contained in the Note,
this Mortgage and all other instruments and documents executed in connection
with the Loan by Mortgagor and/or any other Obligor (the "Loan Documents"),
Mortgagor hereby grants, bargains, sells, conveys, assigns, transfers,
mortgages, pledges, delivers, sets over, warrants and confirms to Mortgagee, and
grants Mortgagee a security interest in:
All those certain lots, pieces, or parcels of land lying and being in
Broward County, State of Florida (the "Property"), together with the buildings
and improvements now or hereafter situated thereon, said land being legally
described as follows:
See Schedule "A" attached hereto and made a part hereof.
TOGETHER WITH all and singular the tenements, hereditaments, easements,
riparian rights and other rights now or hereafter belonging or appurtenant to
the Property, and the rights (if any) in all adjacent roads, ways, streams,
alleys, strips and gores, and the reversion or reversions, remainder and
remainders, rents, issues and profits thereof, and all the estate, right, title,
interest, property, claim and demand whatsoever of Mortgagor of, in and to the
same and every part and parcel thereof;
TOGETHER WITH any and all fixtures (collectively, the "Fixtures") now
or hereafter owned by Mortgagor and now or hereafter located at, affixed to,
placed upon or used in connection with the Property or any present or future
improvements thereon and any other items of property, wherever kept or stored,
if acquired by Mortgagor with the intent of incorporating them in the Property
or any improvements to the Property; together also with all additions thereto
and replacements and proceeds thereof (Mortgagor hereby agreeing, with respect
to all additions and replacements and proceeds, to execute and deliver from time
to time such further instruments as may be requested by Mortgagee to confirm
their inclusion herein); all of which foregoing items described in this
paragraph are hereby declared to be part of the real estate and encumbered by
this Mortgage;
TOGETHER WITH (a) any and all awards or payments, including interest
thereon and the right to receive the same, growing out of or resulting from any
exercise of the power of eminent domain (including the taking of all or any part
of the Premises, as defined hereinafter), or any alteration of the grade of any
street upon which the Property abuts, or any other injury to, taking of, or
decrease in the value of the Premises or any part thereof; (b) any unearned
premiums on any hazard, casualty, liability, or other insurance policy carried
for the benefit of Mortgagor and/or Mortgagee with respect to the Premises (as
defined hereinafter); (c) all rights of Mortgagor in and to all supplies and
materials delivered to or located upon the Property or elsewhere and used or
usable in connection with the construction or refurbishing of improvements on
the Property; and (d) all rights of Mortgagor in, to, under, by virtue of,
arising from or growing out of any and all present
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<PAGE>
or future contracts, instruments, accounts, insurance policies, permits,
licenses, trade names, plans, appraisals, reports, paid fees, choses-in-action,
subdivision restrictions or declarations or other intangibles whatsoever now or
hereafter dealing with, affecting or concerning the Property, the improvements
thereto, or any portion thereof or interest therein, including but not limited
to: (i) all contracts, plans and permits for or related to the Property or its
development or the construction or refurbishing of improvements on the Property,
(ii) any agreements for the provision of utilities to the Property, (iii) all
payment, performance and/or other bonds, (iv) any contracts now existing or
hereafter made for the sale by Mortgagor of all or any portion of the Property,
including any deposits paid by any purchasers (howsoever such deposits may be
held) and any proceeds of such sales contracts, including any purchase-money
notes and mortgages made by such purchasers, and (v) any declaration of
condominium, restrictions, covenants, easements or similar documents now or
hereafter recorded against the title to all or any portion of the Property; and
TOGETHER WITH all of Mortgagor's rights to enter into any lease or
lease agreement regarding all or any part of the Property, and all of
Mortgagor's rights to encumber the Property further for debt, Mortgagor hereby
(a) representing as a special inducement to Mortgagee to make the Loan that, as
of the date hereof, there are no encumbrances to secure debt prior or junior to
this Mortgage, and (b) covenanting that there are to be none as of the date when
this Mortgage is recorded;
TO HAVE AND TO HOLD the above-described and granted property,
appurtenances and rights (referred to collectively in this Mortgage as the
"Premises") unto Mortgagee in fee simple forever.
PROVIDED, HOWEVER, that these presents are upon the condition that if
Mortgagor (a) shall pay or cause to be paid to Mortgagee the principal and all
interest payable in respect of the Loan and any future advance made under this
Mortgage and any other sums secured by this Mortgage, at the time and in the
manner stipulated in the Note or this Mortgage or any other Loan Document, all
without any deduction or credit for taxes or other similar charges paid by
Mortgagor, (b) shall punctually perform, keep and observe all and singular the
covenants and promises in the Note and any future advance agreement(s), in any
renewals, extensions or modifications thereof, and in this Mortgage or any other
Loan Document expressed to be performed, kept and observed by and on the part of
Mortgagor, and (c) shall not permit or suffer to occur any default under this
Mortgage or any other Loan Document, then this Mortgage and all the interests
and rights hereby granted, bargained, sold, conveyed, assigned, transferred,
mortgaged, pledged, delivered, set over, warranted and confirmed shall cease,
terminate and be void, but shall otherwise remain in full force and effect.
Mortgagor covenants with and warrants to Mortgagee: (a) that Mortgagor
has good and marketable title to the Property, is lawfully seized and possessed
of the Property in fee simple and
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has good right to sell and convey the same; (b) that the Premises are
unencumbered; and (c) that Mortgagor shall forever warrant and defend the
Premises unto Mortgagee against the lawful claims and demands of all persons
whomsoever, and shall make such further assurances to perfect fee simple title
to the Property in Mortgagee as Mortgagee may reasonably require. Mortgagor
further covenants and agrees with Mortgagee as follows:
1. Mortgagor shall pay all sums due Mortgagee at the time and in the
manner provided in the Note, this Mortgage, any other Loan Document or any
instrument evidencing a future advance, and Mortgagor shall otherwise perform,
comply with and abide by each and every one of the stipulations, agreements,
conditions and covenants contained in the Note, this Mortgage or any other Loan
Document.
2. Mortgagor shall pay all taxes, assessments (whether general or
special) and other charges whatsoever levied, assessed, placed or made against
all or any part of the Premises or any interest of Mortgagee therein, or against
the Note, this Mortgage, any Loan Document or any obligation thereunder.
Mortgagor shall make such payment in full (and shall deliver to Mortgagee the
paid receipts) upon the same first becoming due and payable. If Mortgagor shall
fail, neglect or refuse to pay any such taxes, assessments or other charges as
aforesaid, then Mortgagee at its option may pay the same, and any funds so
advanced by Mortgagee shall bear interest, shall be paid and shall be secured as
provided in paragraph 14.
3. Insurance.
(1) Mortgagor shall maintain property insurance with a reputable and
highly rated insurance company or companies licensed in Florida and reasonably
acceptable to Mortgagee, covering all buildings and improvements now or
hereafter located on the Property and all the Fixtures and all tangible personal
property encumbered by this Mortgage, for an amount not less than their full
insurable value on a replacement cost basis, without contribution or coinsurance
(or with coinsurance and an agreed amount endorsement), for the benefit of
Mortgagor and Mortgagee as their interests may appear, by policies on such
terms, in such form and for such periods as Mortgagee shall require or approve
from time to time, insuring with extended coverage and broad form coverage
against loss or damage by fire, lightning, flood, windstorm, hail, aircraft,
riot, vehicles, explosion, smoke, falling objects, weight of ice or snow or
sleet, collapse, sudden tearing asunder, breakage of glass, freezing,
electricity, sprinkler leakage, water damage, earthquake, vandalism and
malicious mischief, theft, riot attending a strike, civil commotion, war risks
(when and if war risk coverage is available), and when and to the extent
required by Mortgagee, against any other risks. Regardless of the types or
amounts of insurance required and approved by Mortgagee, Mortgagor shall assign
and deliver to Mortgagee all policies of insurance which insure against any loss
or damage to the Premises or any part thereof, as collateral and further
security for the payment
4
<PAGE>
of the Loan, with loss payable to Mortgagee pursuant to a standard mortgagee
clause acceptable to Mortgagee.
(2) If Mortgagor defaults in so insuring the Premises or any part
thereof or in so assigning and delivering the policies, at its option Mortgagee
may effect such insurance from year to year and pay the premiums therefor, and
any such sums advanced by Mortgagee shall bear interest, shall be paid and shall
be secured as provided in paragraph 14.
(3) If Mortgagee receives any money for loss or damage by reason of
such insurance, then Mortgagee at its option may retain such proceeds and apply
them toward the payment of the Loan (in any order of priority Mortgagee may deem
appropriate in its sole discretion), or Mortgagee may disburse them to
Mortgagor, under such safeguards as Mortgagee shall deem appropriate in its sole
discretion, for the reconstruction or restoration or repair of the damaged
Premises, but Mortgagee shall not be obligated to see to the proper application
by Mortgagor of any such disbursement.
(4) Mortgagor shall obtain and carry general comprehensive liability
insurance with a reputable and highly rated insurance company or companies
licensed in Florida and reasonably acceptable to Mortgagee, which policy shall
name both Mortgagor and Mortgagee as insureds, with initial limits of not less
than One Million Dollars ($1,000,000) as to personal injury or death, and Five
Hundred Thousand Dollars ($500,000) with respect to property damage (or such
greater or different limits which Mortgagee may require from time to time) and
on such terms, in such form and for such periods as Mortgagee shall approve from
time to time.
(5) In the event Mortgagor shall lease in excess of forty percent
(40%) of the Premises, then Mortgagor shall obtain and carry rent insurance in
favor of Mortgagee as loss payee covering against the loss of rents in the event
the improvements on the Property are damaged, in an amount equal to or exceeding
the annual rent roll for the insured improvements.
(6) In the event of a foreclosure of this Mortgage, the purchaser of
the Premises shall succeed to all the rights of Mortgagor in and to all policies
of insurance required under this Mortgage, including any right to unearned
premiums.
(7) Not less than thirty (30) days prior to the expiration date of
each policy required under this Mortgage, Mortgagor shall deliver to Mortgagee a
renewal policy or policies marked "premium paid" or accompanied by other
evidence of payment satisfactory to Mortgagee.
(8) Each policy of insurance required under this Mortgage shall be
non-cancelable without at least thirty (30) days' advance written notice to
Mortgagee.
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<PAGE>
(9) Mortgagee reserves the right to require boiler and
machinery insurance, worker's compensation insurance, sinkhole and wind damage
insurance, and other insurance coverages as Mortgagee may reasonably require.
The policy or policies of insurance shall: (i) be from companies and in
coverage amounts acceptable to Mortgagee; (ii) contain a standard mortgagee
clause in favor of Mortgagor naming Mortgagee as a mortgagee and including a
lender's loss payee clause in such policy, as applicable; and (iii) be evidenced
by original policies or certified copies of policies deposited with Mortgagee,
as Mortgagee may elect, to be held by Mortgagee until the Debt shall have been
fully paid and discharged. Mortgagor shall furnish Mortgagee satisfactory
evidence of payment of all premiums required and similar evidence of renewal or
replacement coverage not later than thirty (30) days prior to the date any
coverage will expire.
Each insurance policy or endorsement required herein shall be
written by an insurer having a rating not less than "AXII" Best's Rating
according to the most current edition of Best's Key Rating Guide as determined
at the time of the initial policy and at all times during the term hereof. All
policies shall indicate that notices related to such insurance shall be sent to
Mortgagee at:
SouthTrust Bank, National Association
P.O. Box 460
Boynton Beach, Florida 33425-0460
Attention: Susan King
4. At Mortgagee's option following a default hereunder, Mortgagor shall
pay to Mortgagee, together with and in addition to each regular installment of
principal and/or interest payable under the Note, an amount deemed sufficient by
Mortgagee to provide Mortgagee with funds in an escrow account sufficient to pay
the taxes, assessments, insurance premiums and other charges next due at least
thirty (30) days before the date the same are due. In no event shall Mortgagee
be liable for any interest on any such funds held in the escrow account. At
least thirty (30) days before the date the same are due, Mortgagor shall furnish
to Mortgagee an official statement of the amount of said taxes, assessments,
insurance premiums and other charges, and Mortgagee shall pay the same, but only
if sufficient funds remain in the escrow account. In the event of any deficiency
in the escrow account, Mortgagor shall upon notice from Mortgagee immediately
deposit with Mortgagee such additional funds as Mortgagee may deem necessary to
cure the deficiency, in its sole discretion. If Mortgagee elects to pay any such
taxes, assessments, insurance premiums or other charges notwithstanding the
escrow account deficiency, then all sums advanced by Mortgagee in excess of the
escrow account balance shall bear interest, shall be paid and shall be secured
as
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<PAGE>
provided in paragraph 14. An official receipt for such sums shall be conclusive
evidence of Mortgagees payment and of the validity of the tax, assessment,
insurance premium or other charge so paid. In the event of any default under the
Note or this Mortgage or any other Loan Document, Mortgagee at its option may
apply any or all funds in the escrow account against the Loan or any other sums
secured by this Mortgage, in any order of priority Mortgagee may deem
appropriate in its sole discretion. At the time of any permitted transfer of the
title to all of the Premises then encumbered by this Mortgage, the balance in
the escrow account shall inure to the benefit of such transferee without any
specific assignment of such funds. Upon payment in full of the Loan and all
other sums secured by this Mortgage, the funds remaining in the escrow account
(if any) shall be paid over to the record owner of the Premises encumbered by
this Mortgage as of the date of such full payment.
5. Without the prior written consent of Mortgagee, which Mortgagee may
grant or withhold in its reasonable discretion, no building or other
improvements covered by the lien of this Mortgage shall be removed, demolished
or materially altered or enlarged (except as required in the event of fire,
other casualty or condemnation). Notwithstanding the foregoing, Mortgagor shall
have the right to remove and dispose of, free from the lien of this Mortgage,
such Fixtures as from time to time may become worn out or obsolete, provided
that, simultaneously with or prior to such removal, Mortgagor shall have
replaced any such Fixtures with new Fixtures (of at least the same quality as
that of the replaced Fixtures when it was new) which shall be free from any
title retention or other security agreement or other encumbrance, and, by such
removal and replacement, Mortgagor shall be deemed to have subjected such new
Fixtures to the lien of this Mortgage. Without the prior written consent of
Mortgagee, which Mortgagee may grant or withhold in its sole discretion,
Mortgagor shall not undertake any development of the Property or any adjoining
land owned or controlled by Mortgagor, nor construct any new improvements
thereon, nor initiate or join in or consent to any new (or any change in any
existing) private restrictive covenant, zoning ordinance, master plan, site
plan, easement, or other public or private restrictions limiting or defining the
uses which may be made of the Property, said adjoining land or any part thereof.
Mortgagor shall complete and pay for any permitted development and/or
improvements undertaken on the Property within a reasonable time after
commencing the same.
6. Mortgagor shall do everything necessary to maintain the Premises in
good condition and repair, shall operate the Premises in a first-class manner,
shall not commit or suffer any waste, impairment, abandonment or deterioration
of the Premises, shall promptly pay all utility fees for services provided to
the Premises, and shall comply with (or cause compliance with) all applicable
restrictive covenants and all statutes, ordinances and requirements of any
governmental authorities having jurisdiction over the Premises or the use
thereof. In the event of any fire or other casualty loss or damage to all or any
part of the Premises, Mortgagor shall notify Mortgagee within forty-eight (48)
hours of such occurrence. Mortgagor shall promptly repair, restore, replace or
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rebuild any part of the Premises which may be damaged or destroyed by any
casualty whatsoever or which may be affected by any condemnation, alteration of
grade, or other public or quasi-public taking or injury. If Mortgagor shall
fail, neglect or refuse to repair or maintain the Premises as aforesaid, then
Mortgagee may at its option undertake such repairs or maintenance, and any funds
advanced therefor by Mortgagee shall bear interest, shall be paid and shall be
secured as provided in paragraph 14.
7. As further security for the repayment of the Loan, Mortgagor hereby
assigns and transfers to Mortgagee all rents, income, issues and profits of the
Premises and all right, title and interest of Mortgagor in and under all leases
and tenancies and occupancy agreements of any nature whatsoever (and any
extensions and renewals thereof) now or hereafter affecting the Premises (the
"Leases"). Mortgagor hereby empowers Mortgagee, its agents or attorneys, to
demand, collect, sue for, receive, settle, compromise and give acquittances for
all of the rents that may become due under the Leases and to avail itself of and
pursue all remedies for the enforcement of the Leases and Mortgagor's rights
thereunder that Mortgagor could have pursued but for this assignment. Mortgagee
is hereby vested with full power and authority to use all measures, legal and
equitable, deemed necessary or proper by Mortgagee to enforce this assignment,
to collect the rents so assigned, and/or to cure any default and perform any
covenant of Mortgagor as the landlord under any Leases, including without
limitation the right to enter upon all or any part of the Premises and to take
possession thereof to the extent necessary to exercise such powers. Mortgagee
shall have the right (but not the obligation) to advance any sums necessary to
exercise such powers, which sums shall bear interest, shall be paid and shall be
secured as provided in paragraph 14. Mortgagor hereby empowers Mortgagee to use
and apply all such rents and other income of the Premises to the payment of the
Loan and all interest thereon and any other indebtedness or liability of
Mortgagor to Mortgagee, and to the payment of the costs of managing and
operating the Premises, including without limitation: (i) taxes, special
assessments, insurance premiums, damage claims, and the costs of maintaining,
repairing, rebuilding, restoring and making rentable any or all of the Premises;
(ii)all sums advanced by Mortgagee (with interest thereon) for the payment of
such costs or for any other reason permitted by this Mortgage or any other Loan
Document; and (iii) all costs, expenses and attorney's fees incurred by
Mortgagee in connection with the enforcement of this Mortgage and/or any Lease;
all in such order of priority as Mortgagee may deem appropriate in its sole
discretion.
(1) Mortgagee shall not be obliged to press any of the rights or
claims of Mortgagor assigned hereby, nor to perform or carry out any of the
obligations of the landlord under any Lease, and Mortgagee assumes no duty or
liability whatsoever in connection with or arising from or growing out of the
covenants of Mortgagor in any Lease. This Mortgage shall not operate to make
Mortgagee responsible for the control, care, management or repair of all or any
part of the Premises, nor shall it operate to make Mortgagee liable for (i) the
performance or carrying out of any of the terms or conditions of any Lease, (ii)
any waste of the Premises by any tenant or any other person,
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(iii) any dangerous or defective condition of the Premises, nor (iv) any
negligence in the management, upkeep, repair or control of all or any part of
the Premises resulting in loss or injury or death to any tenant, licensee,
employee or stranger. Mortgagor hereby indemnifies and holds Mortgagee harmless
against any and all liability, loss, claim, damage, costs and attorney's fees
whatsoever which Mortgagee may or might incur under any Lease or by reason of
this assignment, and against any and all claims or demands whatsoever (and any
related costs and attorney's fees) which may be asserted against Mortgagee by
reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any Lease.
Nothing herein contained shall be construed as constituting Mortgagee a trustee
or mortgagee in possession.
(2) Mortgagor shall promptly deliver to Mortgagee a true, correct
and complete copy of each Lease as and when Mortgagor shall enter into the same,
and Mortgagor shall procure and deliver to Mortgagee estoppel letters or
certificates from each tenant, in form and substance satisfactory to Mortgagee,
within thirty (30) days after Mortgagee's request therefor. Mortgagor hereby
represents and warrants to Mortgagee (and shall be deemed to have represented
and warranted to Mortgagee upon and as of the date of delivering to Mortgagee a
copy of each Lease), except as previously or concurrently disclosed to and
approved by Mortgagee in writing: (i) that each such copy delivered (or to be
delivered) to Mortgagee is true, correct and complete; (ii) that Mortgagor is
the sole owner of the entire landlord's interest in each Lease and has not
previously assigned or pledged any Lease or any interest therein to any person
other than Mortgagee; (iii) that all the Leases are in full force and effect and
have not been altered, modified or amended in any manner whatsoever; (iv) that
each tenant thereunder has accepted that tenant's respective premises and is
paying rent on a current basis; (v) that no default exists on the part of such
tenants or on the part of Mortgagor as landlord in their respective performances
of the terms, covenants, provisions and agreements contained in the Leases; (vi)
that no rent has been paid by any of the tenants for more than two (2) months in
advance; (vii) that Mortgagor is not indebted to any tenant in any manner
whatsoever so as to give rise to any right of set-off against or reduction of
the rents payable under any Lease; and (viii) that no payments of rents to
accrue under any Lease has been or will be waived, released, reduced, discounted
or otherwise discharged or compromised by Mortgagor directly or indirectly,
whether by assuming any tenant's obligations with respect to other premises or
otherwise.
(3) Mortgagor covenants and agrees with Mortgagee: (i) that each
Lease shall remain in full force and effect irrespective of any merger of the
interests of the landlord and tenant thereunder; (ii) that without the prior
written consent of Mortgagee, which consent shall not be unreasonably withheld,
Mortgagor shall not terminate, modify or amend any Lease or any guaranty
thereof, nor grant any concessions in connection therewith (either orally or in
writing) nor accept any surrender or cancellation thereof, and that any
attempted termination, modification,
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amendment, concession, surrender or cancellation without such written consent
shall be null and void; (iii) that Mortgagor shall not collect more than two (2)
months' rent, income and/or profits arising or accruing under any Lease in
advance of the due date for the same, nor discount any future accruing rents,
nor suffer or permit to arise in favor of any tenant any release of liability or
any right to withhold payment of rent, nor take any action or permit any
omission or exercise any right of election which would in any way impair the
value of any Lease or diminish any tenant's liability thereunder or have the
effect of terminating or shortening the stated term of any Lease; (iv) that
Mortgagor shall perform all of Mortgagor's covenants and agreements as landlord
under each Lease and shall promptly send Mortgagee copies of any notice of
alleged default on the part of Mortgagor as landlord received from any tenant
thereunder; (v) that if requested by Mortgagee, Mortgagor shall expeditiously
and in good faith enforce the Leases and all remedies available to Mortgagor in
case of default by the tenants thereunder; and (vi) that Mortgagor shall not
execute any other assignment or pledge of any Lease or any interest therein or
any of the rents thereunder, nor consent to any tenant's assignment of any Lease
or any subletting thereunder, nor request, accept, consent to or agree to any
subordination of any Lease to any mortgage other than this Mortgage now or
hereafter affecting the Premises.
(4) Although Mortgagor and Mortgagee intend that this instrument
shall be a present assignment, it is expressly understood and agreed that so
long as no default shall exist under the Note, this Mortgage or any other Loan
Document, Mortgagor may collect assigned rents and profits for not more than two
(2) months in advance of the accrual thereof, but upon the occurrence of any
such default, or at any time during its continuance, all rights of Mortgagor to
collect or receive rents or profits shall wholly terminate upon notice from
Mortgagee. The tenants under all the Leases are hereby irrevocably authorized to
rely upon and comply with (and shall be fully protected in so doing) any notice
or demand by Mortgagee for the payment to Mortgagee of any rental or other sums
which may be or thereafter become due under the Leases, or for the performance
of any of the tenants' undertakings under the Leases, and none of them shall
have any right or duty to inquire as to whether any default hereunder or under
the Note or any Loan Document shall have actually occurred or is then existing.
8. Mortgagor shall not grant any other lien or mortgage on all or any
part of the Premises or any interest therein, nor make any further assignment of
the leases and rentals of the Premises, without the prior written consent of
Mortgagee, which Mortgagee may grant or withhold in its sole discretion; any
such unpermitted lien or mortgage or assignment by Mortgagor shall entitle
Mortgagee to accelerate the maturity of the Loan and foreclose this Mortgage.
Any such other lien or mortgage or assignment shall be junior to this Mortgage
and to all permitted tenancies now or hereafter affecting the Premises or any
portion thereof and shall be subject to all renewals, extensions, modifications,
releases, interest rate increases, future advances, changes or exchanges
permitted by this Mortgage, all without the joinder or consent of such junior
lienholder or mortgagee
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or assignee and without any obligation on Mortgagee's part to give notice of any
kind thereto. Mortgagor shall maintain in good standing any other mortgage or
encumbrance to secure debt affecting any part of the Premises from time to time
and shall not commit or permit or suffer to occur any default thereunder, nor
shall Mortgagor accept any future advance under or modify the terms of any such
mortgage or encumbrance which may then be superior to the lien of this Mortgage.
Except for encumbrances permitted by Mortgagee, Mortgagor shall not commit or
permit or suffer to occur any act or omission whereby any of the security
represented by this Mortgage shall be impaired or threatened, or whereby any of
the Premises or any interest therein shall become subject to any attachment,
judgment, lien, charge or other encumbrance whatsoever, and Mortgagor shall
immediately cause any such attachment, judgment, lien, charge or other
encumbrance to be discharged or otherwise bonded or transferred to other
security. Mortgagor shall not directly or indirectly do anything or take any
action which might prejudice any of the right, title or interest of Mortgagee in
or to any of the Premises or impose or create any direct or indirect obligation
or liability on the part of Mortgagee with respect to any of the Premises.
9. Mortgagor shall not cause or permit or suffer to occur any of the
following events without the prior written consent of Mortgagee, which except as
expressly set forth Mortgagee may grant or withhold in its sole discretion, and
if any of the same shall occur without such consent, then Mortgagee shall have
the right to accelerate the maturity of the Loan and foreclose this Mortgage:
(a) if all or any portion of the legal or equitable title to all or any portion
of the Premises or any interest therein shall in any manner whatsoever be sold,
conveyed or transferred, either voluntarily or by operation of law; (b) if
Mortgagor shall enter into any lease or other arrangement with any third party
regarding the use or possession by such third party of all or in excess of fifty
percent (50%) of the Premises (regardless of whether such lease or arrangement
includes an option to purchase); (c) the transfer, assignment, sale, pledge or
hypothecation of the stock of the Mortgagor whereby Marc A. Puleo does not own
and control at least fifteen percent (15%) of the stock of the Mortgagor; or (d)
if Mortgagor shall pay, repay or distribute any funds to any guarantor of the
Loan or any other person directly or indirectly related to Mortgagor (such as a
stockholder, partner or beneficiary).
10. From time to time and on demand, Mortgagor shall execute and
deliver to Mortgagee (and pay the costs of preparing and recording) any further
instruments required by Mortgagee to reaffirm, correct or perfect the evidence
of the obligations secured hereby and the security interest of Mortgagee in all
the property intended to be mortgaged hereby, including but not limited to
mortgages, security agreements, financing statements, assignments and renewal
and substitution notes.
11. Upon request made either personally or by mail, Mortgagor shall
certify, by a duly acknowledged writing, to Mortgagee or to any proposed
assignee of this Mortgage, the
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amount of principal and interest and other sums then owing on the Loan and
whether any offsets or defenses exist against the payment of the Loan. Mortgagor
shall provide such estoppel certificate within five (5) days in the case of a
personal request and within ten (10) days after Mortgagor's receipt of a mailed
request. Mortgagor shall furnish to Mortgagee, within thirty (30) days after the
close of each fiscal year of Mortgagor, a financial statement of Mortgagor and
of the income and expenses of the Premises (which shall include financial
information regarding (i) the conduct of any business on the Premises, (ii) the
operation of the Premises, and (iii) the leasing of the Premises), in such
reasonable detail as Mortgagee may request, accompanied by an original
certification signed by a certified public accountant stating whether the
financial statements have been audited, reviewed or compiled. Compiled
statements shall be signed by the president, in the case of a corporation, by a
general partner, in the case of a general or limited partnership, by the
trustee, in the case of a trust, or, in the case of any other business entity,
by a duly appointed officer or representative satisfactory to Mortgagee. On
demand, Mortgagor shall provide to Mortgagee executed counterparts of any such
leases and convenient facilities for the audit and verification of any such
statement. Mortgagor shall also promptly furnish to Mortgagee any financial or
other information regarding Mortgagor or the Premises required by any Loan
Document or which Mortgagee may reasonably request from time to time. Mortgagor
shall also deliver to Mortgagee complete copies of all of its federal income tax
returns, accompanied by all forms and supporting schedules, simultaneously with
the filing thereof by Mortgagor. During any period (following notice and a
period of thirty (30) days to cure same) that Mortgagor fails to comply with the
provisions of this paragraph, or any guarantor of the Loan fails to deliver any
financial documents required by the terms of the guaranty executed by such
guarantor in favor of Mortgagee in connection with the Loan, and regardless of
whether Mortgagee declares this Mortgage to be in default, the Note, without
notice to Mortgagor, shall automatically bear interest at an augmented rate
equal to four percent (4%) above the interest accrual rate which would otherwise
then be in effect under the Note.
12. Whenever Mortgagor or Mortgagee are obliged to give notice to the
other, such notice shall be in writing and shall be given personally or by
prepaid certified mail (return receipt requested), in which latter case notice
shall be deemed effectively made when the receipt is signed or when the
attempted initial delivery is refused or cannot be made because of a change of
address of which the sending party has not been notified. Any notice to
Mortgagee shall be addressed to the attention of a senior vice-president or
higher officer. Until the designated addresses are changed by notice given in
accordance with this paragraph, notice to either party shall be sent to the
respective address set forth on the first page of this Mortgage.
13. At Mortgagees option, all of the principal and interest and other
sums secured by this Mortgage shall immediately or at any time thereafter become
due and payable without notice to any Obligor, and Mortgagee shall immediately
have all the rights accorded Mortgagee by law and hereunder to foreclose this
Mortgage or otherwise to enforce this Mortgage, the Note and any other
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Loan Document, upon the occurrence of any of the following defaults: (a) failure
to pay any sum due under the Note and the expiration of the grace period (if
any) provided in the Note for such payment; or (b) failure to repay any sum paid
or advanced by Mortgagee under the terms of this Mortgage or any other Loan
Document (with interest thereon), as provided in paragraph 14; or (c) failure to
pay any tax, assessment, utility charge, or other charge against the Premises or
any part thereof as and when required by this Mortgage; or (d) actual or
threatened waste, impairment, abandonment, deterioration, removal, demolition,
material alteration or enlargement of any building or other improvements on the
Property, or the commencement of construction of any new building or other
improvements on any part of the Property, in either case without the prior
written consent of Mortgagee, which Mortgagee may grant or withhold in its sole
discretion; or (e) failure to obtain, assign, deliver or keep in force the
policies of insurance required by this Mortgage or any other Loan Document; or
(f) Mortgagor's failure or refusal (following notice and a period of thirty (30)
days to cure same) to certify, within the time required by this Mortgage, the
amount due under the Loan and whether any offsets or defenses exist against
payment of the Loan; or (g) Mortgagor's filing for record, without the prior
written consent of Mortgagee, which Mortgagee may grant or withhold in its sole
discretion, of any notice limiting the maximum principal amount that may be
secured by this Mortgage to an amount less than the limit set forth in the
future advance clause on the first page of this Mortgage; or (h) any sale,
transfer (whether voluntary or by operation of law), pledge, hypothecation or
further encumbrancing of all or any part of the Premises or any interest therein
or any interest in Mortgagor, or the additional assignment of all or any part of
the rents, income or profits arising therefrom, in either case without the prior
written consent of Mortgagee, which Mortgagee may grant or withhold in its sole
discretion; or (i) Mortgagor's failure to remove of record (whether by payment
or transferring to bond), any involuntary lien on the Premises or any part
thereof within twenty (20) days after its filing, or the filing of any suit
against the Premises upon any claim or lien other than this Mortgage (whether
superior or inferior to this Mortgage); or (j) Mortgagor's failure to comply
within ten (10) days with a requirement, order or notice of violation of a law,
ordinance, or regulation issued or promulgated by any political subdivision or
governmental department claiming jurisdiction over the Premises or any operation
conducted on the Property (or, if such order or notice provides a time period
for compliance, Mortgagor's failure to comply within such period), or, in the
case of a curable noncompliance requiring longer than the applicable time period
for its cure, Mortgagor's failure to commence to comply with said order or
notice within said period or failure thereafter to pursue such cure diligently
to completion; or (k) the issuance of any order by the State of Florida, or any
subdivision, instrumentality, administrative board or department thereof,
declaring unlawful or suspending any operation conducted on the Premises; or (l)
the filing by the United States of America or any instrumentality thereof in any
court of competent jurisdiction of any notice of intention to acquire under the
power of eminent domain any estate less than an estate in fee simple in the
entire Property, or the recording by the State of Florida, any instrumentality
thereof or any other person with eminent domain powers, of a notice of taking of
any estate less than an estate in fee simple in the entire Property; or (m) if
any
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representation, warranty, affidavit, certificate or statement made or delivered
to Mortgagee by or on behalf of any Obligor from time to time in connection with
the Loan or this Mortgage or any other Loan Document shall prove false,
incorrect or misleading in any material respect; or (n) sixty (60) days
following the death or mental or physical incapacity of any Obligor who is a
natural person unless the Mortgagee shall have consented to a substitute
Obligor, which determination shall be in the Mortgagor's sole discretion, or the
dissolution or merger or consolidation or termination of existence of any other
Obligor, or the failure or cessation or liquidation of the business of any
Obligor, or if the person(s) controlling any Obligor which is a business entity
shall take any action authorizing or leading to the same; or (o) any default,
following any applicable cure period, by any Obligor in the payment of any
indebtedness for borrowed money (whether direct or contingent and whether
matured or accelerated) to Mortgagee or to any person whomsoever, or if any
Obligor shall become insolvent or unable to pay such Obligor's debts as they
become due; or (p) the disposition or transfer or exchange of all or
substantially all of any Obligor's assets for less than fair market value, or
the issuance of any levy, attachment, charging order, garnishment or other
process against any property of any Obligor, or the filing of any lien against
any such property (and the expiration of any grace period provided in any Loan
Document for the discharge of such lien); or (q) if any Obligor shall make an
assignment for the benefit of creditors, file a petition in bankruptcy, apply to
or petition any tribunal for the appointment of a custodian, receiver,
intervenor or trustee for such Obligor or a substantial part of such Obligor's
assets, or if any Obligor shall commence any proceeding under any bankruptcy,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or if any Obligor shall by
act or omission approve, consent to or acquiesce in the filing of any such
petition or application against such Obligor or the appointment of any such
custodian, receiver, intervenor or trustee or the commencement of any such
proceeding against such Obligor or the entry of an order for relief with respect
to such Obligor, or if any such petition or application shall have been filed or
proceeding commenced against any Obligor which remains undismissed for thirty
(30) days or more or in which an order for relief is entered, or if any Obligor
shall suffer any such appointment of a custodian, receiver, intervenor or
trustee to continue undischarged for thirty (30) days or more; or (r) if any
Obligor shall have concealed, transferred, removed, or permitted to be concealed
or transferred or removed, any part of such Obligor's property with intent to
hinder, delay or defraud any of such Obligor's creditors, or if any Obligor
shall have made or suffered a transfer of any of such Obligor's properties which
may be invalid under any bankruptcy, fraudulent conveyance, preference or
similar law, or if any Obligor shall have made any transfer of such Obligor's
properties to or for the benefit of any creditor at a time when other creditors
similarly situated have not been paid; or (s) the failure to obtain any permit,
license, approval or consent from, or to make any filing with, any governmental
authority (or the lapse or revocation or rescission thereof once obtained or
made) which is necessary in connection with the Loan, any Loan Document or the
enforcement thereof, or if it shall become unlawful for Mortgagee to make or
maintain the Loan or for any Obligor to perform any of such Obligor's
obligations under any Loan Document; or (t) the existence of any uncured default
under
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any other mortgage or encumbrance affecting any part of the Premises then
encumbered by this Mortgage, or Mortgagor's acceptance of any future advance
under, or modification of the terms of, any such other mortgage or encumbrance
which may then be superior to the lien of this Mortgage; or (u) Mortgagee's
election to accelerate the maturity of the Loan under the provisions of any
other Loan Document; or (v) if Mortgagor or any other Obligor shall fail to pay,
following any applicable cure period, any indebtedness for borrowed money owing
by Mortgagor or such other Obligor; or (w) if any change or event shall occur
which in Mortgagee's exclusive judgment, acting reasonably, impairs any security
for the Loan, increases Mortgagee's risk in connection with the Loan, or
indicates that any Obligor may be unable to perform such Obligor's obligations
under any Loan Document; or (x) any default, following any applicable cure
period, in the observance or performance of any other covenant or agreement of
any Obligor in this Mortgage (provided, however, with respect to non-monetary
defaults which are not specifically set forth in this Paragraph 13, Mortgagor
shall have a period of ten (10) days following notice of the default prior to
the Mortgagor being in default hereunder) or any other Loan Document, the
occurrence of any other event prohibited by the terms of this Mortgage or any
other Loan Document, following any applicable grace period, or the violation of
any other provision of this Mortgage or any other Loan Document; or (y) any
default, following any applicable cure period, by Marc A. Puleo ("Guarantor")
under any loan facility Guarantor has or may have with Mortgagee; or if Marc
Puleo, M.D. fails to remain actively involved in the senior management of
Mortgagor [and the Mortgagor has not provided a substitute satisfactory to the
Mortgagee within ninety (90) days, as determined in the Mortgagee's sole
discretion]. No consent or waiver expressed or implied by Mortgagee with respect
to any default under this Mortgage shall be construed as a consent or waiver
with respect to any further default of the same or a different nature; and no
consent or waiver shall be deemed or construed to exist by reason of any
curative action initiated by Mortgagee or any other course of conduct or in any
other manner whatsoever except by a writing duly executed by Mortgagee, and then
only for the single occasion to which such writing is addressed. In order to
accelerate the maturity of the Loan because of Mortgagor's failure to pay any
tax, assessment, insurance premium, charge, liability, obligation or encumbrance
upon the Premises as required by this Mortgage, or in order to accelerate
because of any other default, Mortgagee shall not be required to pay the same or
to advance funds to cure the default, notwithstanding Mortgagee's option under
this Mortgage or any other Loan Document to do so; no such payment or advance by
Mortgagee shall be deemed or construed a waiver of Mortgagee's right to
accelerate the maturity of the Loan on account of such failure or other default.
14. In the event of any default in the performance of any of
Mortgagor's covenants or agreements contained in this Mortgage or any other Loan
Document or the violation of any term thereof, Mortgagee shall have the right
(but in no event the obligation) at its option to cure the default or take any
other action Mortgagee deems necessary or desirable to protect its security
(including without limitation the payment of any taxes, assessments, insurance
premiums,
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<PAGE>
charges, liens or encumbrances required of Mortgagor under this Mortgage),
without thereby waiving any rights or remedies otherwise available to Mortgagee.
If Mortgagee shall elect to advance at any time any sum(s) for the protection of
its security or for any other reason permitted or provided by any of the terms
of this Mortgage or any other Loan Document, then such sum(s) shall be deemed
Loan funds, shall be secured by this Mortgage and shall bear interest until paid
at the "Default Rate" provided in the Note commencing on the date they are
advanced by Mortgagee. If advanced by Mortgagee before the (natural or
accelerated) maturity date of the Loan, such sum(s) shall be due and payable by
Mortgagor on such maturity date or ten (10) days after Mortgagor first learns of
the advance, whichever is earlier, but if advanced after the (natural or
accelerated) maturity date, such sum(s) shall be due and payable immediately.
Mortgagee's lien on the Premises for such advances shall be superior to any
right or title to, interest in, or claim upon all or any portion of the Premises
junior to the lien of this Mortgage. Without the prior written consent of
Mortgagee, which Mortgagee may grant or withhold in its sole discretion,
Mortgagor shall not file for record any notice limiting the maximum principal
amount that may be secured by this Mortgage to an amount less than the limit set
forth in the future advance clause on the first page of this Mortgage.
15. In any action to foreclose this Mortgage, or upon the actual or
threatened waste to any part of the Premises, Mortgagee shall have the right to
apply without notice for the appointment of a receiver of the Premises and the
rents and profits thereof, and Mortgagee shall be entitled to the appointment of
such a receiver as a matter of right, without consideration of the value of the
Premises as security for the amounts due Mortgagee or the solvency of any
Obligor. To the extent permitted by law, Mortgagor hereby waives any right to
object to the appointment of a receiver as aforesaid and expressly consents that
such appointment shall be made as an admitted equity and as a matter of absolute
right to Mortgagee.
16. The rights and remedies of Mortgagee under this Mortgage or any
other Loan Document or applicable law shall be cumulative and concurrent and may
be pursued separately, successively or together against any Obligor(s), the
Premises, any other collateral for the Loan, or any one or more of the
foregoing, all at the sole discretion of Mortgagee, and may be exercised as
often as occasion therefor shall arise, all to the maximum extent permitted by
law. Mortgagee's pursuit of any remedy shall not preclude pursuit of any other
remedy until Mortgagee shall have recovered all sums due Mortgagee, together
with the appropriate interest thereon and all costs of collection, including
attorney's fees and appellate attorney's fees, with interest thereon. Neither
Mortgagor nor anyone claiming through or under Mortgagor shall set up, claim or
seek to take advantage of any appraisement, valuation, stay, moratorium,
extension, exemption or redemption laws, now or hereafter in force, in order to
prevent or hinder the enforcement or foreclosure of this Mortgage or the sale of
the Premises. To the maximum extent permitted by law, the Obligors, for
themselves and all who may claim through or under any of them, hereby severally
waive the benefit of all such laws and waive any and all rights to have the
Premises or any other collateral for the Loan
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marshaled upon any foreclosure of this Mortgage or any other instrument securing
the Loan, and hereby severally agree that the Premises and any such other
collateral may be sold as an entirety or in such parcels, in such manner and in
such order as Mortgagee in its sole discretion may elect. In the event that
Mortgagor should seek protection under the U.S. Bankruptcy Code, or should
Mortgagor be adjudicated a Debtor thereunder, Mortgagor hereby consents to
relief from the automatic stay pursuant to 11 USC 362(d) to allow Mortgagee to
proceed to, and obtain, a final judgment of foreclosure of this Mortgage, to
complete a foreclosure sale pursuant thereto, to cause the issuance of a
certificate of title pursuant thereto, and to otherwise take all such actions as
Mortgagee may elect in its sole discretion in pursuance of the other rights and
remedies available to Mortgagee in the case of a default under this Mortgage.
Mortgagor hereby waives any protection under 11 U.S.C. 362(a).
17. Mortgagor shall pay any and all costs, expenses and attorney's fees
incurred by Mortgagee (regardless of whether in connection with any action,
proceeding or appeal) to sustain the lien of this Mortgage or its priority, to
protect or enforce any of Mortgagee's rights under this Mortgage or under any
other Loan Document, to recover any indebtedness secured hereby, to contest or
collect any award or payment in connection with the taking or condemnation of
all or any part of the Premises, or for any title examination or abstract
preparation or title insurance policy relating to the Property, and all such
sums shall bear interest, shall be paid and shall be secured as provided in
paragraph 14.
18. Notwithstanding any taking by eminent domain, any alteration of the
grade of any street, or any other injury to or decrease in value of the Premises
or any portion thereof caused by any public or quasi-public authority or person,
Mortgagor shall continue to pay interest on the Loan and all other sum(s)
secured hereby until Mortgagee shall have actually received the award or payment
for such taking or alteration or injury and shall have applied the same against
the Loan. Mortgagee at its option may retain any such award or payment and apply
all or part of the same toward payment of the Loan (in any order of priority
Mortgagee may deem appropriate in its sole discretion), or Mortgagee may
disburse all or part of such award or payment to Mortgagor for the purpose of
altering, restoring or rebuilding any part of the Premises which may have been
altered, damaged or destroyed as a result of any such taking or alteration or
injury, or for any other purpose or object satisfactory to Mortgagee in its sole
discretion. If all of the Property is so taken but the award or payment therefor
received by Mortgagee is insufficient to pay in full all sums then secured by
this Mortgage, then at Mortgagee's option the unpaid balance shall be
immediately due and payable.
19. If at any time the State of Florida shall determine that the
intangible tax paid in connection with this Mortgage is insufficient or that the
documentary stamps affixed hereto are insufficient, and that additional
intangible tax should be paid or that additional stamps should be
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affixed, then Mortgagor shall pay for the same, together with any interest or
penalties imposed in connection with such determination, and Mortgagor hereby
agrees to indemnify and hold Mortgagee harmless therefrom. If any such sums
shall be advanced by Mortgagee, they shall bear interest, shall be paid and
shall be secured as provided in paragraph 14.
20. If any federal, state or local law shall hereafter be enacted which
(a) for the purpose of ad valorem taxation shall deduct the amount of any lien
from the value of real property, or (b) shall impose on Mortgagee the payment of
all or any part of the taxes or assessments or charges required to be paid
hereunder by Mortgagor, or (c) shall change in any way the laws for the taxation
of mortgages or debts secured thereby or Mortgagee's interest in the Premises,
or shall change the manner of collecting such taxes, so as to affect this
Mortgage or the debt secured hereby or the holder thereof, then upon demand
Mortgagor shall pay such taxes or assessments or charges imposed on Mortgagee or
shall reimburse Mortgagee therefor; provided, however, that if in the opinion of
Mortgagee's counsel the requirement that Mortgagor make such payments might be
unlawful or might result in the imposition of interest in excess of the maximum
lawful rate, then Mortgagee shall have the right to declare the Loan and all
other sums secured hereby to be due and payable thirty (30) days after notice
thereof to Mortgagor.
21. This Mortgage is a "security agreement" and creates a "security
interest" in favor of Mortgagee as a "secured party" with respect to all
property described on the UCC-1 attached hereto and made a part hereof as
Exhibit B. Upon default under the Note, this Mortgage or any other Loan
Document, Mortgagee may at its option pursue any and all rights and remedies
available to a secured party with respect to any portion of the Premises so
covered by the Uniform Commercial Code, or Mortgagee may at its option proceed
as to all or any part of the Premises in accordance with Mortgagee's rights and
remedies in respect of real property. Mortgagor and Mortgagee agree that the
mention of any portion of the Premises in a financing statement filed in the
records normally pertaining to personal property shall never derogate from or
impair in any way their declared intention that all items of collateral
described in this Mortgage are part of the real estate encumbered hereby to the
fullest extent permitted by law, regardless of whether any such item is
physically attached to the improvements or whether serial numbers are used for
the better identification of certain items of Fixtures. Specifically, the
mention in any such financing statement of (a) the rights in or the proceeds of
any insurance policy, (b) any award in eminent domain proceedings for a taking
or for loss of value, (c) Mortgagor's interest as lessor in any present or
future lease or right to income growing out of the use or occupancy of the
Property or improvements thereto, whether pursuant to lease or otherwise, or (d)
any other item included in the definition of the Premises, shall never be
construed to alter any of the rights of Mortgagee as determined by this Mortgage
or to impugn the priority of Mortgagee's lien and security interest with respect
to the Premises; such mention in a financing statement is declared to be for the
protection of Mortgagee in the event any court shall hold that notice of
Mortgagee's priority of interest with respect to any
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such portion of the Premises must be filed in the Uniform Commercial Code
records in order to be effective against or to take priority over any particular
class of persons, including but not limited to the federal government and any
subdivision or instrumentality of the federal government. This Mortgage or a
carbon, photographic copy or other reproduction hereof or of any financing
statement shall be sufficient as a financing statement.
22. Any payment made in accordance with the terms of the Note or this
Mortgage by any person at any time liable for the payment of the whole or any
part of the sums now or hereafter secured by this Mortgage, by any subsequent
owner of the Premises, or by any other person whose interest in the Premises
might be prejudiced in the event of a failure to make such payment (or by any
partner, stockholder, officer or director of any such person), shall be deemed,
as between Mortgagee and all such persons who at any time may be so liable or
may have an interest in the Premises, to have been made on behalf of all such
persons. Mortgagee's acceptance of any payment which is less than full payment
of all amounts then due and payable to Mortgagee, even if made by one other than
the person liable therefor, shall not constitute a waiver of any rights or
remedies of Mortgagee.
23. Mortgagor consents and agrees that, at any time and from time to
time without notice, (a) Mortgagee and the owner(s) of any collateral then
securing the Loan may agree to release, increase, change, substitute or exchange
all or any part of such collateral, and (b) Mortgagee and any person(s) then
primarily liable for the Loan may agree to renew, extend or compromise the Loan
in whole or in part or to modify the terms of the Loan in any respect
whatsoever. Mortgagor agrees that no such release, increase, change,
substitution, exchange, renewal, extension, compromise or modification, no sale
of the Premises or any part thereof, no forbearance on the part of Mortgagee,
nor any other indulgence given by Mortgagee (whether with or without
consideration) shall relieve or diminish in any manner the liability of any
Obligor, nor adversely affect the priority of this Mortgage, nor limit or
prejudice or impair any right or remedy of Mortgagee. All Obligors and all those
claiming by, through or under any of them hereby jointly and severally waive any
and all right to prior notice of, and any and all defenses or claims based upon,
any such release, increase, change, substitution, exchange, renewal, extension,
compromise, modification, sale, forbearance or indulgence.
24. This Mortgage shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida, excepting only that federal
law shall govern to the extent it may permit Mortgagee to charge, from time to
time, interest on the Loan at a rate higher than may be permissible under
applicable Florida law.
25. In no event shall any agreed to or actual exaction charged,
reserved or taken as an advance or forbearance by Mortgagee as consideration for
the Loan exceed the limits (if any)
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imposed or provided by the law applicable from time to time to the Loan for the
use or detention of money or for forbearance in seeking its collection;
Mortgagee hereby waives any right to demand any such excess. In the event that
the interest provisions of the Note or any exactions provided for in the Note,
this Mortgage or any other Loan Document shall result at any time or for any
reason in an effective rate of interest that transcends the maximum interest
rate permitted by applicable law (if any), then without further agreement or
notice the obligation to be fulfilled shall automatically be reduced to such
limit and all sums received by Mortgagee in excess of those lawfully collectible
as interest shall be applied against the principal of the Loan immediately upon
Mortgagee's receipt thereof, with the same force and effect as though the payor
had specifically designated such extra sums to be so applied to principal and
Mortgagee had agreed to accept such extra payment(s) as a premium-free
prepayment or prepayments.
26. Any provision of this Mortgage which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction only, be ineffective only to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
27. Mortgagee and any persons authorized by Mortgagee shall have the
right, from time to time at the discretion of Mortgagee, following reasonable
notice to Mortgagor, to enter and inspect the Premises. At any time after
default under the terms of the Note, this Mortgage or any other Loan Document,
if any of the buildings, improvements or Fixtures now or hereafter located on or
in the Property shall be unprotected or unguarded, or if any improved portion of
the Property shall be allowed to remain vacant or deserted, then at its option
Mortgagee may employ watchmen for the Property and expend any monies deemed
necessary by Mortgagee to protect the Property and the buildings, improvements
and Fixtures thereon from waste, vandalism and other hazards, depredation or
injury, and any sums expended by Mortgagee for such purpose shall bear interest,
shall be paid and shall be secured as provided in paragraph 14.
28. Mortgagor agrees that the management of the Premises shall be
conducted at all times by Mortgagor or by such other professional property
management organization as Mortgagee shall approve in writing, which Mortgagee
may grant or withhold in its reasonable discretion. At any time after default
under the Note, this Mortgage or any other Loan Document, if Mortgagee shall
determine in its sole discretion that the management or maintenance of the
Premises is unsatisfactory, then Mortgagor shall employ as managing agent of the
Premises such person(s) as Mortgagee may designate from time to time, at
Mortgagor's sole expense and for the duration of the default. Any sums advanced
by Mortgagee in connection with such managing agent shall bear interest, shall
be paid and shall be secured as provided in paragraph 14.
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29. Mortgagor shall deliver to Mortgagee or its designated agent any
abstract or abstracts of title now owned or hereafter acquired by Mortgagee
covering the Property as further security for the Loan, which abstract(s) shall
remain in the possession of Mortgagee or its agent at all times until all sums
secured by this Mortgage are paid in full. In the event of a foreclosure of this
Mortgage or other transfer of title to the Premises, all right, title and
interest of Mortgagor in and to such abstract(s) of title shall pass to the
foreclosure purchaser or other transferee.
30. In the event Mortgagee shall be named as a party to any lawsuit
brought at any time involving any Obligor or with respect to the Premises, this
Mortgage or the Loan, or if Mortgagor shall incur any costs or expenses in
connection with any lawsuit involving any Obligor or the Premises in which
Mortgagee is not a party (i.e., if Mortgagee is called upon to produce
documentation, information, or to provide testimony), then regardless of the
type or merits of such lawsuit, Mortgagor shall defend Mortgagee and indemnify
and hold Mortgagee fully harmless from, and shall reimburse Mortgagee for any
and all claims, demands, damages, liabilities, judgments, losses, costs,
expenses and attorney's fees incurred by Mortgagee and arising out of or
resulting from any such lawsuit or any appeal in connection therewith, including
all internal costs for time incurred by Mortgagee's officers and other employees
calculated at Mortgagee's standard rates (which are available to Mortgagor upon
Mortgagor's request). This provision shall survive the satisfaction or other
termination of this Mortgage.
31. Mortgagee is hereby subrogated (a) to the lien(s) of each and every
mortgage, lien or other encumbrance on all or any part of the Premises which is
fully or partially paid or satisfied out of the proceeds of the Loan, and (b) to
the rights of the owner(s) and holder(s) of any such mortgage, lien or other
encumbrance. The respective rights under and priorities of all such mortgages,
liens or other encumbrances shall be preserved and shall pass to and be held by
Mortgagee as security for the Loan, to the same extent as if they had been duly
assigned by separate instrument of assignment and notwithstanding that the same
may have been canceled and satisfied of record.
32. In order to induce Mortgagee to make the Loan, Mortgagor represents
and warrants that: (a) except as previously or concurrently disclosed in writing
to Mortgagee, there are no actions, suits or proceedings pending or threatened
against or affecting any Obligor or any portion of the Premises, or involving
the validity or enforceability of this Mortgage or the priority of its lien,
before any court of law or equity or any tribunal, administrative board or
governmental authority, and no Obligor is in default under any other
indebtedness or with respect to any order, writ, injunction, decree, judgment or
demand of any court or any governmental authority; (b) the execution and
delivery of the Note, this Mortgage and all other Loan Documents do not and
shall not (i) violate any provisions of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to any Obligor,
nor (ii) result in a breach of, or constitute a default
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under, any indenture, bond, mortgage, lease, instrument, credit agreement,
undertaking, contract or other agreement to which any Obligor is a party or by
which any of them or their respective properties may be bound or affected; (c)
the Note, this Mortgage and all other Loan Documents constitute valid and
binding obligations of the Obligor(s) executing the same, enforceable against
such Obligor(s) in accordance with their respective terms; (d) all financial
statements of the Obligors previously delivered to Mortgagee have been prepared
in accordance with generally accepted accounting principles consistently applied
and fairly present the correct respective financial conditions of the Obligors
as of their respective dates, and the foregoing shall be true with respect to
all financial statements of the Obligors delivered to Mortgagee hereafter; (e)
there is no fact that the Obligors have not disclosed to Mortgagee in writing
that could materially adversely affect their respective properties, businesses
or financial conditions or the Premises or any other collateral for the Loan;
(f) the Obligors have duly obtained all permits, licenses, approvals and
consents from, and made all filings with, any governmental authority (and the
same have not lapsed nor been rescinded or revoked) which are necessary in
connection with the execution or delivery or enforcement of this Mortgage or any
other Loan Document or the performance of any Obligor's obligations thereunder;
(g) the proceeds of the Loan are not being used to purchase or carry any "margin
stock" within the meaning of Regulation "U" of the Board of Governors of the
Federal Reserve System, nor to extend credit to others for that purpose; and (h)
each extension of credit secured by this Mortgage is exempt from the provisions
of the Federal Consumers Credit Protection Act (Truth-in-Lending Act) and
Regulation "Z" of the Board of Governors of the Federal Reserve System, because
Mortgagor is a person fully excluded therefrom, and/or because said extension of
credit is only for business or commercial purposes of Mortgagor and is not being
used for personal, family, household or agricultural purposes. Mortgagor
acknowledges and agrees that Mortgagee is relying on the representations and
warranties in this Mortgage and all other Loan Documents as a precondition to
making the Loan, and that all such representations and warranties shall survive
the closing of the Loan and any bankruptcy proceedings.
33. If Mortgagor is a corporation, partnership or other business
entity, then Mortgagor hereby represents and warrants, in order to induce
Mortgagee to make the Loan, that: (a) Mortgagor is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its creation
and the state of Florida; (b) Mortgagor has all requisite power and authority
(corporate or otherwise) to conduct its business, to own its properties, to
execute and deliver the Note and this Mortgage and all other Loan Documents, and
to perform its obligations under the same; (c) the execution, delivery and
performance of the Note, this Mortgage and all other Loan Documents have been
duly authorized by all necessary actions (corporate or otherwise) and do not
require the consent or approval of Mortgagor's stockholders (if a corporation)
or of any other person or entity whose consent has not been obtained; and (d)
the execution, delivery and performance of the Note, this Mortgage and all other
Loan Documents do not and shall not conflict with any provision of Mortgagor's
by-laws or articles of incorporation (if a corporation), partnership agreement
(if a
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partnership) or trust agreement or other document pursuant to which Mortgagor
was created and exists.
34. In the event of any conflict between this Mortgage or any other
Loan Document, the provisions granting the greatest benefit to the Mortgagee
shall govern and control over the conflicting provisions of this Mortgage and
such other Loan Documents.
35. Hazardous Waste. "Hazardous Waste" as used herein shall mean and
include those elements or compounds which are contained in the list of hazardous
substances adopted by the United States Environmental Protection Agency (EPA)
and the list of toxic pollutants designated by Congress or the EPA or defined by
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material as now or at any time in effect.
(1) Representations and Warranties. Mortgagor specifically
represents and warrants that the use and operation of the Premises comply with
all applicable environmental laws, rules and regulations, including, without
limitation, the Federal Resource Conservation and Recovery Act and the
Comprehensive Environmental Response Compensation and Liability Act of 1980 and
all amendments and supplements thereto and Mortgagor shall continue to comply
therewith at all times. Specifically, and without limiting the generality of the
foregoing, there are not now and there shall not in the future be any Hazardous
Waste located or stored in, upon or at the Premises, and there are not now nor
shall there be at any time any releases or discharges from the Premises.
(2) Indemnification.
(1) Mortgagor hereby agrees to indemnify Mortgagee and hold
Mortgagee harmless from and against any and all losses, liabilities, including
strict liability, damages, injuries, expenses, including attorneys' fees for
attorneys of Mortgagee's choice, costs of any settlement or judgment and claims
of any and every kind whatsoever paid, incurred or suffered by, or asserted
against, Mortgagee by any person or entity or governmental agency for, with
respect to, or as a direct or indirect result of, the presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission or release from the
Premises of any Hazardous Waste (including, without limitation, any losses,
liabilities, including strict liability, damages, injuries, expenses, including
attorney's fees for attorneys of Mortgagee's choice, costs of any settlement or
judgment or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liability Act, any federal, state or local
"Superfund" or "Superlien" laws, and any and all other statutes, laws,
ordinances, codes, rules, regulations, orders or decrees regulating,
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with respect to or imposing liability, including strict liability, substances or
standards of conduct concerning any hazardous waste), regardless of whether
within Mortgagor's control.
(2) The aforesaid indemnification and hold harmless agreement
shall benefit Mortgagee from the date hereof and shall continue notwithstanding
payment, release or discharge of this Mortgage or the indebtedness, and, without
limiting the generality of the foregoing such obligations shall continue for the
benefit of Mortgagee and any subsidiary of Mortgagee during and following any
possession of the Premises hereby or any ownership of the Premises thereby,
whether arising by foreclosure or deed in lieu of foreclosure or otherwise, such
indemnification and hold harmless agreement to continue forever.
(3) Notice of Environmental Complaint. If Mortgagor shall receive
any notice of: (i) the happening of any material event involving the spill,
release, leak, seepage, discharge or cleanup of any Hazardous Waste on the Land
or Premises in connection with Mortgagor's operations thereon; or (ii) any
complaint, order, citation or material notice with regard to air emissions,
water discharges or any other environmental, health or safety matter affecting
Mortgagor (an "Environmental Complaint") from any person or entity, then
Mortgagor immediately shall notify Mortgagee orally and in writing of said
notice.
(4) Mortgagee's Reserved Rights. In the event of receipt of an
Environmental Complaint, Mortgagee shall have the right, but not the obligation
(and without limitation of Mortgagee's rights under this Mortgage) to enter onto
the Premises or to take such other actions as it shall deem necessary or
advisable to clean up, remove, resolve or minimize the impact of, or otherwise
deal with, any such Hazardous Waste or Environmental Complaint following receipt
of any notice from any person or entity having jurisdiction asserting the
existence of any Hazardous Waste or an Environmental Complaint pertaining to the
Premises or any part thereof which, if true, could result in an order, suit or
other action against Mortgagor and/or which, in Mortgagee's sole opinion, could
jeopardize its security under this Mortgage. All reasonable costs and expenses
incurred by Mortgagee in the exercise of any such rights shall be secured by
this Mortgage and shall be payable by Mortgagor upon demand.
(5) Environmental Audits. If Mortgagee shall have reason to believe
that Hazardous Waste has been discharged on the Premises, Mortgagee shall have
the right, in its sole discretion, to require Mortgagor to perform periodically
to Mortgagee's satisfaction (but not more frequently than annually unless an
Environmental Complaint shall be then outstanding), at Mortgagor's expense, an
environmental audit and, if deemed necessary by Mortgagee, an environmental risk
assessment of: (i) the Premises; (ii) hazardous waste management practices
and/or (iii) Hazardous Waste disposal sites used by Mortgagor. Said audit and/or
risk assessment must be by an environmental consultant satisfactory to
Mortgagee. Should Mortgagor fail to perform
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any such environmental audit or risk assessment within thirty (30) days after
Mortgagee's request, Mortgagee shall have the right to retain an environmental
consultant to perform such environmental audit or risk assessment. All costs and
expenses incurred by Mortgagee in the exercise of such rights shall be secured
by this Mortgage and shall be payable by Mortgagor upon demand.
(6) Breach. Any breach of any warranty, representation or agreement
contained in this Section shall be an Event of Default and shall entitle
Mortgagee to exercise any and all remedies provided in this instrument, or
otherwise permitted by law.
36. This space is intentionally left blank.
37. Whenever the context of any provision of this Mortgage shall so
require, words in the singular shall include the plural, words in the plural
shall include the singular, and pronouns of any gender shall include the other
genders. Captions and headings in this Mortgage are for convenience only and
shall not affect its interpretation. All references in this Mortgage to
Exhibits, Schedules, paragraphs and subparagraphs refer to the respective
subdivisions of this Mortgage, unless the reference expressly identifies another
document. Wherever used in this Mortgage, unless the context clearly indicates a
contrary intention or unless this Mortgage specifically provides otherwise: (a)
the term "Mortgagor" shall mean "Mortgagor or any subsequent owner or owners of
the Premises"; (b) the term "Mortgagee" shall mean "Mortgagee or any subsequent
holder(s) of this Mortgage"; (c) the term "Note" shall mean "the Note, any
renewal notes and any additional notes hereafter to be issued and secured by
this Mortgage pursuant to the future advance provision hereof"; (d) the term
"Loan" shall mean "the Loan and any future or additional advances made by
Mortgagee from time to time for any reason permitted or provided by the terms of
this Mortgage or any other Loan Document"; and (e) the term "person" shall mean
"an individual, corporation, partnership, limited partnership, unincorporated
association, joint stock corporation, joint venture or other legal entity".
38. Time is of the essence of all provisions of this Mortgage.
Mortgagor hereby waives all right of homestead exemption (if any) in the
Premises. If Mortgagor consists of more than one person, the obligations and
liabilities of each such person hereunder shall be joint and several, and
wherever the term "Mortgagor" is used it shall be deemed to refer to such
persons jointly and severally. If Mortgagor is a partnership, then all general
partners in Mortgagor shall be liable jointly and severally for the covenants,
agreements, undertakings and obligations of Mortgagor in connection with the
Loan, notwithstanding any contrary provision of the partnership laws of the
State of Florida. This Mortgage shall be binding upon the parties hereto and
their respective heirs, personal representatives, successors and assigns, and it
shall inure to the benefit of Mortgagee and its successors and assigns and to
the benefit of Mortgagor and Mortgagor's heirs, personal representatives and
permitted successors and assigns. This Mortgage may be executed in any
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number of counterparts, each of which shall be deemed an original, but all of
which, together, shall constitute but one instrument. This Mortgage cannot be
changed except by an agreement in writing, signed by the party against whom
enforcement of the change is sought.
39. Mortgagor's Covenants. In addition to any other covenant or
obligation of the Mortgagor hereunder, the Mortgagor shall, during the term of
the Loan:
(1) maintain and preserve its existence and all rights,
privileges, franchises and other authority for the conduct of its business;
(2) maintain its properties and facilities in good order;
(3) pay and discharge all taxes, assessment and governmental
charges in a timely manner, except those being contested in good faith;
(4) inform Mortgagee within ten (10) days of any actual or
potential contingent liabilities in excess of Fifty Thousand ($50,000) in the
aggregate (exclusive of trade debt incurred in the ordinary course of business);
(5) maintain proper casualty, liability and business
interruption insurance in amounts reasonably acceptable to Mortgagee, naming
Mortgagee as loss payee as its interest may appear;
(6) comply with all governmental laws, codes and ordinances and
applicable regulatory requirements;
(7) permit Mortgagee the right to inspect all records relating
to the Property; and
(8) not, without the prior written consent of Mortgagee:
(1) permit to exist a lien on or pledge any of the
Premises;
(2) this space is intentionally left blank.
(3) sell, lease, assign, or otherwise dispose of or
transfer any portion of the Premises;
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(4) merge with another entity (Mortgagee's consent shall
not be unreasonably withheld with respec to this subparagraph (D);
(5) grant, suffer, or permit any contractual or
non-contractual lien or security interest on, or security interest in the
Premises, or fail to promptly pay when due all lawful claims, whether for labor,
materials or otherwise; and/or
(6) make any loans or advances to third parties, insiders
or affiliates in excess of Fifty Thousand Dollars ($50,000) in the aggregate.
40. MORTGAGOR AND MORTGAGEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
MORTGAGE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. MORTGAGOR ACKNOWLEDGES THAT THIS WAIVER OF
JURY TRIAL IS A MATERIAL INDUCEMENT TO THE MORTGAGEE IN EXTENDING CREDIT TO THE
MORTGAGOR, THAT THE MORTGAGEE WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS
JURY TRIAL WAIVER, AND THAT MORTGAGOR HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS
HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY
TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
41. Financial Covenants: During the term of the Loan, the Mortgagor
shall, at all times, maintain the following covenants and Mortgagor shall
certify compliance at the request of the Mortgagee:
(1) Minimum Working Capital of at least Two Million Dollars
($2,000,000). As set forth herein, Working Capital shall mean the difference
between current assets and current liabilities.
(2) Maximum Senior Liabilities to Adjusted Net Worth ratio of 2:1.
As set forth herein: (i) Senior Liabilities to Adjusted Net Worth shall mean
senior liabilities divided by adjusted net worth; (ii) Senior Liabilities shall
mean total liabilities minus total subordinated debt; and (iii) Adjusted Net
Worth shall mean total net worth plus subordinated debt minus amounts due from
shareholders, affiliates, subsidiaries and employees.
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(3) Minimum Fixed Charge Coverage of 3:1. As set forth herein:
(i) Fixed Charge Coverage shall mean: (after tax income + total depreciation and
amortization + lease expense + interest expense) / (lease expense + interest
expense + current maturities of long term debt + subordinated debt); and (ii)
after tax income shall mean income after tax but before extraordinary items.
42. Financial Reporting Requirements:
(1) Mortgagor shall provide Mortgagee with: (i) fiscal year end
(3/31/99) company-prepared financial statements within sixty (60) days following
the end the fiscal year and audited financial statements with one hundred twenty
(120) days following fiscal year end; (ii) subsequent financial statements shall
be provided as follows: (a) quarterly Mortgagor prepared financial statements
within forty-five (45) days following the end of each quarter; (b) annual
audited financial statements within one hundred twenty (120) days following the
end of Mortgagor's fiscal year end (together with the auditor's management
letter); (iii) this space is intentionally left blank; (iv) this space is
intentionally left blank; and (v) Mortgagor's 10Q and 10K within ten (10) days
following filing.
(2) Mortgagor shall provide Mortgagee such other reports reasonably
requested by Mortgagee.
43. Year 2000 Compliance. The Mortgagor warrants and represents that
the Mortgagor has (i) initiated a review and assessment of all areas within its
and each of its Subsidiaries' business and operations (including those affected
by suppliers and vendors) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Mortgagor or
any of its Subsidiaries (or its suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. The Mortgagor
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to its or any of its subsidiaries'
business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 compliant"), except to the extent that a failure to do so
could not reasonably be expected to have Material Adverse Effect.
WITNESS the due execution hereof as of the date first above written.
<TABLE>
<S> <C>
Signed, sealed and delivered in
the presence of these witnesses: PETMEDEXPRESS.COM, INC., a Florida corporation
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
Witness: Kenneth P. Wurtenberger By: /s/ Marc Puleo, M.D. (SEAL)
-------------------------- ----------------------------------
Print Name: Kenneth P. Wurtenberger Print Name: Dr. Marc Puleo
----------------------- --------------------------
Title: President/CEO
-------------------------------
Witness: Linda D. Purrington Address: 3350 N.W. 53rd Street
-------------------------- Fort Lauderdale, FL 33309
Print Name: Linda D. Purrington
-----------------------
</TABLE>
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by Marc
Puleo, the President of PETMEDEXPRESS.COM, INC., a Florida corporation, freely
and voluntarily under authority duly vested in him/her by said corporation and
that the seal affixed thereto is the true corporate seal of said corporation.
He/She is personally known to me or who has produced Florida D.L. as
identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 29th day of April, 1999.
<TABLE>
<S> <C>
/s/ Linda D. Purrington
-----------------------------------------------
Notary Public
-----------------------------------------------
Typed, printed or stamped name of Notary Public
</TABLE>
My Commission Expires:
29
<PAGE>
EXHIBIT A
Legal Description
Parcel "A" of GATEWAY INDUSTRIAL CENTER NO.7, according to the Plat thereof,
recorded in Plat Book 84, at Page 6, of the Public Records of Broward County,
Florida.
30
<PAGE>
EXHIBIT B
UCC-1 Form
31
Exhibit 10.9
This Instrument Prepared By
and Return To:
MARK K. SOMERSTEIN, ESQ.
Ruden, McClosky, Smith,
Schuster & Russell, P.A.
P.O. Box 1900
Fort Lauderdale, Florida 33302
MORTGAGE MODIFICATION AGREEMENT/1
THIS MORTGAGE MODIFICATION AGREEMENT ("Agreement") is made by and
between PETMEDEXPRESS.COM, INC., a Florida corporation ("Borrower"), MARC A.
PULEO (the "Guarantor") (the Borrower and the Guarantor are collectively, the
"Obligors"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION, its nominees and/or
assigns ("Lender" or "Bank") effective September 17, 1999.
R E C I T A L S:
A. The Borrower is indebted to the Lender pursuant to that certain
Promissory Note ("Promissory Note") dated April 29, 1999, executed by Borrower
in the original principal amount of ONE MILLION SIX HUNDRED EIGHTY THOUSAND
DOLLARS ($1,680,000) (the "Indebtedness").
B. The Indebtedness is secured by, inter alia: (i) Florida Real Estate
Mortgage, Assignment of Leases and Rents and Security Agreement dated April 29,
1999, recorded in Official Records Book 29421, Page 1377, of the Public Records
of Broward County, Florida (the "Mortgage"); and (ii) UCC-1 recorded in Official
Records Book 29421, Page 1407, of the Public Records of Broward County, Florida
("UCC").
C. The Guarantor guaranteed the Indebtedness pursuant to, inter alia,
the Continuing and Unconditional Guaranty dated April 29, 1999 (the "Guaranty").
- --------
1/DOCUMENTARY STAMPS AND INTANGIBLE TAX IN THE AMOUNT REQUIRED BY LAW WITH
REGARD TO THE ORIGINAL INDEBTEDNESS WERE AFFIXED TO THE REAL ESTATE MORTGAGE,
ASSIGNMENT AND SECURITY AGREEMENT RECORDED IN OFFICIAL RECORDS BOOK 29421, PAGE
1377, PUBLIC RECORDS OF BROWARD COUNTY, FLORIDA ("ORIGINAL MORTGAGE"). THIS
DOCUMENT PROVIDES FOR A FUTURE ADVANCE TO BE SECURED BY THE MORTGAGE.
DOCUMENTARY STAMPS AND INTANGIBLE TAX ARE NOW DUE ON $5,500.00 AND ARE AFFIXED
HERETO.
1
<PAGE>
D. The Indebtedness, Mortgage, UCC, the Guaranty, and any other
documents executed in connection with the foregoing are hereinafter collectively
referred to as the "Loan Documents".
E. The Obligors have requested and the Lender has agreed to modify the
terms of the Loan Documents as more particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and for TEN DOLLARS
($10) and other good and valuable considerations, the parties agree as follows:
1. The foregoing recitations are true and correct and are incorporated
herein by reference.
2. The provisions of this Agreement shall control in the event of any
conflict with the provisions of the Loan Documents, the unaffected provisions of
which are specifically reaffirmed and incorporated herein by reference.
3. The Indebtedness is restated and modified to include not only the
Promissory Note but also the additional amount of One Million Dollars
($1,000,000) evidenced by that certain Promissory Note dated even date herewith
in the original principal amount of One Million Dollars ($1,000,000) executed by
the Borrower in favor of the Bank ("Line of Credit Note"). The maturity date of
the Line of Credit Note is one (1) year following the date hereof.
4. The Mortgage, as amended by this Agreement, shall continue to secure
the Promissory Note and in addition shall secure the Line of Credit Note as if
the Line of Credit Note was originally secured by the Mortgage.
5. The Obligors acknowledge and agree that the Lender shall not be
obligated to further modify the Indebtedness or the Mortgage. In conjunction
with the foregoing, Lender shall not be obligated to make any additional
advances under the Loan Documents.
6. AS A MATERIAL INDUCEMENT FOR LENDER TO EXECUTE THIS AGREEMENT, THE
OBLIGORS DO HEREBY RELEASE, WAIVE, DISCHARGE, COVENANT NOT TO SUE, ACQUIT,
SATISFY AND FOREVER DISCHARGE LENDER, ITS OFFICERS AND DIRECTORS, EMPLOYEES AND
AGENTS AND ITS AFFILIATES, AND ASSIGNS FROM ANY AND ALL LIABILITY, CLAIMS,
COUNTERCLAIMS, DEFENSES, ACTIONS, CAUSES OF ACTION, SUITS, CONTROVERSIES,
AGREEMENTS, PROMISES AND DEMANDS WHATSOEVER IN LAW OR IN EQUITY WHICH THE
OBLIGORS EVER HAD, OR HAVE, OR WHICH ANY PERSONAL REPRESENTATIVE, SUCCESSOR,
HEIR OR ASSIGN OF OBLIGORS HEREAFTER CAN, SHALL OR MAY HAVE AGAINST THE LENDER,
ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, AND ITS AFFILIATES AND ASSIGNS,
FOR, UPON OR BY REASON OF ANY MATTER, CAUSE OR THING
2
<PAGE>
WHATSOEVER RELATED TO THE LOAN DOCUMENTS THROUGH THE DATE THIS AGREEMENT HAS
BEEN EXECUTED. OBLIGORS FURTHER EXPRESSLY AGREE THAT THE FOREGOING RELEASE AND
WAIVER AGREEMENT IS INTENDED TO BE AS BROAD AND INCLUSIVE AS PERMITTED BY THE
LAWS OF THE STATE OF FLORIDA. IN ADDITION TO, AND WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AND IN CONSIDERATION OF THE LENDER'S EXECUTION OF
THIS AGREEMENT, OBLIGORS COVENANT WITH AND WARRANT UNTO LENDER, AND ITS
AFFILIATES AND ASSIGNS, THAT THERE EXISTS NO CLAIMS, COUNTERCLAIMS, DEFENSES,
OBJECTIONS, OFFSETS OR CLAIMS OF OFFSETS AGAINST LENDER RELATED TO THE LOAN
DOCUMENTS OR THE OBLIGATION OF OBLIGORS TO PAY THE INDEBTEDNESS TO LENDER WHEN
AND AS THE SAME BECOMES DUE AND PAYABLE.
7. The Obligors hereby agree that, in consideration of the recitals and
mutual covenants contained herein, and for other good and valuable
consideration, including the forbearance of Lender from exercising its rights
and remedies otherwise available to it, as hereby amended, the receipt and
sufficiency of which are hereby acknowledged, in the event the Obligors (or any
of them) shall: (i) file with any bankruptcy court of competent jurisdiction or
be the subject of any petition (which is not dismissed within ninety [90] days
from the filing) under Title 11 of the U.S.C. Code, as amended; (ii) be the
subject of any order for relief issued under such Title 11 of the U.S.C. Code,
as amended (which is not dismissed within ninety [90] days from the filing);
(iii) file or be the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency or other relief for debtors (which is not dismissed
within ninety [90] days from the filing); (iv) have sought or consented to or
acquiesced in the appointment of any trustee, receiver, conservator or
liquidator; (v) be the subject of any order, judgment or decree entered by any
court of competent jurisdiction approving a petition filed against such party
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or relief for debtors (which is not
dismissed within ninety [90] days from the filing); and/or (vi) be the subject
of any action (which is not dismissed within ninety [90] days from the filing)
to set aside or otherwise prevent the provisions of this Agreement
(subparagraphs [i] - [vi] above are hereinafter collectively defined as
"Bankruptcy Proceedings"), Lender shall thereupon be entitled to relief from any
automatic stay imposed by Section 362 of Title 11 of the U.S.C. Code, as
amended, or otherwise, on or against the exercise of the rights and remedies
otherwise available to Lender as provided in the Loan Documents and as otherwise
provided by law.
8. Obligors agree to pay to Lender any and all documentary stamps
and/or intangible taxes and all interest and penalties associated therewith
which may be assessed on account of the execution and/or recording of this
Agreement. Obligors shall pay such sums immediately upon receipt of notice of
such amounts from Lender or its assigns. In the event Obligors fail to pay such
sums, Lender or its assigns may, at its option, pay such taxes and/or
documentary stamps. Any such payment by Lender or its assigns shall be added to
the Indebtedness and shall bear interest from the
3
<PAGE>
date advanced to the date of recovery at the maximum rate permissible under
Florida law. If Obligors fail to pay any and all documentary stamps and/or
intangible taxes and any interest or penalties associated therewith which may be
assessed on account of the execution and/or recording of this Agreement, it
shall be deemed to be a default under the terms hereof and shall immediately
accelerate the principal balance due hereunder, together with accrued interest.
The Obligors shall have the right to contest the foregoing charges;
provided such does not adversely affect the Lender or the Loan Documents.
9. The Guarantor hereby confirms that the Guaranty remains in full
force and effect and shall, inter alia, guarantee the repayment of the
Promissory Note and Line of Credit Note.
10. This Agreement shall not be construed more strictly against either
party by virtue of the preparation hereof.
11. Except as herein specifically provided, all of the terms,
provisions and representations of the Loan Documents are hereby specifically
reaffirmed by the Obligors and are incorporated herein by this reference. THE
OBLIGORS (AND EACH OF THEM) HEREBY AGREE AND CONFIRM THAT, AS OF THE DATE
HEREOF, THE LOAN DOCUMENTS ARE IN FULL FORCE AND EFFECT. THIS AGREEMENT
SUPERSEDES ALL PRIOR NEGOTIATIONS AND/OR CORRESPONDENCE RELATING TO THE LOAN
DOCUMENTS.
12. Time is of the essence under the Loan Documents and this Agreement.
13. The Obligors warrant and represent that all of the parties
executing this Agreement on behalf of the Obligors are duly authorized to
execute this Agreement and that this Agreement is valid and binding upon the
Obligors in accordance with its terms.
14. This Agreement may be executed in one or more counterparts, each of
which shall be an original, but all of which shall constitute one (1) and the
same agreement. This Agreement may be executed and delivered via telecopy.
15. This Agreement is not intended to be a novation, but merely to
evidence a modification, and it is not the intention of the parties to create a
novation of the Loan Documents.
16. This Agreement shall not be binding upon the Lender nor shall this
Agreement constitute an offer by the Lender until such time as this Agreement is
fully executed.
17. A default or breach of a representation or warranty by the
Obligors, or any of them, under this Agreement shall constitute a default under
the Loan Documents.
4
<PAGE>
18. The obligations of the Obligors under this Agreement shall be joint
and several. The reference to the Obligors hereunder shall, at the Lender's
option, be to all or any of the Obligors.
IN WITNESS WHEREOF, Obligors and Lender have executed this Agreement as
of the day and year set forth above.
Signed, sealed and delivered BORROWER:
in the presence of:
PETMEDEXPRESS.COM, INC., a Florida
corporation
/s/ Hazel Hunter By: /s/ Marc Puleo, M.D. (SEAL)
- ------------------------- -------------------------------------
Print Name: Hazel Hunter Print Name: Marc Puleo
-------------------------------------
Title: President/CEO
-------------------------------------
Date: 9-17-99
/s/ Kenneth P. Wurtenberger Address: 1441 S.W. 49th Avenue
- ----------------------------------- Pompano Beach, Florida 33066
Print Name: Kenneth P. Wurtenberger
GUARANTOR:
/s/ Hazel Hunter /s/ Marc Puleo
- ----------------------------------- ---------------------------------------
Print Name: Hazel Hunter MARC A. PULEO
Date: 9-17-99
/s/ Kenneth P. Wurtenberger Address: 1441 S.W. 49th Avenue
- ----------------------------------- Pompano Beach, Florida 33066
Print Name: Kenneth P. Wurtenberger
LENDER:
SOUTHTRUST BANK, NATIONAL ASSOCIATION
/s/ Hazel Hunter By: /s/ Susan King (SEAL)
- ------------------------- ------------------------------------
Print Name: Hazel Hunter Print Name: Susan King
------------------------------------
Title: Vice President
------------------------------------
Date: 9/17/99
/s/ Kenneth P. Wurtenberger Address: One East Broward Boulevard
- ----------------------------------- Fort Lauderdale, Florida 33301
Print Name: Kenneth P. Wurtenberger
5
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by Marc
Puleo, the President of PETMEDEXPRESS.COM, INC., a Florida corporation, freely
and voluntarily under authority duly vested in him/her by said corporation and
that the seal affixed thereto is the true corporate seal of said corporation.
He/She is personally known to me or who has produced _____________________ as
identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 17th day of September, 1999.
/s/ Kenneth P. Wurtenberger
----------------------------------
Notary Public
----------------------------------
Typed, printed or stamped name of
Notary Public
My Commission Expires:
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by MARC A.
PULEO, who is personally known to me or who has produced
________________________ as identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 17th day of September,1999.
/s/ Kenneth P. Wurtenberger
---------------------------------
Notary Public
---------------------------------
Typed, printed or stamped name of
Notary Public
My Commission Expires:
6
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, the foregoing instrument was acknowledged before me by Susan
King, the Vice President of SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national
banking association, freely and voluntarily under authority duly vested in
him/her by said association. He/She is personally known to me or who has
produced ______________________ as identification.
WITNESS my hand and official seal in the County and State last
aforesaid this 17th day of September, 1999.
/s/ Kenneth P. Wurtenberger
---------------------------------
Notary Public
---------------------------------
Typed, printed or stamped name of
Notary Public
My Commission Expires:
Exhibit 10.10
Borrower's Taxpayer
Identification No. 65-0680967
PROMISSORY NOTE
$1,680,000.00 April 29, 1999
Fort Lauderdale, Florida
FOR VALUE RECEIVED, PETMEDEXPRESS.COM, INC., a Florida corporation
(sometimes hereinafter referred to as the "undersigned" or the "Borrower"),
promises to pay to the order of SOUTHTRUST BANK, NATIONAL ASSOCIATION or any
subsequent holder of this note ("Bank" or "Lender") at its principal offices
located at P.O. Box 460, Boynton Beach, Florida 33425-0460 (or at such other
place or places as Bank may designate) the principal sum of ONE MILLION SIX
HUNDRED EIGHTY THOUSAND DOLLARS ($1,680,000) or so much thereof as may be from
time to time outstanding, together with interest thereon on the principal amount
from time to time outstanding. Interest shall be computed on the actual number
of days elapsed and an assumed year of 360 days. Borrower and all endorsers,
sureties, guarantors and any other persons liable or to become liable with
respect to the loan evidenced by this Note (the "Loan") are each included in the
term "Obligors" as used in this Note. Said principal and interest shall be
payable in lawful money of the United States, on the dates and in the amounts
specified below, to wit:
1. Interest. This Note shall bear interest at a fixed rate (computed on
the basis of a 360-day year and calculated based upon the actual number of days
elapsed) equal to seven and three-quarters percent (7.75%) ("Rate"). In no event
shall said rate of interest exceed the maximum annual rate of interest permitted
under Florida Law or Federal Law in the event Federal Law preempts Florida Law
or is otherwise applicable.
2. Said principal and interest shall be payable in lawful money of the
United States, on the dates and in the amounts specified below, to wit:
Eighty-Three (83) equal monthly payments of principal and interest in
the amount of Fifteen Thousand Nine Hundred Twenty-Four and 89/100
Dollars ($15,924.89) shall be due and payable commencing on the fifth
(5th) day of the first (1st) full month following the date hereof, with
a like payment due on the 5th day of each consecutive month thereafter,
with the entire outstanding principal balance, together with all
accrued but unpaid interest, due and payable seven (7) years from the
date hereof ("Maturity Date").
1
<PAGE>
3. Borrower shall pay to Bank a late charge of five percent (5%) of any
payment not received by Bank within fifteen (15) days of its due date; provided,
however, if said fifteen (15) day period ends on a day other than a day on which
Bank is open for Business (a "Business Day"), then the aforedescribed late
charge shall be payable if the payment is not received by the last Business Day
within said fifteen (15) day period.
4. This Note may be prepaid in whole or in part at any time; provided,
however, any prepayment, whether voluntary or involuntary, must be accompanied
by a prepayment fee as follows: (i) three percent (3%) of the amount prepaid if
paid during the first year of this Note; (ii) two percent (2%) of the amount
prepaid if paid during the second year of this Note; and (iii) one percent (1%)
of the amount prepaid if paid during the third year of this Note. No prepayment
shall affect the requirement of the Borrower to make the regular monthly
payments of principal and interest.
5. Borrower shall pay all amounts owing under this Note in full when
due without set-off, counterclaim deduction or withholding for any reason
whatsoever. If any payment falls due on a day other than a Business Day, then
such payment shall instead be made on the next succeeding Business Day, and
interest shall accrue accordingly. Any payment received by Bank after 1:00 p.m.
shall not be credited against the indebtedness under this Note until at least
the next succeeding Business Day.
6. If default be made in the payment of any sums payable pursuant to
the terms of this Note following a grace period of five (5) days (which shall
not require the giving of any notice), or if default or other event causing the
acceleration of this Note occur under the Florida Real Estate Mortgage and
Security Agreement securing this Note (the "Mortgage"), or any other instrument
or document executed in connection with the Loan (this Note, the Mortgage and
all such instruments and documents, including, without limitation, any
guaranties, agreements, mortgages, security agreements, assignments and other
documents securing this Note, are referred to in this Note as the "Loan
Documents") (an "Event of Default"), then or at any time thereafter at the
option of Bank, the whole of the principal sum then remaining unpaid hereunder,
together with all interest accrued thereon and all other sums owing under the
Loan Documents, shall immediately become due and payable without notice and Bank
shall be entitled to pursue any and all rights and remedies provided by
applicable law and/or under the terms of this Note or any other Loan Document,
all of which shall be cumulative and may be exercised successively or
concurrently. Upon the occurrence and during the continuation of any Event of
Default, Bank, at its option, may at any time declare any or all other
liabilities of any Obligor to Bank immediately due and payable (notwithstanding
any contrary provisions thereof) without demand or notice of any kind. In
addition, Bank shall have the right to set off any and all sums owed to any
Obligor by Bank in any capacity (whether or not then due) against the Loan
and/or against any other liabilities of any Obligor to Bank.
2
<PAGE>
7. From and after an Event of Default, and regardless of whether the
Bank also elects to accelerate the maturity of this Note, the entire principal
remaining unpaid hereunder shall bear an augmented annual interest rate equal to
the lesser of (i) twenty-five percent (25%) per annum, or (ii) the highest
applicable lawful rate. Failure to exercise any and all rights or remedies Bank
may in the event of any such default be entitled to shall not constitute a
waiver of the right to exercise such rights or remedies in the event of any
subsequent default, whether of the same or different nature. No waiver of any
right or remedy by Bank shall be effective unless made in writing and signed by
Bank, nor shall any waiver on one occasion apply to any future occasion.
8. In no event shall any agreed or actual exaction charged, reserved or
taken as an advance or forbearance by Bank as consideration for the Loan exceed
the limits (if any) imposed or provided by the law applicable from time to time
to the Loan for the use or detention of money or for forbearance in seeking its
collection, and Bank hereby waives any right to demand such excess. If the
floating rate of interest based on the Prime Rate should increase above such
maximum interest rate permitted by applicable law (if any), then notwithstanding
any contrary provision in this Note or any other Loan Document and without
necessity of further agreement or notice by Bank or any Obligor, the unpaid
principal balance of the Loan shall thereupon bear interest at such maximum
lawful rate. If the floating interest should thereafter decrease below such
maximum lawful rate, the Loan shall nevertheless continue to bear interest at
such maximum lawful rate until Bank, receives the full amount of interest
delayed by the application of such maximum lawful rate under this paragraph, at
which time the Loan shall once again bear interest at the then applicable
floating interest rate. In the event that the interest provisions of this Note
or any exactions provided for in this Note or any other Loan Document shall
result at any time or for any reason in an effective rate of interest that
transcends the maximum interest rate permitted by applicable law (if any), then
without further agreement or notice the obligation to be fulfilled shall be
automatically reduced to such limit and all sums received by Bank in excess of
those lawfully collectible as interest shall be applied against the principal of
the Loan immediately upon Bank's receipt thereof, with the same force and effect
as though the payor had specifically designated such extra sums to be so applied
to principal and Bank had agreed to accept such extra payment(s) as a
premium-free prepayment or prepayments. During any time that the Loan bears
interest at the maximum lawful rate (whether by application of this paragraph,
the default provisions of this Note or otherwise), interest shall be computed on
the basis of the actual number of days elapsed and the actual number of days in
the respective calendar year. Pursuant to Florida Statutes, Section 687.12, the
interest rate charged is authorized by Florida Statutes, Chapter 665.
9. The Obligors hereby severally: (a) waive demand, presentment,
protest, notice of dishonor, suit against or joinder of any other person, and
all other requirements necessary to charge or hold any Obligor liable with
respect to the Loan; (b) waive any right to immunity from any such action or
proceeding and waive any immunity or exemption of any property, wherever
located, from garnishment, levy, execution, seizure or attachment prior to or in
execution of judgment, or sale
3
<PAGE>
under execution or other process for the collection of debts; (c) waive any
right to interpose any set-off or non-compulsory counterclaim or to plead laches
or any statute of limitations as a defense in any such action or proceeding and
waive (to the extent lawfully waivable) all provisions and requirements of law
for the benefit of any Obligor now or hereafter in force; (d) submit to the
jurisdiction of the state and federal courts in the State of Florida for
purposes of any such action or proceeding; (e) agree that the venue of any such
action or proceeding may be laid in Broward County, Florida (in addition to any
county in which any collateral for the Loan is located), and waive any claim
that the same is an inconvenient forum; (f) stipulate that service of process in
any such action or proceeding shall be properly made if mailed by any form of
registered or certified mail (airmail if international), postage prepaid, to the
address then registered in Bank's records for the Obligor(s) so served, and that
any process so served shall be effective ten (10) days after mailing; and (g)
agree that the death or mental or physical incapacity of any Obligor who is a
natural person, or the dissolution or merger or consolidation or termination of
the existence of any Obligor that is a business entity (or if any person
controlling such Obligor shall take any action authorizing or leading to the
same), shall at Bank's option, which option may be exercised then or at any time
thereafter, result in the Loan being then due and payable in full. No provision
of this Note shall limit Bank's right to serve legal process in any other manner
permitted by law or to bring any such action or proceeding in any other
competent jurisdiction. The Obligors hereby severally consent and agree that, at
any time and from time to time without notice, (i) Bank and the owners(s) of any
collateral then securing the Loan may agree to release, increase, change,
substitute or exchange all or any part of such collateral, and (ii) Bank and any
person(s) then primarily liable for the Loan may agree to renew, extend or
compromise the Loan in whole or in part or to modify the terms of the Loan in
any respect whatsoever; no such release, increase, change, substitution,
exchange, renewal, extension, compromise or modification shall release or affect
in any way the liability of any Obligor, and the Obligors hereby severally waive
any and all defenses and claims whatsoever based thereon. Until Bank receives
all sums due under this Note and all other Loan Documents in immediately
available funds, no Obligor shall be released from liability with respect to the
Loan unless Bank expressly releases such Obligor in a writing signed by Bank,
and Bank's release of any Obligor(s) shall not release any other person liable
with respect to the Loan.
10. The Obligors jointly and severally agree to pay all filing fees and
similar charges and all costs incurred by Bank in collecting or securing or
attempting to collect or secure the Loan, including attorney's fees, whether or
not involving litigation and/or appellate, administrative or Bankruptcy
proceedings. The Obligors jointly and severally agree to pay any documentary
stamp taxes, intangibles taxes or other taxes (except for federal or Florida
franchise or income taxes based on Bank's net income) which may now or hereafter
apply to this Note or the Loan or any security therefor, and the Obligors
jointly and severally agree to indemnify and hold Bank harmless from and against
any liability, costs, attorney's fees, penalties, interest or expenses relating
to any such taxes, as and when the same may be incurred. The Obligors jointly
and severally agree to pay on demand, and to indemnify and hold Bank harmless
from and against, any and all present or future taxes,
4
<PAGE>
levies, imposts, deductions, charges and withholdings imposed in connection with
the Loan by the laws or governmental authorities of any jurisdiction other than
the State of Florida or the United States of America, and all payments to Bank
under this Note shall be made free and clear thereof and without deduction
therefor.
11. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida, except that federal law shall
govern to the extent that it may permit Bank to charge, from time to time,
interest on the Loan at a rate higher than may be permissible under applicable
Florida law.
12. Any provision of this Note which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction only, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent that the Obligors may
lawfully waive any law that would otherwise invalidate any provision of this
Note, each of them hereby waives the same, to the end that this Note shall be
valid and binding and enforceable against each of them in accordance with all
its terms.
13. If this Note is signed by more than one person, then the term
"Borrower" as used in this Note shall refer to all such persons jointly and
severally, and all promises, agreements, covenants waivers, consents,
representations, warranties and other provisions in this Note are made by and
shall be binding upon each and every undersigned person, jointly and severally.
The term "Bank" shall be deemed to include any subsequent holder(s) of this
Note. Whenever used in this Note, the term "person" means any individual, firm,
corporation, trust or other organization or association or other enterprise or
any governmental or political subdivision, agency, department or instrumentality
thereof. Whenever used in this Note, words in the singular include the plural,
words in the plural include the singular, and pronouns of any gender include the
other genders, all as may be appropriate. The "Prime Rate" is a base reference
rate of interest adopted by SouthTrust Bank, National Association as a general
benchmark from which SouthTrust Bank, National Association determines the
floating interest rates chargeable on various loans to borrowers with varying
degrees of creditworthiness, and Borrower acknowledges and agrees that Bank has
made no representations whatsoever that the "Prime Rate" is the interest rate
actually offered by SouthTrust Bank, National Association to borrowers of any
particular creditworthiness.
14. Time shall be of the essence with respect to the terms of this
Note. This Note cannot be changed or modified orally. Bank shall have the right
unilaterally to correct patent errors or omissions in this Note or any other
Loan Document. Except as otherwise required by law or by the provisions of this
Note or any other Loan Document, payments received by Bank hereunder shall be
applied first against expenses and indemnities, next against interest accrued on
the Loan, and next in reduction of the outstanding principal balance of the
Loan, except that from and after any default
5
<PAGE>
under this Note, Bank may apply such payments in any order of priority
determined by Bank in its exclusive judgment. For purposes of determining
interest accruing under this Note, principal shall be deemed outstanding on the
date payment is credited by Bank. If any payment required to be made pursuant to
this Note is not received on the due date, Bank shall have the right, at its
election, to charge any of Borrower's accounts at Bank with the amount of such
payment. Except as otherwise required by the provisions of this Note or any
other Loan Document, any notice required to be given to any Obligor shall be
deemed sufficient if made personally or if mailed, postage prepaid, to such
Obligor's address as it appears in this Note (or, if none appears, to any
address for such Obligor then registered in Bank's records). Bank may grant
participations in all or any portion of, and may assign all or any part of
Bank's rights under, this Note. Bank may disclose to any such participant or
assignee any and all information held by or known to Bank at any time with
respect to any Obligor. If Borrower or any other Obligor is a partnership, then
all general partners thereof shall be liable jointly and severally for all
obligations under this Note and for all other covenants, agreements,
undertakings and obligations of Borrower in connection with the Loan,
notwithstanding any contrary provision of the partnership laws of the State of
Florida. All of the terms of this Note shall inure to the benefit of Bank and
its successors and assigns and shall be binding upon each and every one of the
Obligors and their respective heirs, executors, administrators, personal
representatives, successors and assigns, jointly and severally.
15. The Mortgage encumbers real and personal property located in
Broward County, Florida, and is intended to be recorded amongst the Public
Records of said County.
16. BANK AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF EITHER PARTY. BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE
BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND
THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO
CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND
UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.
6
<PAGE>
WITNESS the due execution hereof as of the date first above written.
PETMEDEXPRESS.COM, INC., a Florida corporation
By: /s/ Marc Puleo, M.D. (SEAL)
Print Name: Dr. Marc Puleo
Title: President/CEO
DOCUMENTARY STAMPS IN THE AMOUNT OF $5,880.00 HAVE BEEN PAID UPON AND AFFIXED TO
THE MORTGAGE SECURING THIS PROMISSORY NOTE.
7
Exhibit 10.11
PROMISSORY NOTE
31 March 1999 Fort Lauderdale, Florida
$1,950,000
PetmedExpress.com, Inc., referred to herein as "MAKER," agrees to pay
to the Order of Philip Puleo, referred to herein as "HOLDER," or order, the sum
of $1,950,000 (One Million Nine Hundred Fifty Thousand & no/100 Dollars), at
3350 N.W. 53rd Street, Fort Lauderdale, Florida, with interest thereon at a rate
of 10% per annum, (12% per annum rate for April 1999, only) simple interest.
The full amount of principal and interest due herein shall be payable
on 1 April 2001.
This note is payable in U.S. Dollars. At any time, the maximum rate of
interest applicable to this transaction shall not exceed the legal maximum rate
of interest for a note of this type. Any sums paid in excess of any lawful
limitation shall be applied to principal.
After default herein, this note will bear interest at the highest legal
rate for this type of note until paid in full. Upon any default, MAKER agrees to
pay a reasonable attorney's fee for any and all services of an attorney, whether
in or out of court, and for appeal and post-judgment collection legal services.
Dated: March 31, 1999
PETMEDEXPRESS.COM, INC.
/s/ Marc Puleo, M.D.
- --------------------------------
Marc A. Puleo, President & CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 974,987
<SECURITIES> 0
<RECEIVABLES> 229,536
<ALLOWANCES> 16,849
<INVENTORY> 1,939,183
<CURRENT-ASSETS> 3,300,556
<PP&E> 3,300,556
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,750,437
<CURRENT-LIABILITIES> 1,098,500
<BONDS> 0
0
22,246
<COMMON> 6,370
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,750,437
<SALES> 8,344,961
<TOTAL-REVENUES> 8,344,961
<CGS> 4,620,399
<TOTAL-COSTS> 4,620,399
<OTHER-EXPENSES> 92,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96,564
<INCOME-PRETAX> 182,981
<INCOME-TAX> 0
<INCOME-CONTINUING> 182,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 182,981
<EPS-BASIC> .03
<EPS-DILUTED> .02
</TABLE>
